specpro reviewer

| SPECIAL PROCEEDINGS REVIEWER (SAN PEDRO)

I. SPECIAL PROCEEDINGS IN GENERAL

Rule 1, Sec. 3 (c)Cases governed.These Rules shall govern the procedure to be observed in actions, civil or criminal, and special proceedings.(c) A special proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact.

Notes:

Establishing a right as opposed to invoking a right, which is civil

Inaccurate statements: o All specpro are governed by the ROC Determine if

principally or suppletorilyo All specpro are in rem

Commenced by application, petition or special form Special Jurisdiction of RTC to act in specpro Limited; as

opposed to its general jurisdiction

Ordinary Action Special Proceeding

To protect/enforce a right or prevent/redress a wrong

To establish right/status/fact

Involves 2 or more parties May involve only 1 party

Governed by ordinary rules supplemented by special rules

Governed by special rules, supplemented by ordinary rules

Initiated by pleading and parties respond through an answer

Initiated by petition, parties respond through an opposition

Rule 72 SUBJECT MATTER AND APPLICABILITY OF GEN. RULESSec. 1. Subject matter of special proceedings. - Rules of special proceedings are provided for in the following cases:(a) Settlement of estate of deceased persons;(b) Escheat;(c) Guardianship and custody of children;(d) Trustees;(e) Adoption;(f) Rescission and revocation of adoption;(g) Hospitalization of insane persons;(h) Habeas corpus;(i) Change of name;(j) Voluntary dissolution of corporations;(k) Judicial approval of voluntary recognition of minor natural children;(l) Constitution of family home;(m) Declaration of absence and death;(n) Cancellation or correction of entries in the civil registry.

Sec. 2. Applicability of rules of civil actions. - In the absence of special provisions, the rules provided for in ordinary actions shall be, as far as practicable, applicable in special proceedings. Notes:

Memory Aid: GASH VJ TAR HHCC (j) now supplanted by Corporation Code Secs. 117-122 Distinction between final and interlocutory orders in civil

actions for purposes of appeal is NOT strictly applicable to orders issued in specpro.

Rule 33 regarding judgment on demurrer to evidence is applicable to specpro.

FRIA Sec. 3Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem. Jurisdiction over all persons affected by the proceedings shall be considered as acquired upon publication of the notice of the commencement of the proceedings in any newspaper of general circulation in the Philippines in the manner prescribed by the rules of procedure to be promulgated by the Supreme Court.The proceedings shall be conducted in a summary and non-adversarial manner consistent with the declared policies of this Act and in accordance with the rules of procedure that the Supreme Court may promulgate.

Rombe v Asiatrust (2008) Quick Facts: RTC Branch 7 dismissed Rombe’s Petition for Declaration of a State of Suspension of Payments with Approval of Proposed Rehabilitation Plan. Asiatrust initiated foreclosure proceedings, which prompted Rombe to file a complaint for Annulment of Documents and Damages with TRO and Injunction with RTC Branch 15, which issued the writ of injunction. Court of Appeals annulled the writ on the ground that Branch 15 interfered with Branch 7.

Doctrine: The annulment was improper because the rehabilitation case is distinct and dissimilar from the annulment of foreclosure case in that the 1st case is a specpro while the 2nd is a civil action. A civil action is 1 by which a party sues another for the enforcement or protection of a right or the prevention or redress of a wrong. Strictly speaking, cause of action only in civil actions. The rehabilitation case is treated as a specpro as per AM No. 00-8-10-SC, which clarified that it is one that seeks to establish the status of a party or a particular fact – the inability to pay its debts. Thus, a petition for rehabilitation need not state a cause of action and hence, Rombe’s contention that the 2 cases have distinct causes of action is incorrect. Indeed, the 2 cases are different with respect to their nature, purpose and the relief sought such that the injunctive relief did not interfere with the rehabilitation case.

Special Rules of Court on Alternative Dispute Resolution Rule 1.2Nature of the proceedings. All proceedings under the Special ADR Rules are special proceedings.

Notes:

Sir: Arbitration isn’t a specpro because it is a non-judicial/quasi-judicial proceeding

II. SPECIAL PROCEEDINGS UNDER THE RULES OF COURT

A. SETTLEMENT OF ESTATES

1. VENUE AND JURISDICTION

RULE 73VENUE AND PROCESSES Sec. 1. Where estate of deceased person settled. - If the decedent is an inhabitant of the Philippines at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled, in the CFI in the province in which he resides at the time of his death, and if he is an inhabitant of a foreign country, the CFI of any province in which he had estate. The court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts. The jurisdiction assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not be contested in a suit or proceeding, except in an appeal from that court, in the original case, or when the want of jurisdiction appears on the record.

C2013 | DAMASCO DOROTAN GO OAMINAL REGALARIO REYES ROLEDA SY

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Notes:

Venue: residence at the time of death Rule:

o Resident of Phil. RTC of province of residenceo Non-resident RTC of province where he had properties

Nationality not material Residence: personal, actual or physical habitation, his actual

residence or place of abode and not to his permanent legal residence or domicile.

Residence does not affect court’s jurisdiction. Venue may be waived make sure to raise objection

seasonably if improperly brought Court first taking cognizance of the proceeding acquires

exclusive jurisdiction to resolve questions concerning settlement of estates to the exclusion of all other courts or branches.

Probate court acquires jurisdiction over the proceeding from the moment the petition for settlement is filed. It cant be divested of such by the subsequent acts of the interested parties.

Supreme Court may order change of venue under its supervisory authority.

Sec. 2. Where estate settled upon dissolution of marriage. - When the marriage is dissolved by the death of the husband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, in the testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or intestate proceedings of either.

Notes:

If only 1 dead: in proceedings of deceased If 2 dead: consolidated OR in either of the proceedings, subject

to judicial discretion. Upon death of a spouse, no action can be maintained against

the surviving spouse for the recovery of a debt chargeable against the conjugal partnership, as the claim should be filed in the settlement of estate of the deceased spouse.

Surviving spouse not allowed to novate contracts executed by both spouses.

If in the determination of the conjugal nature of such property a question of title thereto is raised by a 3rd person, the probate court has no jurisdiction to determine the title to said property, as the issue should be threshed out in a proper action. Protect rights by notice of lis pendens.

The probate court may pass upon the question of title to property only where: o The interested parties who are ALL HEIRS of the deceased

consent thereto and the interests of 3rd parties aren’t prejudiced; and

o In a provisional manner, to determine whether said property should be included in or excluded from the inventory, without prejudice to the final determination of title in a separate action.

Actions filed by strangers to recover property may be allowed to intervene only to protect their interests and not for decision on their claims.

Probate court has the power to determine: o Who are heirso Recognition of a natural childo Validity of disinheritanceo Status of a woman who claims to be the lawful wife of

decedento Validity of waiver of hereditary rights. o Nature of property (whether conjugal or exclusive) o All matters incidental or collateral to the settlement and

distribution of the estate. Generally, probate court cant issue writs of execution except:

o To satisfy contributive shares of devicees

o To enforce payment of expenses of partitiono To satisfy costs when a person is cited for examination in

probate proceedings. Exclusive enumeration. Memorize!

Sec. 3. Process. - In the exercise of probate jurisdiction, CFI may issue warrants and processes necessary to compel the attendance of witnesses or to carry into effect their orders and judgments, and all other powers granted them by law. If a person does not perform an order of judgment rendered by a court in the exercise of its probate jurisdiction, it may issue a warrant for the apprehension and imprisonment of such person until he performs such order or judgment, or is released.

Notes:

To acquire jurisdiction over the persons.

Sec. 4. Presumption of death. - For purposes of settlement of his estate, a person shall be presumed dead if absent and unheard from for the periods fixed in the Civil Code. But if such person proves to be alive, he shall be entitled to the balance of his estate after payment of all his debts. The balance may be recovered by motion in the same proceeding.

Notes:

NCC: absentee shall be presumed dead for the purpose of opening his succession: o 10 yearso 5 years if he disappeared after the age of 75o 4 years: if he was on board a vessel lost during sea voyage,

or on an airplane which is missing or was in the armed forces and has taken part in war, or has been in danger of death under other circumstances.

The recovery by the returning absentee of his estate is subject to the conditions that:o All his debts must have been paid;o He shall recover his property in the condition in which it

may be found, together with the price of any property that may have been alienated or the property acquired therewith; and

o He is not entitled to fruits or rents

Rule 141, Sec. 7(d)Sec. 7. Clerks of Regional Trial Courts. (d) For initiating proceedings for the allowance of wills, granting letters of administration, appointment of guardians, trustees, and other special proceedings, the fees payable shall be collected in accordance with the value of the property involved in the proceedings, which must be stated in the application or petition, as follows: Not more than P100,000.00 P3,500.00P100,000 or more but less than P150,000 P4,000.00P150,000 or more but less than P200,000 P4,700.00P200,000 or more but less than P250,000 P5,000.00P250,000 or more but less than P300,000 P5,500.00P300,000 or more but less than P350,000 P6,000.00P350,000 or more but less than P400,000 P6,500.00For each P1,000 in excess of P400,000 P20.00If the value of the estate as definitely appraised by the court is more than the value declared in the application, the fees on the difference shall be paid: Provided, however, that a certificate from the clerk of court that the proper fees had been paid shall be required prior to the closure of the proceedings.

Notes:

Value of estate also determines which court has jurisdiction. RTC or MTC.

Garcia v Fule (1976)


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Quick Facts: Fule filed a Petition for Letters of Administration with the CFI Calamba for the estate of Amado Garcia, alleging that the deceased died in QC, owned property in Calamba, was delegate to the 1971 ConCom for Laguna. CFI Calamba issued order appointing her as special administratrix. Surviving Spouse Garcia opposed and moved to dismiss the petition. She presented the death certificate (which stated that deceased was a resident of QC), residence certificate (QC), and other documents. The Court of Appeals annulled the proceedings in CFI Laguna for lack of jurisdiction.

Doctrine: The fact of death and his last residence within the country are foundation facts upon which all subsequent proceedings in the administration of estate rest. Residence doesn’t constitute an element of jurisdiction over the subject matter, but merely constitutive of venue. The word “resides” connotes ex vi termini “actual residence” as distinguished from legal residence or domicile. It is to be understood in its popular sense, that is, actual or physical habitation of a person. No particular length of time is required but it must be more than temporary.

Jao v CA (2001) Quick Facts: Petitioner Rodolfo and private respondent Perico are the only sons of deceased spouses Jao. Perico instituted a petition for issuance of letters of administrator before RTC QC. Rodolfo moved for dismissal on the ground of improper venue, alleging that the deceased spouses didn’t reside in QC but in Angeles City, Pampanga. He alleged that the spouses stayed at Rodolfo’s house in QC solely for the purpose of obtaining medical treatment and hospitalization. He submitted income tax returns, voter’s affidavits, statements of assets and liabilities, real estate tax payments and passports all indicating their residence to be in Pampanga. Perico countered with a copy of the death certificates where it was conclusively declared that their last residence before they died was at QC.

Doctrine: The estate of an inhabitant of the Philippines shall be settled or letters of administration granted in the proper court located in the province where the decedent resides at the time of his death. This case cited Eusebio v Eusebio, where the court held that the deceased, who was in the process of transferring his belongings to QC but died before he could move therein, retained his domicile in San Fernando. Here, though, there is substantial proof that the decedents have transferred to QC, where they have been staying for some 3 to 4 years before they died. The death certificate, which was filled out by petitioner, unqualifiedly shows petitioner recognized his parents’ residence to be QC. As enunciated in Garcia-Fule v CA, residence is different from domicile. (see above) Venue for ordinary civil actions and that for special proceedings have one and the same meaning, that is, a person’s actual residence or place of abode, provided he resides therein with continuity and consistency.

Notes:

Sir pointed out that under these 2 cases, the Court gave evidentiary weight to the death certificates

Lee v CA (1973) Quick Facts: This is a case of a double sale by an heir (Alberto) of his share in his parent’s estate, which was being settled by CFI Cebu. While the specpro was pending, Alberto sold his interest over the estate to petitioners. The Specpro was terminated without being partitioned because the heirs allegedly preferred to receive the properties pro-indiviso. The heirs then discovered more real properties belonging to the estate and executed an extra-judicial partition of the estate. Alberto sold his share from the estate to private respondents, which prompted petitioners to file a complaint for annulment with CFI Cebu, which was granted. CFI issued an Order to Archive Case, requiring the reopening of the specpro settlement.

Doctrine: The issue doesn’t involve the estate nor its heirs or creditors but simply a question of conflicting claims of ownership.

The probate court had already lost jurisdiction over the estate. The conflict is properly the subject matter of the action to quiet title, which is beyond the jurisdiction of the probate court to determine. Probate courts have no jurisdiction to determine with finality conflicts of ownership.

Valera v Inserto (1987) Quick Facts: Conflicting claims over a fishpond.

Doctrine: CFI, acting as a probate court, exercises but limited jurisdiction, and thus has no power to take cognizance of and determine the issue of title to property claimed by a 3rd person adversely to the decedent, unless the claimant and all the other parties having legal interest in the property consent, expressly or impliedly, to the submission of the question to the probate court for adjudgement, or the interests of 3rd persons aren’t thereby prejudiced, the reason for the exception being that the question of whether or not a particular matter should be resolved by the court in the exercise of its general jurisdiction or of its limited jurisdiction as special court is in reality not a jurisdictional but in essence of procedural one, involving a mode of practice which may be waived. It was at all times clear to the court as well as to the parties that if cognizance was being taken of the question of title over the fishpond was merely to determine whether it should be included in the inventory. Property cannot and shouldn’t be subject of execution, as against its possessor who has set up title in himself adversely to the decedent, and whose right to possess hasn’t been ventilated and adjudicated in an appropriate action.

Coca v Pangilinan (1978) Doctrine: Whether a particular matter should be resolved by the CFI in the exercise of its general jurisdiction or of its limited probate jurisdiction is in reality not a jurisdictional question. In essence, it is a procedural question involving a mode of practice which may be waived. As a general rule, the question as to title to property shouldn’t be passed upon in the estate or intestate proceeding but should be ventilated in a separate action. The probate court may provisionally pass upon the question of inclusion in the inventory of a piece of property without prejudice to its final determination in a separate action. If the interested parties are all heirs or the question is one of collation or advancement, or the parties consent to the assumption of jurisdiction by the probate court and the rights of 3rd parties aren’t impaired, then the probate court is competent to decide the question of ownership (where this case falls under).

2. SUMMARY SETTLEMENT OF ESTATES

Notes:

General rule: estate of deceased should be jucidially administered through administrator/executor

Exceptions: o Extrajudicial settlemento Summary settlement of estates of small value

Distinctions:

Extrajudicial settlement Summary settlement

Doesn’t require court intervention

Requires court intervention, although summary

Value of estate is immaterial Applies only to estates less than P10,000 (amount jurisdictional)

Allowed only in intestate succession

Allowed in both

Proper only if estate left with no obligation (unless

Even if there are debts


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all creditors consent thereto)

Can be resorted to only at the instance and by agreement of all heirs

May be instituted by any interested party and even by a creditor without the consent of heirs

Amount of bond is equal to the value of personalty as established by the instrument of adjudication.

Amount of bond determined by the court

RULE 74SUMMARY SETTLEMENT OF ESTATESSec. 1. Extrajudicial settlement by agreement between heirs. - If the decedent left no will and no debts and the heirs are all of age, or the minors are represented by their judicial or legal representatives duly authorized for the purpose, the parties may, without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action of partition. If there is only one heir, he may adjudicate to himself the entire estate by means of an affidavit filed in the office of the register of deeds. The parties to an extrajudicial settlement, whether by public instrument or by stipulation in a pending action for partition, or the sole heir who adjudicates the entire estate to himself by means of an affidavit shall file, simultaneously with and as a condition precedent to the filing of the public instrument, or stipulation in the action for partition, or of the affidavit in the office of the register of deeds, a bond with the said register of deeds, in an amount equivalent to the value of the personal property involved as certified to under oath by the parties concerned and conditioned upon the payment of any just claim that may be filed under Section 4 of this rule. It shall be presumed 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.The fact of the extrajudicial settlement or administration shall be published in a newspaper of general circulation in the manner provided in the next succeeding section; but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof.

Notes:

Requisites 1. Decedent died intestate2. No outstanding debts at the time of settlement3. Heirs are all of age, or minors are represented by their

judicial guardians or legal representatives4. Settlement is made in a public instrument, stipulation or

affidavit duly filed with register of deeds5. Fact of such settlement must be published in a

newspaper of general circulation in the province once a week for at least 3 consecutive weeks

3 ways: 1. Public instrument (all heirs)

If not in a public instrument, the same is still valid and reformation may be compelled. BUT public document required for registration.

2. Action for Partition Unless prohibited by agreement. If despite the institution, they subsequently arrive at

an agreement, they may enter into the corresponding stipulation and register they same.

3. Affidavit of Adjudication (1 heir) If there were debts, extrajudicial settlement proper if they’re

paid at the time the settlement is entered into. It is presumed that the decedent left no debt if no creditor

files a petition for letters of administration with 2 years after death.

Bond required only when personalty is involved, as the real

estate is subject to a lien in favor of creditors, heirs or other persons for the full period of 2 years from such distribution, which cant be substituted by a bond.

If heir is a minor, he must be represented by a judicial guardian if the property adjudicated to him is worth more than P2,000. If not, he may be represented by his legal guardian.

Sec. 2. Summary settlement of estates of small value. - Whenever the gross value of the estate of a deceased person, whether he died testate or intestate, does not exceed P10,000, and that fact is made to appear to the CFI having jurisdiction of the estate by the petition of an interested person and upon hearing, which shall be held not less than 1 month nor more than 3 months from the date of the last publication of a notice which shall be published once a week for 3 consecutive weeks in a newspaper of general circulation in the province, and after such other notice to interested persons as the court may direct, the court may proceed summarily, without the appointment of an executor or administrator, and without delay, to grant, if proper, allowance of the will, if any there be, to determine who are the persons legally entitled to participate in the estate, and to apportion and divide it among them after the payment of such debts of the estate as the court shall then find to be due; and such persons, in their own right, if they are of lawful age and legal capacity, or by their guardians or trustees legally appointed and qualified, if otherwise, shall thereupon be entitled to receive and enter into the possession of the portions of the estate so awarded to them respectively. The court shall make such order as may be just respecting the costs of the proceedings, and all orders and judgments made or rendered in the course thereof shall be recorded in the office of the clerk, and the order of partition or award, if it involves real estate, shall be recorded in the proper register's office.

Notes:

MTC/MCTC (inferior court) jurisdiction

Sec. 3. Bond to be filed by distributees. - The court, before allowing a partition in accordance with the provisions of the preceding section, may require the distributees, if property other than real is to be distributed, to file a bond in an amount to be fixed by court, conditioned for the payment of any just claim which may be filed under the next succeeding section.

Sec. 4. Liability of distributees and estate. - If it shall appear at any time within 2 years after the settlement and distribution of an estate in accordance with the provisions of either of the 1st 2 sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if within the same time of 2 years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of 2 years after such distribution, notwithstanding any transfers of real estate that may have been made.

Notes:

The 2 year lien shall be annotated on the title issued to the distributees and may be cancelled by the register of deeds after the lapse of the period without need of a court order.


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Remedies:o Within 2 years:

1. Heir – settlement of estate2. Persons deprived

a. Payable in money- Distributee shall contribute/pay- Bond

b. Other (property) - Settlement of estate

o After the 2-year period: unpaid creditor may file an ordinary action against the distributees within the statutes of limitations but not against the bond.

Action to annul a deed of extrajudicial settlement on the ground of fraud should be filed within 4 years from the discovery of the fraud.

Sec. 5. Period for claim of minor or incapacitated person. - If on the date of the expiration of the period of 2 years prescribed in the preceding section the person authorized to file a claim is a minor or mentally incapacitated, or is in prison or outside the Philippines, he may present his claim within 1 year after such disability is removed.

Pereira v CA (1989) Quick Facts: Andres de Guzman, PAL EE, died without a will, survived by his surviving spouse Victoria Pereira and his sister Rita. Rita instituted proceedings for letters of administration in her favor, alleging that deceased died leaving only Victoria and herself as heirs, with no will, creditors and properties (PAL death benefits, PESALA, SS, PNB and PCIB deposits and 300M lot in Rizal). Victoria opposed. RTC appointed Rita as administrator upon a P1,000 bond. Court of Appeals affirmed.

Doctrine: Whether there’s an estate to administer is best left to the probate court to resolve. The general rule is that when a person dies leaving property, the same should be judicially administered in the order established in Rue 78, Sec. 6. The exception under Rule 74, Sec. 1 is when al heirs are of lawful age and there are no debts due from the estate, they may agree in writing to partition the property without instituting judicial administration or applying for appointment. But this does not preclude heirs from instituting administration proceedings. Even if the estate has no debts/obligations, if they don’t desire to resort, for good reasons, to an ordinary action for partition. Where partition is possible, either in or out of court, the estate shouldn’t be burdened with an administration proceeding. Whether there is a good reason depends on circumstances, and to obtain possession is not a compelling reason.

Notes:

Sir outlined the modes of disposition of estate as follows: 1. Extrajudicial settlement2. Ordinary action for partition3. Specpro only with good reason (ex. Vast estate)

Portugal v Portugal-Beltran (2005) Quick Facts: Portugal married Paz, who gave birth to respondent Aleli. Portugal married Isabel, who gave birth to Jose Douglas. When Portugal died, Aleli executed an Affidavit for Adjudication by Sole Heir of Estate, for which a TCT (on Portugal’s land, which was his only property) was issued in her name. Jose Douglas filed a complaint for Annulment of Affidavit of Adjudication, claiming that Aleli isn’t related to Portugal. RTC dismissed the petition for failure to state cause of action and lack of jurisdiction.

Doctrine: In cases in which the adverse parties are putative heirs to the estate of a decedent or parties to the specpro for its settlement, the common doctrine is that if the specpro are pending, or if there are no specpro filed but there is, under the circumstances of the

case, a need to file 1, then the determination of, among other issues, heirship should be raised and settled in the specpro. Where the specpro has been instituted and had been finally closed and terminated, however, or if a putative heir has lost the right to have himself declared in the specpro as co-heir and he can no longer ask for its re-opening, then an ordinary civil action can be filed for his declaration as heir in order to bring about annulment of the partition or distribution of a property belonging to the estate of deceased. There is no reason to subject the estate to administration proceeding since Portugal’s only property is the land and because the determination of Aleli’s heirship could be achieved in the civil case.

3. PROBATE OF WILLS

Notes:

Testate proceedings take precedence over intestate proceedings for the same estate. If during the pendency of intestate proceedings, a will of the decedent is discovered, proceedings for the probate of the will shall replace the intestate proceedings even if an administrator had already been appointed therein. Should the will not be allowed, then proceedings shall be continued as an intestacy.

Doubts should be resolved in favor of testacy. Subsequent petition for probate shouldn’t be dismissed but the

2 proceedings should be consolidated and jointly heard. Proceeding in rem(in rem is Latin for "against a thing."[1] In a

lawsuit, an action in rem is directed towards a piece of property rather than against a person (which is an in personam or personal action). The action disputes or seeks to transfer title to property. When title to real estate (such as who owns a house) is in dispute, an in rem action is used to deliver the land to the plaintiff.The distinction between an in rem action and an in personam action is relevant to court jurisdiction for purposes of conflicts of laws and civil procedure. In an in rem action the proper jurisdiction is where the property is located.)

RULE 75PRODUCTION OF WILL. ALLOWANCE OF WILL NECESSARYSection 1. Allowance necessary. Conclusive as to execution. — No will shall pass either real or personal estate unless it is proved and allowed in the proper court. Subject to the right of appeal, such allowance of the will shall be conclusive as to its due execution.

Notes:

Probateo Refers to its due execution whether the testator, being of

sound mind, freely executed the will in accordance with the formalities prescribed by law.

o Doesn’t affect or pertain to the intrinsic validity of the will. Except in cases where the defect is apparent on its face,

as the probate may become a useless ceremony. Example: heirs completely preterited by the will; the

devisee was the paramour Allowance in a final judgment is conclusive on that issue and

cant be assailed in another proceeding, except on the ground of fraud in the procurement of the decree.

