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SPECPRO - Meeting 3 - Rule 85 - 87 - Coggle Diagram
SPECPRO - Meeting 3 - Rule 85 - 87
Rule 85 - ACCOUNTABILITY AND COMPENSATION OF EXECUTORS AND ADMINISTRATORS
RULE 86: CLAIMS AGAINST THE ESTATE
RULE 87: ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORS
Actions that survive
Right of heir inchoate
Right to compel 3rd persons to examination and right to recover property
Right of creditor to file if exec/adm refuses
Right to recover property can be done in probate court
Sec. 1 Allowable Actions against Executor/Administrator
- Only the following actions may be filed against the executor/administrator
Recovery of real or personal property or an interest therein from the estate
Enforcement of lien on real or personal property from the estate, and
Recovery of damages for an injury to persons or property, whether real or personal.
Must be filed before death.
not limited to injuries to specific property, but it also extends to wrongs by which the personal estate is injured or diminished.
Money Claims
- Should be filed against the estate NOT the administrator or executor.
Things Requiring Court Approval -
1.
Things With no Court Approval -
Sec. 2 Actions which may be brought be Executor/Administrator
- For the recovery or protection of the property or rights of the deceased, an executor or administrator may bring or defend, in the right of deceased, actions for causes which survive. Ex. Actions involving real or personal property
Thus, any action extinguished by the death of the decedent may not be brought.
Sec. 3 Legal Personality of Heirs
- The heirs or devisees have no cause of action against the administrator for recovery of the property in the estate before distribution is made or before any residue is known.
Thus, partition and delivery must precede the suit filed by the heir against the administrator/executor
Rationale
- An executor or administrator who assumes the trust takes possession of the property left by the decedent for the purpose of paying debts.
When the debts of the decedent are undetermined and unpaid, no residue may be settled for distribution among the heirs and devisees. This means no cause of action for recovery of the property.
Actions against Third Parties -
GR
- Heirs have no legal standing to sue for the recovery or protection of the property rights of the decedent
It is the executor or administrator who may bring these actions.
XCPN
- in the following cases:
Pending the filing of administration (NCC 777)
Administration proceedings have already been commenced, but an administrator has yet to be appointed (NCC 777)
The executor or administrator is unwilling or refuses to bring suit
The executor or administrator is alleged to have participated in the act complained of, and he is made a party defendant.
In case of unreasonable delay in the appointment of an executor or administrator of the estate or in case where the heirs resort to an extrajudicial settlement of the estate, the court may adopt the alternative of allowing the heirs of the deceased to be substituted for the deceased
Rationale
- Under 777 rights are transmitted, but pending distribution may no cause of action yet.
Here, conflict with the executor/armi
Applicability to Donees
- This rule is not applicable to a donee inter vivos.
A donee inter vivos may file an action to compel the administrator to deliver the property donated to him by the decedent. Different from legatee
Sec. 4 Compromise with Debtors
- An executor or administrator may compromise with the decedent’s debtor with the approval of the court.
May give a discharge of such debt on receiving a just dividend of the estate of the debtor.
Sec. 5 Mortgage due estate may be foreclosed
- An executor or administrator may foreclose a mortgagee belonging to the estate even without the approval of the court.
Effect of Negligence
-
GR - the executor is not chargeable for the loss sustained by the estate.
XCPN - if through his negligence, the estate sustains a loss such as when he/she does not foreclose a mortgage, the executor or administrator shall bear the loss.
