d. Claims Against Estate (Rule 86)

A. Settlement of Estate of Deceased Persons (part 2 of 4)

Sec. 3. Married- women may serve.— A married woman may serve as executrix or administratrix, and the marriage of a single woman shall not affect her authority so to serve under a previous appointment.

Sec. 4. Letters testamentary issued when will allowed.—When a will has been proved and allowed, the court shall issue letters testamentary thereon to the person named as executor therein, if he is competent, accepts the trust, and gives bond as required by these rules.

Sec. 5. Where some coexecutors disqualified others may act.—When all of the executors named in a will can not act because of incompetency, refusal to accept the trust, or failure to give bond, on the part of one or more of them, letters testamentary may issue to such of them as are competent, accept and give bond, and they may perform the duties and discharge the trust required by the will.

Sec. 6. When and to whom letters of administration ranted.— If no executor is named in the will, or the executor or executors are incompetent, refuse the trust, fail to give bond, or a person dies intestate, administration shall be granted:(a) To the surviving husband or wife, as the case may be, or next of kin, or both, in the discretion of the court, or to such person as such surviving husband or wife, or next of kin, requests to have appointed, if competent and willing to serve;(b) If such surviving husband or wife, as the case may be, or next of kin, or the person selected by them, be incompetent or unwilling, or if the husband or widow, or next of kin, neglects for thirty (30) days after the death of the person to apply for administration or to request that administration be granted to some other person, it may be granted to one or more of the principal creditors, if competent and willing to serve;(c) If there is no such creditor competent and willing to serve, it may be granted to such other person as the court may select.

> Rule 86 CLAIMS AGAINST ESTATE

Section 1. Notice to creditors to be issued by court.— Immediately after granting letters testamentary or of administration, the court shall issue a notice requiring all persons having money claims against the decedent to file them in the office of the clerk of said court.

Sec. 2. Time within which claims shall be filed. — In the notice provided in the preceding section, the court shall state the time for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6) months after the date of the first publication of the notice. However, at any time before an order of distribution is entered, on application of a creditor who has failed to file his claim within the time previously limited, the court may, for cause shown and on such terms as are equitable, allow such claim to be filed within a time not exceeding one (1) month.

Sec. 3. Publication of notice to creditors. — Every executor or administrator shall, immediately after the notice to creditors is issued, cause the same to be published three (3) weeks successively in a newspaper of general circulation in the province, and to be posted for the same period in four public places in the province and in two public places in the municipality where the decedent last resided.

Sec. 4. Filing copy of printed notice. — Within ten (10) days after the notice has been published and posted in accordance with the preceding section, the executor or administrator shall file or cause to be filed in the court a printed copy of the notice accompanied with an affidavit setting forth the dates of the first and last publication thereof and the name of the newspaper in which the same is printed.

Sec. 5 Claims which must be filed under the notice. If not filed, barred; exceptions.— All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. Where an executor or administrator commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead of presenting them independently to the court as herein provided, and mutual claims may be set off against each other in such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall be considered the true balance against the estate, as though the claim had been presented directly before the court in the administration proceedings. Claims not yet due, or contingent, may be approved at their present value.

Sec. 6. Solidary obligation of decedent.— Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. In a joint obligation of the decedent, the claim shall be confined to the portion belonging to him.

Sec. 7. Mortgage debt due from estate.— A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made.

Sec. 8. Claim of executor or administrator against an estate.— If the executor or administrator has a claim against the estate he represents, he shall give notice thereof, in writing, to the court, and the court shall appoint a special administrator, who shall, in the adjustment of such claim, have the same power and be subject to the same liability as the general administrator or executor in the settlement of other claims. The court may order the executor or administrator to pay to the special administrator necessary funds to defend such claim.

Sec. 9. How to file a claim. Contents thereof. Notice to executor or administrator.—A claim may be filed by delivering the same with the necessary vouchers to the clerk of court and by serving a copy thereof on the executor or administrator. If the claim be founded on a bond, bill, note, or any other instrument, the original need not be filed, but a copy thereof with all indorsements shall be attached to the claim and filed therewith. On demand, however, of the executor or administrator, or by order of the court or judge, the original shall be exhibited, unless it be lost or destroyed, in which case the claimant must accompany his claim with affidavit or affidavits containing a copy or particular description of the instrument and stating its loss or destruction.When the claim is due, it must be supported by affidavit stating the amount justly due, that no payments have been made thereon which are not credited, and that there are no offsets to the same, to the knowledge of the affiant. the claim is not due, or is contingent, when filed, it must also be supported by affidavit stating the particulars thereof. When the affidavit is made by a person other than the claimant, he must set forth therein the reason why it is not made by the claimant. The claim once filed shall be attached to the record of the case in which the letters testamentary or of administration were issued, although the court, in its discretion, and as a matter of convenience, may order all the claims to be collected in a separate folder.