Doctrine of estoppel doesn’t apply because probate is required by public policy

Section 2. Custodian of will to deliver. — The person who has custody of a will shall, within 20 days after he knows of the death of the testator, deliver the will to the court having jurisdiction, or to the executor named in the will.

Notes:

Delivery is made to the Clerk of Court of the RTC having jurisdiction over the estate.


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Section 3. Executor to present will and accept or refuse trust. — A person named as executor in a will shall, within 20 days after he knows of the death of the testate, or within 20 days after he knows that he is named executor if he obtained such knowledge after the death of the testator, present such will to the court having jurisdiction, unless the will has reached the court in any other manner, and shall, within such period, signify to the court in writing his acceptance of the trust or his refusal to accept it.

Section 4. Custodian and executor subject to fine for neglect. — A person who neglects any of the duties required in the 2 last preceding sections without excuses satisfactory to the court shall be fined not exceeding two thousand pesos.

Section 5. Person retaining will may be committed. — A person having custody of a will after the death of the testator who neglects without reasonable cause to deliver the same, when ordered so to do, to the court having jurisdiction, may be committed to prison and there kept until he delivers the will.

RULE 76ALLOWANCE OR DISALLOWANCE OF WILLSection 1. Who may petition for the allowance of will. — Any executor, devisee, or legatee named in a will, or any other person interested in the estate, may, at any time after the death of the testator, petition the court having jurisdiction to have the will allowed, whether the same be in his possession or not, or is lost or destroyed.The testator himself may, during his lifetime, petition the court for the allowance of his will.

Notes:

Petition for probate is not subject to bar by the statute of limitations and doesn’t prescribe “at any time after death”

Who may: 1. Executor2. Devisee3. Legatee4. Any other person interested – creditors, heirs (except those

who have assigned or renounced their hereditary rights, who have no legal interest)

5. Testator himself

Section 2. Contents of petition. — A petition for the allowance of a will must show, so far as known to the petitioner:(a) The jurisdictional facts;(b) The names, ages, and residences of the heirs, legatees, and devisees of the testator or decedent;(c) The probable value and character of the property of the estate;(d) The name of the person for whom letters are prayed;(e) If the will has not been delivered to the court, the name of the person having custody of it.But no defect in the petition shall render void the allowance of the will, or the issuance of letters testamentary or of administration with the will annexed.

Notes:

Jurisdictional facts required: o That a person died leaving a will; o In the case of resident, that he died in his residence within

the territorial jurisdiction of the court or, in the case of a nonresident, that he left an estate within such territorial jurisdiction; and

o That the will has been delivered to the court.

Section 3. Court to appoint time for proving will. Notice thereof to be published. — When a will is delivered to, or a petition for the allowance of a will is filed in, the court having jurisdiction, such court shall fix a time and place for proving the will when all

concerned may appear to contest the allowance thereof, and shall cause notice of such time and place to be published 3 weeks successively, previous to the time appointed, in a newspaper of general circulation in the province.But no newspaper publication shall be made where the petition for probate has been filed by the testator himself.

Section 4. Heirs, devisees, legatees, and executors to be notified by mail or personally. — The court shall also cause copies of the notice of the time and place fixed for proving the will to be addressed to the designated or other known heirs, legatees, and devisees of the testator resident in the Philippines at their places of residence, and deposited in the post office with the postage thereon prepaid at least 20 days before the hearing, if such places of residence be known. A copy of the notice must in like manner be mailed to the person named as executor, if he be not the petitioner; also, to any person named as co-executor not petitioning, if their places of residence be known. Personal service of copies of the notice at least 10 days before the day of hearing shall be equivalent to mailing.If the testator asks for the allowance of his own will, notice shall be sent only to his compulsory heirs.

Notes:

Probate of a will is a proceeding in rem and the publication is a jurisdictional requirement.

But if heirs and their residences are known, notice must be sent to them and such requirement cant be satisfied by mere publication.

Once a week successively 3 times suffices for publication requirement.

If testator petitions for probate, no publication is required and notice is required only for his compulsory heirs, which shall be considered a jurisdictional requisite.

Section 5. Proof at hearing. What sufficient in absence of contest. — At the hearing compliance with the provisions of the last 2 preceding sections must be shown before the introduction of testimony in support of the will. All such testimony shall be taken under oath and reduced to writing. If no person appears to contest the allowance of the will, the court may grant allowance thereof on the testimony of one of the subscribing witnesses only, if such witness testify that the will was executed as is required by law.In the case of a holographic will, it shall be necessary that at least 1 witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. In the absence of any such competent witness, and if the court deem it necessary, expert testimony may be resorted to.

Notes:

Witnesseso No contest/opposition

Notarial 1 subscribing witness Holographic 1 person who knows testator’s

handwriting or experto Contested

Notarial all witnesses + notary public; others Holographic 3 persons who know testator’s

handwriting or expert Evidence for petitioner may be received ex parte if without any

opposition. Testimony of the notary before whom the will was

acknowledged will prevail over that of the 2 attesting witnesses who claim undue execution of the will.

In holographic wills, it isn’t mandatory that witnesses be first presented before expert testimony may be resorted to.

Section 6. Proof of lost or destroyed will. Certificate thereupon. — No will shall be proved as a lost or destroyed will unless the execution


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and validity of the same be established, and the will is proved to have been in existence at the time of the death of the testator, or is shown to have been fraudulently or accidentally destroyed in the lifetime of the testator without his knowledge, nor unless its provisions are clearly and distinctly proved by at least 2 credible witnesses. When a lost will is proved, the provisions thereof must be distinctly stated and certified by the judge, under the seal of the court, and the certificate must be filed and recorded as other wills are filed and recorded.

Notes:

Exception to the rule on secondary evidence in Rule 130, Sec. 5 Must clearly establish the ff.:

1. The due execution and formal validity of the will2. The existence of the will at the time of the death of the

testator or its fraudulent or accidental destruction in the lifetime of the testator and without his knowledge, and

3. The provisions of said will, to be testified by at least 2 credible witnesses.

If contested follow Sec. 11 of this Rule (all subscribing witnesses and the notary public must be accounted for)

Where a lost will is shown to have been in the possession of the testator when last seen, or that the testator had ready access to the will and it cant be found after his death, the presumption is that he destroyed or cancelled it and not that it was destroyed by other persons without his knowledge or authority.

Applies to both notarial and holographic wills A lost of destroyed holographic will cant be proved by the bare

testimony of witnesses who have seen and/or read such will as the probate thereof requires identification of the handwriting and signature of the testator. o May be proved by photo copies

Section 7. Proof when witnesses do not reside in province. — If it appears at the time fixed for the hearing that none of the subscribing witnesses resides in the province, but that the deposition of 1 or more of them can be taken elsewhere, the court may, on motion, direct it to be taken, and may authorize a photographic copy of the will to be made and to be presented to the witness on his examination, who may be asked the same questions with respect to it, and to the handwriting of the testator and others, as would be pertinent and competent if the original will were present.

Section 8. Proof when witnesses dead or insane or do not reside in the Philippines. — If the appears at the time fixed for the hearing that the subscribing witnesses are dead or insane, or that none of them resides in the Philippines, the court may admit the testimony of other witnesses to prove the sanity of the testator, and the due execution of the will; and as evidence of the execution of the will, it may admit proof of the handwriting of the testator and of the subscribing witnesses, or of any of them.

Notes:

In the case of a notarial will where none of the attesting witnesses are available, the court may admit other witnesses and admit proof of the handwriting of the testator and the attesting witnesses.

Section 9. Grounds for disallowing will. — The will shall be disallowed in any of the following cases:(a) If not executed and attested as required by law;(b) If the testator was insane, or otherwise mentally incapable to make a will, at the time of its execution;(c) If it was executed under duress, or the influence of fear, or threats;(d) If it was procured by undue and improper pressure and influence, on the part of the beneficiary, or of some other person for his benefit;

(e) If the signature of the testator was procured by fraud or trick, and he did not intend that the instrument should be his will at the time of fixing his signature thereto.

Notes:

Essentially: Form, Capacity and Consent.

Section 10. Contestant to file grounds of contest. — Anyone appearing to contest the will must state in writing his grounds for opposing its allowance, and serve a copy thereof on the petitioner and other parties interested in the estate.

Section 11. Subscribing witnesses produced or accounted for where will contested. — If the will is contested, all the subscribing witnesses, and the notary in the case of wills executed under the Civil Code of the Philippines, if present in the Philippines and not insane, must be produced and examined, and the death, absence, or insanity of any of them must be satisfactorily shown to the court. If all or some of such witnesses are present in the Philippines but outside the province where the will has been filed, their deposition must be taken. If any or all of them testify against the due execution of the will, or do not remember having attested to it, or are otherwise of doubtful credibility, the will may nevertheless, be allowed if the court is satisfied from the testimony of other witnesses and from all the evidence presented that the will was executed and attested in the manner required by law.If a holographic will is contested, the same shall be allowed if at least 3 witnesses who know the handwriting of the testator explicitly declare that the will and the signature are in the handwriting of the testator; in the absence of any competent witnesses, and if the court deem it necessary, expert testimony may be resorted to.

Section 12. Proof where testator petitions for allowance of holographic will. — Where the testator himself petitions for the probate of his holographic will and no contest is filed, the fact that the affirms that the holographic will and the signature are in his own handwriting, shall be sufficient evidence of the genuineness and due execution thereof. If the holographic will is contested, the burden of disproving the genuineness and due execution thereof shall be on the contestant. The testator may, in his turn, present such additional proof as may be necessary to rebut the evidence for the contestant.

Section 13. Certificate of allowance attached to prove will. To be recorded in the Office of Register of Deeds. — If the court is satisfied, upon proof taken and filed, that the will was duly executed, and that the testator at the time of its execution was of sound and disposing mind, and not acting under duress, menace, and undue influence, or fraud, a certificate of its allowance, signed by the judge, and attested by the seal of the court shall be attached to the will and the will and certificate filed and recorded by the clerk. Attested copies of the will devising real estate and of certificate of allowance thereof, shall be recorded in the register of deeds of the province in which the lands lie.

RULE 77ALLOWANCE OF WILL PROVED OUTSIDE OF PHILIPPINES AND ADMINISTRATION OF ESTATE THEREUNDERSection 1. Will proved outside Philippines may be allowed here. — Wills proved and allowed in a foreign country, according to the laws of such country, may be allowed, filed, and recorded by the proper Court of First Instance in the Philippines.

Notes:

Must be re-probated in the Philippines Same venue requirements If decedent left properties in different countries, the

proceedings in his last residence is the principal administration


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and any other administration proceedings are ancillary administration.

The 2 proceedings are distinct and separate. What must be proved:

1. That the testator was domiciled in the foreign country2. That the will has been admitted to probate in such country3. That the foreign court was, under the laws of said foreign

country, a probate court with jurisdiction over the proceedings

4. The law on probate procedure in said foreign country and proof of compliance therewirth, and

5. The legal requirements in said foreign country for the valid execution of the will.

In the absence of proof of the foreign law, it is presumed to be the same as that in the Philippines.

Section 2. Notice of hearing for allowance. — When a copy of such will and of the order or decree of the allowance thereof, both duly authenticated, are filed with a petition for allowance in the Philippines, by the executor or other person interested, in the court having jurisdiction, such court shall fix a time and place for the hearing, and cause notice thereof to be given as in case of an original will presented for allowance.

Notes:

Who may petition: executor or other person interested

Section 3. When will allowed, and effect thereof. — If it appears at the hearing that the will should be allowed in the Philippines, the shall so allow it, and a certificate of its allowance, signed by the judge, and attested by the seal of the court, to which shall be attached a copy of the will, shall be filed and recorded by the clerk, and the will shall have the same effect as if originally proves and allowed in such court.

Section 4. Estate, how administered. — When a will is thus allowed, the court shall grant letters testamentary, or letters of administration with the will annexed, and such letters testamentary or of administration, shall extend to all the estate of the testator in the Philippines. Such estate, after the payment of just debts and expenses of administration, shall be disposed of according to such will, so far as such will may operate upon it; and the residue, if any shall be disposed of as is provided by law in cases of estates in the Philippines belonging to persons who are inhabitants of another state or country.

Notes:

The local administrator has power only over the property of the decedent in the Philippines. But the estate in the Philippines shall be disposed of in accordance with his national law (NCC 16).

Any surplus of the estate in the hands of the Philippine ancillary administrator shall be remitted to the domiciliary jurisdiction but it would be advisable for Philippine courts to retain in custodial egis a sufficient amount to protect Philippine claimants with contingent claims.

Balanay, Jr. v Martinez (1975) Quick Facts: Decedent left a will which provided that her properties shouldn’t be divided during her husband’s lifetime and that her heir’s legitimes should be satisfied from the fruits of her properties. The court issued an order denying probate of the will, declaring the will void.

Doctrine: In view of certain unusual provisions of the will, which are of dubious legality, and because of the motion to withdraw the petition for probate, the trial court acted correctly in passing upon the will’s intrinsic validity even before its formal validity had been established. The probate of a will might become an idle ceremony if on its face it appears to be intrinsic validity of the will be passed

upon, even before it is probated, the court should meet the issue. A notice to creditors is not in order if only a special administrator has been appointed. The probate court’s appointment of its branch clerk of court as special administrator isn’t a salutary practice because it might engender the suspicion that the probate judge and his clerk are in cahoots in milking the decedent’s estate.

Nepomuceno v CA (1985) Quick Facts: Martin Jugo died, leaving a notarial will appointing petitioner Sofia as his executor. His will gave the amount of legitime to his compulsory heirs and everything else to petitioner, to whom his will explicitly said he was co-habiting with. CFI denied petition for probate on the ground of evident intrinsic invalidity.

Doctrine: The general rule is that the probate court’s area of inquiry is limited to an examination and resolution of extrinsic validity (capacity and compliance with requisites). But when practical considerations call for it, the court may deny probate. The court here said that considering that there was no issue as to the extrinsic validity, which was admitted by both parties, and the patent invalidity of the will (the testator admitted in his will that he was cohabiting with petitioner, and donations or testamentary disposition to her is a void donation), it would be a waste of time, effort, expense and added anxiety if probate continued.

CIVIL CODE ART. 811In the probate of a holographic will, it shall be necessary that at least 1 witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. If the will is contested, at least 3 of such witnesses shall be required. In the absence of any competent witness referred to in the preceding paragraph, and if the court deem it necessary, expert testimony may be resorted to.

Ramos v CA (1978) Quick Facts: Disparity in the quality of testimonies of attesting witnesses and notary public.

Doctrine: All the attesting witness to a will if available, must be called to prove the will. Under this circumstance, they become “forced witnesses” and their declaration derogatory to the probate of the will need not bind the proponent hence, the latter may present other proof of due exemption even if contrary to the testimony of all or all of the attesting witness. As a rule, if any or all of the submitting witness testify against the due execution of the will, or do not remember having attested to it, or are otherwise of doubtful ability, the will may, nevertheless, be allowed if the court is satisfied from the testimony of other witness and from all the evidence presented that the will was executed and attested in the manner by law. Accordingly, although the subscribing witnesses to a contested will are the best witness in connection with its due execution, to deserve full credit, their testimony must be reasonable, and unbiased; if otherwise it may be overcome by any competent evidence. In the absence of any showing of self-interest that might possibly have warped his judgment and twisted his declaration, the intervention of a notary public, in his professional capacity, in the execution of a will deserves grave consideration.

Rodelas v Aranza (1982) Doctrine: If the holographic wil has been lost or destroyed and no other copy is available, the will cant be probated because the best and only evidence is the handwriting of the testator in said will. It is necessary that there be a comparison between sample handwritten statements of the testator and the handwritten will. But, a photostatic copy or Xerox copy of the holographic will may be allowed because comparison can be made with the standard writings of the testator. (This is where they cite the footnote in Gam v Yap, which is of the same tenor.)


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CIVIL CODE ART. 839The will shall be disallowed in any of the following cases: (1) If the formalities required by law have not been complied with;(2) If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution; (3) If it was executed through force or under duress, or the influence of fear or threats;(4) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; (5) If the signature of the testator was procured by fraud; (6) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature thereto.

CIVIL CODE ART. 16Real property as well as personal property is subject to the law of the country where it is stipulated.However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found.

4. EXECUTORAS AND ADMINISTRATORS

Notes:

Executor – the person named in the will to administer decedent’s estate and carry out the provisions thereof.

Administrator – the person appointed by the court to administer the estate where the decedent died intestate, or where the will was void and not allowed to probate, or where no executor was name in the will, or the executor name therin is incompetent or refuses to serve as such.

A corporation or association authorized to conduct the business of a trust company may be appointed as an executor or administrator

RULE 78LETTERS TESTAMENTARY AND OF ADMINISTRATION, WHEN AND TO WHOM ISSUEDSection 1. Who are incompetent to serve as executors or administrators. — No person in competent to serve as executor or administrator who:(a) Is a minor;(b) Is not a resident of the Philippines; and(c) Is in the opinion of the court unfit to execute the duties of the trust by reason of drunkenness, improvidence, or want of understanding or integrity, or by reason of conviction of an offense involving moral turpitude.

Section 2. Executor of executor not to administer estate. — The executor of an executor shall not, as such, administer the estate of the first testator.

Section 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.

Section 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.

Section 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.

Notes:

More than 1 executor may be issued letters testatmentary in accordance with the nomination in the will or by order of the court.

Gen. practice is that co-executors or co-administrators will exercise joint supervision over the entire estate, but the court for justifiable reasons may charge a co-administrator with powers over a particular portion of the estate for administration by him independent of his co-administrator, but he must act in close cooperation with the latter.

Section 6. When and to whom letters of administration granted. — If no executor is named in the will, or the executor or executors are incompetent, refuse the trust, or 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 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.

Notes:

Order of Preference May be disregarded for valid cause A full-dress hearing should be conducted to determine the

competence of the person named as administrator. The principal consideration is the interest in the said estate of 1

to be appointed as administrator. Underlying assumption of rule: those who will reap the benefits

of a wise, speedy and economical administration of the estate or, on the other hand, suffer the consequences of waste and improvidence or mismanagement, have the higher interest and most influential motive to administer the estate correctly.

Reasons for upholding co-administrators: 1. To have the benefit of their judgment and, perhaps, at all

times to have different interests represented2. Where justice and equity demand that opposing parties

or factions be represented in the management of the estate

3. Where the estate is large or, from any cause, an intricate and perplexing one to settle;

4. To have all interested persons satisfied and representatives to work in harmony for the best interests of the estate; and

5. When a person entitled to the administration of an estate desires to have another competent person associated with him in the office.

Next of kin those persons who are entitled under the statute of distribution to the decedent’s property

Nearest of kin whose interest is more preponderant Among members of a class, the strongest ground for preference

is the amount or preponderance of interest. Administrator cant be a debtor of estate The criterion in the selection of the administrator isn’t his

impartiality alone but the extent of his interest in the estate, so much so that the one assumed to have grated interest is


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preferred to another who has less. Clerks of court and other court personnel of probate courts

shouldn’t be appointed.

RULE 79OPPOSING ISSUANCE OF LETTERS TESTAMENTARY. PETITION AND CONTEST FOR LETTERS OF ADMINISTRATIONSection 1. Opposition to issuance of letters testamentary. Simultaneous petition for administration. — Any person interested in a will may state in writing the grounds why letters testamentary should not issue to the persons named therein as executors, or any of them, and the court, after hearing upon notice, shall pass upon the sufficiency of such grounds. A petition may, at the time, be filed for letters of administration with the will annexed.

Section 2. Contents of petition for letters of administration. — A petition for letters of administration must be filed by an interested person and must show, so far as known to the petitioner:(a) The jurisdictional facts;(b) The names, ages, and residences of the heirs, and the names and residences of the creditors, of the decedent;(c) The probable value and character of the property of the estate;(d) The name of the person for whom letters of administration are prayed.But no defect in the petition shall render void the issuance of letters of administration.

Notes:

Under Sec. 1, 2 petitions must be filed. In order to be a party, a person must have material and direct,

and not one that is only indirect or contingent, interest. An heir who validly assigns all his rights to the estate before the

institution of settlement proceedings no long has the requisite interest.

Where the assignment is made during the pendency of settlement proceedings, it requires the approval of the court for its validity, which shall be final only upon the termination of the settlement proceedings.

Section 3. Court to set time for hearing. Notice thereof. — When a petition for letters of administration is filed in the court having jurisdiction, such court shall fix a time and place for hearing the petition, and shall cause notice thereof to be given to the known heirs and creditors of the decedent, and to any other persons believed to have an interest in the estate, in the manner provided in sections 3 and 4 of Rule 76.

Section 4. Opposition to petition for administration. — Any interested person may, by filing a written opposition, contest the petition on the ground of the incompetency of the person for whom letters are prayed therein, or on the ground of the contestant's own right to the administration, and may pray that letters issue to himself, or to any competent person or person named in the opposition.

Section 5. Hearing and order for letters to issue. — At the hearing of the petition, it must first be shown that notice has been given as hereinabove required, and thereafter the court shall hear the proofs of the parties in support of their respective allegations, and if satisfied that the decedent left no will, or that there is no competent and willing executor, it shall order the issuance of letters of administration to the party best entitled thereto.

Section 6. When letters of administration granted to any applicant. — Letters of administration may be granted to any qualified applicant, though it appears that there are other competent persons having better right to the administration, if such persons fail to appear when notified and claim the issuance of letters to themselves.

RULE 80SPECIAL ADMINISTRATORSection 1. Appointment of special administrator. — When there is delay in granting letters testamentary or of administration by any cause including an appeal from the allowance or disallowance of a will, the court may appoint a special administrator to take possession and charge of the estate of the deceased until the questions causing the delay are decided and executors or administrators appointed.

Notes:

Special administrator may also be appointed when the regular administrator or executor has a claim against the estate.

The order of preference doesn’t apply here. Grounds for removal of the regular administrator don’t apply

strictly to the special administrator as he may be removed by the court on other grounds in its discretion.

Order appointing a special administrator is an interlocutory order and isn’t appealable.

Section 2. Powers and duties of special administrator. — Such special administrator shall take possession and charge of the goods, chattels, rights, credits, and estate of the deceased and preserve the same for the executors or administrator afterwards appointed, and for that purpose may commence and maintain suits as administrator. He may sell only such perishable and other property as the court orders sold. A special administrator shall not be liable to pay any debts of the deceased unless so ordered by the court.

Section 3. When powers of special administrator cease. Transfer of effects. Pending suits. — When letters testamentary or of administration are granted on the estate of the deceased, the powers of the special administrator shall cease, and he shall forthwith deliver to the executor or administrator the goods, chattels, money, and estate of the deceased in his hands. The executor or administrator may prosecute to final judgment suits commenced by such special administrator.

Notes:

Special administrator also has the duty to submit an inventory and to render an accounting of his administration as required by the terms of his bond.

While a special administrator may commence and maintain suits under Sec. 2, he can’t be sued by a creditor for the payment of a debt of the deceased. o Exception: where the creditor would suffer the adverse

effects of the running of the statute of limitations if the appointment is delayed.

RULE 81BOND OF EXECUTORS AND ADMINISTRATORSSection 1. Bond to be given issuance of letters. Amount. Conditions. — Before an executor or administrator enters upon the execution of his trust, and letters testamentary or administration issue, he shall give a bond, in such sum as the court directs, conditioned as follows:(a) To make and return to the court, within three (3) months, a true and complete inventory of all goods, chattels, rights, credits, and estate of the deceased which shall come to his possession or knowledge or to the possession of any other person for him;(b) To administer according to these rules, and, if an executor, according to the will of the testator, all goods, chattels, rights, credits, and estate which shall at any time come to his possession or to the possession of any other person for him, and from the proceeds to pay and discharge all debts, legacies, and charges on the same, or such dividends thereon as shall be decreed by the court;


10


(c) To render a true and just account of his administration to the court within one (1) years, and at any other time when required by the court;(d) To perform all orders of the court by him to be performed.

Section 2. Bond of executor where directed in will. When further bond required. — If the testator in his will directs that the executors serve without bond, or with only his individual bond, he may be allowed by the court to give bond in such sum and with such surety as the court approves conditioned only to pay the debts of the testator; but the court may require of the executor a further bond in case of a change in his circumstance, or for other sufficient case, with the conditions named in the last preceding section.

Notes:

Bonds posted are intended as an indemnity to the creditors, the heirs and the estate.

