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Specpro - Meeting 4 - Rule 88 - 91 - Coggle Diagram

- - - - Effect of Civil case against Administratrix - The probate court may hold in abeyance intestate estate proceedings pending determination of a civil case against the administratrix.
        
        Consequently, The heirs of the estate may not demand the closing of an intestate proceeding at anytime where there is a pending case against the administrator.
    - - Effect on Filing requirements - While the testator has acknowledged a specific debt in his will, the creditor is NOT relieved from the duty of filing his claim in the testate/intestate proceeding. Otherwise, the claim will be barred.
      - Sec. 3 Order of Preference for Payment of Debts -
        
        From the portion or property designated in the will;
        
        From the personal property; and
        
        From the real property.
        
        When Estate is Insufficient - In case of deficiency after the exhaustion of the decedent's estate, it shall be satisfied from the contribution of devisees, legatees, or heirs who have been in possession of portions of the estate before the debts and expenses have been settled and paid.
        
        Insolvent Decedent - If the decedent is insolvent, the preference of credits stated in Articles 1059 and 2239 to 2251 of the Civil Code must be followed.
        
        Exception, when Real Estate may be Charged First -
        
        GR - Personal estate of the deceased not disposed of the will, shall be first chargeable with the payment of the debts and expenses.
        
        Exceptions -
        
        When the decedent's personal property is insufficient;
        
        When the sale of personal property shall be detrimental to the participants of the estate;
        
        When the sale of personal property may injure the business or interests of those interested in the estate;
        
        When the testator has not made sufficient provision for payment of such debts, expenses, and legacies;
        
        When the decedent was, in his lifetime, under contract, binding in law, to deed real property to beneficiary; and
        
        When the decedent during his lifetime held real property in trust for another.
        
        Requisites for Charging Real Estate First -
        
        (1) The executor or administrator makes an application with the court;
        
        (2) Written notice is given to the persons interested;
        
        (3) Hearing by the court.
        
        Sec. 4-5 Contingent Claims - One that is subject to the happening of a future uncertain event.
        
        Requisites for Retention of Estate for Contingent Claims -
        
        The contingent claim is duly filed within the two-year period allowed for the creditors to present claims;
        
        The court is satisfied that the claim is valid; and
        
        The claim has become absolute.
        
        Effect of Expiration of Two year period - (De Bautista v. De Guzman) Assets retained in the hands of the executor or administrator not exhausted in the payment of the claims, shall be distributed by order of the court to the persons entitled to the same.
        
        If this matures, after expiration of two years, the creditor may sue the distributees. They are liable in proportion to the shares in the estate respectively received by them.
        
        Subject to condition that these may still be applied to the payment of the claim when established, and the creditor may maintain an action against the distributees to recover the debt, and such distributees and their estates shall be liable for the debt in proportion to the estate they have respectively received from the property of the deceased.
        
        Importance of Establishing and Filing of Contingent Claims - 88.5 Is the only instance when a creditor can file an action against a distributee of the debtor’s asset.
        
        If filed after termination of intestate proceedings, no longe rallowed.
        
        Effect of Distribution -
        
        Claim filed within 2 years - the assets retained in the hands of the executor or administrator, not exhausted in the payment of claims, shall be disturbed by the order of the court to the persons entitled to the same;
        
        If Claim not Yet Established - Claim may be subsequently established and creditor may file action against distributees to recover the debt. Liable for debt in proportion to the estate they have respectively received from the property of the deceased.
        
        Claim Filed After Two Years - No longer allowed.
        
        Even under the above rule, the contingent claims must first have been established and allowed in the probate court before the creditors can file an action directly, against the distributees.
        
        Right to Dispute - Executor or Administrator may dispute validity of the claim. If disputed, it may be proved and allowed or disallowed by the court as the facts may warrant.
        
        Scope of Court Authority - The residuary funds within the estate, even if within the possession of the universal heirs are considered funds of the estate.
        
        Thus, Court may compel the heirs to deliver said funds to administrator of the estate for the payment of any claim against the estate.
        
        Retention -
        
        GR - may order the executor or administrator to retain in his hands sufficient estate to pay such contingent claim when the same becomes absolute
        
        XCPN - if the estate is insolvent, sufficient to pay a portion equal to the dividend of the other creditors.
        
        Sec. 6 Contributive Shares of Heirs - Where Heirs have entered into possession of portions of the estate before the debts and expenses have been settled and paid, and have become liable to contribute for the payment of such debts and expenses,
        
        The court may by order after hearing, settle the amount of their several liabilities, and order how much and in what manner each person shall contribute, and may issue execution as circumstances require.
        