Sec. 10. Answer of executor or administrator. Offsets.—Within fifteen (15) days after service of a copy of the claim on the executor or administrator, he shall file his answer admitting or denying the claim specifically, and setting forth the substance of the matters which are relied upon to support the admission or denial. If he has no knowledge sufficient to enable him to admit or deny specifically, he shall state such want of knowledge. The executor or administrator in his answer shall allege in offset any claim which the decedent before death had against the claimant, and his failure to do so shall bar the claim forever. A copy of the answer shall be served by the executor or administrator on the claimant. The court in its discretion may extend the time for filing such answer.

Sec. 11. Disposition of admitted claim.— Any claim admitted entirely by the executor or administrator shall immediately be submitted by the clerk to the court who may approve the same without hearing; but the court, in its discretion, before approving the claim, may order that known heirs, legatees, or devisees be notified and heard. If upon hearing, an heir, legatee, or devisee opposes the claim, the court may, in its discretion, allow him fifteen (15) days to file an answer to the claim in the manner prescribed in the preceding section.

Sec. 12. Trial of contested claim.—Upon the filing of an answer to a claim, or upon the expiration of the time for such filing, the clerk of court shall set the claim for trial with notice to both parties. The court may refer the claim to a commissioner.

Sec. 13. Judgment appealable.— The judgment of the court approving or disapproving a claim, shall be filed with the record of the administration proceedings with notice to both parties, and is appealable as in ordinary cases. A judgment against the executor or administrator shall be that he pay, in due course of administration, the amount ascertained to be due, and it shall not create any lien upon the property of the estate, or give to the judgment creditor any priority of payment.

Sec. 14. Costs.—When the executor or administrator, in his answer, admits and offers to pay part of a claim, and the claimant refuses to accept the amount offered in satisfaction of his claim, if he fails to obtain a more favorable judgment, he cannot recover costs, but must pay to the executor or administrator costs from the time of the offer. Where an action commenced against the deceased for money has been discontinued and the claim embraced therein presented as in this rule provided, the prevailing party shall be allowed the costs of his action up to the time of its discontinuance.

> Rule 87 ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORS

Section 1. Actions which may and which may not be brought against executor or administrator. — No action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator; but actions to recover real or personal property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to recover damages for an injury to person or property, real or personal, may be commenced against him.

Sec. 2. Executor or administrator may bring or defend actions which survive. — 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 the deceased, actions for causes which survive.Sec 3. Heir may not sue until share assigned.— When an executor or administrator is appointed and assumes the trust, no action to recover the title or possession of lands or for damages done to such lands shall be maintained against him by an heir or devisee until there is an order of the court assigning such lands to such heir or devisee or until the time allowed for paying debts has expired.

Sec. 4. Executor or administrator may compound with debtor. — With the approval of the court, an executor or administrator may compound with the debtor of the deceased for a debt due, and 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.—A mortgage belonging to the estate of a deceased person, as mortgagee or assignee of the right of a mortgagee, may be foreclosed by the executor or administrator.

Sec. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed.— If an executor or adminstrator, heir, legatee, creditor, or other individual interested in the estate of the deceased, complains to the court having jurisdiction of the estate that a person is suspected of having concealed, embezzled, or conveyed away any of the money, goods, or chattels of the deceased, or that such person has in his possession or has knowledge of any deed, conveyance, bond, contract, or other writing which contains evidence of or tends to disclose the right, title, interest, or claim of the deceased to real or personal estate, or the last will and testament of the deceased, the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint; and if the person so cited refuses to appear, or to answer on such examination or such interrogatories as are put to him, the court may punish him for contempt, and may commit him to prison until he submits to the order of the court. The interrogatories put to any such person, and his answers thereto, shall be in writing and shall be filed in the clerk's office.