Sec. 6 property concealed, embezzled, or fraudulently conveyed
. - This contemplates 2 situations:
A person is suspected to have concealed, embezzled or conveyed away any of the money, goods, or chattels of the deceased, or
When such person has in his possession or has knowledge of any deed, conveyance, bond, contract or other writing, which contains evidence the title, interest or claims of the deceased. (Withholds information of documentary evidence which tends to disclose rights or claims of the deceased to the property)
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How claims presented/prosecuted
Claims allowed
Procedure on claims
Sec. 1 Notice to creditors to be issued by court
When issued: Immediately after granting letters testamentary or administration
To whom given: All persons having money claims against the estate
Action: Requiring all persons having money claims against the estate to file them in the office of the clerk of court
Purpose of administration
- Liquidation of the estate and distribution of its residue. Liquidation is the determination of all the assets of the estate, and the payment of all debts and expenses
Purpose of Presentation of Claims
- To protect the estate of the deceased.
It enables the executor or administrator to examine each claim and to determine whether it is a proper one which should be allowed.
It apprises the administrator of the existence of the claim so that a proper and timely arrangement may be made for its payment, either in full or by pro rata portion in the due course of the administration.
Form of Claims
- Need not be in any particular form. Sufficient that:
it states the character and amount of the claim,
Enables the representative to provide for its payment
Serves to bar all other claims by reason of its particularity of designation
Type of claims that may be filed
- Only money claims contracted BEFORE the decedent’s death may be brought under this rule.
Claims originating AFTER the decedent’s death may be allowed as expenses of administration, but not as money claims under Rule 86.
But instead, collected from the administrator or executor personally or by motion in the proceedings without the formalities and limitations for money claims as stated in this Rule.
Definition of Claims
- Includes every species of liability which an executor/administrator can be called upon to pay from the general fund of the estate.
Refers to debts or demands against the decedent which may have been enforced during his lifetime by personal actions for the recovery of money.
Claims for Taxes
- whether assessed before or after the death of the decedent, can be collected from the heirs even after the distribution of the properties of the decedent.
The heirs shall be liable for these in proportion to their share in the inheritance
86.2. Time within which claims shall be filed.
- Claims against the estate may be filed not less than 6 months, but not more than 12 months from the date of the first publication of the notice.
Statute of Non-Claims
- the period fixed by the probate court for the claims against the estate. Claims not filed within this period are barred forever.
Rationale of period
- The rule specifies a range in order to give the probate court the discretion to fix the period for filing of claims.
Once fixed, the period becomes mandatory. This is to ensure the speedy settlement of affairs of the deceased, and the early delivery of the property to the person entitled to the same.
Nature of the Statute
- Non-exclusive, money claims against the estate may be allowed at any time before an order of distribution of the estate is entered.
Court may for good cause, allow claims to be filed within a period not exceeding 1 month, which commences from date of the order of the court allowing a filing NOT expiration of the original period for filing of claims.
Cause for Belated claim
- Rule 87.2 states that the court has no authority to admit a belated claim for no cause or for an insufficient cause.
However, this rule does not state which cause shall be considered sufficient.
Thus, it leaves the determination of sufficiency of cause to the discretion of the court.
Effect on Statute of Limitations
- The statute of non-claims supersedes the statute of limitations.
Thus, even if a claim has not yet prescribed under the statute of limitations, if such claim is not made within this period, the creditor may no longer collect because of the statute of non-claims.
Waiver of Statute of Non-Claims
- Though the presentment of probate claims is imperative, it is generally understood that this may be waived by the estate’s representative. This is determined from administrator's act and conduct, such as to plead the statute of non-claims, his active participation, and resistance to the plaintiff’s claim in a civil suit amounts to such waiver.
Exceptions to Statute -
Creditor may apply for a new period not exceeding 1 month from the order allowing the same for just cause
The creditor may set up his claim as a counterclaim in an action filed by the executor or administrator against him under Rule 86.5.
86.3 Publication of notice to creditors
86.4 Filing of copy of printed notice
-
A copy of the printed notice must be filed with the court within ten days after publication and posting.
Additionally, the affidavit of the published notice must also be submitted, setting forth the dates of the first and last publication, as well as the newspaper on which it was printed.
Rationale
- To inform the creditors as well as the courts that the notice requirement has been duly followed.