Bond will answer for breach of duty

Section 3. Bonds of joint executors and administrators. — When two or more persons are appointed executors or administrators the court may take a separate bond from each, or a joint bond from all.

Section 4. Bond of special administrator. — A special administrator before entering upon the duties of his trust shall give a bond, in such sum as the court directs, conditioned that he will make and return a true inventory of the goods, chattels, rights, credits, and estate of the deceased which come to his possession or knowledge, and that he will truly account for such as are received by him when required by the court, and will deliver the same to the person appointed executor or administrator, or to such other person as may be authorized to receive them.

RULE 82REVOCATION OF ADMINISTRATION, DEATH, RESIGNATION, AND REMOVAL OF EXECUTORS OR ADMINISTRATORSSection 1. Administration revoked if will discovered. Proceedings thereupon. — If after letters of administration have been granted on the estate of a decedent as if he had died intestate, his will is proved and allowed by the court, the letters of administration shall be revoked and all powers thereunder cease, and the administrator shall forthwith surrender the letters to the court, and render his account with such time as the court directs. Proceeding for the issuance of letters testamentary or of administration under the will shall be as hereinbefore provided.

Section 2. Court may be remove or accept resignation of executor or administrator. Proceeding upon death, resignation, or removal. — If an executor or administrator neglects to render his account and settle the estate according to law, or to perform an order or judgment of the court, or a duty expressly provided by these rules, or absconds, or becomes insane, or otherwise incapable or insuitable to discharge the trust, the court may remove him, or in its discretion, may permit him to resign. When an executor or administrator dies, resign, or is removed the remaining executor or administrator may administer the the trust alone, unless the court grants letters to someone to act with him. If there is no remaining executor or administrator, administration may be to any suitable person.

Section 3. Acts before revocation, resignation, or removal to be valid. — The lawful acts of an executor or administrator before the revocation of his letters testamentary or of administration, or before his resignation or removal, shall have the like validity as if there had been no such revocation, resignation, or removal.

Section 4. Powers of new executor or administrator. Renewal of license to sell real estate. — The person to whom letters testamentary or of administration are granted after the revocation

of former letters, or the death, resignation, or removal of a former executor or administrator, shall have the like powers to collect and settle the estate not administered that the former executor or administrator had, and may prosecute or defend actions commenced by or against the former executor or administrator, and have execution on judgments recovered in the name of such former executor or administrator. An authority granted by the court to the former executor or administrator for the sale or mortgage of real estate may be renewed in favor of such person without further notice or hearing.

Notes:

The mere fact that it was subsequently discovered that the duly appointed administrator was indebted to the decedent isn’t a ground for his removal, absent any other circumstance indicative of bad faith or lack of integrity on his part.

RULE 83INVENTORY AND APPRAISAL. PROVISION FOR SUPPORT OF FAMILYSection 1. Inventory and appraisal to be returned within three months. — Within three (3) months after his appointment every executor or administrator shall return to the court a true inventory and appraisal of all real and personal estate of the deceased which has come into his possession or knowledge. In the appraisement of such estate, the court may order one or more of the inheritance tax appraisers to give his or their assistance.

Notes:

The 3-month period isn’t mandatory and the court retains jurisdiction even if the inventory is filed after said period.

Delay, if unexplained, may be a ground for removal.

Section 2. Certain article not to be inventoried. — The wearing apparel of the surviving husband or wife and minor children., the marriage bed and bedding, and such provisions and other articles as will necessarily be consumed in the substinence of the family of the deceased, under the direction of the court, shall not be considered as assets, nor administered as such, and shall not be included in the inventory.

Section 3. Allowance to widow and family. — The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom, under the direction of the court, such allowance as are provided by law.

Notes:

Property claimed by 3rd persons may be included in the inventory as part of the assets of the estate and the probate court may order such inclusion, but such order of the probate court is only a prima facie determination and doesn’t preclude the claimant from maintaining an ordinary civil action for the determination of title.

Allowances for support are subject to collation

RULE 84GENERAL POWERS AND DUTIES OF EXECUTORS AND ADMINISTRATORSSection 1. Executor or administrator to have access to partnership books and property. How right enforced. — The executor or administrator of the estate of a deceased partner shall at all times have access to, and may examine and take copies of, books and papers relating to the partnership business, and make examine and make invoices of the property belonging to such partnership; and the surviving partner or partners, on request, shall exhibit to him all such books, papers, and property in their hands or control. On the written application of such executor or administrator, the court having jurisdiction of the estate may order any such surviving


11


partner or partners to freely permit the exercise of the rights, and to exhibit the books, papers, and property, as in this section provided, and may punish any partner failing to do so for contempt.

Section 2. Executor or administrator to keep buildings in repair. — An executor or administrator shall maintain in tenanble repair the houses and other structures and fences belonging to the estate, and deliver the same in such repair to the heirs or devisees when directed so to do by the court.

Section 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed. — An executor or administrator shall have the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and the expenses of administration.

Notes:

An administrator or executor has all the powers necessary for the administration of the estate and which powers he can exercise without leave of court.

Constitution of a lease is an act of administration must be impugned in an ordinary civil action

But if lease is for more than 1 year, then the same is no longer considered a mere act of administration and leave of court should ordinarily be required.

RULE 85ACCOUNTABILITY AND COMPENSATION OF EXECUTORS AND ADMINISTRATORSSection 1. Executor or administrator chargeable with all estate and income. — Except as otherwise expressly provided in the following sections, every executor or administrator is chargeable in his account with the whole of the estate of the deceased which has come into his possession, at the value of the appraisement contained in the inventory; with all the interest, profit, and income of such estate; and with the proceeds of so much of the estate as is sold by him, at the price at which it was sold.

Section 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. He 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.

Section 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.

Section 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.

Section 5. Accountable if he neglects or delays to raise or pay money. — When an executor or administrator neglects or unreasonably delays to raise money, by collecting the debts or selling the real or personal estate of the deceased, or neglects to pay over the money he has in his hands, and the value of the estate is thereby lessened or unnecessary cost or interest accrues, or the persons interested suffer loss, the same shall be deemed waste and the damage

sustained may be charged and allowed against him in his account, and he shall be liable therefor on his bond.

Section 6. When allowed money paid as cost. — The amount paid by an executor or administrator for costs awarded against him shall be allowed in his administration account, 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.

Section 7. What expenses and fees allowed executor or administrator. Not to charge for services as attorney. Compensation provided by will controls unless renounced. — An executor or administrator shall be allowed the necessary expenses the care, management, and settlement of the estate, and for his services, four pesos per day for the time actually and necessarily employed, or 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, of two per centum of the first five thousand pesos of such value, one per centum of so much of such value as exceeds five thousand pesos and does not exceed thirty thousand pesos, one-half per centum of so much of such value as exceed one hundred thousand pesos. But in any special case, 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. If objection to the fees allowed be taken, the allowance may be re-examined on appeal.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.When the executors or administrator is an attorney, he shall not charge against the estate any professional fees for legal services rendered by him.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.

Notes:

Not proper expenses of administration: 1. Services rendered by an administrator in favor of an heir

which services weren’t beneficial to the estate2. Premiums for his bond3. Expenses for the repair of property of the estate being

occupied and used by him4. Expenses for the keeping of ordinary records and receipts

involved in his administration work5. Losses incurred in the conduct of business with the use of

the funds of the estate. Where attorney’s services were rendered in a litigation

involving such administrator or executor in his capacity as trustee of the estate and for the protection of the interests of such estate, the attorney’s fee is chargeable to the estate.

To recover attorney’s fees: o Bring independent action personally against the executor

or administrator; or o File a petition in the administration proceedings for the

probate court to allow the same and to direct payment. Compensation of executor is that fixed in the will.

Section 8. When executor or administrator to render account. — Every executor or administrator shall render an account of his administration within 1 year from the time of receiving letters testamentary or of administration, unless the court otherwise directs because of extensions of time for presenting claims against, or paying the debts of, the estate, or for disposing of the estate; and he shall render such further accounts as the court may require until the estate is wholly settled.


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Section 9. Examinations on oath with respect to account — The 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, except when no objection is made to the allowance of the account and its correctness is satisfactorily established by competent proof. The 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.

Section 10. Account to be settled on notice. — Before the account of an executor or administrator is allowed, notice shall be given to persons interested of the time and place of examining and allowing the same; 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.

Section 11. Surety on bond may be party 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.

PCIB v Escolin (1974) Linnie Hodges died, and 5½ years later, her husband, Charles, died as well. Both of them left wills giving all of the residue and remainder of their estate to each other during their respective natural lifetime, subject to the condition that upon the death of whoever of them survived the other, the remainder of what the deceased would have inherited from the “survivor” is given to the brothers and sisters of the first deceased.The siblings of Linnie alleged that Charles made statements that he had renounced his inheritance from his wife in favor of her other heirs. Magno, the administratrix of Linnie’s estate claims that naked ownership passed to the siblings, and that only a lifetime usufruct was given to Charles. She claims that under Texas law, spouse has no legitime.PCIB, as administrator of Charles’ estate, claims that what was passed to Mr. Hodges was not only usufruct but also ownership, with the right to dispose.

Doctrine: No final distribution and adjudication can be made yet. At best, Sec. 2 of Rule 109 allowed Charles to dispose of portions of his inheritance in advance of final adjudication, there being no possible prejudice to 3rd parties, inasmuch as Linnie had no creditors and all pertinent taxes have been paid.The special proceeding for the settlement of Linnie’s estate should not be closed despite the court order allegedly adjudicating Charles as the sole heir, because there is no final distribution to all parties concerned of the estate. Sec. 1 of Rule 90 provides that after the residue is assigned to parties entitled to it, the Special Proceeding is deemed ready for final closure, where an Order is issued for distribution/assignment of estate among those entitled to it, and payment of debts, funeral expenses, administration expenses, widow allowance, taxes, etc. should be made. But, since there is still residue, the Special Proceeding can't be closed yetPCIB argues that there is no liquidation of conjugal properties yet, so it should solely administer everything to determine the separate estate of Linnie, over which Magno could administer. BUT, both PCIB and Magno should administer; it was Charles' fault why there is still no administration of his estate. Sec. 6 of Rule 78 states that the executor (PCIB) of an executor (Charles, over Linnie's) can't administer the estate of a decedent (Linnie). Also, under Sec. 2 of Rule 73, liquidation of the conjugal partnership may be done in either spouse's probate proceedings.

Uriarte v CFI (1970)

Petitioner filed for intestate proceedings in CFI-Negros, and an administrator was appointed.Afterwards, Private Respondents filed for testate proceedings in CFI-Manila, involving the settlement of the same estate as that in the intestate proceedings in CFI-Negros. PRs alleged that there was a will, contrary to Petitioner’s claim.Petitioner filed a petition for certiorari vs. CFI-Negros and CFI-Manila, seeking the annulment of CFI-Negros’ dismissal of the first Special Proceeding and CFI-Manila’s denial of his motion to dismiss the second one.

Doctrine: Testate proceedings takes precedence over intestate proceedings for the same purpose. If during the pendency of intestate proceedings it is found that the decedent had left a will, proceedings for the probate of the latter should replace the intestate proceedings, even if at that stage an administrator had already been appointed.This is, however, without prejudice that should the alleged will be rejected or is disapproved, the proceeding shall continue as intestacy.

5. CLAIMS AND ACTIONS BY AND AGAINST THE ESTATE

RULE 86CLAIMS AGAINST ESTATESection 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.

Section 2. Time within which claims shall be filed. — In the notice provided in the preceding section, the court shall estate the time for the filing of claims against the estate, which shall not be more than 12 not less than 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 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 1 month.

Notes:

“Statute of non-claims” supersedes the ordinary statutes of limitations

Period for filing claims starts to run from the date of the 1st

publication of the notice and runs even against the State. 6 month period: starting from the 6th month after the date of 1st

publication down to the 12th month The court, for good cause shown, may grant a 1-month period

for a creditor to file a claim which he failed to file during the original period granted for the filing of claims. o May be filed at any time during the administration

proceedings provided no order of distribution has yet been entered

Claims must be filed within a time not exceeding 1 month from the order of the court allowing the filing of such particular claim.

Section 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.

Section 4. Filing of 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


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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.

Notes:

Notice to creditors not proper when only a special administrator has been appointed

Notice to creditors is constructive notice to all Proceeding for filing of claims is in rem

Section 5. Claims which must be filed under the notice. If not filed, barred; exceptions. — All claims for money against the decent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expense for the last sickness of the decedent, and judgment for money against the decent, 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.

Section 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 debtor. In a joint obligation of the decedent, the claim shall be confined to the portion belonging to him.

Notes:

The claims in Sec. 5 must be for money which aren’t secured by a lien against property of the estate.

If the claim is for the recovery of real or personal property from the estate or the enfocement of any lien thereon, an action should be instituted for that purpose against the executor or administrator.

Claims must have arisen from liability contracted by the decedent before his death.

Claims arising from contracto Express or impliedo Entered into by decedent during his lifetimeo Excludes claims arising from crime or quasi-delict, which

should be subject of an action against the executor or administrator or against the heirs

Taxeso If filed within the period of limitations in NIRC, aren’t

covered by the statute of non-claims, as these are monetary obligations created by law.

o Need not be presented as a claim; the probate court may just direct payment

o May be enforced even after distribution of estate against the heirs, in proportion to their shares

Quasi-contracto “implied” contracts

Contingent claim – one which depends for its demandability upon the happening of a future uncertain event; subject to a suspensive conditiono No payment until happening of event but portion of estate

may be reserved for its satisfaction Claims not filed within the period for the filing of claims are

barred, but if the claimant is sued by the administrator or executor, either within the period for filing of claims of

thereafter, such claim may be availed of by the defendant as a counterclaim and if proves the same, hey may recover from the estate.

Money claims must be duly filed even if the deceased acknowledged and ordered payment of the same in his will. o May be waived such as when the executor or administrator

substitutes decedent in a civil case and proceeds to trial. If defendant dies before final judgment in the action is for

recovery of money, debt or interest thereon, the action shall not be dismissed but shall continue until entry of judgment.

If at the time of the death of the decedent, an action is pending against him but not for the primary purpose of recovery of money, debt or interest, his heirs or other legal representatives will merely be substituted for the decedent in said action without the appointment of an executor or administrator.

If final judgment had already been rendered against the decedent prior to his death, but without levy on executrion having been effected against his property, such judgment for a sum of money must also be filed as a claim against the estate in the manner provided by this Rule. If levy had already been made before his death, execution shall proceed.

However, if the final judgment rendered against the decedent in his lifetime is for the recovery of real or personal property other than money, or the enforcement of a lien thereon, then claimant has merely to obtain a writ of execution for enforcement against the executor, administrator or successor-in-interest of the deceased.

Section 7. Mortgage debt due from estate. — A creditor holding a claim against the deceased secured by mortgage or other colateral 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 foreclosure 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 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.

Notes:

Mortgage creditor can only avail of 1 of the 3 remedies and if he fails to recover under that remedy he cant avail of any of the other 2 remedies.

3 Remedies: 1. Abandon his security and prosecute his claim in the

manner provided under this Rule- By filing his claim against the estate as a money claim- Precludes foreclosure

2. Institute a foreclosure suit and recover upon the security- Suit should be against the executor or administrator- He may obtain a deficiency judgment and file it as a

claim against the estate (money claim) - Safe recourse: file a claim for any probable deficiency,

which will be a contingent claim3. Rely solely upon his mortgage and foreclose the same at

any time within the statute of limitations- Party-defendant: executor or administrator (if

administration proceedings still pending) or heirs (if estate has been distributed)

- Extra-judicial foreclosure


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- Waives any further deficiency claim Where the mortgagor died during the pendency of a judicial

foreclosure suit against him, the decision therein shall be enforced by the trial court by writ of execution in the foreclosure proceeding.

Section 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.

Notes:

2nd instance wherein a special administrator may be appointed special administrator shall have authority to act only with

respect to the claim of the regular administrator or the executor

Section 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 list 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. If the claim is not due, or is contingent, when filed, it must also be supported by affidavits 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.

Section 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 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.

Section 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, legatees, 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.

Section 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.

Section 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.

Section 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.

Notes:

If there is no instrument evidencing the debt of the decedent, and no writing is offered as proof thereof, the claim cant be proved.

Dead Man Statute – disqualifies surviving parties under the circumstances provided therein from testifying to any matter of fact occurring before the death of the decedent.

Doesn’t apply to money claims for the funeral expenses or for the last sickness of the deceased.

A probate court has no jurisdiction to entertain a claim in favor of the estate against a 3rd person as the same should be the subject of an ordinary action generally to be prosecuted by the executor or administrator.

Exception: Sec. 10 where executor or administrator to interpose any counterclaim in offset of a claim against the estate. Treated as a compulsory counterclaim

RULE 87ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORSSection 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 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.

Notes:

Actions that survive the death of the decedent1. Recovery of property2. Enforcement of a lien thereon3. Action to recover damages

An administrator or executor may be sued in either his personal or representative capacityo Personal – for violation or non-compliance with duties of

his trusto Representative – if the action would result in a direct

charge upon the estate Legatee may bring an action against the executor or

administrator to compel the payment of the legacy. Action for revival of money judgment may be filed against the

administrator to pre-empt prescription of judgment.

Section 2. Executor or administrator may bring or defend actions which survive. — For the recovery or protection of the property or


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rights of the deceased, an executor or administrator may bring or defend, in the right of deceased, actions for causes which survive.

Notes:

Heirs may maintain actions to recover property of the estate if the executor or administrator is unwilling or refuses to bring suit (unwilling co-plaintiff), or when he himself is alleged to have participated in the act complained of.

Section 3. Heir may not sue until shall 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.

Section 4. Executor or administrator may compound with debtor. — Within 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.

Section 5. Mortgage due estate may be foreclosed. — A mortgage belonging to the estate of a deceased person, as mortgagee or assignee of the right or a mortgage, may be foreclosed by the executor or administrator.

Notes:

Donee inter vivos may sue the administrator for delivery of property donated

Reservee can sue to recover the property which the deceased was bound to reserve.

Section 6. Proceedings when property concealed, embezzled, or fraudulently conveyed. — If an executor or administrator, 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 or discloses the right, title, interest, or claim of the deceased, the court may cite such suspected person to appear before it any 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 any such person, and his answers thereto, shall be in writing and shall be filed in the clerk's office.

Section 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, account, 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.

Section 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.

Notes:

Fact-finding inquiries Probate court cant determine issue of title

Section 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 an 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, not 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.

Section 10. When creditor may bring action. Lien for costs. — When there is such a deficiency of assets, and the deceased in his lifetime had made or attempted such a conveyance, as is stated in the last preceding section, and the executor or administrator has not commenced the action therein provided for, any creditor of the estate may, with the permission of the court, commence and prosecute to final judgment, in the name of the executor or administrator, a like action for the recovery of the subject of the conveyance or attempted conveyance for the benefit of the creditors. But the action shall not be commenced until the creditor has filed in a court a bond executed to the executor or administrator, in an amount approved by the judge, conditioned to indemnify the executor or administrator against the costs and expenses incurred by reason of such action. Such creditor shall have a lien upon any judgment recovered by him in the action for such costs and other expenses incurred therein as the court deems equitable. Where the conveyance or attempted conveyance had been made by the deceased in his lifetime in favor of the executor or administrator, the action which a credit may bring shall be in the name of all the creditors, and permission of the court and filing of bond as above prescribed, are not necessary.

Notes:

Fraudulent transfers or fictitious contracts of the decedent in fraud of creditors

The executor or administrator may, on hiw own initiative or on motion of the creditors and as directed by the court, institute an action for the recovery of said property, but since said action is for the benefit of the creditors, th court may direct creditors to defray part of the costs and expenses.

Any of the creditors may bring suit in his own name, with leave of court, if the executor or administrator still fails to, upon filing of an indemnity bond.

If action is against the executor or administrator himself, the suit shall be in the names of all the creditors without need for leave of court and bond.

RULE 3

PARTIES TO CIVIL ACTIONSSection 16. Death of party; duty of counsel. — Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name


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and address of his legal representative or representatives. Failure of counsel to comply with his duty shall be a ground for disciplinary action.The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs.The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of 30 days from notice.If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within the specified period, the court may order the opposing party, within a specified time to procure the appointment of an executor or administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the deceased. The court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as costs.

Section 20. Action and contractual money claims. — 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. (21a)

RULE 39

EXECUTION, SATISFACTION AND EFFECT OF JUDGMENTSSection 7. Execution in case of death of party. — In case of the death of a party, execution may issue or be enforced in the following manner:(a) In case of the death of the judgment obligee, upon the application of his executor or administrator, or successor in interest;(b) In case of the death of the judgment obligor, against his executor or administrator or successor in interest, if the judgment be for the recovery of real or personal property, or the enforcement of a lien thereon;(c) In case of the death of the judgment obligor, after execution is actually levied upon any of his property, the same may be sold for the satisfaction of the judgment obligation, and the officer making the sale shall account to the corresponding executor or administrator for any surplus in his hands. (7a)

Paredes v Moya (1974) Petitioner had won a collection case in the CFI against his employer, Kuntze, who then died pending appeal to the CA. The administratrix of Kuntze replaced him, then CA dismissed.

Doctrine:In cases for money claims, where the defendant dies during pendency of an appeal on a decision against him OR after final judgment by the lower court, the action should not be dismissed but continued, with the administrator substituting him as his legal representative. 1) All claims for money vs. decedent, arising from contract, whether due or not, 2) claims for funeral expenses and those for his last sickness, and 3) judgment for money against the deceased, MUST be filed before the court where the administration proceedings of his estate is pending, within the time limited in the notice to creditors; otherwise, they are barred forever. If there is no sufficient cash on hand, probate court would then order the sale of properties and payment to be made from the proceeds therefrom.The estate’s properties are under the jurisdiction of the probate court, where they are in custodia legis, and the jurisdiction continues until the properties have been distributed. The plaintiff

must go to the probate court for an order directing execution, or a writ of execution. The judgment became final and executory; it was not arrested by death. The claim’s validity cannot be challenged in the probate court where the administration proceedings are pending.

De Bautista v De Guzman (1983)

Petitioner’s father died while riding a jeep owned by the father of Respondents. The driver of the jeep was convicted, sentenced to prison and to pay Petitioners P3,000. Writ of execution was served, but returned unsatisfied.The father of the respondents (owner) died, and because of the failure to collect the P3,000, Petitioners filed a complaint in the CFI (civil case) vs. Respondents for payment thereof.CFI dismissed the case, and it became final. Then, Petitioners filed with the same court a new complaint, stating the same causes of action, but alleging that the owner died intestate and the proceedings therefor were filed in the same court and have in fact already been closed; the properties already distributed.CFI denied Respondent’s motion to dismiss.

Doctrine:Same as Paredes vs. Moya. The purpose of the rule is to allow the administrator/executor to be informed of the claims, thus allowing him to examine each and determine whether it should be allowed.Petitioners should have presented their claims before the intestate proceedings. Instead, they slept on their right.The only instance when a creditor can file against a distributee of the debtor’s asset is under Rule 88, Sec. 5. However, the contingent claims must first have been established and allowed in the probate court Furthermore, the law presumes that the Petitioners had knowledge of the proceedings, because the settlement of estate is a proceeding in rem.

PNB v CA (2001) Private Respondent was appointed as the administrator of an intestate estate, and was authorized to obtain a P550K loan, secured by a mortgage over a parcel of land owned by the deceased. He obtained a loan from PNB, secured with a mortgage.For failure to pay, PNB foreclosed and won the lot at public auction. There was still a deficiency, so PNB filed in the RTC a civil action vs. PR as administrator to collect the same. The RTC dismissed, and was affirmed by the CA.(This case involves a foreclosure of mortgage arising out of a settlement of estate, where the administrator mortgaged estate property pursuant to an authority granted by the probate court.)

Doctrine:Sec. 7 of Rule 89 states that once the deed of real estate mortgage is recorded in the proper Registry of Deeds, together with a court order authorizing the administrator to mortgage, said deed shall be valid as if it was executed by the deceased himself. This clearly applies herein and the requisites have been complied with.Sec. 7 of Rule 86 grants to the mortgagee 3 mutually exclusive remedies that can be pursued for the satisfaction of his credit in case the mortgagor dies:

1. Waive the mortgage and claim the entire debt from the estate as an ordinary claim

2. Foreclose the mortgage judicially and prove any deficiency as an ordinary claim

3. Rely on the mortgage exclusively, foreclosing at any time before barred by prescription, without the right to file a claim for any deficiency.

