178022566-Balane-Wills.pdf - SUCCESSION REVIEWER Based on Jottings and Jurisprudence on the Law on Succession by Prof Balane and Cases according to the

178022566-Balane-Wills.pdf - SUCCESSION REVIEWER Based on...

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Unformatted text preview: SUCCESSION REVIEWER Based on “Jottings and Jurisprudence on the Law on Succession” by Prof. Balane and Cases according to the 2006 Syllabus of Justice Hofileña CHAPTER 1 GENERAL PROVISIONS ART. 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. The Code has simplified the concept of succession and treats it simply as one of the 7 Modes of Acquiring Ownership as enumerated in Art712 of the NCC. 7 MODES OF ACQUIRING OWNERSHIP 1. Occupation 2. Intellectual Creation 3. Law 4. Donation 5. Estate and Intestate Succession 6. Tradition 7. Prescription Overlap of Codal Definition with Art776 Article 774 talks of ―property, rights and obligations to the extent of the value of the inheritance.‖ Article 776 talks of the ―inheritance‖ as including ―all the property, rights and obligations of a person which are not extinguished by his death.‖ For clarity and better correlation, Prof. Balane opines that Art774 should rather read: “Succession is a mode of acquisition by virtue of which the inheritance of a person is transmitted through his death to another or others either by his will or by operation of law.” And the inheritance which is transmitted through a person‘s death is defined by Article 776 to include ―all the property, rights and obligations of a person which are not extinguished by his death.‖ 1ST SEM 2006-2007 However, Philippine procedural law, as influenced by the common-law system, lays down a different method for the payment of money debts, as found in Rules 88 to 90 of the Rules of Court. It is only AFTER the debts are paid that the residue of the estate is distributed among the successors. Rule 90, Sec1 provides for the When the Order for the Distribution of Residue is made. According to the rule, when the debts, funeral charges and expenses of administration, the allowance to the widow and the inheritance tax have all been paid, that is the only time that the court shall assign the RESIDUE of the estate to persons entitled to it. The rule also provides that there shall be no distribution until the payment of the obligations enumerated above, have been made or provided for. However, if the distributees give a bond for the payment of the said obligations within such time and of such amount as fixed by the court, the distribution may be allowed. In our system therefore, money debts are, properly speaking, not transmitted to the heir nor paid by them. The estate pays them and it is only what is left after the debts are paid [residue] that are transmitted to the heirs. Justice JBL Reyes observed that Philippine rules of Succession Mortis Causa proceed from an imperfect blending of 3 Systems with Contrasting Philosophies – 1. GERMANIC CONCEPT OF UNIVERSAL HEIR Heir directly and immediately steps into the shoes of the deceased upon the latter‘s death At one single occasion [uno ictu] Without need of any formality En mass Automatic Subjective Novation What are Transmitted by Succession? Only Transmissible Rights and Obligations. General Rule – if the right or obligation is strictly personal [intuitu personae], it is intransmissible; otherwise it may be transmitted. 2. FRANCO-SPANISH SYSTEM Acquisition of estate by universal title but only upon acceptance by the heir at any time, with retroactive effect. Acceptance may be made any time except when the creditors or the court requires it be done within a certain time. This is the system followed by the NCC, by having the following features: a) Universality of Property Rights and Obligations b) Transmitted from the moment of death c) En bloc, as an entire mass d) Transmitted even before judicial recognition of heirship. Rule Regarding Pecuniary Obligations A literal construction of Art774 appears to imply that money obligations of the deceased would pass to the heirs, to the extent that they inherit from him. Seemingly, this article mandates that the heirs receive the estate, and then pay off the creditors. 