86.5 Claims which must be filed under the notice. If not filed, barred; exceptions
Types of Claims which must be filed within Period in Notice -
Claims for money against the decedent arising from contract, express or implied, whether due, not due or contingent
Claims for funeral expenses and expenses for last sickness of decedent
Judgment for money against decedent
Money Judgments
- This judgment must be presented as a claim against the estate where the judgment debtor dies before levy on execution of his properties.
Thus, if the action is for recovery of money arising from contract, and the defendant dies before entry of final judgment, it shall not be dismissed but shall be allowed to continue until entry of final judgment.
Implied Contracts
- Includes those arising from quasi-contract, which survive the death of the decedent and may be enforced by filing of claims against the estate. (Metropolitan Bank & Trust Company vs. Absolute Management Corporation)
86.6 Solidary obligation of decedent
- Treatment differs depending if the decedent is a solidary, or joint debtor.
Solidary Obligation
- the creditor is mandated to file a claim against the decedent as if he were the only debtor, i.e., to collect the entire amount.
If the creditor succeeds in collecting, the estate has the right to recover the respective contributions of the other debtors.
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86.7 Mortgage debt due from estate
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Types of Allowable Money Claims -
GR - Only money claims may be presented in the testate or intestate proceedings.This refers to claims upon a liability contracted by the decedent BEFORE his death.
After Death - Any money claim arising after the death of the decedent cannot be presented.
These may be treated as expenses of administration instead and collected from the administrator or executor.
How Collected
- either (a) personally; (b) By motion in the intestate/testate proceedings without the formality and limitations provided for money claims against the decedent. (Herrera, citing Moran, p. 480)
Collection of Taxes
- Claims for taxes due and assessed after the death of the decedent need not be in the form of a claim. Instead, the court, in the exercise of administrative control over the executor/administrator may direct him to pay such taxes.
In such cases, the heirs, even after distribution of the estate are liable for such taxes. (herrera, Citing Moran p. 489)
Duty of Administrator/Executor
- Immediately after the notice to the creditors is issued, the executor or administrator must cause the following:
Publication of the notice three weeks successively in a newspaper of general circulation in the province; and
Posting of the notice for three weeks successively in the following places:
(a) Four public places in the province; and
(b) Two public places in the municipality where the decedent last resided.
Effect of Publication
- Amounts to constructive notice and is binding against the whole world.
Consequently, a creditor cannot be permitted to file his claim beyond the period fixed in the notice on the ground that he had no knowledge of the administration proceedings.
Accountability of executor/administrator
Liability of admin/exec v liability of estate
Necessary expenses
Compensation
Attorney’s fees, when chargeable to estate, exec/adm
Pascual v CA 300 S 214
Accounting by exec/admin (notice to interested parties)
85.1. Accountability of Executor/Administrator.
- The executor/administrator is accountable for the whole estate of the decedent which has come to his possession at the value of the appraisement.
85.2 Not to profit by increase or lose by decrease in value.
- No executor or administrator shall:
profit by the increase,
or suffer loss by the decrease or destruction, without his fault, of any part of the estate.
Must account for the excess when he sells any part of the estate for more than the appraisement, and if any is sold for the less than the appraisement, he is not responsible for the loss, if the sale has justly made.
If he settles any claim against the estate for less than its nominal value, he is entitled to charge in his account only the amount he actually paid on the settlement.
85.3 When not accountable for debts due estate.
- No executor or administrator shall be accountable for debts due the deceased which remain uncollected without his fault.
85.4 Accountable for income from realty used by him.
- If the executor or administrator uses or occupies any part of the real estate himself, he shall account for it as may be agreed upon between him and the parties interested, or adjusted by the court with their assent; and if the parties do not agree upon the sum to be allowed, the same may be ascertained by the court, whose determination in this respect shall be final.