Sec. 7. Person entrusted with estate compelled to render account.— The court, on complaint of an executor or administrator, may cite a person entrusted by an executor or administrator with any part of the estate of the deceased to appear before it, and may require such person to render a full account, on oath, of the money, goods, chattels, bonds, accounts, or other papers belonging to such estate as came to his possession in trust for such executor or administrator, and of his proceedings thereon; and if the person so cited refuses to appear to render such account, the court may punish him for contempt as having disobeyed a lawful order of the court.

Sec. 8. Embezzlement before letters issued.—If a person, before the granting of letters testamentary or of administration on the estate of the deceased, embezzles or alienates any of the money, goods, chattels, or effects of such deceased, such person shall be liable to an action in favor of the executor or administrator of the estate for double the value of the property sold, embezzled, or alienated, to be recovered for the benefit of such estate.

Sec. 9. Property fraudulently conveyed by deceased may be recovered. When executor or administrator must bring action.— When there is a deficiency of assets in the hands of an executor or administrator for the payment of debts and expenses of administration, and the deceased in his lifetime had conveyed real or personal property, or a right or interest therein, or a debt or credit, with intent to defraud his creditors or to avoid any right, debt, or duty; or had so conveyed such property, right, interest, debt, or credit that by law the conveyance would be void as against his creditors, and the subject of the attempted conveyance would be liable to attachment by any of them in his lifetime, the executor or administrator may commence and prosecute to final judgment an action for the recovery of such property, right, interest, debt, or credit for the benefit of the creditors; but he shall not be bound to commence the action unless on application of the creditors of the deceased, nor unless the creditors making the application pay such part of the costs and expenses, or give security therefor to the executor or administrator, as the court deems equitable.

After Final Judgment

The action is enforced as a money claim against the estate. (Rule 86)

Examples of claims NOT extinguished by death are:

• Recovery of real and personal property against the estate;
• Enforcement of liens on such properties; and
• Recovery for an injury to person or property by reason of tort or delict committed by the deceased. (Riano, 2014, p. 289)

Before entry of final judgment

The case shall not be dismissed but shall be allowed to continue until entry of final judgment. (Rule 3, Sec. 20)

The judgment favorable to the plaintiff shall be filed as a money claim against the estate.

After entry of final judgment but before execution

File judgment as a claim against the estate. The plaintiff cannot move to execute under Rule 39.

Interested Party

One who would be benefited by the estate such as an heir or one who has a claim against the estate like a creditor.

The interest must be both material and direct as to the will or estate or the property to be affected by it either as executor or claimant of the estate. (Sumilang v. Romagosa, G.R. No. L-9483, 1960)

When Appointed

• Delay in granting of letters testamentary or of administration, including appeal in the probate of the will. (R80, S1)
• Executor is a claimant of the estate he represents. (R86, S8) In this case, a special administrator shall be appointed by the court with respect to such claim.

Pending appeal of an order substituting an old administrator with a new administrator, a special administrator may NOT be appointed. (Relucio v. San Jose,G.R. No. L-4683 May 29, 1952)

Requirement to File Claims Against the Estate

After granting letters testamentary or of administration, the court shall issue a notice requiring all persons having money claims against the decedent to file them in the office of the clerk of court. (R86, S1)

Purpose of Filing Claims Against The Estate

The purpose of presentation of claims against decedents of the estate in the probate court is to protect the estate of deceased persons. That way, the executor / administrator will be able to examine each claim and determine whether it is a proper one which should be allowed. Further, the primary object of the provisions requiring presentation is to apprise the administrator and the probate court of the existence of the claim so that a proper and timely arrangement may be made for its payment in full or by pro-rata portion in the due course of the administration, inasmuch as upon the death of a person, his entire estate is burdened with the payment of all of his debts and no creditor shall enjoy any preference or priority; all of them shall share pro-rata in the liquidation of the estate of the deceased. (Estate of Olave v. Reyes, G.R. No. L29407, 1983)

Claims That May Be Filed Against The Estate

• Money Claims;
• Claims for Funeral Expenses;
• Claims for Last Sickness of the Decedent;
• Judgment for Money Against The Defendant (R86, S5)

Money Claims

This refers to all money claims arising out of contract, quasi-contract, or law but do not refer to those arising from crime or quasi-delict. Claims for money which are founded on tort or crime are not money claims and should thus be filed against the executor or administrator or against the heirs. (People v. Bayotas, G.R. No. 102007, 2004)

These claims may be:

• Due or not due; or
• Absolute or Contingent

ABSOLUTE CLAIM: This is such as claim as, if contested between living persons, would be the proper subject of immediate legal action and would supply a basis of a judgment for a sum certain. (Gaskell v. Tan Sit, G.R. No. 18405, 1922).

