Union Bank of The Philippines, Petitioner, vs. Edmund Santibañez and Florence

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

SANTIBAÑEZ ARIOLA, respondents. G.R. No. 149926
FACTS:
The First Countryside Credit Corporation and Efraim M. Santibañez entered into a loan
agreement in the amount of P128,000.00. The amount was intended for the payment of the
purchase price of one (1) unit Ford 6600 Agricultural All-Purpose Diesel Tractor. In view thereof,
Efraim and his son, Edmund, executed a promissory note in favor of the FCCC, the principal
sum payable in five equal annual amortizations of P43,745.96.
The FCCC and Efraim entered into another loan agreement, this time in the amount of
P123,156.00. It was intended to pay the balance of the purchase price of another unit of Ford
6600 Agricultural All-Purpose Diesel Tractor, with accessories, and one (1) unit Howard
Rotamotor Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory note for
the said amount in favor of the FCCC. Aside from such promissory note, they also signed a
Continuing Guaranty Agreement5 for the loan.
Sometime in February 1981, Efraim died, leaving a holographic will. Subsequently,

testate proceedings commenced before the RTC of Iloilo City. Edmund, as one of the heirs, was
appointed as the special administrator of the estate of the decedent. During the pendency of the
testate proceedings, the surviving heirs, Edmund and his sister Florence Santibañez Ariola,
executed a Joint Agreement, wherein they agreed to divide between themselves and take
possession of the three (3) tractors; that is, two (2) tractors for Edmund and one (1) tractor for
Florence. Each of them was to assume the indebtedness of their late father to FCCC,
corresponding to the tractor respectively taken by them.
A Deed of Assignment with Assumption of Liabilities was executed by and between

FCCC and Union Savings and Mortgage Bank, wherein the FCCC as the assignor, among
others, assigned all its assets and liabilities to Union Savings and Mortgage Bank.
Demand letters for the settlement of his account were sent by petitioner Union Bank of
the Philippines (UBP) to Edmund. Eventually, petitioner filed a Complaint for sum of money
against the heirs of Efraim Santibañez, Edmund and Florence, before the RTC of Makati City.
A decision was subsequently rendered by the court dismissing the complaint for lack of
merit. The trial court found that the claim of the petitioner should have been filed with the
probate court before which the testate estate of the late Efraim Santibañez was pending, as the
sum of money being claimed was an obligation incurred by the said decedent. The trial court
also found that the Joint Agreement apparently executed by his heirs, Edmund and Florence,
was, in effect, a partition of the estate of the decedent. However, the said 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.
The petitioner appealed from the RTC decision and elevated its case to the CA.
However, the CA affirmed the RTC decision.
ISSUES:
1. Whether or not the partition in the Agreement executed by the heirs is valid.
2. Whether or not the heirs’ assumption of the indebtedness of the deceased is valid.
3. whether the petitioner can hold the heirs liable on the obligation of the deceased.
HELD:
1. No. Well-settled is the rule that 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. In our
jurisdiction, the rule is that there can be no valid partition among the heirs until after the
will has been probated.
This, of course, presupposes that the properties to be partitioned are the same
properties embraced in the will and in the present case, the deceased, Efraim
Santibañez, left a holographic will.
Thus, in executing any 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. Moreover, it is
within the jurisdiction of the probate court to determine the identity of the heirs of the
decedent. In the instant case, there is no showing that the signatories in the joint
agreement were the only heirs of the decedent. When it was executed, the probate of
the will was still pending before the court and the latter had yet to determine who the
heirs of the decedent were. Thus, for Edmund and respondent Florence S. Ariola 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. No. Perusing the joint agreement, it provides that the heirs as parties thereto “have
agreed to divide between themselves and take possession and use the above-described
chattel and each of them to assume the indebtedness corresponding to the chattel taken
as herein after stated which is in favor of First Countryside Credit Corp.” 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 as earlier discussed, 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.
3. No. Perusing the records of the case, nothing therein could hold private respondent
Florence S. Ariola accountable for any liability incurred by her late father. The
documentary evidence presented, particularly the promissory notes and the continuing
guaranty agreement, were executed and signed only by the late Efraim Santibañez and
his son Edmund. 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 said
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.

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Union Bank of The Philippines, Petitioner, vs. Edmund Santibañez and Florence

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UNION BANK OF THE PHILIPPINES, petitioner, vs.

EDMUND SANTIBAÑEZ and FLORENCE

Sometime in February 1981, Efraim died, leaving a holographic will. Subsequently,

A Deed of Assignment with Assumption of Liabilities was executed by and between

Thus, in executing any joint agreement which appears to be in the nature of an

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