85.5 Accountable if he neglects or delays to raise or pay money.-
An executor/administrator becames liable for damages if:
They unreasonably delay to do:
Raise money by collecting debts
Raise money by selling property of deceased
Pay over money in his hands
Which results in:
Value of estate is lessened,
or Unnecessary cost or interest accrues,
AND Persons interested suffered loss
Responsibility for Damages
- The responsibility for damages cannot be shifted to the estate
85.6 Money paid as Cost -
GR - The amount paid by an executor or administrator for costs awarded against him shall be allowed in his administration account,
XCPN - unless it appears that the action or proceeding in which the costs are taxed was prosecuted or resisted without just cause, and not in good faith.
85.7 Expenses and fees allowed executor or administrator.
- An executor administrator/ allowed to charge the following:
Necessary Expenses - For the care, management, and settlement of the estate
Service Fees - For the time actually and necessarily implied
2a. Commission - Alternative to service fee, a commission upon the value of so much of the estate as comes into his possession and is finally disposed of by him in the payment of debts, expenses, legacies, or distributive shares, or by delivery to heirs or devisees.
Exception
- where the estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the executor or administrator, a greater sum may be allowed
Multiple Administrators
- If there are two or more executors or administrators, the compensation shall be apportioned among them by the court according to the services actually rendered by them respectively.
Legal Fees
- When the executors or administrator is an attorney, he shall not charge against the estate any professional fees for legal services rendered by him
Provision for Compensation in Will
- When the deceased by will makes some other provision for the compensation of his executor, that provision shall be a full satisfaction for his services unless by a written instrument filed in the court he renounces all claim to the compensation provided by the will.
Necessary Expenses
- expenses entailed for the preservation and productivity of the estate and its management for purposes of liquidation, payment of debts, and distribution of residue among persons entitled
Improvements
- Expenses for the renovation and improvement of the family residence, incurred to preserve the family home and to maintain the family's social standing in the community are allowable as legitimate administration expenses of the estate the deceased
Non-Necessary expenses
-
Expenses incurred by heir as occupant of family home without paying rent (ex. salary of house helper, light, water bills, gas, etc. [De Guzman v. De Guzman-Carillo]
Expenses incurred by an executor or administrator to produce a bond [Sison v. Teodoro]
The administration bond should not be considered as part of the necessary expenses, not being included among the acts constituting the care, management, and settlement of the estate [Ocampo v. Ocampo]
expenses on the anniversary of the death of the deceased
expenses incurred by a presumptive heir for her appearance and that of her witnesses at the trial to oppose the probate of an alleged will
expenses for the settlement of the question as who are entitled to the estate left by the deceased
expenses incurred by the executor or administrator to procure a bond
Personal expenses of the occupant of the heir of the family residence (ex. salary of the household help, light and water bills, cost of gas)
Expenses for stenographic notes, unexplained representation expenses
Compensation for Executor/Administrator
-
Compensation provided in Will -
GR
- If compensation in will, full satisfaction for services.
XCPN
- If admin, by written instrument filed in court, renounces all claim to compensation provided in the will
No Provision in Will -
GR
- Payment schedule
XCPN
- Greater sum if:
Estate is large
Settlement has been attended with great difficulty, and
Settlement required a high degree of capacity of the executor or administrator
wide latitude or discretion is given to the trial court to grant a greater sum
Payment Schedule -
PHP 4.00/day for the time actually and necessarily employed, OR
Commission upon the value of the estate that came into his possession and is disposed of
2% for the first PHP 5,000
1% for excess up to PHP 30,000
1/2% for excess of PHP30k up to PHP 100,000
1/4% for excess of PHP100k
Attorney's Fees
- Not chargeable to the estate. But instead:
When an attorney assists the administrator or executor personally in the execution of his trust, the liability for the payment of attorney’s fees rests on the executor or administrator
where the administrator is himself the counsel for the heirs, it is the heirs who must pay
XCPN - However, if the fees paid are beneficial to the estate and reasonable, exec/administrator is entitled to reimbursement from the estate. [Uy Tioco v. Imperial]
Procedure for Collection of Attorney's Fees
- Either of two options:
counsel to request the administrator to make payment
Failure to pay - File an action in his personal capacity, not as administrator
If judgment is rendered against the administrator and he pays, she may include the fees so paid in his account to the court
petition in the testate or intestate proceeding asking that the court, after notice to all persons interested, allow his claim and direct the administrator to pay it as an expense of administration
85.8 Duty to Render an Accounting
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GR - Mandatory duty to render an accounting within 1 year from time of receiving letters
XCPN - unless court otherwise directs.