Romualdez v Tiglao (1981) Petitioners sued Respondents for unpaid rentals, and the CFI ruled in the former’s favor. However, the judgment was not satisfied despite a writ of execution.


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A suit to revive judgment was filed in the CFI, and during this time, one of the Respondents died and her estate was being settled in the same CFI, and her estate was made defendant.CFI revived the judgment.

Doctrine:The original judgment was become stale because of its non-execution after the lapse of 5 years. Accordingly, it cannot be presented against the estate of the deceased until it is revived. This is the reason why they filed suit in question; it was not to make the estate pay but merely to keep alive the judgment so that the sums awarded therein can be presented as claims against the estate.

Rioferio v CA (2004) Petitioners are the paramour and children of the deceased, whereas the Respondents are the legal wife and children of the deceased.Respondents discovered that Petitioners had extrajudicially settled the deceased’s estate, were issued TCTs, and obtained a loan, securing it with a RE mortgage over estate properties.Respondents filed a complaint for annulment of the settlement.RTC denied Petitioners’ motion to set affirmative defenses for hearing, ruling that Respondents, as heirs, are real parties in interest, especially in the absence of an administrator.

Doctrine:Pending the filing of administration proceedings, the heirs have legal personality to bring suit in behalf of the estate, since the rights to succession are transmitted from the moment of death.GR: Heirs have no legal standing to sue for the recovery of estate property during the pendency of administration proceedings.Exceptions:

1. Executor/administrator is unwilling or refuses to bring suit2. Administrator is alleged to have participated in the act

complained of and is made a party-defendant3. When there is no administrator (as in this case)

6. PAYMENT OF DEBTS AND DISPOSITION OF PROPERTY OF THE ESTATE

*For Rules 86 and 87, please refer above.

RULE 88PAYMENT OF THE DEBTS OF THE ESTATESection 1. Debts paid in full if estate sufficient. — If, after hearing all the money claims against the estate, and after ascertaining the amount of such claims, it appears that there are sufficient assets to pay the debts, the executor or administrator pay the same within the time limited for that purpose.

Section 2. Part of estate from which debt paid when provision made by will. — If the testator makes provision by his will, or designates the estate to be appropriated for the payment of his debts, the expenses of administration, or the family expenses, they shall be paid according to the provisions of the will; but if the provision made by the will or the estate appropriated, is not sufficient for that purpose, such part of the estate of the testator, real or personal, as is not disposed of by will, if any shall be appropriated for that purpose.

Section 3. Personalty first chargeable for debts, then realty. — The personal estate of the deceased not disposed of by will shall be first chargeable with the payment of debts and expenses; and if said personal estate is not sufficient for tat purpose, or its sale would redound to the detriment of the participants for the estate, the whole of the real estate not dispose of by will, or so much thereof as is necessary, may be sold, mortgaged, or otherwise encumbered for that purpose by the executor or administrator, after obtaining the authority of the court therefor. Any deficiency shall be met by

contributions in accordance with the provisions of section 6 of this rule.

Section 4. Estate to be retained to meet contingent claims. — If the court is satisfied that a contingent claim duly filed is valid, it may order the executor or administrator to retain in his hands sufficient estate to pay such contingent claim when the same becomes absolute, or if the estate is insolvent, sufficient to pay a portion equal to the dividend of the other creditors.

Section 5. How contingent claim becoming absolute in two years allowed and paid. Action against distributees later. — If such contingent claim becomes absolute and is presented to the court, or to the executor or administrator, within two (2) years from the time limited for other creditors to present their claims, it may be allowed by the court if not disputed by the executor or administrator and, if disputed, it may be proved and allowed or disallowed by the court as the facts may warrant. If the contingent claim is allowed, the creditor shall receive payment to the same extent as the other creditors if the estate retained by the executor or administrator is sufficient. But if the claim is not so presented, after having become absolute, within said two (2) years, and allowed, 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; but the assets so distributed 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.

Section 6. Court to fix contributive shares where devisees, legalitees, or heirs have been possession. — Where devisees, legalitees, or 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 having jurisdiction of the estate may, by order for that purpose, 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.

Section 7. Order of payment if estate insolvent — If the assets which can be appropriated for the payment of debts are not sufficient for that purpose, 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.

Section 8. Dividends to be paid in proportion to claims. — 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.

Section 9. Estate of insolvent non-resident, how disposed of. — In case administration is taken in the Philippine of the estate of a person who was at the time of his death an inhabitant of another country, and who died insolvent, hi estate found in the Philippines shall, as far as practicable, be so disposed of that his creditors here and elsewhere may receive each an equal share, in proportion to their respective credits.

Section 10. When and how claim proved outside the Philippines against insolvent resident's estate paid. — If it appears to the court having jurisdiction that claims have been duly proven in another country against the estate of an insolvent who was at the time of his death an inhabitant of the Philippines, and that the executor or administrator in the Philippines had knowledge of the presentation of such claims in such country and an opportunity to contest their allowance, the court shall receive a certified list of such claims, when perfected in such country, and add the same to the list of


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claims proved against the deceased person in the Philippines so that a just distribution of the whole estate may be made equally among all its creditors according to their respective claims; but the benefit of this and the preceding sections shall not be extended to the creditors in another country if the property of such deceased person there found is not equally apportioned to the creditors residing in the Philippines and the other creditor, according to their respective claims.

Section 11. Order for payment of debts. — Before the expiration of the time limited for the payment of the debts, the court shall order the payment thereof, and the distribution of the assets received by the executor or administrator for that purpose among the creditors, as the circumstances of the estate require and in accordance with the provisions of this rule.

Section 12. Orders relating to payment of debts where appeal is taken. — If an appeal has been taken from a decision of the court concerning a claim, the court may suspend the order for the payment of the debts or may order the distributions among the creditors whose claims are definitely allowed, leaving in the hands of the executor or administrator sufficient assets to pay the claim disputed and appealed. When a disputed claim is finally settled the court having jurisdiction of the estate shall order the same to be paid out of the assets retained to the same extent and in the same proportion with the claims of other creditors.

Section 13. When subsequent distribution of assets ordered. — If the whole of the debts are not paid on the first distribution, and if the whole assets are not distributed, or other assets afterwards come to the hands of the executor or administrator, the court may from time to time make further orders for the distributions of assets.

Section 14. Creditors to be paid in accordance with terms of order. — When an order is made for the distribution of assets among the creditors, the executor or administration shall, as soon as the time of payment arrives, pay the creditors the amounts of their claims, or the dividend thereon, in accordance with the terms of such order.

Section 15. Time for paying debts and legacies fixed, or extended after notice, within what periods. — On granting letters testamentary or administration the court shall allow to the executor or administrator a time for disposing of the estate and paying the debts and legacies of the deceased, which shall not, in the first instance, exceed one (1) year; but the court may, on application of the executor or administrator and after hearing on such notice of the time and place therefor given to all persons interested as it shall direct, extend the time as the circumstances of the estate require not exceeding six (6) months for a single extension not so that the whole period allowed to the original executor or administrator shall exceed two (2) years.

Section 16. Successor of dead executor or administrator may have time extended on notice within certain period. — When an executor or administrator dies, and a new administrator of the same estate is appointed, the court may extend the time allowed for the payment of the debts or legacies beyond the time allowed to the original executor or administrator, not exceeding six (6) months at a time and not exceeding six (6) months beyond the time which the court might have allowed to such original executor or administrator; and notice shall be given of the time and place for hearing such application, as required in the last preceding section.

Notes The provisions of Sec. 15 for the payment of debts and legacies

is directory and extensions of the period may be granted by the court.

The payment of the debts of the estate, as a general rule, must be taken in the ff. order: 1. from the portion or property designated in the will;2. from the personal property, and

3. from the real property A legacy isn’t a debt of the estate, hence the probate court cant

issue a writ of execution for the payment or satisfaction thereof.

Sec. 6 authorizes execution against the contributive shares of the devisees, legatees and heirs in possession of the decedent’s assets to satisfy the debts of the estate.

Secs. 4 and 5 provide for the payment of contingent claimso If they become absolute and is presented to the court as an

absolute claim within 2 years from the time allowed for the presentation of claims, it will be paid in the same manner as the other absolute claims.

o After said period, the creditor may proceed against the distributes, provided said contingent claims had been seasonably filed in and allowed by the probate court.

o The property reserved for the payment of such contingent claims may, therefore, be retained by the administrator or executor only within said 2 year period as, thereafter, the same shall be included among the assets for distribution to the heirs.

Preference of credits explicitly incorporate, to be followed where the estate isn’t sufficient to pay for all its debts.

RULE 89SALES, MORTGAGES, AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENTSection 1. Order of sale of personalty. — Upon the application of the executor or administrator, and on written notice to the heirs and other persons interested, the court may order the whole or a part of the personal estate to be sold, if it appears necessary for the purpose of paying debts, expenses of administration, or legacies, or for the preservation of the property.

Section 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts and legacies through personalty not exhausted. — When the personal estate of the deceased is not sufficient to pay the debts, expenses of administration, and legacies, or where the sale of such personal estate may injure the business or other interests of those interested in the estate, and where a testator has not otherwise made sufficient provision for the payment of such debts, expenses, and legacies, the court, on the application of the executor or administrator and on written notice of the heirs, devisees, and legatees residing in the Philippines, may authorize the executor or administrator to sell, mortgage, or otherwise encumber so much as may be necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts, expenses, and legacies, if it clearly appears that such sale, mortgage, or encumbrance would be beneficial to the persons interested; and if a part cannot be sold, mortgaged, or otherwise encumbered without injury to those interested in the remainder, the authority may be for the sale, mortgage, or other encumbrance of the whole of such real estate, or so much thereof as is necessary or beneficial under the circumstances.

Section 3. Persons interested may prevent such sale, etc., by giving bond. — No such authority to sell, mortgage, or otherwise encumber real or personal estate shall be granted if any person interested in the estate gives a bond, in a sum to be fixed by the court, conditioned to pay the debts, expenses of administration, and legacies within such time as the court directs; and such bond shall be for the security of the creditors, as well as of the executor or administrator, and may be prosecuted for the benefit of either.

Section 4. When court may authorize sale of estate as beneficial to interested persons. Disposal of proceeds. — 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, the court may, upon application of the executor or administrator and on written notice to the heirs, devisees, and legatees who are interested in the estate to be sold, authorize the executor or administrator to sell the whole or a part of said estate,


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although not necessary to pay debts, legacies, or expenses of administration; but such authority shall not be granted if inconsistent with the provisions of a will. In case of such sale, the proceeds shall be assigned to the persons entitled to the estate in the proper proportions.

Section 5. When court may authorize sale, mortgage, or other encumbrance of estate to pay debts and legacies in other countries . — When the 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, but it appears from records and proceedings of a probate court in another country that the estate of the deceased in such other country is not sufficient to pay the debts, expenses of administration, and legacies there, the court here may authorize the executor or administrator to sell the personal estate or to sell, mortgage, or otherwise encumber the real estate for the payment of debts or legacies in the other country, in same manner as for the payment of debts or legacies in the Philippines.

Section 6. When court may authorize sale, mortgage, or other encumbrance of realty acquired on execution or foreclosure. — 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 cicumstances and under the same regulations as prescribed in this rule for the sale, mortgage, or other encumbrance of other real estate.Section 7. Regulation for granting authority to sell, mortgage, or otherwise encumber estate. — The court having jurisdiction of the estate of the deceased 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.(a) The executor or administrator shall file a written petition setting forth the debts due from the deceased, the expenses of administration, the legacies, the value of the personal estate, the situation of the estate to be sold, mortgaged, or otherwise encumbered, and such other facts as show that the sale, mortgage, or other encumbrance is necessary or beneficial.(b) The court shall thereupon fix a time and place for hearing such petition, and cause notice stating the nature of the petition, the reasons for the same, and the time and place of hearing, to be given personally or by mail to the persons interested, and may cause such further notice to be given, by publication or otherwise, as it shall deem proper;(c) If the court requires it, the executor or administrator shall give an additional bond, in such sum as the court directs, conditioned that such executor or administrator will account for the proceeds of the sale, mortgage, or other encumbrance;(d) If the requirements in the preceding subdivisions of this section have been complied with, the court, by order stating such compliance, may authorize the executor or administrator to sell, mortgage, or otherwise encumber, in proper cases, such part of the estate as is deemed necessary, and in case of sale the court may authorize it to be public or private, as would be most beneficial to all parties concerned. The executor or administrator shall be furnished with a certified copy of such order;(e) If the estate is to be sold at auction, the mode of giving notice of the time and place of the sale shall be governed by the provisions concerning notice of execution sale;(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold, mortgage, or otherwise encumbered is situated, a certified copy of the order of the court, together with the deed of the executor or administrator for such real estate, which shall be as valid as if the deed had been executed by the deceased in his lifetime.

Section 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed. — Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of

the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of court shall execute the deed. The deed executed by such executor, administrator, or clerk of court shall be as affectual to convey the property as if executed by the deceased in his lifetime; but no such conveyance shall be authorized until notice of the application for that purpose has been given personally or by mail to all persons interested, and such further notice has been given, by publication or otherwise, as the court deems proper; nor if the assets in the hands of the executor or administrator will thereby be reduced so as to prevent a creditor from receiving his full debt or diminish his dividend.

Section 9. When court may authorize conveyance of lands which deceased held in trust. — Where the deceased in his lifetime held real property in trust for another person, the court may after notice given as required in the last preceding section, authorize the executor or administrator to deed such property to the person, or his executor or administrator, for whose use and benefit it was so held; and the court may order the execution of such trust, whether created by deed or by law.

Notes Court may allow only the sale of personal property for the

purposes stated in Sec. 1 and not the encumbrance thereof. Real property may be sold, mortgaged or otherwise

encumbered with leave of court as per Secs. 2,4,5 and 6, and if it will only be for the convenience of or beneficial to the heirs and not for the payment of debts, administration expenses and legacies, real property of the estate can only be allowed to be sold and not encumbered.

Personalty may always be sold at any time if it is necessary for the preservation of its value.

Averment of the value of the personal estate is a requires in a petition for the sale of real property.

Who cant purchase property of estate under administration: 1. executors and administrators2. Justices, judges, prosecuting attorneys, clerks of court and

other officers and employees connected with the administration of justice.

3. Lawyers with respect to property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

RTC has jurisdiction over case brought to rescind a sale made upon prior authority of a probate court, even if the latter subsequently approved the sale.

Manotok Realty v CA (1987) Legarda was appointed co-administrator, authorized to sell a lot. He sold a portion thereof to Lucero, who leased the same to 6 people, including Private Respondent Siojo.Probate court issued an order authorizing PTC, as co-administrator, to sell the property at the earliest time.Lucero waited for Legarda to send him the contract, but it never came so he couldn’t pay. He went to PTC to pay, but the latter refused to receive the same as the property was under litigation.Petitioner was awarded the property in the litigation, and filed a complaint for ejectment against the lessees.

Doctrine:Although the ROC do not state that the sale of an immovable belonging to an estate in a special proceeding should be made with approval of the probate court, this authority is necessarily include in its capacity as a probate court.An administrator cannot enjoy blanket authority to dispose of real estate. Where the estate of the deceased is subject of a testate/intestate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the court.


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Furthermore, the probate court required Legarda to submit the document of sale for approval, but he didn’t. Therefore, the sale to Lucero could not have affected Petitoner’s right over the lot.

Pizarro v CA (1980) Special Proceedings were initiated in the CFI after the death of the father of both Petitioners and Respondents. Corias was appointed as administrator, and later filed for authority to sell 2 properties to settle estate debts. Respondents opposed, but the CFI granted the authority.Corias found a buyer for one of the lots, and the court authorized the sale. Petitioners then filed for rescission of the sale, but were denied because it was not within the probate court’s power; it then approved the sale. Petitioners filed for rescission in the RTC, but were denied as “it could not review the actuations of a coordinate branch.

Doctrine:What Petitioners sought to achieve in filing for rescission was to rescind the sale for failure of the vendees to pay the full consideration; a valid ground for rescission.This cause of action is beyond the jurisdiction of the probate court, whose main province was the settlement of the estate.RTC should have taken cognizance of the rescission case, having exclusive original jurisidiction over civil cases whose subject matter is incapable of pecuniary estimation.

Pio Barretto Realty Inc v CA (1984) A petition for the probate of Drepin’s holographic will was filed after his death. The only asset of the testate estate were 3 parcels of titled land and another still pending registration.An offer to purchase a lot was made by Moslares, to whom the deceased had sold a parcel of land. On that basis, Moslares proposed to the administrator that he be permitted to pay the balance on the sale. This was approved by the probate court, authorizing the administrator to act on it. BUT, Drepin’s checks bounced, so the agreement with him was rescinded. The administrator was then authorized to enter into agreement with any other interested parties. Pursuant thereto, he sold the Drepin lands to Petitioner.Moslares questioned the titles and ownership of Petitioner, and the CFI and CA ruled in his favor.

Doctrine:Questions of title or ownership, which would result to inclusion in or exclusion from the inventory of the property can only be settled in a separate action. Any ruling by the probate court to include properties is only provisional in character and is without prejudice to a judgment in a separate action on the issue of title or ownership.If third persons, claiming title to property, oppose an application for leave to sell such property of the decedent, the title claim cannot be adjudicated by the probate court, BUT it can hold in abeyance the approval of the sale until the question of ownership shall have been decided in a proper action.Also, the probate court has ample discretion to determine whether conditions of a particular sale would be beneficial to the estate. In rescinding the agreement, the court merely enforced its right to put an end to an agreement which had ceased to be a working proposition.Furthermore, Moslares could have prevented the sale by giving bond, under Sec. 3 of Rule 89.

7. DISTRIBUTION AND PARTITION OF THE ESTATE

RULE 90DISTRIBUTION AND PARTITION OF THE ESTATESec. 1. When order for distribution of residue made. - When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or administrator, or of a person

interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and such person may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

Notes:

Liquidation means the determination of all the assets and payment of all the liabilities of the estate

When order of distribution of residue made:o General Rule: Order of Distribution shall be made after

payment of all debts, funeral expenses expenses of administration, allowance of widow and inheritance tax is effected

o Exception: If the distributes or any of them gives a bond conditioned for the payment of said obligation the Order of Distribution can be made before the debts are paid.

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.

Sec. 3. By whom expenses of partition paid. - If at the time of the distribution the executor or administrator has retained sufficient effects in his hands which may lawfully be applied for the expenses of partition of the properties distributed, such expenses of partition may be paid by such executor or administrator when it appears equitable to the court and not inconsistent with the intention of the testator; otherwise, they shall be paid by the parties in proportion to their respective shares or interest in the premises, and the apportionment shall be settled and allowed by the court, and, 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 for the sum assessed.

Notes:

By whom expenses of the partition paid:o By the executor or administrator if he has sufficient effects

in his hands and when equitable and not inconsistent with the testator’s intention

o By the parties in proportion to their respective shares or interest in the premises

Sec. 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.

Notes:

In these proceedings the court shall:o Collateo Determine heirso Determine share of each heir

When title is vestedo From finality of order of distribution

An order which determined the distributive shares of the heirs is appealable. If not appealed it becomes finalo The probate court loses jurisdiction over the settlement

proceedings only upon payment of all debts and remaining


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estate delivered to the heirs entitled to receive the same. The finality of the approval of the project partition by itself does not terminate the proceedings.

Conditions precedent to the issuance of an Order of Distributiono Showing that the executor, administrator or person

interested in the estate applied for such; and o The requirements as to notice and hearing unpon such

application have been fulfilled. Remedy of Heir who has not received his share

o If excluded from proceedings: move for reopening of the proceedings before the order declaring the sameclosed has become final and executor (after 30 days)

o If not excluded but is yet to receive share: file a motion for execution, since proceedings close only upon actual distribution of shares.

Uriarte v CFI (1970)

Quick Facts: the petitioner Vicente Uriarte filed for recognition as a natural heir (son) during the lifetime of the decedent and when the same died filed for intestate proceedings in CFI of Negros Occ. After the initiation of the same respondents, nephews of the deceased submitted a will to the CFI of manila for probate, as such the action in Negros was suspended. Petioner appeals.

Doctrine: the initiation of probate proceedings validly suspends an intestate proceeding as testamentary disposition takes precedent over intestate disposition. The remedies of an unacknowledged compulsory heir would be entitled to prosecute the case for his recognition (having already been initiated during the life time of the deceased, or intervene in the probate proceedings, if it is still open, or to ask for its reopening if it has already been closed, so as to be able to submit for determination the question of his acknowledgment as natural child of the deceased testator, said court having, in its capacity as a probate court, jurisdiction to declare who are the heirs of the deceased testator and whether or not a particular party is or should be declared his acknowledged natural child.

Divinagracia v Rovira (1976)

Quick facts: Whether an intestate proceeding, which had already been closed, can still be reopened so as to allow a spurious child to present evidence on his filiation and to claim his share in the decedent's estate. The judge approved the final accounting and project of partition and declared the proceeding "closed and terminated, subject to the condition that the heirs shall assume all the outstanding obligations of the estate". The partition was duly registered. The order closing the intestate proceeding had become final, Camilo Divinagracia filed a motion to reopen it and to set aside the order of closure.Held: We hold that the probate court erred in reopening the intestate proceeding, a proceeding in rem of which Camilo Divinagracia is deemed to have had constructive notice. The order closing it was already final and executory. The motion to reopen it was not filed within the thirty-day reglementary period counted from the date the order of closure was served on the administratrix. The closure order could not be disturbed anymore where the motion to reopen the intestate proceeding was not filed within the reglementary period.Moreover, the order for the reopening of the intestate proceeding was predicated on the false assumption that there had been no liquidation of the conjugal partnership and no declaration of heirs. The truth is that the project of partition and distribution, with final accounting, which was submitted by the administratrix and approved by the probate court, contained a liquidation of the conjugal partnership and a statement as to who were the decedent's heirs and what were their respective hereditary shares. That project of partition was a substantial compliance with articles 179 et sequentia of the Civil Code.

The probate court further erred in entertaining Camilo Divinagracia's motion to reopen the intestate proceeding. It erred because that motion involved the determination of his status as the decedent's spurious child. That question falls within the exclusive original jurisdiction of the Juvenile and Domestic Relations Court of Iloilo.

B. ESCHEAT

RULE 91

ESCHEATSSec. 1. When and by whom petition filed. - When a person dies intestate, seized of real or personal property in the Philippines, leaving no heir or person by law entitled to the same, the Solicitor General or his representative in behalf of the Republic of the Philippines, may file a petition in the Court of First Instance of the province where the deceased last resided or in which he had estate, if he resided out of the Philippines, setting forth the facts, and praying that the estate of the deceased be declared escheated.

Sec. 2. Order for hearing. - If the petition is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date and place for the hearing thereof, which date shall be not more than six (6) months after the entry of the order, and shall direct that a copy of the order be published before the hearing at least once a week for six (6) successive weeks in some newspaper of general circulation published in the province, as the court shall deem best.

Sec. 3. Hearing and judgment. - Upon the satisfactory proof in open court on the date fixed in the order that such order has been published as directed and that the person died intestate, seized of real or personal property in the Philippines, leaving no heir or person entitled to the same, and no sufficient cause being shown to the contrary, the court shall adjudge that the estate of the deceased in the Philippines, after the payment of just debts and charges, shall escheat; and shall, pursuant to law, assign the personal estate to the municipality or city where he last resided in the Philippines, and the real estate to the municipalities or cities, respectively, in which the same is situated. If the deceased never resided in the Philippines, the whole estate may be assigned to the respective municipalities or cities where the same is located. Such estate shall be for the benefit of public schools, and public charitable institutions and centers in said municipalities or cities. The court, at the instance of an interested party, or on its own motion, may order the establishment of a permanent trust, so that only the income from the property shall be used.

Sec. 4. When and by whom claim to estate filed. - If a devisee, legatee, heir, widow, widower or other person entitled to such estate appears and files a claim thereto with the court within five (5) years from the date of such judgment, such person shall have possession of and title to the same, or if sold, the municipality or city shall be accountable to him for the proceeds, after deducting reasonable charges for the care of the estate; but a claim not made within said time shall be forever barred.

Sec. 5. Other actions for escheat. - Until otherwise provided by law, actions for reversion or escheat of properties alienated in violation of the Constitution or of any statute shall be governed by this rule, except that the action shall be instituted in the province where the land lies in whole or in part.