3. ANGLO-AMERICAN [COMMON LAW] SYSTEM Estate must first be liquidated, assets marshaled and the debts paid or settled under judicial supervision, by an intervening trustee or personal representative [administrator or executor] before the net residue is taken over by the successor. Jen Laygo 3D Digests c/o 3C ’06-’07: Alvin Saga, Cecille Natividad, CJ Tan, Julie Domingo, Mars Rongo, Lea Mateo, Nina Rances & Ryan Quan 1 SUCCESSION REVIEWER This is the system followed by the Rules of Court, in that: a) Executor or administrator has possession and management of the estate as long as necessary for the payment of debts and expenses of administration, with authority to exercise the right of disposition. b) Section 3 Rule 87 – action to recover title or possession of lands in the hands of the executor or administrator can be maintained by the heir only upon the order of the Court assigning such land to the heir or devisee. c) Section 1 Rule 90 – heirs may recover their share only upon: Payment of debts, expenses and taxes Hearing conducted by the court Court assigns the residue of the estate to the heirs. As a result of the blending of these 3 systems, JBL Reyes says that we are thus faced with divergent, if not contradictory principles. Do the successors acquire the WHOLE of the transmissible assets and liabilities of the decedent? Art774 – by virtue of succession the property, rights and obligations, to the extent of the value of the inheritance of a person, are transmitted by and at the moment of his death, implying a transfer at that instant of the totality or universality of assets and liabilities. Do the successors only acquire the RESIDUUM remaining after payment of the debts, as implied by the Rules of Court? Art1057 – within 30 days after the court has issued an order for the distribution of the estate in accordance with the RoC, the heirs, devisees and legatees shall signify to the court having jurisdiction, whether they accept or repudiate the inheritance. The order of distribution under the RoC is issued only after the debts, taxes and administration expenses have been paid; hence it is arguable that the acceptance can no longer refer to assets already disposed of by the administrator, but must be limited to the net residue. But if title vests in the heir as of the death of the decedent then the acceptance of the heir becomes entirely superfluous, and the law should limit itself to regulating the effects the effects of a repudiation by an heir or legatee, and its retroactive effect. Or do the successors acquire only the NAKED TITLE at the death of the predecessor, but with possession or enjoyment vested in the Jen Laygo 3D 1ST SEM 2006-2007 administrator or personal representative until after settlement of the claims against the estate? RESULT of these divergent rules – Creditors must now pursue their claims during the settlement proceedings and not against the heirs individually. CASE Union Bank v. Santibañez - On May 31, 1980, First Country Credit Corporation (FCCC) and Efraim M. Santibanez entered into a loan agreement in the amount of P128,000 which was intended for the payment of the purchase price of 1 unit of a tractor. In view of this, Efraim and his son, Edmund executed a promissory note in favor of FCCC. - On Dec. 13, 1980, FCCC and Efraim entered into another similar loan agreement which was intended to pay the balance of the purchase price of another unit of a tractor. And again, father and son executed a promissory note for the said amount in favor of FCCC. - However, sometime in Feb 1981, Efraim died, leaving a holographic will and subsequently testate proceedings were commenced before the RTC of Iloilo with Edmund being appointed as the special administrator of the estate of the decedent. - During the pendency of the testate proceedings, Edmund and his sister, Florence Santibanez Ariola, executed a joint agreement on July 22, 1981 wherein they agreed to divide between themselves and take possession of the 3 tractors; 2 for Edmund and 1 for Florence, each of them to assume indebtedness of their late father to FCCC. - On August 20, 1981 a deed of assignment with assumption of liabilities was executed by and between FCCC and Union Savings and Mortgage Bank, wherein FCCC as the assignor, assigned all its assets and liabilities to Union Savings and Mortgage Bank. - Not long after, demand letter for the settlement of the account were sent by Union Bank to Edmund but the latter refused to pay. Thus Union Bank filed a complaint for sum of money against the Edmund and Florence before the RTC of Makati. - However the case was dismissed. The lower court said that the claim should have been filed with the probate court were the testate estate of Efraim was pending. Furthermore, the agreement was void considering that the probate court did not approve the agreement and no valid partition until after the will has been probated. - Also, the list of assets and liabilities of Union Bank did not clearly refer to the decedent‘s account. Also, it was contended that the obligation of the deceased had passed to his legitimate children and heirs already, in this case Edmund and Efraim. CA affirmed RTC decision. - Hence this appeal. WON the partition in the Agreement executed by the heirs is valid. - No, there can be no valid partition among the heirs until after the will has been probated by the