Receipt of Funds after Approval of Final Accounts
- an executor or administrator who receives assets of the estate after he has filed an account should file a supplementary account, and may be compelled to do so. the fact that the final accounts had been approved does not divest the court of jurisdiction to require supplemental accounting since, aside from the initial accounting, the Rules provide that "he shall render such further accounts as the court may require until the estate is wholly settled."
Effect of Extrajudicial Settlement - Joson v. Joson:
fact that all the heirs of the estate have entered into an extrajudicial settlement and partition in order to put an end to their differences cannot in any way be interpreted as a waiver of the objections of the heirs to the accounts submitted by the administrator
Nature of Duty
- The duty of an administrator to render an account is not a mere incident of an administration proceeding which can be waived or disregarded when the same is terminated, but that it is a duty that has to be performed and duly acted upon by the court before the administration is finally ordered closed and terminated
85.9 Examinations on oath with respect to account
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GR - Court may examine the executor or administrator upon oath with respect to every matter relating to any account rendered by him, and shall so examine him as to the correctness of his account before the same is allowed
XCPN - when no objection is made to the allowance of the account and its correctness is satisfactorily established by competent proof.
Duty of Other Parties
- heirs, legatees, distributees, and creditors of the estate shall have the same privilege as the executor or administrator of being examined on oath on any matter relating to an administration account.
How Examined
- hearing is usually held before an administrator's account is approved, especially if an interested party raises objections to certain items in the accounting report. At this hearing, common practice is for:
administrator to take the witness stand
testify under oath on his accounts
identify the receipts, vouchers and documents evidencing his disbursements which are offered as exhibits
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85.10 Notice Requirement
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When - Before the account of an executor or administrator is allowed,
Whom - notice shall be given to persons interested
What - of the time and place of examining and allowing the same;
Form of Notice - and such notice may be given personally to such persons interested or by advertisement in a newspaper or newspapers, or both, as the court directs.
Other Notice Requirements -
Rule 85, Sec. 10: In reference to the time and place of examining and allowing the account of the executor or administrator;
Rule 89, Sec. 7(b): Concerns the petition to authorize the executor or administrator to sell personal estate or to sell, mortgage, or otherwise encumber real estate
Rule 90, Sec. 1: Hearing for the application for an order for distribution of the estate residue
85.11 Admission of surety to Accounting
- Upon the settlement of the account of an executor or administrator, a person liable as surety in respect to such account may, upon application, be admitted as party to such accounting.
Scope of Duty
-
GR
- Refers to properties which have come into his possession. Thus, does not include property not coming into possession, even if within his knowledge.
XCPN
- If he gains knowledge respecting the estate, he may be held accountable if he fails to recover possession through fraud or negligence.
Q.
Define Accountability
A - Administrator has to answer for these properties. Starts with an inventory,
Q.
How to account for gains and losses?
A - Every year, administrator reports an updated inventory to the court which reflects the change in assets.
Q.
Administrator for unrealized profits?
DC - No, but administrator must always be prudent(?)
Q. Does an heir have personality in estate proceedings?
DC - An heir, though inchoate interest still has personality. Manifested from fact that they can file motion to discharge administrator, etc.,
Q. If there are oppositions filed by heirs, and despite these, the admin goes ahead and estate suffers a loss, is he going to be liable
DC - Opposition may raise grounds for potential loss already. Therefore, proceeding regardless may be negligence.