        Extent of Liability of Heirs - The heirs are not liable to respond with their own property for the debts of the deceased. But, even after partition, liable in proportion to the amount or value of the property they have respectively received from the estate for any lawful outstanding claims against the estate
        
        Rationale - The hereditary property refers to that part which remains after the settlement of all lawful claims against the estate. Thus, the heirs cannot, by any act of their own or by agreement among themselves, reduce the creditors security for the payment of their claims.
        
        Enforcement of Liability - 88.6 Authorizes execution as means to enforce payments of the debts of the estate.
        
        Such debts do not include a legacy, as legatees are among those against whom execution is authorized to be issued. (Pastor, Jr. v. CA)
        
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        Sec. 7 Order of Payment in Insolvent Estates - the executor or administrator shall pay the debts against the estate, observing the provisions of Articles 1059 and 2239 to 2251 of the Civil Code
        
        Sec. 8 Payment of Dividends - If there are no assets sufficient to pay the credits of any once class of creditors after paying the credits entitled to preference over it, each creditor within such class shall be paid a dividend in proportion to his claim.
        
        No creditor of any one class shall receive any payment until those of the preceding class are paid.
        
        Applicable Situation - Where:
        
        There are several creditors entitled to the same preference and
        
        The assets are insufficient to pay all of them.
        
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        Sec 9 Estate of Insolvent Non-Resident - If the decedent is a non-resident and insolvent, his estate found in the Philippines shall be distributed to his creditors, both here and outside,the country, in proportion to their respective shares.
        
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      - Q. Do heirs have right to designated payment of assets?
        
        A - No, generally must follow will. Rule on preference of credits apply.
        
        Subject to instances where exceptions to preference of credit applies.
        
        DC - Subquestion is, what prejudice will happen to the estate if the heirs pick out estate property?
        
        A - There may be no prejudice in these instances, after exhaustion of properties designated by will. Thus heirs may pick out properties?
  - - - Sec. 2 Authorization for Sale, mortgage, or other encumbrance of realty to pay debts and legacies through personalty not exhausted
        
        Sec. 3 Section 3. Persons interested may prevent such sale, etc., by giving bond - Any person interested in the estate may prevent the sale, mortgage, or encumbrance of real or personal property part of the estate
        
        Sec. 4. Court Authorization for Sale of Estate
        
        Sec. 5 Encumbrance of Estate to pay foreign Debts or Legacies -
        
        When Allowed -
        
        Sale of personal estate, or the sale, mortgage, or other encumbrance of real estate is not necessary to pay the debts, expenses of administration, or legacies in the Philippines;
        
        Records of probate court in another country show that the estate is NOT sufficient to pay the debts, expenses of administration, and legacies there.
        
        How Authorized - Court may authorize in same manner as for the payment of debts or legacies in the Philippines
        
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        Sec. 6 Sale of Properties Acquired by Execution Sale - The court may authorize an executor or administrator to sell mortgage, or otherwise encumber real estate acquired by him on execution or foreclosure sale, under the same circumstances and under the same regulations as prescribed in this rule for the sale, mortgage, or other encumbrance of other real estate.
        
        Who may be Authorized - Only the executor or administrator of the estate may be authorized by the intestate court to mortgage real estate belonging to the estate. Thus, the order of the estate court authorizing the heirs to mortgage the realty of the estate is a nullity. [Orola, et al. v. The Rural Bank of Pontevedra]
        
        Sec. 7 Regulation for granting authority to sell, mortgage, or otherwise encumber estate. Court may authorize the executor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these rules and when it appears necessary or beneficial under the following regulations.
        
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        Requirements for Sale of Realty -
        
        written notice of the application and time and place of hearing
        
        to be served upon heirs residing in PH is mandatory
        
        Court Order
        
        Application of the executor or administrator
        
        When Allowed - When it appears that the sale of the whole or a part of the real or personal estate, will be beneficial to the heirs, devisees, legatees, and other interested persons
        
        Sale under Sec. 4 - Here, not necessary to pay debts, legacies or expenses of administration.
        
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        How Prevented - By Giving a bond, conditioned on payment of debts, expenses of administration and legacies, as well as security of the creditors, executor, or administrator
        
        Interim Expenses after Bond - Only that specific property is stayed. Other properties may be sold. Bond is for future instances. Otherwise, provision would have said that you provide cash, not bond.
        