probate court. This is specially because when the joint agreement executed by Edmund and Florence partitioning the tractors among themselves were executed, there was already a pending proceeding for the probate of their late father‘s holographic will covering the said tractors. Thus the probate court had already acquired jurisdiction over the said tractors which they can‘t be divested of. Any extrajudicial agreement needs court approval. Digests c/o 3C ’06-’07: Alvin Saga, Cecille Natividad, CJ Tan, Julie Domingo, Mars Rongo, Lea Mateo, Nina Rances & Ryan Quan 2 SUCCESSION REVIEWER WON the heirs‘ assumption of the indebtedness of the deceased is valid. - No, the assumption of the indebtedness of the decedent by Edmund and Florence is not binding. Such assumption was conditioned upon the agreement above. Hence, when the agreement of partition between Edmund and Florence was invalidated, then the assumption of the indebtedness cannot be given and force and effect. Also, the court should have filed it money claim against the decedent‘s estate in the probate court. Furthermore, it cannot go after Florence for she took no part in the documents related to the tractors, specifically the promissory notes and the continuing guaranty agreement; they should have gone after Edmund being a co-signatory to the promissory notes and guaranty. WON the Union Bank can hold the heirs liable on the obligation of the deceased. - No, Union Bank cannot hold the heirs liable on the obligation of the deceased because it had not sufficiently shown that it is the successor-in-interest of the Union Savings and Mortgage Bank to which the FCCC assigned its assets and liabilities. Furthermore, the documentary evidence clearly reflects that the parties in the deed of assignment with assumption of liabilities were the FCCC, and the Union Savings and Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc. Nowhere can the participation therein of Union Bank as a party can be found. As a result, Union Bank has no personality to file the complaint and therefore cannot hold the heirs liable for the obligation of the deceased. In a sense, it can be said that even money debts are transmitted to and paid for by the heirs, but this would be by mere indirection – Because whatever payment is thus made from the estate is ultimately a payment by the heirs and distributes, since the amount of the paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to receive. BUT only the payment of MONEY DEBTS has been affected by the Rules of Court. The transmission of other obligations not by nature personal follows the rule in Art774 and is transmitted by succession. CASE Estate of K.H. Hemady v. Luzon Surety - Luzon Surety filed a claim against the Estate based on 20 different indemnity agreements or counter bonds, each subscribed by a distinct principal and by the deceased K.H. Hemady, a surety solidary guarantor in all of them, in consideration of Luzon Surety‘s of having guaranteed, the various principals in favor of different creditors. - Luzon Surety also prayed for allowance, as a contingent claim, of the value of the 20 bonds it had executed in consideration of the counterbonds, and further asked for judgment for the unpaid premiums and documentary stamps affixed to the bonds with 12% interest. - Before the answer was filed, the lower court dismissed the claims of Luzon Surety, on two grounds: (1) that the premiums due and cost of documentary stamps were not contemplated under the indemnity agreements to be a part Jen Laygo 3D 1ST SEM 2006-2007 of the undertaking of the guarantor (Hemady), since the were not liabilities incurred after the execution of the counterbonds; and (2) that ―whatever losses may occur after Hemady‘s death, are not chargeable to his estate, because upon his death he ceased to be guarantor.‖ Whether losses are chargeable to Hemady’s Estate. - YES. While in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of the inheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the deceased but also to his obligations. - Under the CC, the heirs, by virtue of the rights of succession are subrogated to all the rights and obligations of the deceased and cannot be regarded as third parties with respect to a contract to which the deceased was a party, touching the estate of the deceased. - By contract, the articles of the Civil Code that regulate guaranty or suretyship contain no provision that the guaranty is extinguished upon the death of the guarantor or the surety. - Although Art. 2056 requires that one who is required to furnish a guarantor must present a person who possesses integrity, capacity to bind himself, and sufficient property to answer for the obligation which he guarantees, it will be noted that the law requires these qualities to be present only