2. Extrajudicial Settlement (Rule 74)

Exceptions:

• Extrajudicial settlement by agreement between or among heirs. (R74, S1).
• Summary settlement of estates of small value (R74, S2).

Requirements:

• Decedent died intestate (left no will);
• There are no outstanding debts at the time of settlement;
• Heirs are all of legal age or minors represented by judicial guardians or legal representatives;
• The settlement is made in a public instrument OR by means of an affidavit, in the case of a sole heir, duly filed with the Register of Deeds;
• If the decedent left only one heir: the heir executes an affidavit of self-adjudication.
• If the decedent left more than one heir, the settlement must be made in a public instrument
• Publication of the extrajudicial settlement in a newspaper of general circulation in the province once a week for three consecutive weeks; and
• Filing of bond equivalent to the value of personal property posted with the register of deeds.

Form of Settlement

Nothing in Sec. 1, Rule 74 concludes that a written instrument or other formality is an essential requisite to the validity of the partition. an oral partition is valid (Vda. de Reyes v. CA, G.R. No. 92436, 1991). Settlement in a private instrument is valid. The requirement of a public instrument in Section 1, Rule 74 is not constitutive of the validity but is merely evidentiary in nature. However, reformation of the instrument may be compelled. (Hernandez v. Andal, G.R. No. L-273, 1947)

Failure to file the extrajudicial settlement or the affidavit of self-adjudication does not affect its validity when there are no creditors or when no rights of creditors are involved.

Requirement of Bond

The bond is required only when personality is involved. If it is a real estate, it shall be subject to a lien in favor of creditors, heirs or other persons for the full period of 2 years from such distribution and such lien cannot be substituted by a bond.

The bond is the value of the personal property certified by the parties under oath and conditioned upon payment of just claims filed under Section 4, Rule 74 of the Rules of Court.

Two-year prescriptive period

An heir or interested person who was able to participate either in the extrajudicial or summary settlement of estate of the decedent has a period of two years after the settlement and distribution to assail its validity. (Pedrosa v CA, G.R. No. 118680, March 5, 2001)

There is a disputable presumption that the decedent left no debts if no creditor files a petition for letters of administration within two (2) years after the death of the decedent. (Guico v. Bautista, G.R. No. L-14921, 1960)

Exceptions:

• If the aggrieved heir is in possession of the property – imprescriptible

An action for reconveyance is imprescriptible when the plaintiff, the legal owner, and not the defendant registered owner, is in possession of the land to be reconveyed (Heirs of Saludares v. CA, G.R. No. 128254, 2004).

• If an innocent purchaser for value is in possession of the property – imprescriptible

Remedy: File damages against the other heirs who fraudulently caused the transfer to the innocent purchaser for value. (PEZA v. Fernandez, G.R. 138971, 2001)

• If the property is in the hands of other heirs who caused the extrajudicial settlement

General Rule: 10 years from the issuance of title, since a constructive trust was created

This period shall commence:

• Upon the issuance of a new title over the property in question. (Marquez v. CA, G.R. No. 125715, 1998); or
• From time of actual notice – unregistered deed (Neri v. Heirs of Uy, G.R. No. 194366, 2012)

Publication does not constitute constructive notice to the heirs who had no knowledge or did not take part in it. (Cua vs Vargas, G.R. No. 156536, 2006).

Exception:

The implied trust may be converted into an express trust ,which is imprescriptible, unless repudiated by the trustee. (Torbela v. Rosario, G.R. No. 140528, 2011). The prescriptive period is 10 years from repudiation of the title, which must be proven by clear and convincing evidence and made known to the beneficiary.

• Civil Code, Art. 1410 – imprescriptible

Heirs with no knowledge or who did not consent to the deed of settlement may resort to an action for annulment of the deed of extrajudicial settlement. (Reillo v. San Jose, G.R. No. 166393, 2009).

Affidavit of self-adjudication by sole heir

General Rule: Extra-judicial settlement shall be done by means of a public instrument filed in the Register of Deeds. (R74, S1)

Exception:

If there is only one heir, he may adjudicate to himself the entire estate by means of an affidavit filed in the Registry of Deeds. (R74, S1)

If a person misrepresents himself as the only heir, an implied/constructive trust is created in favor of the other heirs whose rights were violated. Action of reconveyance based on implied trust prescribes 10 years from the issuance of TCT over the property. (Marquez v. CA, G.R. No. 125715, 1998)

If a person does not have knowledge of the extrajudicial partition, being an ex-parte proceeding, then he cannot be bound thereby. (PEZA v. Fernandez G.R. No. 138971, 2001)

Summary settlement of estates of small value, when allowed

Unlike extrajudicial settlement, summary settlement of estates of small value may be chosen by the heirs regardless of whether the decedent died testate or intestate.

Requisites:

• Petition filed by any interested person
• Gross value of the estate, whether or not the decedent died testate or intestate, must not exceed ten thousand pesos (P10,000).
• Application must contain allegation of gross value of estate.
• Upon hearing, the date of which:
• Shall be set by court not less than one (1) month
• nor more than three (3) months from date of last publication of notice.
• Notice of hearing published once a week for three (3) consecutive weeks in a newspaper of general circulation.
• Notice shall be served upon such interested persons as the court may direct.
• Bond in an amount fixed by the court (not value of personal property) conditioned upon payment of just claims under Section 4, Rule 74 of the Rules of Court. (R74, S2)

After such requisites are met, the court may proceed summarily, without the appointment of an executor or administrator.

Remedies of aggrieved parties after extra-judicial settlement of estate

The following remedies are available to the aggrieved party after extrajudicial settlement of the estate:

• Claim Against the Bond or Real Estate or Both (R74, S4)
• Petition for Relief (R38)
• Reopening by Intervention Within Reglementary Period
• New Action to Annul Settlement Within Reglementary Period of Two Years;
• Rescission in Case of Preterition of Compulsory Heir in Partition Tainted with Bad Faith (Art. 1104, NCC); and
• Action for Reconveyance (Art. 1144, NCC)
• Action to Annul Extrajudicial Settlement (Neri v. Uy)

Updated: A deprived coheir’s claim to declare an inexistent contract void is imprescriptible and is not barred by laches, even though reconveyance based on implied trust generally has a ten-year prescriptive period (Delos Santos v. Delos Santos, G.R. No. 258887, 31 July 2023).