Rule 86

Claims Against the Estate

Section 1. After granting letters testamentary, the Court shall issue notice requiring persons
having money claims to file them in the office of the Clerk.
• The time for filing shall not be more than 12 months, nor less that 6 months from the date from
the date of first publication.
o But the money claims against the estate may be allowed anytime before an order of
partition is made, at the discretion of the court upon such terms equitable.
o The one-month allowable extension comments from the order of the court allowing the
late filing.
• The Statute of Non-claims
o Period fixed by the court must not be less than 6 months nor more than 12 months
from the date of the first publication of notice.
o One fixed, it is mandatory and it cannot be shortened.
o The statute of non-claims supersedes the statue of limitations.
• Exception to the Statute of Non-Claims
o Motion for allowance – not more than one month; or
o Creditor may set up his claims as a counterclaim in an action brought by the executor
or administrator against him.

Echaus v Blanco
Echaus filed a claim against Hodges. During the pendency of the case, he died. Eventually, the
court ruled in Echaus’ favor and he, in turn, filed a claim against the estate of Hodges. The
administrator contended that the claim is already barred.
• The court ruled that it is not barred. The period provided under the Rules are not mandatory.
A creditor may still be allowed to file his claim (1) for a cause shown (2) on terms as are
equitable. It may be allowed any time before distribution.

Gaffney v Butler
Sps. Butler received a sum of money from petitioner as investment to a business which never
materialized. The husband died and the petitioner demanded from the wife the return of his money.
In the action, he impleaded the estate of the husband with the wife as representative.
• The issue is W/N the estate can be impleaded as defendant.
• The court held that NO. There can be no doubt that a deceased person or his estate may
not be impleaded as defendant in a civil action as they lack legal personality. When Anthony
died, his legal personality ceased and he could no longer be impleaded as respondent in
the present ordinary civil suit for collection. Any cause of action arising from the herein
alleged debt against the estate of Anthony may be brought as a claim against said estate in
the proper settlement proceedings.

What claims must be filed?

1. All claims for money arising from contract, whether due, not due or contingent.
o Only money claims which arose before the decedent’s death may be claimed.

Aguas v Llemos (actions which survive death)

In this case, Llemos made Sps. Aguas believe that he would apply for a writ of possession involving
a property located in Samar. The Sps. went to Samar only to discover that no such petition was
filed. They filed a complain against Llemos. Llemos died before filing an answer.
• The lower court said that the recovery of money must be initiated as a claim in the estate
proceedings.
• Under Rule 88, actions which survive the death are:
 (a) Actions to recovery real and personal property;
(b) Actions to enforce a lien; and
(c) Actions to recover damages for and injury.
• In this case, the claim of Sps. Aguas survive the death of Llemos.

MBTC v Absolute Management Corporation (solutio indebiti)

SHC issued checks to AMC for the purchase of plywoods. AMC allegedly never received payment,
and thus did not deliver the plywood. It was discovered later on that the check was delivered to a
certain Chua, the manager of AMC, who is also a proprietor of Ayala Lumber. Chua caused the
checks to be deposited to Ayala Lumber instead pf AMC. Hence, a fourth party complaint was filed
against his estate.
• The court held that there is solutio indebiti in this case.
• Section 5, Rule 86 allows claims of monetary obligations from the estate arising from implied
contracts.
• The claim of metrobank is also contingent in character. Should MBTC be held liable against
AMC, then it may claim from the Estate of Chua.

De Bautista v De Guzman (transportation case)

This is a transportation case. Respondent was the operator of a jeepney which was involved in an
accident. The driver was found guilty of reckless imprudence and was ordered to pay indemnity.
The writ of execution was not satisfied, and the respondent died. A complaint was initiated against
the respondent because they cannot collect from the driver, but it was dismissed.
• The court held that the dismissal was proper because under Section 5, Rule 86, it must be
prosecuted against the estate. The liability in this case originated from a breach of contract
which is a source of the money claim.
• The petitioner however, slept on their rights, and their claim was already barred. The estate
had already been distributed.
• As to contingent claims:
o As an exception to the bar, it was held that contingent claims which becomes
absolute within (2) years form the time limited for creditors to present claim, it may
be allowed if not disputed.
o If filed outside (2) years, the payment shall be sourced from the assets retained by
the administrator. Otherwise, the distributed assets may still be applied.
• As to contingent claims, it must be allowed by the probate court in order that the creditor
may proceed against the administrator or distributees.