CONTINGENT CLAIM: It is one in which liability depends on some future event that may or may not happen, and which makes it uncertain whether there will be any liability at all.

The rules provide that a contingent claim is to be presented in the administration proceedings in the same manner as any ordinary claim, and that when the contingency arises which converts the contingent claim into a valid claim, the court should then be informed that the claim had already matured. (Buan v. Laya, G.R. No. L-7593, 1957)

DEFICIENCY JUDGMENT: A deficiency judgment is a contingent claim and therefore, must be filed with the probate court where the settlement of the deceased is pending. (First Nat’l City Bank v. Cheng Tan, G.R. No. L-14234, 1962).

What happens to actions for money claims that are already pending in court against the decedent at the time of his death

When the action is for recovery of money arising from contract, express or implied, and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person. (R3, S20)

Solidary Obligations

Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor. (R86, S6) There is no need to implead the estate of the decedent which is solidarily liable with another person in a collection case filed against the latter. The estate of the decedent is not considered an indispensable party. The whole amount of obligation may proceed against any one of the solidary debtors pursuant to Art. 1216 of the Civil Code. (Boston Equity Resources, Inc. v. Court of Appeals, G.R. No. 173946, 2013)

When the spouses are sued for the enforcement of an obligation entered into by them, they are being impleaded in their capacity as representatives of the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability, as between them, does not apply. Even assuming that to be true, the nature of the obligation involved in this case is not solidary but rather merely joint. (Alipio v. CA, G.R. No. 134100, September 29, 2000).

Time within which claims shall be filed.

General rule: Within the time fixed in the notice which shall not be more than twelve (12) months nor less than six (6) months after the date of the first publication.

Otherwise, the claims are barred forever.

Exception: BELATED CLAIMS – Claims not filed within the original period fixed by the court.

On application of a creditor who has failed to file his claim within the time previously limited, at any time before an order of distribution is entered, the court may, for cause shown and, on such terms, as are equitable, allow such claim to be filed not exceeding one (1) month from the order allowing belated claims (the order may either be in open court or not). (R86, S2)

Note: Money claims against the estate may be allowed any time before an order of distribution is entered, at the discretion of the court for cause and upon such terms as are equitable. At the time petitioner’s motion to direct payment of the judgment credit was filed, no order of distribution was issued yet. (Echaus v. Blanco, G.R. No. L-30453, 1989).

But: Under Rule 87, Sec. 2, the court has no authority to admit a belated claim for no cause or for an insufficient cause. (Barredo v. CA, G.R. No. L17863, 1962).

State of non-claims.

The Statute of non-claims refers to the specific period fixed by the probate court (following the 6-12 month range) for the filing of claims against the estate for examination and allowance; otherwise, the claims are barred forever.

The guidelines as to the statutes of non-claims are as follows:

• The period fixed by the probate court must not be less than six months nor more than 12 months from the date of first publication of the notice
• Such period once fixed by the court is mandatory and it cannot be shortened
• The statute of non-claims supersedes the statute of limitations.

The rule requires certain creditors of a deceased person to present their claims for examination and allowance within a specified period, the purpose thereof being to settle the estate with dispatch, so that the residue may be delivered to the persons entitled thereto without their being afterwards called upon to respond in actions for claims, which, under the ordinary statute of limitations, have not yet prescribed. (Santos v. Manarang, G.R. No. L-8235, 1914)

The statute of non-claims supersedes the statute of limitations insofar as the debts of deceased persons are concerned because if a creditor fails to file his claim within the time fixed by the court in the notice, them the claim is barred forever. (In re: Estate of De Dios, G.R. L-7940, Mar. 27, 1913).

Exception 1:

The court, for good cause shown, may grant a onemonth period for a creditor to file a claim which he failed to bring during the original period granted for the filing of claims.