Notes:

3 INSTANCES OF ESCHEATS1. When a person dies intestate leaving no heir but leaving

property in the Philippines 2. Reversion Proceedings – Sale in violation of the

Constitutional provision; and


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3. Unclaimed Balances Act (dormant accounts for 10 years shall be escheated).

What is the basis of the state’s right to receive property in escheat?

Order of succession under actions for reversion of property alienated in violation of Constitution or any statute shall be governed by Rule 91. However, the action must be instituted in the province where the land lies in whole or in part.

PERIOD: Within 5 years from the date of judgment; (under Art. 1014 of the Civil Code, THE 5-YEAR PERIOD IS RECKONED FROM THE DATE THE PROPERTY WAS DELIVERED TO THE STATE and further provides that if the property had been sold, the municipality or city shall be accountable only for such part of the proceeds as may not have been lawfully spent.)

BY WHOM: person with interest Can court convert escheat proceedings into ordinary special

proceedings or vice-versa? NO. This is not allowed for the two actions have different

requirements in acquiring jurisdiction. In special proceedings, publication is once a week for 3 weeks while in escheat, once a week for 6 weeks.

C. GUARDIANSHIP

RULE 92VENUESec. 1. Where to institute proceedings. - Guardianship of the person or estate of a minor or incompetent may be instituted in the Court of First Instance of the province, or in the justice of the peace court of the municipality, or in the municipal court of the chartered city where the minor or incompetent person resides, and if he resides in a foreign country, in the Court of First Instance of the province wherein his property or part thereof is situated; provided, however, that where the value of the property of such minor or incompetent exceeds the jurisdiction of the justice of the peace or municipal court, the proceedings shall be instituted in the Court of First Instance.In the City of Manila, the proceedings shall be instituted in the Juvenile and Domestic Relations Court.

Sec. 2. Meaning of word "incompetent." - Under this rule, the word "incompetent" includes persons suffering the penalty of civil interdiction or who are hospitalized lepers, prodigals, deaf and dumb who are unable to read and write, those who are of unsound mind, even though they have lucid intervals, and persons not being of unsound mind, but by reason of age, disease, weak mind, and other similar causes, cannot, without outside aid, take care of themselves and manage their property, becoming thereby an easy prey for deceit and exploitation.

Sec. 3. Transfer of venue. - The court taking cognizance of a guardianship proceeding, may transfer the same to the court of another province or municipality wherein the ward has acquired real property, if he has transferred thereto his bona-fide residence, and the latter court shall have full jurisdiction to continue the proceedings, without requiring payment of additional court fees.

RULE 93APPOINTMENT OF GUARDIANSSec. 1. Who may petition for appointment of guardian for resident. - Any relative, friend, or other person on behalf of a resident minor or incompetent who has no parent or lawful guardian, or the minor himself if fourteen years of age or over, may petition the court having jurisdiction for the appointment of a general guardian for the person or estate, or both, of such minor or incompetent. An officer of the Federal Administration of the United States in the Philippines may also file a petition in favor of a ward thereof, and the Director of Health, in favor of an insane person who should be hospitalized, or in favor of an isolated leper.

Sec. 2. Contents of petition. - A petition for the appointment of a general guardian must show, so far as known to the petitioner:(a) The jurisdictional facts;(b) The minority or incompetency rendering the appointment necessary or convenient;(c) The names, ages, and residences of the relatives of the minor or incompetent, and of the persons having him in their care;(d) The probable value and character of his estate;(e) The name of the person for whom letters of guardianship are prayed.The petition shall be verified; but no defect in the petition or verification shall render void the issuance of letters of guardianship.

Sec. 3. Court to set time for hearing; Notice thereof. - When a petition for the appointment of a general guardian is filed, the court shall fix a time and place for hearing the same, and shall cause reasonable notice thereof to be given to the persons mentioned in the petition residing in the province, including the minor if above 14 years of age or the incompetent himself, and may direct other general or special notice thereof to be given.

Sec. 4. Opposition to petition. - Any interested person may, by filing a written opposition, contest the petition on the ground of majority of the alleged minor, competency of the alleged incompetent, or the unsuitability of the person for whom letters are prayed, and may pray that the petition be dismissed, or that letters of guardianship issue to himself, or to any suitable person named in the opposition.Sec. 5. Hearing and order for letters to issue. - At the hearing of the petition the alleged incompetent must be present if able to attend, and it must be shown that the required notice has been given. Thereupon the court shall hear the evidence of the parties in support of their respective allegations, and, if the person in question is a minor, or incompetent it shall appoint a suitable guardian of his person or estate, or both, with the powers and duties hereinafter specified.

Sec. 6. When and how guardian for nonresident appointed; Notice. - When a person liable to be put under guardianship resides without the Philippines but has estate therein, any relative or friend of such person, or any one interested in his estate, in expectancy or otherwise, may petition a court having jurisdiction for the appointment of a guardian for the estate, and if, after notice given to such person and in such manner as the court deems proper, by publication or otherwise, and hearing, the court is satisfied that such nonresident is a minor or incompetent rendering a guardian necessary or convenient, it may appoint a guardian for such estate.

Sec. 7. Parents as guardians. - When the property of the child under parental authority is worth two thousand pesos or less, the father or the mother, without the necessity of court appointment, shall be his legal guardian. When the property of the child is worth more than two thousand pesos, the father or the mother shall be considered guardian of the child's property, with the duties and obligations of guardians under these rules, and shall file the petition required by section 2 thereof. For good reasons the court may, however, appoint another suitable person.

Sec. 8. Service of judgment. - Final orders or judgments under this rule shall be served upon the civil registrar of the municipality or city where the minor or incompetent person resides or where his property or part thereof is situated.

RULE 94BONDS OF GUARDIANSSec. 1. Bond to be given before issuance of letters; Amount; Conditions. - Before a guardian appointed enters upon the execution of his trust, or letters of guardianship issue, he shall give a bond, in such sum as the court directs, conditioned as follows:


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(a) To make and return to the court, within three (3) months, a true and complete inventory of all the estate, real and personal, of his ward which shall come to his possession or knowledge or to the possession or knowledge of any other person for him;(b) To faithfully execute the duties of his trust, to manage and dispose of the estate according to these rules for the best interests of the ward, and to provide for the proper care, custody, and education of the ward;(c) To render a true and just account of all the estate of the ward in his hands, and of all proceeds or interest derived therefrom, and of the management and disposition of the same, at the time designated by these rules and such other times as the court directs; and at the expiration of his trust to settle his accounts with the court and deliver and pay over all the estate, effects, and moneys remaining in his hands, or due from him on such settlement, to the person lawfully entitled thereto;(d) To perform all orders of the court by him to be performed.

Sec. 2. When new bond may be required and old sureties discharged. - Whenever it is deemed necessary, the court may require a new bond to be given by the guardian, and may discharge the sureties on the old bond from further liability, after due notice to interested persons, when no injury can result therefrom to those interested in the estate.

Sec. 3. Bonds to be filed; Actions thereon. - Every bond given by a guardian shall be filed in the office of the clerk of the court, and, in case of the breach of a condition thereof, may be prosecuted in the same proceeding or in a separate action for the use and benefit of the ward or of any other person legally interested in the estate.

RULE 95SELLING AND ENCUMBERING PROPERTY OF WARDSec. 1. Petition of guardian for leave to sell or encumber estate. - When the income of an estate under guardianship is insufficient to maintain the ward and his family, or to maintain and educate the ward when a minor, or when it appears that it is for the benefit of the ward that his real estate or some part thereof be sold, or mortgaged or otherwise encumbered, and the proceeds thereof put out at interest, or invested in some productive security, or in the improvement or security of other real estate of the ward, the guardian may present a verified petition to the court by which he was appointed setting forth such facts, and praying that an order issue authorizing the sale or encumbrance.

Sec. 2. Order to show cause thereupon. - If it seems probable that such sale or encumbrance is necessary, or would be beneficial to the ward, the court shall make an order directing the next of kin of the ward, and all persons interested in the estate, to appear at a reasonable time and place therein specified to show cause why the prayer of the petition should not be granted.

Sec. 3. Hearing on return of order; Costs. - At the time and place designated in the order to show cause, the court shall hear the proofs and allegations of the petitioner and next of kin, and other persons interested, together with their witnesses, and grant or refuse the prayer of the petition as the best interests of the ward require. The court shall make such order as to costs of the hearing as may be just.

Sec. 4. Contents of order for sale or encumbrance, and how long effective; Bond. - If, after full examination, it appears that it is necessary, or would be beneficial to the ward, to sell or encumber the estate, or some portion of it, the court shall order such sale or encumbrance and that the proceeds thereof be expended for the maintenance of the ward and his family, or the education of the ward, if a minor, or for the putting of the same out at interest, or the investment of the same as the circumstances may require. The order shall specify the causes why the sale or encumbrance is necessary or beneficial, and may direct that estate ordered sold be disposed of at either public or private sale, subject to such

conditions as to the time and manner of payment, and security where a part of the payment is deferred, as in the discretion of the court are deemed most beneficial to the ward. The original bond of the guardian shall stand as security for the proper appropriation of the proceeds of the sale, but the judge may, if deemed expedient, require an additional bond as a condition for the granting of the order of sale. No order of sale granted in pursuance of this section shall continue in force more than one (1) year after granting the same, without a sale being had.

Sec. 5. Court may order investment of proceeds and direct management of estate. - The court may authorize and require the guardian to invest the proceeds of sales or encumbrances, and any other of his ward's money in his hands, in real estate or otherwise, as shall be for the best interest of all concerned, and may make such other orders for the management, investment, and disposition of the estate and effects, as circumstances may require.

RULE 96GENERAL POWERS AND DUTIES OF GUARDIANSSec. 1. To what guardianship shall extend. - A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the management of the estate only, as the case may be. The guardian of the estate of a nonresident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship.

Sec. 2. Guardian to pay debts of ward. - Every guardian must pay the ward's just debts out of his personal estate and the income of his real estate, if sufficient; if not, then out of his real estate upon obtaining an order for the sale or encumbrance thereof.

Sec. 3. Guardian to settle accounts, collect debts, and appear in actions for ward. - A guardian must settle all accounts of his ward, and demand, sue for, and receive all debts due him, or may, with the approval of the court, compound for the same and give discharges to the debtor, on receiving a fair and just dividend of the estate and effects; and he shall appear for and represent his ward in all actions and special proceedings, unless another person be appointed for that purpose.

Sec. 4. Estate to be managed frugally, and proceeds applied to maintenance of ward. - A guardian must manage the estate of his ward frugally and without waste, and apply the income and profits thereon, so far as may be necessary, to the comfortable and suitable maintenance of the ward and his family, if there be any; and if such income and profits be insufficient for that purpose, the guardian may sell or encumber the real estate, upon being authorized by order so to do, and apply so much of the proceeds as may be necessary to such maintenance.

Sec. 5. Guardian may be authorized to join in partition proceedings after hearing. - The court may authorize the guardian to join in an assent to a partition of real or personal estate held by the ward jointly or in common with others, but such authority shall only be granted after hearing, upon such notice to relatives of the ward as the court may direct, and a careful investigation as to the necessity and propriety of the proposed action

Sec. 6. Proceedings when person suspected of embezzling or concealing property of ward. - Upon complaint of the guardian or ward, or of any person having actual or prospective interest in the estate of the ward as creditor, heir, or otherwise, that anyone is suspected of having embezzled, concealed, or conveyed away any money, goods, or interest, or a written instrument, belonging to the ward or his estate, the court may cite the suspected person to appear for examination touching such money, goods, interest, or instrument, and make such orders as will secure the estate against such embezzlement, concealment or conveyance.


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Sec. 7. Inventories and accounts of guardians, and appraisement of estates. - A guardian must render to the court an inventory of the estate of his ward within three (3) months after his appointment, and annually after such appointment an inventory and account, the rendition of any of which may be compelled upon the application of an interested person. Such inventories and accounts shall be sworn to by the guardian. All the estate of the ward described in the first inventory shall be appraised. In the appraisement the court may request the assistance of one or more of the inheritance tax appraisers. And whenever any property of the ward not included in an inventory already rendered is discovered, or succeeded to, or acquired by the ward, like proceedings shall be had for securing an inventory and appraisement thereof within three (3) months after such discovery, succession, or acquisition

Sec. 8. When guardian's accounts presented for settlement. - Expenses and compensation allowed. Upon the expiration of a year from the time of his appointment, and as often thereafter as may be required, a guardian must present his account to the court for settlement and allowance. In the settlement of the account, the guardian, other than a parent, shall be allowed the amount of his reasonable expenses incurred in the execution of his trust and also such compensation for his services as the court deems just, not exceeding fifteen per centum of the net income of the ward.

RULE 97TERMINATION OF GUARDIANSHIPSec. 1. Petition that competency of ward be adjudged, and proceedings thereupon. - A person who has been declared incompetent for any reason, or his guardian, relative, or friend, may petition the court to have his present competency judicially determined. The petition shall be verified by oath, and shall state that such person is then competent. Upon receiving the petition, the court shall fix a time for hearing the questions raised thereby, and cause reasonable notice thereof to be given to the guardian of the person, so declared incompetent, and to the ward. On the trial, the guardian or relatives of the ward, and, in the discretion of the court, any other person, may contest the right to the relief demanded, and witnesses may be called and examined by the parties or by the court on its own motion. If it be found that the person is no longer incompetent, his competency shall be adjudged and the guardianship shall cease.

Sec. 2. When guardian removed or allowed to resign; New appointment. - When a guardian becomes insane or otherwise incapable of discharging his trust or unsuitable therefor, or has wasted or mismanaged the estate, of failed for thirty (30) days after it is due to render an account or make a return, the court may, upon reasonable notice to the guardian, remove him, and compel him to surrender the estate of the ward to the person found to be lawfully entitled thereto. A guardian may resign when it appears proper to allow the same; and upon his resignation or removal the court may appoint another in his place.

Sec. 3. Other termination of guardianship. - The marriage or voluntary emancipation of a minor ward terminates the guardianship of the person of the ward, and shall enable the minor to administer his property as though he were of age, but he cannot borrow money or alienate or encumber real property without the consent of his father or mother, or guardian. He can sue and be sued in court only with the assistance of his father, mother or guardian. The guardian of any person may be discharged by the court when it appears, upon the application of the ward or otherwise, that the guardianship is no longer necessary.

Sec. 4. Record to be kept by the justice of the peace or municipal judge. - When a justice of the peace or municipal court takes cognizance of the proceedings in pursuance of the provisions of these rules, the record of the proceedings shall be kept as in the court of first instance.

Sec. 5. Service of judgment. - Final orders or judgments under this rule shall be served upon the civil registrar of the municipality or city where the minor or incompetent person resides or where his property or part thereof is situated.

Notes:

KINDS OF GUARDIANS:

A. According to scope: 1. General – over the person of the ward or over his property2. Limited – over the property only.

B. According to Constitution: 1. General Guardian; 2. Legal Guardian – without judicial appointment; 3. Guardian Ad Litem – appointed by courts of justice to

prosecute or defend a minor, insane or person declared to be incompetent, in an action in court.

INCOMPETENT includes:

1. those suffering from penalty of civil interdiction; 2. hospitalized lepers; 3. prodigals; 4. deaf and dumb who are unable to read and write; 5. those of unsound mind though they have lucid intervals; 6. persons not of unsound mind but by reason of age, disease,

weak mind, and other similar causes cannot, without outside aid, take care of themselves or manage their property.

Guardianship of minors is now governed by the Rule on Guardianship of Minors (A.M. No. 03-0205-SC) which took effect on May 1, 2003. While, guardianship of incompetents is still governed by the provisions of the Rules of Court on Guardianship (Rule 92 to Rule 97)

RULE 93 APPOINTMENT OF GUARDIANS o Section 1. Who may petition for appointment of guardian

for resident MINOR (a) any relative; or (b) other person on behalf of a minor; or (c) the minor himself if 14 years of age or over; or INCOMPETENT (a) any relative; or (b) friend; or (c) other person on behalf of the resident incompetent who has no parents or lawful guardian; or (d) the Director of Health in favor of an insane person who should be hospitalized or in favor of an isolated leper (Sec. 1)

RULE 92 VENUE o Section 1. Where to institute proceedings:

INCOMPETENTS – RTC of his residence or where his property is located in case of non-residents (Sec. 1)

MINORS – Family Court of his residence or where his property is located in case of non-resident (Sec. 3, A.M. No. 03-02-05-SC) “Residence” means “domicile”.

PROCEDURE OF GUARDIANSHIP PROCEEDINGS 1. filing of petition; 2. court shall set the case for hearing; 3. cause notices to be served to the persons mentioned in

the petition, including the minor, if above 14 years of age;

4. court shall receive evidence; 5. declaration of the propriety of the petition; 6. issue letters of guardianship.

RULE 94 BONDS OF GUARDIAN Section 1. Bond to be given before issuance of letters; Amounts; Conditions Before an appointed guardian enters upon the execution of his trust, he shall give a BOND.

CONDITIONS:1. To make and return to the court, within three (3) months, a

true and complete INVENTORY of all the estate, real and personal, of his ward which shall come to his possession or knowledge or to the possession or knowledge of any other person for him;

2. To faithfully EXECUTE THE DUTIES of his trust, to manage and dispose of the estate according to these rules for the


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best interests of the ward, and to provide for the proper care, custody, and education of the ward;

3. To render a true and just ACCOUNT of all the estate of the ward in his hands, and of all proceeds or interest derived therefrom, and of the management and disposition of the same, at the time designated by these rules and such other times as the court directs; and at the expiration of his trust to settle his accounts with the court and deliver and pay over all the estate, effects, and moneys remaining in his hands, or due from tohim on such settlement, to are needed see this picture. the person lawfully entitled thereto;

4. To PERFORM all orders of the court by him to be performed.

GROUNDS FOR TERMINATION MINOR INCOMPETENT o The ward has come of

Competency of the age; or ward has been judicially determined; or

The ward has died; oro Guardianship is no longer necessary; oro Death of guardian o When guardian removed or allowed to resign

GROUNDS FOR REMOVAL OF A GUARDIAN: 1. insanity; 2. incapability or unsuitability to discharge functions;3. wastage or mismanagement of the property of the ward;

and 4. failure to render an account or make a return within 30

days after it was due. The abovementioned grounds are EXCLUSIVE .

Parco Vs. Ca (1982)

Quick facts: whether or not respondent Judge of the Court of First Instance of Quezon-Calauag has the authority or power to take further action in Special Proceedings No. 2641 after the Presiding Judge of the Court of First Instance of Quezon-Lucena City asserted its jurisdiction by issuing two (2) orders and respondent Judge correspondingly ordered the return of the case to Lucena in an order dated February 20,1969.

Held: there is no dispute that both Branch I and Branch IV of the Court of First Instance of Quezon, have jurisdiction over the subject matter, a guardianship proceedings under Section 1, Rule 92 of the Rules of Court and Section 44(a) of the Judiciary Act of 1948. While it is recognized that when a case is filed in one branch, jurisdiction over the case does not attach to the branch or judge alone, to the exclusion of the other branches, 22 We are of the view however, considering the unusual circumstances and incidents attendant in this case the situation in the case at bar is different.

Here, it must be noted that the Presiding Judge of Branch I asserted and resumed its prior jurisdiction by issuing two (2) orders, one of which requires private respondent to render an inventory and accounting of the property of the ward. On the other hand, respondent Judge of Branch IV, in confirmation of such resumption of jurisdiction, ordered the return of the records of Special Proceedings No. 2641 to Branch I-Lucena City, Court of First Instance of Quezon, but, instead of regularly relinquishing jurisdiction over the case, respondent Judge continued to take further action on the case in total disregard of the two (2) orders of the Presiding Judge of Branch I.

Should one branch be permitted to equally assert, assume or retain jurisdiction over a case or controversy over which another coordinate or co-equal branch has already resumed its jurisdiction, We would then sanction undue interference by one branch over another. With that, the judicial stability of the decrees or orders of the courts would be a meaningless precept in a well-ordered administration of justice.

Jurisdiction of the court in guardianship proceedings, ordinarily, is to cite persons suspected of having embezzled, concealed or conveyed the property belonging to the ward for the purpose of

obtaining information which may be used in an action later to be instituted by the guardian to protect the right of the ward. Generally, the guardianship court exercising special and limited jurisdiction cannot actually order the delivery of the property of the ward found to be embezzled, concealed or conveyed.

In a categorical language of this Court, only in extreme cases, where property clearly belongs to the ward or where his title thereto has been already judicially decided, may the court direct its delivery to the guardian. In effect, there can only be delivery or return of the embezzled, concealed or conveyed property of the ward, where the right or title of said ward is clear and undisputable. However, where title to any property said to be embezzled, concealed or conveyed is in dispute, under the Cui case, the determination of said title or right whether in favor of the person said to have embezzled, concealed or conveyed the property must be determined in a separate ordinary action and not in guardianship proceedings.

Paciente Vs. Dacuycuy (1982)

Quick facts: Whether the respondent court acting as a guardianship court has jurisdiction to order the Register of Deeds to cancel the transfer certificate of title of petitioner and to order the issuance of a new title to include the minors as co-owners.

Held: Yes, Insofar as the acts of the guardianship court intended to effect the delivery or return of the property conveyed are concerned, We find the orders of the respondent court valid. The petitioner's contentions in this regard are untenable. Even the aforecited cases relied upon do not support her argument. While it is true that in these two cases We ruled that where title to any property said to be embezzled, concealed or conveyed is in question, the determination of said title or right whether in favor of the ward or in favor of the person said to have embezzled, concealed or conveyed the property must be determined in a separate ordinary action and not in guardianship proceedings, We also emphasized that if the right or title of the ward to the property is clear and indisputable the court may issue an order directing its delivery or return.

In the present case the right or title of the two minors to the property is clear and indisputable. They inherited a part of the land in question from their father. The sale of this land, where they are co-owners, by their mother without the authority of the guardianship court is illegal.

In issuing the above questioned order and resolution, the respondent court did not exceed its jurisdiction but merely exercised its duty to protect persons under disability.

The respondent court's order directing the deposit of an additional consideration of P10,000.00 is a different matter. It was issued without a hearing to determine not only the valuation of the property but the time frame for fixing said valuation which is not clear. It is, consequently, null and void.

D. TRUSTEES

RULE 98

TRUSTEES

Sec. 1. Where trustee appointed. - A trustee necessary to carry into effect the provisions of a will or written instrument shall be appointed by the Court of First Instance in which the will was allowed if it be a will allowed in the Philippines, otherwise by the Court of First Instance of the province in which the property, or some portion thereof, affected by the trust is situated.

Sec. 2. Appointment and powers of trustee under will; Executor of former trustee need not administer trust. - If a testator has omitted in his will to appoint a trustee in the Philippines, and if such appointment is necessary to carry into effect the provisions of the


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will, the proper Court of First Instance may, after notice to all persons interested, appoint a trustee who shall have the same rights, powers, and duties, and in whom the estate shall vest, as if he had been appointed by the testator. No person succeeding to a trust as executor or administrator of a former trustee shall be required to accept such trust.

Sec. 3. Appointment and powers of new trustee under written instrument. - When a trustee under a written instrument declines, resigns, dies, or is removed before the objects of the trust are accomplished, and no adequate provision is made in such instrument for supplying the vacancy, the proper Court of First Instance may, after due notice to all persons interested, appoint a new trustee to act alone or jointly with the others, as the case may be. Such new trustee shall have and exercise the same powers, rights, and duties as if he had been originally appointed, and the trust estate shall vest in him in like manner as it had vested or would have vested, in the trustee in whose place he is substituted; and the court may order such conveyance to be made by the former trustee or his representatives, or by the other remaining trustees, as may be necessary or proper to vest the trust estate in the new trustee, either alone or jointly with the others.

Sec. 4. Proceedings where trustee appointed abroad. - When land in the Philippines is held in trust for persons resident here by a trustee who derives his authority from without the Philippines, such trustee shall, on petition filed in the Court of First Instance of province where the land is situated, and after due notice to all persons interested, be ordered to apply to the court for appointment as trustee; and upon his neglect or refusal to comply with such order, the court shall declare such trust vacant, and shall appoint a new trustee in whom the trust estate shall vest in like manner as if he had been originally appointed by such court.