at the time of the perfection of the contract of guaranty - The contract of suretyship entered into by K.H. Hemady in favor of Luzon Surety not being rendered intransmissible due to the nature of the undertaking, nor by the stipulations of the contracts themselves, nor by provision of law, his eventual liability thereunder necessarily passed upon his death to his heirs. The contracts, therefore, give rise to contingent claims provable against his estate. - The SC reversed the order of the lower court and instead ordered the case be remanded to the CFI. - The general rule is that a party‘s contractual rights and obligations are transmissible to the successors. - Art. 1311 of NCC: Contracts take effect only as between the parties, their assigns and heirs, except in the case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. - Art. 774 of NCC: 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 other either by his will or by operation of law. - Art. 776 of NCC: The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death. - The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in the Rules of Court that money debts of a deceased must be liquidated and paid from the estate before the residue is distributed among said heirs. The reasons is that whatever payment is made from the estate is ultimately a payment by the heirs, since the amount of the paid claim in fact diminishes or reduces the shares that the heirs would have been entitled to receive. Digests c/o 3C ’06-’07: Alvin Saga, Cecille Natividad, CJ Tan, Julie Domingo, Mars Rongo, Lea Mateo, Nina Rances & Ryan Quan 3 SUCCESSION REVIEWER Alvarez v. IAC - Aniceto Yanes owned a parcel of land identified as Lot 773 in Negros Occidental. He was survived by his children, Rufino, Felipe, and Teodora. - Aniceto left his children with Lots 773 and 823. - Teodora cultivated part of Lot 823. - Rufino and his children left the province to settle in other places as a result of the outbreak of WWII. - After the liberation, Rufino‘s children went back to the land to get the their share in the sugar produce. They were informed that Santiago already owned Lot 773, and had the corresponding TCTs. - Santiago sold the land to Fuentabella. - After Fuentabella died, the administratrix of his estate (Arsenia) filed a motion requesting authority to sell Lot 773 (already subdivided to Lots 773-A and 773-B). - The motion was granted and Arsenia sold the lands to Alvarez. - Teodora and Rufino‘s children (Yaneses) filed a complaint in CFI Negros Occidental for the ―return‖ of the possession and ownership of Lots 773 and 823. - During the pendency of the case, Alvarez sold the land to Siason. - CFI ordered Alvarez to reconvey Lots 773 and 823 to the Yaneses. - Execution of the decision was unsuccessful with regard to Lot 773 as it was already in the name of Siason. - Another action was instituted by the Yaneses, this time impleading Siason. - Siason claims that he was a purchaser in good faith and thus, he has title to Lot 773. - CFI dismissed the complaint against Siason and ordered the children of Alvarez to solidarily pay the Yaneses Php 20,000, representing the actual value of Lot 773. WON it was correctly ruled that the children of Alvarez be made responsible for the liability of their father (Alvarez). - YES. The rights and obligations of the deceased are generally transmissible to his legitimate children and heirs. - As heirs of the late Alvarez, the children cannot escape the consequences of their father‘s transaction, which gave rise to the present claim for damages. - The children are, however, liable only to the extent of the value of their inheritance. - Art. 774, NCC: 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. - Art. 776, NCC: The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death. ART. 775. In this Title, “decedent” is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator. 1ST SEM 2006-2007 Testator – specific term, person who transmits his property via a will. It is unfortunate that the Code does not use the term ―Intestate‖ to refer to a decedent who died without a will, This would have prevented the ambiguity now inherent in the term ―decedent‖ ART. 776. The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death. Overlap of Codal Definition with Art776 Article 774 talks of ―property, rights and obligations to the extent of the value of the inheritance.‖ Article 776 talks of the ―inheritance‖ as including ―all the property, rights and obligations of a person which are not extinguished by his death.‖ For clarity and better correlation, Prof. Balane opines that Art774 should rather read: “Succession is a mode of acquisition by virtue of which the inheritance of a person is transmitted through hi...
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