2. Claims for funeral expenses and expenses for last sickness; and

3. Judgment for money against decedent.

o If debtor dies after actual levy, then the levied property may be sold.
o If he dies before, then the money claim must be presented against the estate, without
need of proof. The payment shall be in accordance with the settlement of estate,
subject to preference of credits.

4. Claims that survive the death

o Claims for civil liability may also be based on a source of obligation other than a delict,
such a contract, law, quasi-contract and quasi delict. A separate civil action may be
enforced against:
(a) The estate of the accused, in the case of contract; or
(b) The executor or administrator, in case of law, quasi-contract, and quasi-
delict.
Stronghold v Republic (surety)
JDS and Asahi entered into a construction contract. The performance was guaranteed by the
petitioner surety. The progress was slow which constrained the republic for claim upon the surety
bond. The petitioner denied the claim arguing that the proprietor of JDS, who is the party to the
surety already died, and thus, the money claims have been extinguished upon his death.
• The court held that only purely personal obligations are distinguished upon death.
• Under Section 5, Rule 86, the prosecution of money claims is allowed against the estate of
the deceased debtor. What is extinguished is only the obligee’s action or suit filed before
the court which is not a probate court.
• Thus, the petitioner surety cannot escape liability using his death.

Cabugao v People
Ynzon, one of the petitioners in this case was found guilty by the SC of reckless imprudence
resulting to homicide. He died during the pendency of appeal, and a separate civil action was
instituted against the administrator of his estate to recover civil liability based on quasi-delict.
• Upon death, criminal and civil liability ex delicto are extinguished.
• Civil liability sourced from law or quasi delict survives.
o An action to recover may be enforced against the administrator (if qd) or the estate
(if based on contract).

5. Mortgage debt
o The mortgagee has three options:
(a) To abandon the security and present his claim against the estate from the general
distribution;
(b) Foreclose his mortgage judicially, making the executor a party-defendant, and if
there is deficiency, file a contingent claim against the estate within the statute of
non-claims; or
(c) Rely solely on mortgage and foreclose the same extrajudicially, within the statute
of limitations. He forfeits his share on the distribution of the estate

Magaslang v Manila Bank

Sps. Magaslang entered into a credit line agreement. When the husband died, the bank notified the
court of its claim but proceeded to extrajudicially foreclose the REM. However, there remained a
deficiency causing it to file a suit to recover the deficiency amount.
• The Court discussed the three remedies and held that the mortgagee bank used the third
remedy. The remedies are distinct, independent and mutually exclusive from each other;
thus, the election of one effectively bars the exercise of the others.
• It did not exercise the first option since it merely notified the probate court of the outstanding
obligation. Thus, having opted to exercise the third option, respondent is now precluded
from filing a suit to recover any deficiency amount as earlier discussed.

Jacob v Court of Appeals

The bank foreclosed the property mortgaged to it by Centenera, by virtue of the SPA issued by
Jacob. The petitioner, who is the administratrix of the estate of Jacob, questioned the foreclosure.
The issue is raised is W/N extrajudicial foreclosure of a mortgage may proceed even after the death
of the mortgagor – YES.
• The mortgagee does not lose its right to foreclose even after death of mortgagor. That power
survives the death of the mortgagor. The right of the mortgagee bank to extrajudicially
foreclose the mortgage after the death of the mortgagor, acting through his attorney-in-fact,
did not depend on the authority in the deed of mortgage executed by the latter
Procedure for filing claims
• Claim must be delivered to the clerk of court with necessary vouchers.
• A copy must be served to the executor or administrator.
• The instrument upon which the claim is founded must be attached.
• If the claim is due, it must be supported by affidavit stating
o The amount due
o That no payments have been made; and
o That there are no offsets
• If the claim is a contingent claim, it must be supported with affidavits stating its particulars; and
• When a person other than the claimant makes an affidavit, the reason must be stated.

Rule 88
Payment of Debts of the Estate

Requirements before money claims may be prosecuted against the estate:

(1) A hearing is conducted
(2) The amount of claim is ascertained; and
(3) There are sufficient assets to pay for the debt.

If the assets are insufficient, the order of preference for payment is as follows:
(1) From the portion designated in the Will; and
(2) From the personal property; and
(3) From the real property
(4) If still insufficient, it must be satisfied from the contributions of the heirs who have been in
possession of portions of the estate prior to settlement of debts.