Sec. 5. Trustee must file bond. Before entering on the duties of his trust, a trustee shall file with the clerk of the court having jurisdiction of the trust a bond in the amount fixed by the judge of said court, payable to the Government of the Philippines and sufficient and available for the protection of any party in interest, and a trustee who neglects to file such bond shall be considered to have declined or resigned the trust; but the court may until further order exempt a trustee under a will from giving a bond when the testator has directed or requested such exemption, and may so exempt any trustee when all persons beneficially interested in the trust, being of full age, request the exemption. Such exemption may be cancelled by the court at any time and the trustee required to forthwith file a bond.

Sec. 6. Conditions included in bond. - The following conditions shall be deemed to be a part of the bond whether written therein or not:

(a) That the trustee will make and return to the court, at such time as it may order, a true inventory of all the real and personal estate belonging to him as trustee, which at the time of the making of such inventory shall have come to his possession or knowledge;

(b) That he will manage and dispose of all such estate, and faithfully discharge his trust in relation thereto, according to law and the will of the testator or the provisions of the instrument or order under which he is appointed;

(c) That he will render upon oath at least once a year until his trust is fulfilled, unless he is excused therefrom in any year by the court, a true account of the property in his hands and of the management and disposition thereof, and will render such other accounts as the court may order;

(d) That at the expiration of his trust he will settle his accounts in court and pay over and deliver all the estate remaining in his hands, or due from him on such settlement, to the person or persons entitled thereto.

But when the trustee is appointed as a successor to a prior trustee, the court may dispense with the making and return of an inventory,

if one has already been filed, and in such case the condition of the bond shall be deemed to be altered accordingly.

Sec. 7. Appraisal; Compensation of trustee. - When an inventory is required to be returned by a trustee, the estate and effects belonging to the trust shall be appraised and the court may order one or more inheritance tax appraisers to assist in the appraisement. The compensation of the trustee shall be fixed by the court, if it be not determined in the instrument creating the trust.

Sec. 8. Removal or resignation of trustee. - The proper Court of First Instance may, upon petition of the parties beneficially interested and after due notice to the trustee and hearing, remove a trustee if such removal appears essential in the interests of the petitioners. The court may also, after due notice to all persons interested, remove a trustee who is insane or otherwise incapable of discharging his trust or evidently unsuitable therefor. A trustee, whether appointed by the court or under a written instrument, may resign his trust if it appears to the court proper to allow such resignation.

Sec. 9. Proceedings for sale or encumbrance of trust estate. - When the sale or encumbrance of any real or personal estate held in trust is necessary or expedient, the court having jurisdiction of the trust may, on petition and after due notice and hearing, order such sale or encumbrance to be made, and the reinvestment and application of the proceeds thereof in such manner as will best effect the objects of the trust. The petition, notice, hearing, order of sale or encumbrance, and record of proceedings, shall conform as nearly as may be to the provisions concerning the sale or encumbrance by guardians of the property of minors or other wards.

E. ADOPTION OF MINORS

[A.m. No. 02-6-02-SC 2002-08-02]RULE ON ADOPTION A. DOMESTIC ADOPTIONSection 1. Applicability of the Rule. – This Rule covers the domestic adoption of Filipino children.

Sec. 2. Objectives. – (a) The best interests of the child shall be the paramount consideration in all matters relating to his care, custody and adoption, in accordance with Philippine laws, the United Nations (UN) Convention on the Rights of the Child, UN Declaration on Social and Legal Principles Relating to the Protection and Welfare of Children with Special Reference to Foster Placement and Adoption, Nationally and Internationally, and the Hague Convention on the Protection of Children and Cooperation in Respect of Inter-country Adoption.(b) The State shall provide alternative protection and assistance through foster care or adoption for every child who is a foundling, neglected, orphaned, or abandoned. To this end, the State shall:(i) ensure that every child remains under the care and custody of his parents and is provided with love, care, understanding and security for the full and harmonious development of his personality. Only when such efforts prove insufficient and no appropriate placement or adoption within the child’s extended family is available shall adoption by an unrelated person be considered.(ii) safeguard the biological parents from making hasty decisions in relinquishing their parental authority over their child;(iii) prevent the child from unnecessary separation from his biological parents;(iv) conduct public information and educational campaigns to promote a positive environment for adoption;(v) ensure that government and private sector agencies have the capacity to handle adoption inquiries, process domestic adoption applications and offer adoption-related services including, but not limited to, parent preparation and post-adoption education and counseling;


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(vi) encourage domestic adoption so as to preserve the child’s identity and culture in his native land, and only when this is not available shall inter-country adoption be considered as a last resort; and (vii) protect adoptive parents from attempts to disturb their parental authority and custody over their adopted child.Any voluntary or involuntary termination of parental authority shall be administratively or judicially declared so as to establish the status of the child as “legally available for adoption” and his custody transferred to the Department of Social Welfare and Development or to any duly licensed and accredited child-placing or child-caring agency, which entity shall be authorized to take steps for the permanent placement of the child.

Sec. 3. Definition of Terms. – For purposes of this Rule:(a) “Child” is a person below eighteen (18) years of age at the time of the filing of the petition for adoption. (b) “A child legally available for adoption” refers to a child who has been voluntarily or involuntarily committed to the Department or to a duly licensed and accredited child-placing or child-caring agency, freed of the parental authority of his biological parents, or in case of rescission of adoption, his guardian or adopter(s). (c) “Voluntarily committed child” is one whose parents knowingly and willingly relinquish parental authority over him in favor of the Department.(d) “Involuntarily committed child” is one whose parents, known or unknown, have been permanently and judicially deprived of parental authority over him due to abandonment; substantial, continuous or repeated neglect and abuse; or incompetence to discharge parental responsibilities. (e) “Foundling” refers to a deserted or abandoned infant or child whose parents, guardian or relatives are unknown; or a child committed to an orphanage or charitable or similar institution with unknown facts of birth and parentage and registered in the Civil Register as a “foundling.” (f) “Abandoned child” refers to one who has no proper parental care or guardianship or whose parents have deserted him for a period of at least six (6) continuous months and has been judicially declared as such. (g) “Dependent child” refers to one who is without a parent, guardian or custodian or one whose parents, guardian or other custodian for good cause desires to be relieved of his care and custody and is dependent upon the public for support.(h) “Neglected child” is one whose basic needs have been deliberately not attended to or inadequately attended to, physically or emotionally, by his parents or guardian. (i) “Physical neglect” occurs when the child is malnourished, ill-clad and without proper shelter. (j) “Emotional neglect” exists when a child is raped, seduced, maltreated, exploited, overworked or made to work under conditions not conducive to good health or made to beg in the streets or public places, or placed in moral danger, or exposed to drugs, alcohol, gambling, prostitution and other vices. (k) “Child-placement agency” refers to an agency duly licensed and accredited by the Department to provide comprehensive child welfare services including, but not limited to, receiving applications for adoption, evaluating the prospective adoptive parents and preparing the adoption home study report. (l) “Child-caring agency” refers to an agency duly licensed and accredited by the Department that provides 24-hour residential care services for abandoned, orphaned, neglected or voluntarily committed children. (m) “Department” refers to the Department of Social Welfare and Development. (n) “Deed of Voluntary Commitment” refers to the written and notarized instrument relinquishing parental authority and committing the child to the care and custody of the Department executed by the child’s biological parents or in their absence, mental incapacity or death, by the child’s legal guardian, to be witnessed by an authorized representative of the Department after

counseling and other services have been made available to encourage the biological parents to keep the child. (o) “Child Study Report” refers to a study made by the court social worker of the child’s legal status, placement history, psychological, social, spiritual, medical, ethno-cultural background and that of his biological family needed in determining the most appropriate placement for him. (p) “Home Study Report” refers to a study made by the court social worker of the motivation and capacity of the prospective adoptive parents to provide a home that meets the needs of a child. (q) “Supervised trial custody” refers to the period of time during which a social worker oversees the adjustment and emotional readiness of both adopters and adoptee in stabilizing their filial relationship. (r) “Licensed Social Worker” refers to one who possesses a degree in bachelor of science in social work as a minimum educational requirement and who has passed the government licensure examination for social workers as required by Republic Act No. 4373. (s) “Simulation of birth” is the tampering of the civil registry to make it appear in the birth records that a certain child was born to a person who is not his biological mother, thus causing such child to lose his true identity and status.(t) “Biological Parents” refer to the child’s mother and father by nature.(u) “Pre-Adoption Services” refer to psycho-social services provided by professionally-trained social workers of the Department, the social services units of local governments, private and government health facilities, Family Courts, licensed and accredited child-caring and child-placement agencies and other individuals or entities involved in adoption as authorized by the Department. (v) “Residence” means a person’s actual stay in the Philippines for three (3) continuous years immediately prior to the filing of a petition for adoption and which is maintained until the adoption decree is entered. Temporary absences for professional, business, health, or emergency reasons not exceeding sixty (60) days in one (1) year does not break the continuity requirement. (w) “Alien” refers to any person, not a Filipino citizen, who enters and remains in the Philippines and is in possession of a valid passport or travel documents and visa.

SEC. 4. Who may adopt. – The following may adopt:(1) Any Filipino citizen of legal age, in possession of full civil capacity and legal rights, of good moral character, has not been convicted of any crime involving moral turpitude; who is emotionally and psychologically capable of caring for children, at least sixteen (16) years older than the adoptee, and who is in a position to support and care for his children in keeping with the means of the family. The requirement of a 16-year difference between the age of the adopter and adoptee may be waived when the adopter is the biological parent of the adoptee or is the spouse of the adoptee’s parent;(2) Any alien possessing the same qualifications as above-stated for Filipino nationals: Provided, That his country has diplomatic relations with the Republic of the Philippines, that he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition for adoption and maintains such residence until the adoption decree is entered, that he has been certified by his diplomatic or consular office or any appropriate government agency to have the legal capacity to adopt in his country, and that his government allows the adoptee to enter his country as his adopted child. Provided, further, That the requirements on residency and certification of the alien’s qualification to adopt in his country may be waived for the following:(i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or(ii) one who seeks to adopt the legitimate child of his Filipino spouse; or


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(iii) one who is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse. (3) The guardian with respect to the ward after the termination of the guardianship and clearance of his financial accountabilities.Husband and wife shall jointly adopt, except in the following cases:(i) if one spouse seeks to adopt the legitimate child of one spouse by the other spouse; or(ii) if one spouse seeks to adopt his own illegitimate child: Provided, however, That the other spouse has signified his consent thereto; or(iii) if the spouses are legally separated from each other.In case husband and wife jointly adopt or one spouse adopts the illegitimate child of the other, joint parental authority shall be exercised by the spouses.

SEC. 5. Who may be adopted. – The following may be adopted:(1) Any person below eighteen (18) years of age who has been voluntarily committed to the Department under Articles 154, 155 and 156 of P.D. No. 603 or judicially declared available for adoption;(2) The legitimate child of one spouse, by the other spouse;(3) An illegitimate child, by a qualified adopter to raise the status of the former to that of legitimacy;(4) A person of legal age regardless of civil status, if, prior to the adoption, said person has been consistently considered and treated by the adopters as their own child since minority;(5) A child whose adoption has been previously rescinded; or(6) A child whose biological or adoptive parents have died: Provided, That no proceedings shall be initiated within six (6) months from the time of death of said parents. (7) A child not otherwise disqualified by law or these rules.

Sec. 6. Venue. – The petition for adoption shall be filed with the Family Court of the province or city where the prospective adoptive parents reside.

Sec. 7. Contents of the Petition. – The petition shall be verified and specifically state at the heading of the initiatory pleading whether the petition contains an application for change of name, rectification of simulated birth, voluntary or involuntary commitment of children, or declaration of child as abandoned, dependent or neglected.1) If the adopter is a Filipino citizen, the petition shall allege the following:(a) The jurisdictional facts;(b) That the petitioner is of legal age, in possession of full civil capacity and legal rights; is of good moral character; has not been convicted of any crime involving moral turpitude; is emotionally and psychologically capable of caring for children; is at least sixteen (16) years older than the adoptee, unless the adopter is the biological parent of the adoptee or is the spouse of the adoptee’s parent; and is in a position to support and care for his children in keeping with the means of the family and has undergone pre-adoption services as required by Section 4 of Republic Act No. 8552. 2) If the adopter is an alien, the petition shall allege the following:(a) The jurisdictional facts;(b) Sub-paragraph 1(b) above;(c) That his country has diplomatic relations with the Republic of the Philippines;(d) That he has been certified by his diplomatic or consular office or any appropriate government agency to have the legal capacity to adopt in his country and his government allows the adoptee to enter his country as his adopted child and reside there permanently as an adopted child; and(e) That he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition and he maintains such residence until the adoption decree is entered.The requirements of certification of the alien’s qualification to adopt in his country and of residency may be waived if the alien: (i) is a former Filipino citizen who seeks to adopt a relative within the fourth degree of consanguinity or affinity; or

(ii) seeks to adopt the legitimate child of his Filipino spouse; or (iii) is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth degree of consanguinity or affinity of the Filipino spouse.3) If the adopter is the legal guardian of the adoptee, the petition shall allege that guardianship had been terminated and the guardian had cleared his financial accountabilities. 4) If the adopter is married, the spouse shall be a co-petitioner for joint adoption except if: (a) one spouse seeks to adopt the legitimate child of the other, or (b) if one spouse seeks to adopt his own illegitimate child and the other spouse signified written consent thereto, or (c) if the spouses are legally separated from each other. 5) If the adoptee is a foundling, the petition shall allege the entries which should appear in his birth certificate, such as name of child, date of birth, place of birth, if known; sex, name and citizenship of adoptive mother and father, and the date and place of their marriage.6) If the petition prays for a change of name, it shall also state the cause or reason for the change of name.In all petitions, it shall be alleged:(a) The first name, surname or names, age and residence of the adoptee as shown by his record of birth, baptismal or foundling certificate and school records.(b) That the adoptee is not disqualified by law to be adopted.(c) The probable value and character of the estate of the adoptee.(d) The first name, surname or names by which the adoptee is to be known and registered in the Civil Registry.A certification of non-forum shopping shall be included pursuant to Section 5, Rule 7 of the 1997 Rules of Civil Procedure.

Sec. 8. Rectification of Simulated Birth. – In case the petition also seeks rectification of a simulated of birth, it shall allege that:(a) Petitioner is applying for rectification of a simulated birth;(b) The simulation of birth was made prior to the date of effectivity of Republic Act No. 8552 and the application for rectification of the birth registration and the petition for adoption were filed within five years from said date;(c) The petitioner made the simulation of birth for the best interests of the adoptee; and(d) The adoptee has been consistently considered and treated by petitioner as his own child.

Sec. 9. Adoption of a foundling, an abandoned, dependent or neglected child. – In case the adoptee is a foundling, an abandoned, dependent or neglected child, the petition shall allege:(a) The facts showing that the child is a foundling, abandoned, dependent or neglected;(b) The names of the parents, if known, and their residence. If the child has no known or living parents, then the name and residence of the guardian, if any;(c) The name of the duly licensed child-placement agency or individual under whose care the child is in custody; and(d) That the Department, child-placement or child-caring agency is authorized to give its consent.

Sec. 10. Change of name. – In case the petition also prays for change of name, the title or caption must contain:(a) The registered name of the child;(b) Aliases or other names by which the child has been known; and(c) The full name by which the child is to be known.

Sec. 11. Annexes to the Petition. – The following documents shall be attached to the petition:A. Birth, baptismal or foundling certificate, as the case may be, and school records showing the name, age and residence of the adoptee; B. Affidavit of consent of the following:1. The adoptee, if ten (10) years of age or over;2. The biological parents of the child, if known, or the legal guardian, or the child-placement agency, child-caring agency, or the


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proper government instrumentality which has legal custody of the child;3. The legitimate and adopted children of the adopter and of the adoptee, if any, who are ten (10) years of age or over;4. The illegitimate children of the adopter living with him who are ten (10) years of age or over; and5. The spouse, if any, of the adopter or adoptee. C. Child study report on the adoptee and his biological parents;D. If the petitioner is an alien, certification by his diplomatic or consular office or any appropriate government agency that he has the legal capacity to adopt in his country and that his government allows the adoptee to enter his country as his own adopted child unless exempted under Section 4(2); E. Home study report on the adopters. If the adopter is an alien or residing abroad but qualified to adopt, the home study report by a foreign adoption agency duly accredited by the Inter-Country Adoption Board; andF. Decree of annulment, nullity or legal separation of the adopter as well as that of the biological parents of the adoptee, if any.

Sec. 12. Order of Hearing. – If the petition and attachments are sufficient in form and substance, the court shall issue an order which shall contain the following:(1) the registered name of the adoptee in the birth certificate and the names by which the adoptee has been known which shall be stated in the caption;(2) the purpose of the petition;(3) the complete name which the adoptee will use if the petition is granted;(4) the date and place of hearing which shall be set within six (6) months from the date of the issuance of the order and shall direct that a copy thereof be published before the date of hearing at least once a week for three successive weeks in a newspaper of general circulation in the province or city where the court is situated; Provided, that in case of application for change of name, the date set for hearing shall not be within four (4) months after the last publication of the notice nor within thirty (30) days prior to an election. The newspaper shall be selected by raffle under the supervision of the Executive Judge.(5) a directive to the social worker of the court, the social service office of the local government unit or any child-placing or child-caring agency, or the Department to prepare and submit child and home study reports before the hearing if such reports had not been attached to the petition due to unavailability at the time of the filing of the latter; and(6) a directive to the social worker of the court to conduct counseling sessions with the biological parents on the matter of adoption of the adoptee and submit her report before the date of hearing.At the discretion of the court, copies of the order of hearing shall also be furnished the Office of the Solicitor General through the provincial or city prosecutor, the Department and the biological parents of the adoptee, if known. If a change in the name of the adoptee is prayed for in the petition, notice to the Solicitor General shall be mandatory.

Sec. 13. Child and Home Study Reports. – In preparing the child study report on the adoptee, the concerned social worker shall verify with the Civil Registry the real identity and registered name of the adoptee. If the birth of the adoptee was not registered with the Civil Registry, it shall be the responsibility of the social worker to register the adoptee and secure a certificate of foundling or late registration, as the case may be.The social worker shall establish that the child is legally available for adoption and the documents in support thereof are valid and authentic, that the adopter has sincere intentions and that the adoption shall inure to the best interests of the child.In case the adopter is an alien, the home study report must show the legal capacity to adopt and that his government allows the adoptee to enter his country as his adopted child in the absence of

the certification required under Section 7(b) of Republic Act No. 8552.If after the conduct of the case studies, the social worker finds that there are grounds to deny the petition, he shall make the proper recommendation to the court, furnishing a copy thereof to the petitioner.

Sec. 14. Hearing. – Upon satisfactory proof that the order of hearing has been published and jurisdictional requirements have been complied with, the court shall proceed to hear the petition. The petitioner and the adoptee must personally appear and the former must testify before the presiding judge of the court on the date set for hearing. The court shall verify from the social worker and determine whether the biological parent has been properly counseled against making hasty decisions caused by strain or anxiety to give up the child; ensure that all measures to strengthen the family have been exhausted; and ascertain if any prolonged stay of the child in his own home will be inimical to his welfare and interest.

Sec. 15. Supervised Trial Custody. – Before issuance of the decree of adoption, the court shall give the adopter trial custody of the adoptee for a period of at least six (6) months within which the parties are expected to adjust psychologically and emotionally to each other and establish a bonding relationship. The trial custody shall be monitored by the social worker of the court, the Department, or the social service of the local government unit, or the child-placement or child-caring agency which submitted and prepared the case studies. During said period, temporary parental authority shall be vested in the adopter.The court may, motu proprio or upon motion of any party, reduce the period or exempt the parties if it finds that the same shall be for the best interests of the adoptee, stating the reasons therefor.An alien adopter however must complete the 6-month trial custody except the following:a) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; orb) one who seeks to adopt the legitimate child of his Filipino spouse; orc) one who is married to a Filipino citizen and seeks to adopt jointly with his or her spouse the latter’s relative within the fourth (4th) degree of consanguinity or affinity.If the child is below seven (7) years of age and is placed with the prospective adopter through a pre-adoption placement authority issued by the Department, the court shall order that the prospective adopter shall enjoy all the benefits to which the biological parent is entitled from the date the adoptee is placed with him. The social worker shall submit to the court a report on the result of the trial custody within two weeks after its termination.

Sec. 16. Decree of Adoption. – If the supervised trial custody is satisfactory to the parties and the court is convinced from the trial custody report and the evidence adduced that the adoption shall redound to the best interests of the adoptee, a decree of adoption shall be issued which shall take effect as of the date the original petition was filed even if the petitioners die before its issuance.The decree shall:A. State the name by which the child is to be known and registered;B. Order:1) the Clerk of Court to issue to the adopter a certificate of finality upon expiration of the 15-day reglementary period within which to appeal;2) the adopter to submit a certified true copy of the decree of adoption and the certificate of finality to the Civil Registrar where the child was originally registered within thirty (30) days from receipt of the certificate of finality. In case of change of name, the decree shall be submitted to the Civil Registrar where the court issuing the same is situated. 3) the Civil Registrar of the place where the adoptee was registered:


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a. to annotate on the adoptee’s original certificate of birth the decree of adoption within thirty (30) days from receipt of the certificate of finality;b. to issue a certificate of birth which shall not bear any notation that it is a new or amended certificate and which shall show, among others, the following: registry number, date of registration, name of child, sex, date of birth, place of birth, name and citizenship of adoptive mother and father, and the date and place of their marriage, when applicable; c. to seal the original certificate of birth in the civil registry records which can be opened only upon order of the court which issued the decree of adoption; andd. to submit to the court issuing the decree of adoption proof of compliance with all the foregoing within thirty days from receipt of the decree.If the adoptee is a foundling, the court shall order the Civil Registrar where the foundling was registered, to annotate the decree of adoption on the foundling certificate and a new birth certificate shall be ordered prepared by the Civil Registrar in accordance with the decree.

Sec. 17. Book of Adoptions. – The Clerk of Court shall keep a book of adoptions showing the date of issuance of the decree in each case, compliance by the Civil Registrar with Section 16(B)(3) and all incidents arising after the issuance of the decree.

Sec. 18. Confidential Nature of Proceedings and Records. – All hearings in adoption cases, after compliance with the jurisdictional requirements shall be confidential and shall not be open to the public. All records, books and papers relating to the adoption cases in the files of the court, the Department, or any other agency or institution participating in the adoption proceedings shall be kept strictly confidential.If the court finds that the disclosure of the information to a third person is necessary for security reasons or for purposes connected with or arising out of the adoption and will be for the best interests of the adoptee, the court may, upon proper motion, order the necessary information to be released, restricting the purposes for which it may be used.

Sec. 19. Rescission of Adoption of the Adoptee. – The petition shall be verified and filed by the adoptee who is over eighteen (18) years of age, or with the assistance of the Department, if he is a minor, or if he is over eighteen (18) years of age but is incapacitated, by his guardian or counsel.The adoption may be rescinded based on any of the following grounds committed by the adopter:1) repeated physical and verbal maltreatment by the adopter despite having undergone counseling;2) attempt on the life of the adoptee;3) sexual assault or violence; or4) abandonment or failure to comply with parental obligations. Adoption, being in the best interests of the child, shall not be subject to rescission by the adopter. However, the adopter may disinherit the adoptee for causes provided in Article 919 of the Civil Code.

Sec. 20. Venue. – The petition shall be filed with the Family Court of the city or province where the adoptee resides.

Sec. 21. Time within which to file petition. – The adoptee, if incapacitated, must file the petition for rescission or revocation of adoption within five (5) years after he reaches the age of majority, or if he was incompetent at the time of the adoption, within five (5) years after recovery from such incompetency. Sec. 22. Order to Answer. – The court shall issue an order requiring the adverse party to answer the petition within fifteen (15) days from receipt of a copy thereof. The order and copy of the petition shall be served on the adverse party in such manner as the court may direct.

Sec. 23. Judgment. – If the court finds that the allegations of the petition are true, it shall render judgment ordering the rescission of adoption, with or without costs, as justice requires.The court shall order that the parental authority of the biological parent of the adoptee, if known, or the legal custody of the Department shall be restored if the adoptee is still a minor or incapacitated and declare that the reciprocal rights and obligations of the adopter and the adoptee to each other shall be extinguished.The court shall further declare that successional rights shall revert to its status prior to adoption, as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected. It shall also order the adoptee to use the name stated in his original birth or foundling certificate.The court shall further order the Civil Registrar where the adoption decree was registered to cancel the new birth certificate of the adoptee and reinstate his original birth or foundling certificate.