        Application Requirement - Upon application, court may authorize the executor or administrator to:
        
        Sell
        
        Mortgage, or
        
        Otherwise encumber decedent’s real estate, instead of personal property
        
        When Allowed -
        
        Personal estate of the deceased is not sufficient to pay the debts, expenses of administration, and legacies, or
        
        Sale of such personal estate may injure the business or other interests of those interested in the estate, and
        
        Testator has not otherwise made sufficient provision for the payment of such debts, expenses, and legacies
        
        Condition for Encumbrance - Sale, mortgage or other encumbrance is conditioned on:
        
        Application of executor or administrator
        
        Written notice to heirs, devisees, and legatees residing in the Philippines
        
        Such would be beneficial to person interested
        
        Partial Sale - Executor or administrator is not constrained to sell, mortgage, or encumber the whole property or none.
        
        Instead, so much as may be necessary of the real estate need to be sold, mortgaged, or encumbered
        
        Sale of Whole Property - The whole property may be may be sold, mortgaged, or encumbered in the ff:
        
        If sale, mortgage, or encumbrance of a part will injure those interested in the remainder, and
        
        If it’s necessary under the circumstances
      - Effect of Lack of Court Order - Executor or administrator is prohibited from selling personal property of decedent without court order, even if heirs and other persons interest consented
        
        Executor or administrator may be held answerable for selling decedent’s property without court order.
        
        Motu Proprio Order - Court cannot motu proprio order sale of personal property.
        
        Essential that executor or administrator applies for sale with court and gives written notice to heirs and other persons interested
    - - Sec. 1 When Order for Distribution is Made - The estate must first be settled in a special proceeding before a court can make a partition and distribution of the estate. Thus, only after:
        
        After all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid;
        
        Or before payment of said obligation, provide the distributees or any of them gives a bond in a sum fixed by the court
        
        Application for Distribution - The order of distribution is only issued upon proper and specific application of the interest party or parties, not of the court.
        
        Rationale - As long as the estate has not been fully settled and partitioned, the heirs right of ownership over the properties is merely inchoate.
        
        Requisites for Order of Distribution -
        
        Liquidation of estate or payment of obligations - The determination of all assets of the estate and payment of all debts and expenses
        
        Declaration of heirs - There must first be a declaration of heirs to determine to whom the residue of the estate should be distributed.
        
        Liquidation Requirement -
        
        GR: No distribution shall be allowed until payment of the obligations above mentioned
        
        XCPN: When the distributees or any of them give a bond in a sum to be fixed by the cour
        
        Scope of Obligations - the debts, funeral charges and inheritance tax, if any chargeable to the estate in accordance with law.
        
        Estate Tax - If the estate tax is not yet paid, the distributees must post a bond to meet the tax obligation in proportion to their respective shares in the inheritance.
        
        If there is a residue, this may be distributed among the heirs.
        
        Declaration of Heirs -
        
        How Filed - The action for declaration of heirs must be filed within the same special proceedings
        It cannot be a separate action.
        
        When made - It is only after and not before the declaration of heirs is made that the residue may be distributed and delivered to the heirs.
        
        But the court is not enjoined from making a declaration of heirs prior to the satisfaction of the obligations.
        
        Sec. 2 Questions as to advancement to be determined - Questions as to advancement made, or alleged to have been made, by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate proceedings; and the final order of the court thereon shall be binding on the person raising the questions and on the heir.
        
        Section 3. By whom expenses of partition paid.
        
        GR - If at the time of distribution, there are sufficient assets retained for expenses of partition, may be paid by executor/administrator when it appears equitable to the court and not inconsistent with the intention of the testator;
        
        XCPN - If insufficient, then paid by the parties to partition in proportion to their respective shares or interest in the premises.
        
        Appointment settled and allowed by court.
        
        Section 4. Recording the order of partition of estate - Certified copies of final orders and judgments of the court relating to the real estate or the partition thereof shall be recorded in the registry of deeds of the province where the property is situated.
        
        Effect of Non-Payment - if any person interested in the partition does not pay his proportion or share, the court may issue an execution in the name of the executor or administrator against the party not paying the sum assessed.
        
        Power to Determine Proportion - The probate court has the power to determine the parts to which each distributee is entitled at this stage but the right to specific distribute shares is only determined after the debts are paid
        
        Determination of Net Estate - All obligations and charges would deducted from the gross estate
        
        Then all donations subject to collation would be added to it.
        
        Questions on Advancement - The RTC acting in its general jurisdiction cannot resolve the issue of advancement.
        
        Thus, this provision refers to the probate court.
        
        An action for reconveyance and annulment of title before the regular is not the proper vehicle to raise questions on advancements made.