Such motion for leave to file a claim beyond the original period may be filed at any time during the administration proceedings provided no order of distribution has yet been entered. (Aquino, et al. v. Aquino, 103 Phil. 1107; cf. Danan, et al. v. Buencamino, etc., et al., G.R. No. 57205, 1981)

Exception 2:

Claims not filed within the time given in the notice may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. (R86, S5)

A judgment for a money claim against the deceased cannot be enforced by writ of execution. A judgment against the deceased for a money claim must be filed as a claim before the probate court. If death of the defendant occurred prior to levy, the judgment is not enforceable by writ of execution. The judgment creditor must file a claim in the probate court.

Even if the testator acknowledged the debt in his will and instructed the executor to pay such debt, the Statute of Non-Claims must still be complied with. (Santos v. Manarang, G.R. No. L-8235, 1914)

Claim of executor or administrator against the estate.

If executor/administrator has a claim, he shall give notice to the court in writing and the court thereafter shall appoint a special administrator with the same power and subjected to the same liability as the general executor or administrator, but only as to the adjustment of the claim. (R86, S8)

The executor or administrator having a claim against the estate cannot simply pay himself from the estate (Sison v Azarraga, G.R. No. 8470, 1915)

How to File a Claim: Two Methods

• Delivering the claim with the necessary vouchers to the clerk of court and by serving a copy to the executor/administrator
• Serve a copy on the executor or administrator. (R86, S9)

An affidavit must support such claim, stating the amount justly due, that no payments have been made thereon which are not credited and that there are no offsets to the same.

If the claim is contingent, an affidavit stating the particulars must accompany the claim.

Answer of Executor/Administrator

Within fifteen (15) days after service of a copy of the claim on the executor or administrator, he shall file his answer admitting or denying the claim. (R86, S10)

Upon the filing of an answer to a claim, or expiration of the time for such filing, the claim shall be set for trial with notice to both parties. (R86, S12)

The judgment of the court approving or disapproving a claim shall be appealable. (R86, S13)

ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORS

As a rule of thumb, actions which survive the decedent’s death should be made against the executor or administrator. Only the following actions may be commenced against the executor or administrator:

• Recovery of real/personal property (or any interest therein) from the estate;
• Enforcement of a lien thereon;
• Action to recover damages for an injury to person or property, whether real or personal. (R87, S1)

Injury to property is not limited to injuries to specific property, but extends to other wrongs by which personal estate is injured or diminished. To maliciously cause a party to incur unnecessary expenses is certainly injury to that party's property. (Board of Liquidators v. Heirs of Kalaw, G.R. No. L18805, 1967, citing Javier v. Araneta, G.R. No. L4369, 1953)

Comparative Table: Rule 86 vs. Rule 87

How to File a Claim: Two Methods

• Delivering the claim with the necessary vouchers to the clerk of court and by serving a copy to the executor/administrator
• Serve a copy on the executor or administrator. (R86, S9)

An affidavit must support such claim, stating the amount justly due, that no payments have been made thereon which are not credited and that there are no offsets to the same.

If the claim is contingent, an affidavit stating the particulars must accompany the claim.

Answer of Executor/Administrator

Within fifteen (15) days after service of a copy of the claim on the executor or administrator, he shall file his answer admitting or denying the claim. (R86, S10)

Upon the filing of an answer to a claim, or expiration of the time for such filing, the claim shall be set for trial with notice to both parties. (R86, S12)

The judgment of the court approving or disapproving a claim shall be appealable. (R86, S13)

How to File a Claim: Two Methods

• Delivering the claim with the necessary vouchers to the clerk of court and by serving a copy to the executor/administrator
• Serve a copy on the executor or administrator. (R86, S9)

An affidavit must support such claim, stating the amount justly due, that no payments have been made thereon which are not credited and that there are no offsets to the same.

If the claim is contingent, an affidavit stating the particulars must accompany the claim.

Answer of Executor/Administrator

Within fifteen (15) days after service of a copy of the claim on the executor or administrator, he shall file his answer admitting or denying the claim. (R86, S10)

Upon the filing of an answer to a claim, or expiration of the time for such filing, the claim shall be set for trial with notice to both parties. (R86, S12)

The judgment of the court approving or disapproving a claim shall be appealable. (R86, S13)

Instances when probate court may issue writ of execution

General Rule: Probate court cannot issue writ of execution. (Pastor v. CA, G.R. No. L-56340, 1983)

Rationale: Its orders usually refer to the adjudication of claims against the estate which the executor / administrator may satisfy without the need of executory process.