Sec. 24. Service of Judgment. – A certified true copy of the judgment together with a certificate of finality issued by the Branch Clerk of the Court which rendered the decision in accordance with the preceding Section shall be served by the petitioner upon the Civil Registrar concerned within thirty (30) days from receipt of the certificate of finality. The Civil Registrar shall forthwith enter the rescission decree in the register and submit proof of compliance to the court issuing the decree and the Clerk of Court within thirty (30) days from receipt of the decree.The Clerk of Court shall enter the compliance in accordance with Section 17 hereof.

SEC. 25. Repeal. - This supersedes Rule 99 on Adoption and Rule 100 of the Rules of Court.

B. Inter-Country AdoptionSec. 26. Applicability. – The following sections apply to inter-country adoption of Filipino children by foreign nationals and Filipino citizens permanently residing abroad.

SEC. 27. Objectives. – The State shall:a) a) consider inter-country adoption as an alternative means of child care, if the child cannot be placed in a foster or an adoptive family or cannot, in any suitable manner, be cared for in the Philippines;b) ensure that the child subject of inter-country adoption enjoys the same protection accorded to children in domestic adoption; andc) take all measures to ensure that the placement arising therefrom does not result in improper financial gain for those involved.

Sec. 28. Where to File Petition. – A verified petition to adopt a Filipino child may be filed by a foreign national or Filipino citizen permanently residing abroad with the Family Court having jurisdiction over the place where the child resides or may be found.It may be filed directly with the Inter-Country Adoption Board.

Sec. 29. Who may be adopted. – Only a child legally available for domestic adoption may be the subject of inter-country adoption. Sec. 30. Contents of Petition. – The petitioner must allege:a) his age and the age of the child to be adopted, showing that he is at least twenty-seven (27) years of age and at least sixteen (16) years older than the child to be adopted at the time of application, unless the petitioner is the parent by nature of the child to be adopted or the spouse of such parent, in which case the age difference does not apply;b) if married, the name of the spouse who must be joined as co-petitioner except when the adoptee is a legitimate child of his spouse;c) that he has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and


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has undergone the appropriate counseling from an accredited counselor in his country;d) that he has not been convicted of a crime involving moral turpitude;e) that he is eligible to adopt under his national law;f) that he can provide the proper care and support and instill the necessary moral values and example to all his children, including the child to be adopted;g) that he agrees to uphold the basic rights of the child, as embodied under Philippine laws and the U. N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of Republic Act No. 8043;h) that he comes from a country with which the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption of a Filipino child is allowed under his national laws; andi) that he possesses all the qualifications and none of the disqualifications provided in this Rule, in Republic Act No. 8043 and in all other applicable Philippine laws.

Sec. 31. Annexes. - The petition for adoption shall contain the following annexes written and officially translated in English:a) Birth certificate of petitioner;b) Marriage contract, if married, and, if applicable, the divorce decree, or judgment dissolving the marriage;c) Sworn statement of consent of petitioner’s biological or adopted children above ten (10) years of age; d) Physical, medical and psychological evaluation of the petitioner certified by a duly licensed physician and psychologist;e) Income tax returns or any authentic document showing the current financial capability of the petitioner;f) Police clearance of petitioner issued within six (6) months before the filing of the petitioner;g) Character reference from the local church/minister, the petitioner’s employer and a member of the immediate community who have known the petitioner for at least five (5) years;h) Full body postcard-size pictures of the petitioner and his immediate family taken at least six (6) months before the filing of the petition.

Sec. 32. Duty of Court. – The court, after finding that the petition is sufficient in form and substance and a proper case for inter-country adoption, shall immediately transmit the petition to the Inter-Country Adoption Board for appropriate action.

SEC. 33. Effectivity. - This Rule shall take effect on August 22, 2002 following its publication in a newspaper of general circulation.

F. CUSTODY OF MINORS

[A.M. No. 03-04-04-SC 2003-04-22]RE: PROPOSED RULE ON CUSTODY OF MINORS AND WRIT OF HABEAS CORPUS IN RELATION TO CUSTODY OF MINORS RESOLUTION

SECTION 1. Applicability. - This rule shall apply to petitions for custody of minors and writs of habeas corpus in relation thereto.The Rules of Court shall apply suppletorily.

SEC. 2. Petition for custody of minors; who may file.- A verified petition for the rightful custody of a minor may be filed by any person claiming such right. The party against whom it may be filed shall be designated as the respondent.

SEC. 3. Where to file petition. - The petition for custody of minors shall be filed with the Family Court of the province or city where the petitioner resides or where the minor may be found.

SEC. 4. Contents of petition. - The verified petition shall allege the following:(a) The personal circumstances of the petitioner and of the respondent;(b) The name, age and present whereabouts of the minor and his or her relationship to the petitioner and the respondent;(c) The material operative facts constituting deprivation of custody; and(d) Such other matters which are relevant to the custody of the minor.The verified petition shall be accompanied by a certificate against forum shopping, which the petitioner must sign personally.

SEC. 5. Summons; personal service on respondent. - If the court is satisfied that the petition is sufficient in form and substance, it shall direct the clerk of court to issue summons, which shall be served together with a copy of the petition personally on the respondent.

SEC. 6. Motion to Dismiss. - A motion to dismiss the petition is not allowed except on the ground of lack of jurisdiction over the subject matter or over the parties. Any other ground that might warrant the dismissal of the petition may be raised as an affirmative defense in the answer.

SEC. 7. Verified Answer. - The respondent shall file an answer to the petition, personally verified by him, within five days after service of summons and a copy of the petition.

SEC. 8. Case study; duty of social worker. - Upon the filing of the verified answer or the expiration of the period to file it, the court may order a social worker to make a case study of the minor and the parties and to submit a report and recommendation to the court at least three days before the scheduled pre-trial.

SEC. 9. Notice of mandatory pre-trial. - Within fifteen days after the filing of the answer or the expiration of the period to file answer, the court shall issue an order: (1) fixing a date for the pre-trial conference; (2) directing the parties to file and serve their respective pre-trial briefs in such manner as shall ensure receipt thereof by the adverse party at least three days before the date of pre-trial; and (3) requiring the respondent to present the minor before the court.The notice of its order shall be served separately on both the parties and their respective counsels. The pre-trial is mandatory.SEC. 10. Contents of pre-trial brief. - The pre-trial brief shall contain the following:(a) A statement of the willingness of the parties to enter into agreements that may be allowed by law, indicating its terms;(b) A concise statement of their respective claims together with the applicable laws and authorities;(c) Admitted facts and proposed stipulations of facts;(d) The disputed factual and legal issues;(e) All the evidence to be presented, briefly stating or describing its nature and purpose;(f) The number and names of the witnesses and their respective affidavits which shall serve as the affiant's testimony on direct examination; and(g) Such other matters as the court may require to be included in the pre-trial brief.Failure to file the pre-trial brief or to comply with its required contents shall have the same effect as failure to appear at the pre-trial.

SEC. 11. Effect of failure to appear at the pre-trial.-(a) If the petitioner fails to appear personally at the pre-trial, the case shall be dismissed, unless his counsel or a duly authorized representative appears in court and proves a valid excuse for the non-appearance of the petitioner.(b) If the respondent has filed his answer but fails to appear at the pre-trial, the petitioner shall be allowed to present his evidence ex


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parte. The court shall then render judgment on the basis of the pleadings and the evidence thus presented.

SEC. 12. What may be done at pre-trial. - At the pre-trial, the parties may agree on the custody of the minor. If the parties fail to agree, the court may refer the matter to a mediator who shall have five days to effect an agreement between the parties. If the issue is not settled through mediation, the court shall proceed with the pre-trial conference, on which occasion it shall consider such other matters as may aid in the prompt disposition of the petition.

SEC. 13. Provisional order awarding custody. - After an answer has been filed or after expiration of the period to file it, the court may issue a provisional order awarding custody of the minor. As far as practicable, the following order of preference shall be observed in the award of custody:(a) Both parents jointly;(b) Either parent, taking into account all relevant considerations, especially the choice of the minor over seven years of age and of sufficient discernment, unless the parent chosen is unfit;(c) The grandparent, or if there are several grandparents, the grandparent chosen by the minor over seven years of age and of sufficient discernment, unless the grandparent chosen is unfit or disqualified;(d) The eldest brother or sister over twenty-one years of age, unless he or she is unfit or disqualified;(e) The actual custodian of the minor over twenty-one years of age, unless the former is unfit or disqualified; or(f) Any other person or institution the court may deem suitable to provide proper care and guidance for the minor.

SEC. 14. Factors to consider in determining custody. - In awarding custody, the court shall consider the best interests of the minor and shall give paramount consideration to his material and moral welfare. The best interests of the minor refer to the totality of the circumstances and conditions as are most congenial to the survival, protection, and feelings of security of the minor encouraging to his physical, psychological and emotional development. It also means the least detrimental available alternative for safeguarding the growth and development of the minor.The court shall also consider the following:(a) Any extrajudicial agreement which the parties may have bound themselves to comply with respecting the rights of the minor to maintain direct contact with the non custodial parent on a regular basis, except when there is an existing threat or danger of physical, mental, sexual or emotional violence which endangers the safety and best interests of the minor;(b) The desire and ability of one parent to foster an open and loving relationship between the minor and the other parent;(c) The health, safety and welfare of the minor;(d) Any history of child or spousal abuse by the person seeking custody or who has had any filial relationship with the minor, including anyone courting the parent;(e) The nature and frequency of contact with both parents;(f) Habitual use of alcohol, dangerous drugs or regulated substances;(g) Marital misconduct;(h) The most suitable physical, emotional, spiritual, psychological and educational environment for the holistic development and growth of the minor; and(i) The preference of the minor over seven years of age and of sufficient discernment, unless the parent chosen is unfit.

SEC. 15. Temporary visitation rights. - The court shall provide in its order awarding provisional custody appropriate visitation rights to the non-custodial parent or parents, unless the court finds said parent or parents unfit or disqualified.The temporary custodian shall give the court and non custodial parent or parents at least five days' notice of any plan to change the residence of the minor or take him out of his residence for more

than three days provided it does not prejudice the visitation rights of the non-custodial parent or parents.

SEC. 16. Hold Departure Order. - The minor child subject of the petition shall not be brought out of the country without prior order from the court while the petition is pending.The court, motu proprio or upon application under oath, may issue ex parte a hold departure order, addressed to the Bureau of Immigration and Deportation, directing it not to allow the departure of the minor from the Philippines without the permission of the court.The Family Court issuing the hold departure order shall furnish the Department of Foreign Affairs and the Bureau of Immigration and Deportation of the Department of Justice a copy of the hold departure order within twenty-four hours from its issuance and through the fastest available means of transmittal.The hold departure order shall contain the following information:(a) The complete name (including the middle name), the date and place of birth, the nationality and the place of last residence of the person against whom a hold departure order has been issued or whose departure from the country has been enjoined;(b) The complete title and docket number of the case in which the hold departure order was issued; (c) The specific nature of the case;(d) The date of the hold departure order; and(e) A recent photograph, if available, of the party against whom a hold departure order has been issued or whose departure from the country has been enjoined.The court may recall the hold departure order motu proprio, or upon verified motion of any of the parties after summary hearing, subject to such terms and conditions as may be necessary for the best interests of the minor.

SEC. 17. Protection Order. - The court may issue a Protection Order requiring any person:(a) To stay away from the home, school, business, or place of employment of the minor, other parent or any other party, or from any other specific place designated by the court;(b) To cease and desist from harassing, intimidating, or threatening such minor or the other parent or any person to whom custody of the minor is awarded;(c) To refrain from acts of commission or omission that create an unreasonable risk to the health, safety, or welfare of the minor;(d) To permit a parent, or a party entitled to visitation by a court order or a separation agreement, to visit the minor at stated periods;(e) To permit a designated party to enter the residence during a specified period of time in order to take personal belongings not contested in a proceeding pending with the Family Court; and(f) To comply with such other orders as are necessary for the protection of the minor.

SEC. 18. Judgment. - After trial, the court shall render judgment awarding the custody of the minor to the proper party considering the best interests of the minor.If it appears that both parties are unfit to have the care and custody of the minor, the court may designate either the paternal or maternal grandparent of the minor, or his oldest brother or sister, or any reputable person to take charge of such minor, or commit him to any suitable home for children.In its judgment, the court may order either or both parents to give an amount necessary for the support, maintenance and education of the minor, irrespective of who may be its custodian. In determining the amount of support, the court may consider the following factors: (1) the financial resources of the custodial and non-custodial parent and those of the minor; (2) the physical and emotional health, special needs, and aptitude of the minor; (3) the standard of living the minor has been accustomed to; and (4) the non-monetary contributions that the parents would make toward the care and well-being of the minor.


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The court may also issue any order that is just and reasonable permitting the parent who is deprived of the care and custody of the minor to visit or have temporary custody.

SEC. 19. Appeal. - No appeal from the decision shall be allowed unless the appellant has filed a motion for reconsideration or new trial within fifteen days from notice of judgment.An aggrieved party may appeal from the decision by filing a Notice of Appeal within fifteen days from notice of the denial of the motion for reconsideration or new trial and serving a copy thereof on the adverse parties.

SEC. 20. Petition for writ of habeas corpus. - A verified petition for a writ of habeas corpus involving custody of minors shall be filed with the Family Court. The writ shall be enforceable within its judicial region to which the Family Court belongs.However, the petition may be filed with the regular court in the absence of the presiding judge of the Family Court, provided, however, that the regular court shall refer the case to the Family Court as soon as its presiding judge returns to duty.The petition may also be filed with the appropriate regular courts in places where there are no Family Courts.The writ issued by the Family Court or the regular court shall be enforceable in the judicial region where they belong.The petition may likewise be filed with the Supreme Court, Court of Appeals, or with any of its members and, if so granted, the writ shall be enforceable anywhere in the Philippines. The writ may be made returnable to a Family Court or to any regular court within the region where the petitioner resides or where the minor may be found for hearing and decision on the merits.Upon return of the writ, the court shall decide the issue on custody of minors. The appellate court, or the member thereof, issuing the writ shall be furnished a copy of the decision.

SEC. 21. Confidentiality of proceedings. - The hearings on custody of minors may, at the discretion of the court, be closed to the public and the records of the case shall not be released to non-parties without its approval.

SEC. 22. Effectivity. - This Rule shall take effect on May 15, 2003 following its publication in a newspaper of general circulation not later than April 30, 2003.

Briones V. Miguel (2004)

Quickfacts: The mother of the illegitimate child works in Japan and wants custody. The father wants custody while the mother is away. Whether or not the natural father, may be denied the custody and parental care of his own child in the absence of the mother who is away.

Held: Having been born outside a valid marriage, the minor is deemed an illegitimate child of petitioner and Respondent Loreta. Article 176 of the Family Code of the Philippines explicitly provides that “illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code.” This is the rule regardless of whether the father admits paternity

David v. Court of Appeals held that the recognition of an illegitimate child by the father could be a ground for ordering the latter to give support to, but not custody of, the child. The law explicitly confers to the mother sole parental authority over an illegitimate child; it follows that only if she defaults can the father assume custody and authority over the minor. Of course, the putative father may adopt his own illegitimate child; in such a case, the child shall be considered a legitimate child of the adoptive parent.

G. HOSPITALIZATION OF INSANE PERSONS

RULE 101

Sec. 1. Venue; Petition for commitment. - A petition for the commitment of a person to a hospital or other place for the insane may be filed with the Court of First Instance of the province where the person alleged to be insane is found. The petition shall be filed by the Director of Health in the all cases where, in his opinion, such commitment is for the public welfare, or for the welfare of said person who, in his judgment, is insane, and such person or the one having charged of him is opposed to his being taken to a hospital or other place for the insane.

Sec. 2. Order for hearing. - If the petition filed is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date for the hearing thereof, and copy of such order shall be served on the person alleged to be insane, and to the one having charge of him, or on such of his relatives residing in the province or city as the judge may deem proper. The court shall furthermore order the sheriff to produce the alleged insane person, if possible, on the date of the hearing.

Sec. 3. Hearing and judgment. - Upon satisfactory proof, in open court on the date fixed in the order, that the commitment applied for is for the public welfare or for the welfare of the insane person, and that his relatives are unable for any reason to take proper custody and care of him, the court shall order his commitment to such hospital or other place for the insane as may be recommended by the Director of Health. The court shall make proper provisions for the custody of property or money belonging to the insane until a guardian be properly appointed.

Sec. 4. Discharge of insane. - When, in the opinion of the Director of Health, the person ordered to be committed to a hospital or other place for the insane is temporarily or permanently cured, or may be released without danger he may file the proper petition with the Court of First Instance which ordered the commitment.

Sec. 5. Assistance of fiscal in the proceeding. - It shall be the duty of the provincial fiscal or in the City of Manila the fiscal of the city, to prepare the petition for the Director of Health and represent him in court in all proceedings arising under the provisions of this rule.

H. HABEAS CORPUS AND OTHER WRITS

WRIT OF HABEAS CORPUS Procedure for Issuance of Writ1. Petition alleging illegal confinement/detention2. Issuance of writ by a court with jurisdiction3. Service by leaving with the person whom the writ is directed,

and preserving a copy4. Hearing by the court5. Recommitment, bail or discharge of the detained6. Execution of the writ by conveying the detained person

before the court, with return of service

Section 1. To what habeas corpus extends. — Except as otherwise expressly provided by law, the writ of habeas corpus shall extend to all cases of illegal confinement or detention by which any person is deprived of his liberty, or by which the rightful custody of any person is withheld from the person entitled thereto.

Notes: Definition: A writ directed to the person detaining another and

commanding him to produce the body of the detained at a certain time and place, with the day and the cause of his caption and detention, to do, to submit to and receive whatever the court shall consider in that behalf. [Bouvier’s Law Dictionary]

Kinds:o Preliminary citation – if the person is detained under

governmental authority and the illegality of his detention is not patent from the petition for the writ, the court issues the citation to the government officer having custody to


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show cause why the writ should not issue.o Preemptory writ – if the cause of the detention appears to

be patently illegal. Non-compliance with this is punishable.

Section 2. Who may grant the writ. — The writ of habeas corpus may be granted by the Supreme Court, or any member thereof in the instances authorized by law, and if so granted it shall be enforceable anywhere in the Philippines, and may be made returnable before the court or any member thereof, or before a Court of First Instance, or any judge thereof for the hearing and decision on the merits. It may also be granted by a Court of First Instance, or a judge thereof, on any day and at any time, and returnable before himself, enforceable only within his judicial district.

Section 3. Requisites of application therefor. — Application for the writ shall be by petition signed and verified either by the party for whose relief it is intended, or by some person on his behalf, and shall set forth:(a) That the person in whose behalf the application is made is imprisoned or restrained on his liberty;(b) The officer or name of the person by whom he is so imprisoned or restrained; or, if both are unknown or uncertain, such officer or person may be described by an assumed appellation, and the person who is served with the writ shall be deemed the person intended;(c) The place where he is so imprisoned or restrained, if known;(d) A copy of the commitment or cause of detention of such person, if it can be procured without impairing the efficiency of the remedy; or, if the imprisonment or restraint is without any legal authority, such fact shall appear.

Section 4. When writ not allowed or discharge authorized. — If it appears that the person alleged to be restrained of his liberty is in the custody of an officer under process issued by a court or judge or by virtue of a judgment or order of a court of record, and that the court or judge had jurisdiction to issue the process, render the judgment, or make the order, the writ shall not be allowed; or if the jurisdiction appears after the writ is allowed, the person shall not be discharged by reason of any informality or defect in the process, judgment, or order. Not shall anything in this rule be held to authorize the discharge of a person charged with or convicted of an offense in the Philippines, or of a person suffering imprisonment under lawful judgment.

Section 5. When the writ must be granted and issued. — A court or judge authorized to grant the writ must, when a petition therefor is presented and it appears that the writ ought to issue, grant the same forthwith, and immediately thereupon the clerk of the court shall issue the writ under the seal of the court; or in case of emergency, the judge may issue the writ under his own hand, and may depute any officer or person to serve it.

Section 6. To whom writ directed, and what to require. — In case of imprisonment or restraint by an officer, the writ shall be directed to him, and shall command him to have the body of the person restrained of his liberty before the court or judge designated in the writ at the time and place therein specified. In case of imprisonment or restraint by a person not an officer, the writ shall be directed to an officer, and shall command him to take and have the body of the person restrained of his liberty before the court or judge designated in the writ at the time and place therein specified, and to summon the person by whom he is restrained then and there to appear before said court or judge to show the cause of the imprisonment or restraint.

Notes:Restraint by officer Restraint NOT by officerDirected to him Directed to an officer

Orders him to produce the person before the court

Orders officer to:1. Take and produce the person before

the court; and2. Summon the person detaining to show

the cause of restraint

Section 7. How prisoner designated and writ served. — The person to be produced should be designated in the writ by his name, if known, but if his name is not known he may be otherwise described or identified. The writ may be served in any province by the sheriff or other proper officer, or by a person deputed by the court or judge. Service of the writ shall be made by leaving the original with the person to whom it is directed and preserving a copy on which to make return or service. If that person cannot be found, or has not the prisoner in his custody, then the service shall be made on any other person having or exercising such custody.

Notes: The writs of HC and certiorari may be ancillary to each other

where necessary to give effect to the supervisory powers of the higher courts. [Regalado]o Rationale: An HC writ reaches the body and the

jurisdictional matters, but not the record. A certiorari writ reaches the record, but not the body. Hence, the two may be used together for review purposes.

Section 8. How writ executed and returned. — The officer to whom the writ is directed shall convey the person so imprisoned or restrained, and named in the writ, before the judge allowing the writ, or in case of his absence or disability, before some other judge of the same court, on the day specified in the writ, unless, from sickness or infirmity of the person directed to be produced, such person cannot, without danger, be bought before the court or judge; and the officer shall make due return of the writ, together with the day and the cause of the caption and restraint of such person according to the command thereof.

Section 9. Defect of form. — No writ of habeas corpus can be disobeyed for defect of form, if it sufficiently appears therefrom in whose custody or under whose restraint the party imprisoned or restrained is held and the court or judge before whom he is to be bought.

Section 10. Contents of return. — When the person to be produced is imprisoned or restrained by an officer, the person who makes the return shall state therein, and in other cases the person in whose custody the prisoner is found shall state, in writing to the court or judge before whom the writ is returnable, plainly and unequivocably:(a) Whether he has or has not the party in his custody or power, or under restraint;(b) If he has the party in his custody or power, or under restraint, the authority and the true and whole cause thereof, set forth at large, with a copy of the writ, order execution, or other process, if any, upon which the party is held;(c) If the party is in his custody or power or is restrained by him, and is not produced, particularly the nature and gravity of the sickness or infirmity of such party by reason of which he cannot, without danger, be bought before the court or judge;(d) If he has had the party in his custody or power, or under restraint, and has transferred such custody or restraint to another, particularly to whom, at what time, for what cause, and by what authority such transfer was made.

Section 11. Return to be signed and sworn to. — The return or statement shall be signed by the person who makes it; and shall also be sworn by him if the prisoner is not produced, and in all other cases unless the return is made and signed by a sworn public officer in his official capacity.


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Section 12. Hearing on return. Adjournments. — When the writ is returned before one judge, at a time when the court is in session, he may forthwith adjourn the case into the court, there to be heard and determined. The court or judge before whom the writ is returned or adjourned must immediately proceed to hear and examine the return, and such other matters as are properly submitted for consideration, unless for good cause shown the hearing is adjourned, in which event the court or judge shall make such order for the safekeeping of the person imprisoned or restrained as the nature of the case requires. If the person imprisoned or restrained is not produced because of his alleged sickness or infirmity, the court or judge must be satisfied that it is so grave that such person cannot be produced without danger, before proceeding to hear and dispose of the matter. On the hearing the court or judge shall disregard matters of form and technicalities in respect to any warrant or order of commitment of a court or officer authorized to commit by law.