Real property may be charged first if (1) the execom filed an application in the court, (2) written
notice is given to persons interested, and (3) upon hearing it is determined that:
(a) Personal property is insufficient
(b) When the sale of personal property is detrimental to the participants
(c) When the sale may injure the business or interests of those interested in the estate
(d) When the testator has not made sufficient provision for payment of debts, expenses, and
legacies
(e) When the decedent, in his lifetime, contracted to deed the property to the beneficiary; or
(f) When the decedent held the real property in trust of another.

Contingent claims:
(a) Filed within two-year period allowed for creditors to present claims; and
(b) The court is satisfied that the claim is valid; and
(c) The claim has become absolute.
• It shall be paid from the estate retained by execom, or from the assets distributed
proportionately.

Rule 87
Actions By and Against Executors and Administrators

No action upon a claim for the recovery of money or debt or interest thereon may be commenced
against the executor or administrator, except:
• To recover real or personal property, or an interest therein
• Enforcement of a lien on real or personal property; and
• Recovery of damages for an injury to person, property, whether real or personal
Only actions which survives the death of the decedent shall be made against the executor or
administrator. Conversely, actions that do not survive must be claimed against the estate.
Executor or Administrator may bring or defend actions which survive
The general rule is that heirs have no legal standing to sue for recovery of property rights of the
deceased unless there is already partition and delivery to the heir. The exception are:
(a) When the administration proceedings are pending or administrator has not yet been
appointed.
(b) The administrator is unwilling or refuses to bring suit; or
(c) The executor or administrator is alleged to have participated in the act complaint as
defendant.
• The rule does not entirely preclude the heirs if:
o There is an order of the court assigning the property to them; or
o The time allowed for payment of the debt has expired

Executor in favor of Creditor; and Creditor may bring an action

An executor or administrator may commence and prosecute an action for recovery of property
for the benefit of creditors if:
(a) The deceased converted property
(b) The conveyance is:
o Made with intent to defraud creditors;
o Made to avoid any right, debt, or duty; and
o The subject of attempted conveyance would be liable to attachment by any of them in
his lifetime; and
(c) There is deficiency of assets in the hands of an executor or administrator for the payment of
debts and expenses.
(d) The creditors apply to the court with payment of the expenses and court deems it equitable.

The creditor himself may bring an action if:

(a) There is a deficiency of assets;
(b) The deceased in his lifetime made or attempted to convey the property with intent to defraud;
and
(c) The executor has not commenced an action; and
(d) The creditor filed a bond to the executor in the amount approved by the judge

Rule 89
Sales, Mortgages, and other Encumbrances of Property of Decedent

Section 1. The executor is prohibited from selling personal property of decedent without order of the
court, even if the heirs consented thereto.

Section 2. The court, on application, may authorize the executor to sell, mortgage, or otherwise
encumber the decedent’s real estate or personal property, in order to pay debts expenses and
legacies.
• Upon written notice;
• As would be beneficial to the persons interested.
The sale or encumbrance may only be alienated insofar as necessary. However, whole property may
be sold if:
• The sale in part will injure those interested as to the remainder; and
• It is necessary under the circumstance.

Orola v Rural Bank

In this case, some the children contracted loans from the bank with a REM on their inherited
properties from the estate of their mother. The estate is being administered by their father. The
 father failed to pay for amortization, and thus, the REM was foreclosed. The children then sought
for the nullification of the mortgage since it was not approved by the RTC.
• The Court noted that The Court agrees with the petitioners’ contention that respondent
Orola failed to secure an order from the intestate estate court authorizing him to mortgage
the subject lots.
• Effectively, it was the heirs who were authorized to contract the loan. However, under
Section 7 of Rule 89 of the Rules of Court, only the executor or administrator of the estate
may be authorized by the intestate estate court to mortgage real estate belonging to the
estate; hence, the order of the estate court authorizing the petitioners to mortgage the
realty of the estate to the respondent Rural Bank is a nullity.

Pahamotang v PNB
The husband was appointed as judicial guardian and administrator of the estate of his wife. There
are other 8 children as heirs. He executed mortgage without notification to the legal heirs. The
heirs questioned its validity.
• The court said that an order to sell a real property was issued without the notice to the
heirs, it is not only the contract itself which is null and void but also the order of the court
authorizing the same.

Section 3. A person interested may prevent the sale by giving a bond.

 Rule 90
Distribution and Partition

Rule 91
Escheats

Rule 98
Trustees

Rule 107
Absentees
General Guardian and Guardianship

Adoption

Custody and Commitment of Minors