Section 13. When the return evidence, and when only a plea. — If it appears that the prisoner is in custody under a warrant of commitment in pursuance of law, the return shall be considered prima facie evidence of the cause of restraint, but if he is restrained of his liberty by any alleged private authority, the return shall be considered only as a plea of the facts therein set forth, and the party claiming the custody must prove such facts.

Section 14. When person lawfully imprisoned recommitted, and when let to bail. — If it appears that the prisoner was lawfully committed, and is plainly and specifically charged in the warrant of commitment with an offense punishable by death, he shall not be released, discharged, or bailed. If he is lawfully imprisoned or restrained on a charge of having committed an offense not so punishable, he may be recommitted to imprisonment or admitted to bail in the discretion of the court or judge. If he be admitted to bail, he shall forthwith file a bond in such sum as the court or judge deems reasonable, considering the circumstances of the prisoner and the nature of the offense charged, conditioned for his appearance before the court where the offense is properly cognizable to abide its order of judgment; and the court or judge shall certify the proceedings, together with the bond, forthwith to the proper court. If such bond is not so filed, the prisoner shall be recommitted to confinement.

Section 15. When prisoner discharged if no appeal. — When the court or judge has examined into the cause of caption and restraint of the prisoner, and is satisfied that he is unlawfully imprisoned or restrained, he shall forthwith order his discharge from confinement, but such discharge shall not be effective until a copy of the order has been served on the officer or person detaining the prisoner. If the officer or person detaining the prisoner does not desire to appeal, the prisoner shall be forthwith released.

Section 16. Penalty for refusing to issue writ, or for disobeying the same. — A clerk of a court who refuses to issue the writ after allowance thereof and demand therefor, or a person to whom a writ is directed, who neglects or refuses to obey or make return of the same according to the command thereof, or makes false return thereof, or who, upon demand made by or on behalf of the prisoner, refuses to deliver to the person demanding, within six (6) hours after the demand therefor, a true copy of the warrant or order of commitment, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recorded in a proper action, and may also be punished by the court or judge as for contempt.

Section 17. Person discharged not to be again imprisoned. — A person who is set at liberty upon a writ of habeas corpus shall not be again imprisoned for the same offense unless by the lawful order or process of a court having jurisdiction of the cause or offense; and a person who knowingly, contrary to the provisions of this rule, recommits or imprisons, or causes to be committed or imprisoned, for the same offense, or pretended offense, any person so set at

liberty, or knowingly aids or assists therein, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recovered in a proper action, notwithstanding any colorable pretense or variation in the warrant of commitment, and may also be punished by the court or judge granting the writ as for contempt.

Section 18. When prisoner may be removed from one custody to another. — A person committed to prison, or in custody of an officer, for any criminal matter, shall not be removed therefrom into the custody of another unless by legal process, or the prisoner be delivered to an inferior officer to carry to jail, or, by order of the proper court or judge, be removed from one place to another within the Philippines for trial, or in case of fire epidemic, insurrection, or other necessity or public calamity; and a person who, after such commitment, makes signs, or counter-signs any order for such removal contrary to this section, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recovered in a proper action.

Section 19. Record of writ, fees and costs. — The proceedings upon a writ of habeas corpus shall be recorded by the clerk of the court, and upon the final disposition of such proceedings the court or judge shall make such order as to costs as the case requires. The fees of officers and witnesses shall be included in the costs taxed, but no officer or person shall have the right to demand payment in advance of any fees to which he is entitled by virtue of the proceedings. When a person confined under color of proceedings in a criminal case is discharged, the costs shall be taxed against the Republic of the Philippines, and paid out of its Treasury; when a person in custody by virtue or under color of proceedings in a civil case is discharged, the costs shall be taxed against him, or against the person who signed the application for the writ, or both, as the court shall direct.

Moncupa v Enrile (1986)(Actual and effective restraint)It is not physical restraint alone which is inquired into by the writ of habeas corpus. Any restraint which will prejudice freedom of action is sufficient ground.The release that renders a petition for the HC writ moot and academic is one that is free from involuntary restraints. Hence, the writ may still be applied for if:1. A person continues to be denied any of his constitutional

rights;2. The restraints are not merely involuntary but appear to be

unnecessary;3. An originally valid deprivation of liberty became arbitrary, in

light of subsequent developments.

Olaguer v Military Commission No. 34 (1987)(Release of the detained)The sole issue in habeas corpus proceedings is detention. When the release of the detained person in effected, the petition for the issuance of the writ of habeas corpus becomes moot and academic.

Pp. v Simon (1994)If the judgment which could be affected and modified by the reduced penalties provided in Republic Act No. 7659 has already become final and executory or the accused is serving sentence thereunder, then practice, procedure and pragmatic considerations would warrant and necessitate the matter being brought to the judicial authorities for relief under a writ of habeas corpus.

Paredes v Sandiganbayan (1991)Lack of preliminary investigation does not warrant an issuance of a writ of habeas corpus. The absence of a preliminary investigation does not affect the court’s jurisdiction over the case nor impair the validity of the information or otherwise render it defective. The remedy of the accused in such a case is to call the attention of the court to the lack of a preliminary investigation and demand, as a matter of right, that one be conducted. The court, instead of


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dismissing the information, should merely suspend the trial and order the fiscal to conduct a preliminary investigation.

Galvez v CA (1994)(Not a substitute for trial’s ordinary course)The writ of habeas corpus is not intended as a substitute for the functions of a trial court. In the absence of exceptional circumstances, the orderly course of trial should be pursued and the usual remedies must be exhausted before the writ may be invoked. The writ of habeas corpus is not ordinarily available in advance of trial to determine jurisdictional errors that may arise.

Aquino v Esperon (2007)A writ of habeas corpus can only question the fact or duration, and not the conditions, of confinement. The WHC will not issue where the person alleged to be restrained of his liberty is in the custody of an officer under a process issued by the court which has jurisdiction to do so (no involuntary restraint). While it is true that the extraordinary WHC is the appropriate remedy to inquire into questions of violations of constitutional right, this Court, however, does not find the conditions of Major Aquino’s confinement to be a proper subject of inquiry in the instant petition.

WRIT OF AMPARONotes: AMPARO – Literally, to protect. The instrument originated in Mexico and has been

constitutionally adopted by Latin American countries (except Cuba) to protect against human rights abuses, especially during the time when they were governed by military juntas. The writ was adopted to provide for a remedy to protect the whole range of constitutional rights, including socio-economic rights.

In light of the recent prevalence of extralegal killings and enforced disappearances (ELKED),SC exercised its enhanced power to promulgate rules to protect and enforce constitutional rights. [Art. 8, Sec. 5[5], Consti]o EXTRALEGAL KILLINGS – Killings committed without due

process of law (i.e. without legal safeguards or judicial proceedings).

o ENFORCED DISAPPEARANCES – Attended by the following circumstances: Arrest/detention/abduction of a person by a

government official or organized groups or private individuals acting with the in/direct acquiescence of the State;

Refusal of the State to disclose the fate/whereabouts of the person concerned, or refusal to acknowledge the deprivation of liberty, which places such persons outside the protection of the law. [Declaration on the Protection of All Persons from Enforced Disappearances]

The Philippine Constitution does not explicitly provide for the writ. However, several amparo protections are available under the 1987 Constitution.

The Grave Abuse Clause in Art. 8, Sec. 1, Consti accords the same protection to human rights given by amparo.

WRIT O HABEAS DATANotes: An independent remedy to protect the right to privacy,

especially the right to informational privacy. Rationale:

o The privacy of one’s person/family/home is a sanctified right in the history of constitutional law. A person’s home is his kingdom, which even the king has to respect.

o The right to privacy is accorded a recognition independent of its identification with liberty. In itself, it is fully deserving of constitutional protection. A system of limited government safeguards a private sector, which belongs to the individual; firmly distinguishing it from the public sector, which the government can control. Protection of

this private sector (i.e. of the individual’s dignity and integrity) has become increasingly important as modern society developed. All the forces of technological age operate to narrow the area of privacy and facilitate intrusion into it. In modern terms, the capacity to maintain and support this enclave of private life marks the difference between a democratic and a totalitarian society. [Morfe v. Mutuc (1968)

o The HD writ is also a remedy to protect the right to life/liberty/security of a person from violation (or threat thereof) by an unlawful act/omission of a public official/EE or of a private individual/entity.]

Writ of Amparo Writ of Habeas DataNature of remedy

If right to life or liberty or security is violated or threatened to be violated, by a public official or employee or a private individual or entity

If right to privacy is violated or threatened to be violated, in gathering or collecting or storing data/information about aggrieved party’s person/family/home/correspondence

Who may file

1) Aggrieved party;2) In order: a. immediate family members b. ascendants or descendants or collateral relatives within 4th civil degree c. concerned citizen or organization

1) Aggrieved party;2) In order: a. immediate family members b. ascendants or descendants or collateral relatives within 4th civil degree

Docket fees

Exempt If indigent petitioner, exempt

Docket petition and act immediately

Docket petition and act immediately, but without prejudice to submission of proof of indigency within 15 days from filing

Contents of petition

Signed, verified, and allege:1. Petitioner’s circumstances;2. Respondent’s circumstances;3. Right violated or threatened to be violated, and how violated/threatened;4. Investigation conducted;5. Petitioner’s actions/recourses to determine aggrieved party’s identity/whereabouts and violator’s identity;6. Relief prayed for

Signed, verified, and allege:1. Petitioner’s circumstances;2. Respondent’s circumstances;3. File/database location and person/entity in possession or control;4. Petitioner’s actions/recourses to secure the data/information;6. Relief prayed for, including the update, rectification, suppression, or destruction of the file/database or enjoinment of the threat

*Include general prayer for other just and equitable reliefs

*Include general prayer for other just and equitable reliefs

Issuance of writ

*Upon filing and petition’s prima facie validity:

-same

Court shall immediately issue the

-same


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writClerk of court shall issue the writ under the court’s seal

-same and to be served within 3 days of issuance

* If urgent, the judge/justice may issue the writ in his own handwriting and deputize anyone to serve it

-same

* The writ shall set the date and time for summary hearing, which should be within 7 days from issuance

-same but within 10 days from issuance

Penalty for refusing to issue writ

Contempt, without prejudice to other disciplinary actions

-same

Service of writ

Serve a copy to respondent but retain a copy on which to make a return of service

-same

* If respondent cannot be served personally, apply substituted service rules

-same

Return on the writ

Respondent must file a verified written return within 72 hours after service

-same but within 5 working days, the court may extend the period for justifiable reasons

Contents of return:1. Lawful defenses;2. Steps/actions taken to determine the whereabouts ;3. All relevant information;4. If respondent is a public official/EE, actions that were taken or will be takes: a) To verify the aggrieved party’s identity; b) to recover and preserve evidence for prosecution; c) to determine the circumstances of the death/disappearance; d) to identify and apprehend persons involved; e) to bring suspected offenders to court

1. -same2. If respondent had possession or control of the data or information: a) disclosure of the data or information, its nature, and the purpose of its collection b) steps/actions taken to secure the data/information’s confidentiality3. Other relevant allegations

* General denial of petition’s allegations is not allowed

-same

Defenses raised

All defenses not raised in the defense are deemed waived

Hearing may be in the chambers if respondent invokes the following defenses:1. Release of the date/info will compromise national security of State secrets;2. Data/info cannot be divulged to public

because of its nature or privileged character

Prohibited pleadings or motions

1. MTD2. Motion for extension to file pleading3. Dilatory motion for postponement4. Motion for bill of particulars5. Counter/cross complaint6. 3rd party complaint7. Reply8. Motion to declare respondent in default9. Intervention10. Memorandum11. MFR or interlocutory orders or interim relief orders12. Petition for certiorari, mandamus, prohibition against interlocutory orders

-same

Effect of failure to file return

Ex parte hearing -same

May grant petitioner relief as petition warrants, although it is the court’s discretion to require petitioner to submit evidence

Summary hearing

Allowed but the court may call for a preliminary conference to simplify the issues and determine possibility of obtaining stipulations and admissions

-same

Hearing will be day to day until completed, and has the same priority as HC petitions

Interim reliefs

Upon filing and anytime before judgment, the court may grant any of the following:1. Temporary protection order;2. Inspection order (to permit entry for inspecting relevant objects or operations);3. Production order (to produce and permit inspection of evidence);4. Witness protection order

Availability of interim reliefs to respondent

Only #2 and #3

Contempt For disobeying lawful court orders or processes

-same

Burden of Proof

Substantial evidence


38


Required standard of diligence

If respondent is:1. Private individual or entity: Ordinary2. Public official/EE: Extraordinary; and cannot invoke presumption of regularity in the performance of official duty to evade liability

Judgment Must be rendered within 10 days from petition’s submission for decision

-same

* If petition’s allegations are proven by substantial evidence, grant writ and reliefs; otherwise, deny

-same

* upon judgments finality, enforce within 5 days

Return of Service

Executing officer must make return within 3 days from enforcement

* notice and hearing on the executing officer’s return

Appeal Appeal to SC under Rule 45, on questions of law, and within 5 days from notice of adverse judgment

-same

* appeal has same priority as HC cases

* appeal has same priority as HC and Amparo cases

Archiving and revival of cases

If petition cannot proceed for a valid cause, the courts shall not dismiss it, but archive it* after 2 years from notice of archiving to petitioner, petition shall be dismissed with prejudice, upon failure to prosecute

Institution of separate actions (criminal or civil)

Not precluded -same

Effect of filing a criminal action

A separate petition for the Amparo writ cannot be filed, but the remedy may be availed by motion in the criminal action

-same

Consolidated with another action

If separate criminal (and civil) action is filed subsequent to the filing of petition for the writ, consolidate the petition with the criminal action

Substantive rights

Cannot be increased, decreased, or modified

-same

ROC applicatio

suppletory -same

n

In Re Melissa Roxas/Roxas V Macapagal-Arroyo (2010)1. DOCTRINE OF COMMAND RESPONSIBILITY AND THE WRIT OF AMPAROCommand responsibility as justification in impleading respondents is legally inaccurate – The use of the doctrine of command responsibility as justification in impleading the respondents in her amparo petition, is legally inaccurate, if not incorrect. Such doctrine is a rule of substantive law that establishes liability and, by this account, cannot be a proper legal basis to implead a party-respondent in an amparo petition.The Writ of Amparo as a protective remedy – As held in the case of Rubrico v. Arroyo, the writ of amparo is a protective remedy aimed at providing judicial relief consisting of the appropriate remedial measures and directives that may be crafted by the court, in order to address specific violations or threats of violation of the constitutional rights to life, liberty or security. It does not fix liability for such disappearance, killing or threats, whether that may be criminal, civil or administrative under the applicable substantive law. Since the application of command responsibility presupposes an imputation of individual liability, it is more aptly invoked in a full-blown criminal or administrative case rather than in a summary amparo proceeding. However, the inapplicability of the doctrine of command responsibility does not preclude impleading military or police commanders on the ground that the complained acts in the petition were committed with their direct or indirect acquiescence. In which case, commanders may be impleaded — not actually on the basis of command responsibility—but rather on the ground of their responsibility, or at least accountability.

2. EVIDENCE REQUIRED IN AMPARO PROCEEDINGSIn amparo proceedings, direct evidence of identity must be preferred over mere circumstantial evidence – In amparo proceedings, the weight that may be accorded to parallel circumstances as evidence of military involvement depends largely on the availability or non-availability of other pieces of evidence that has the potential of directly proving the identity and affiliation of the perpetrators. Direct evidence of identity, when obtainable, must be preferred over mere circumstantial evidence based on patterns and similarity, because the former indubitably offers greater certainty as to the true identity and affiliation of the perpetrators.

3. EVIDENCE REQURED IN HABEAS DATA PROCEEDINGSSubstantial evidence of an actual or threatened violation of the right to privacy in life, liberty or security of the victim is an indispensable requirement before the privilege of the writ may be extended – An indispensable requirement before the privilege of the writ may be extended is the showing, at least by substantial evidence, of an actual or threatened violation of the right to privacy in life, liberty or security of the victim. In the case at bar, Roxas failed to show that there is an actual or threatened violation of such right. Hence, until such time that any of the respondents were found to be actually responsible for the abduction and torture of Roxas, any inference regarding the existence of reports being kept in violation of the petitioner’s right to privacy becomes farfetched, and premature. The Court must, at least in the meantime, strike down the grant of the privilege of the writ of habeas data.

I. CHANGE OF NAME

Procedure for change of name under Rule 103:1. Petition for change of name2. Court order fixing the date and place for hearing3. Publication of the court order fixing the date and place of

hearing, at least once a week for 3 successive weeks in a newspaper of general circulation

4. Hearing on the petition


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5. Judgment granting/denying the change of name. Copy of the judgment shall be served on the Civil Registrar, who shall annotate the same

Notes: A change of name is a proceeding in rem. As such, strict

compliance with all jurisdictional requirements, particularly on publication, is essential in order to vest the court with jurisdiction. [Regalado]

Change of name (Rule 103)

Correction of clerical or typographical error (RA 9048)

Judicial Administrative: local civil registrar or consul general (for non-resident citizens)

Includes change in surname

Clerical/typographical errors and change in first/nick name

RULE 103CHANGE OF NAMESection 1. Venue. — A person desiring to change his name shall present the petition to the Court of First Instance of the province in which he resides, or, in the City of Manila, to the Juvenile and Domestic Relations Court.

Section 2. Contents of petition. — A petition for change of name shall be signed and verified by the person desiring his name changed, or some other person on his behalf, and shall set forth:(a) That the petitioner has been a bona fide resident of the province where the petition is filed for at least 3 years prior to the date of such filing;(b) The cause for which the change of the petitioner's name is sought;(c) The name asked for.

Section 3. Order for hearing. — If the petition filed is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date and place for the hearing thereof, and shall direct that a copy of the order be published before the hearing at least once a week for 3 successive weeks in some newspaper of general circulation published in the province, as the court shall deem best. The date set for the hearing shall not be within 30 days prior to an election nor within 4 month after the last publication of the notice.

Section 4. Hearing. — Any interested person may appear at the hearing and oppose the petition. The Solicitor General or the proper provincial or city fiscal shall appear on behalf of the Government of the Republic.

Section 5. Judgment. — Upon satisfactory proof in open court on the date fixed in the order that such order has been published as directed and that the allegations of the petition are true, the court shall, if proper and reasonable cause appears for changing the name of the petitioner, adjudge that such name be changed in accordance with the prayer of the petition.

Section 6. Service of judgment. — Judgments or orders rendered in connection with this rule shall be furnished the civil registrar of the municipality or city where the court issuing the same is situated, who shall forthwith enter the same in the civil register.

New Civil CodeArt. 412. No entry in a civil register shall be changed or corrected, without a judicial order. (n)

RA 9048Procedure under RA 90481. Petition with the civil registrar or consul general2. Publication of the petition at least once a week for 2

consecutive weeks

3. Posting by the civil registrar of the petition in a conspicuous place for 10 consecutive days

4. Decision by the civil registrar within 5 days after the completion of the posting requirement

5. Transmission by the civil registrar of a copy of the decision (together with the records of the proceeding) to the Civil Registrar General

6. The Civil Registrar General may impugn the decision on the grounds in RA 9048, and exercise appellate jurisdiction

APPLICATION OF RA 9048 TO CHANGES OF NAME OR CORRECTIONS OF ENTRIES IN THE CIVIL REGISTRY [RA 9048, Sec. 1]• RA 9048 can only be used with regards clerical or typographical errors and change of first or nickname which can be corrected or changed by the Civil Registrar or by the Consul General as regards non-residents.

CLERICAL OR TYPOGRAPHICAL ERROR [RA 9048, Sec. 2(3)]• Definition: A mistake committed in the performance of clerical work in writing/copying/transcribing/ typing an entry in the civil register that is harmless and innocuous, such as misspelled name or misspelled place of birth or the like, which is visible to the eyes or obvious to the understanding, and can be corrected/changed only by reference to other existing record/s: Provided, however, That no correction must involve the change of nationality, age, status or sex of the petitioner.

WHO MAY FILE PETITION [RA 9048, Sec. 3]• Any person having direct and personal interest in the correction of a clerical/typographical error in an entry and/or change of first name or nickname in the civil register.

VENUE UNDER RA 9048 [RA 9048, Sec. 3]1. Local Civil Registry of the city/municipality where the record

being sought is kept.2. Local Civil Registry where the interested party is presently

residing/domiciled: Only if the petitioner migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected or changed. In this case, the 2 local civil registrars concerned will communicate to facilitate the processing of the petition.

3. Philippine consulates: Only in cases of Philippine citizens who are residing/domiciled n foreign countries.

• All petitions for correction of errors/change of first names/nicknames may be availed of only once.

VALID GROUNDS FOR CHANGE OF FIRST NAME/NICKNAME UNDER RA 9048 [RA 9048, Sec. 4]1. When the name is ridiculous, dishonorable or extremely

difficult to write/pronounce.2. The new first/nick name has been habitually and continuously

used by the petitioner and he has been publicly known by that first/nick name in the community.

3. To avoid confusion.

PETITION’S CONTENTS UNDER RA 9048 [RA 9048, Sec. 5]• The petition shall be in the form of an affidavit, subscribed and sworn to before any person authorized by the law to administer oaths and shall set forth: [Secan Kok v. Republic (1973)]1. The facts necessary to establish the merits of the petition;2. That the petitioner is competent to testify to the matters stated;3. The erroneous entry which are sought to be corrected;4. All names by which petitioner is known.

ANNEXES TO THE PETITION [RA 9048, Sec. 5]1. A certified true machine copy of the certificate or of the page of

the registry book containing the entries sought to be corrected/changed.


40


2. At least 2 public/private documents showing the correct entries upon which correction/change shall be based

3. Other documents which the petitioner or the city/municipal civil registrar or the consul general may consider relevant and necessary for the approval of the petition.

4. Certification from appropriate law enforcement agencies that the petitioner has no pending case or no criminal record.

PUBLICATION REQUIREMENT [RA 9048, Sec. 5]• The petition must be published at least oncea week for 2 consecutive weeks in a newspaper of general circulation.

COPIES OF PETITION TO BE FILED [RA 9048, Sec. 5]1. For the city/municipal civil registrar, or the consul general;2. For the Office of the Civil Registrar General.3. For the petitioner.

DUTIES OF THE CITY/MUNICIPAL CIVIL REGISTRAR OR THE CONSUL GENERAL [RA 9048, Sec. 6]1. Examine the petition and its supporting documents.2. Post the petition in a conspicuous place provided for that

purpose for 10 consecutive days after he finds the petition and its supporting documents sufficient in form and substance.

3. Act on the petition and render a decision not later than 5 working days after the completion of the posting and/or publication requirement.

4. Transmit a copy of his decision together with the records of the proceedings to the Office of the Civil Registrar General within 5 working days from the date of the decision.

DUTIES AND POWERS OF THE CIVIL REGISTRAR GENERAL [RA 9048, Sec. 7]1. Within 10 working days from receipt of the decision granting a

petition, the Civil Registrar General shall exercise the power to impugn such decision by way of an objection based on the following grounds:a. The error is not clerical/typographical.b. The correction of entries is substantial/controversial as it

affects the civil status of a person.c. The basis used in changing the first/nick name of a person

does not fall under those provided by law.2. The Civil Registrar General shall immediately notify the

city/municipal civil registrar or the consul general of the action taken on the decision.

3. He has appellate powers over the decision of the local civil registrars/consul generals.

o If the Civil Registrar General fails to exercise his power to impugn within the prescribed period, the decision of the city/municipal civil registrar or the consul general shall become final and executory.

J. DISSOLUTION OF CORPORATIONS

Notes: The Dissolution should now be filed with the SEC, and is

covered by Secs. 117 to 122 of the Corporation Code of the Philippines (BP 68) which took effect on May 1, 1980.

Dissolution - when the corporation ceases to be a juridical person.

Corporation CodeTITLE XIV – DISSOLUTIONSection 117. Methods of dissolution. - A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily. (n)

Notes: 2 ways to dissolve a corporation: voluntary and involuntary

3 ways of voluntary dissolution: 1. Voluntary dissolution where no creditors are affected

(Sec. 118)2. Voluntary dissolution where creditors are affected (Sec.

119)3. Dissolution by shortening corporate term (Sec. 120)

Section 118. Voluntary dissolution where no creditors are affected. - If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution duly adopted by the affirmative vote of the stockholders owning at least 2/3 of the outstanding capital stock or of at least 2/3 of the members of a meeting to be held upon call of the directors or trustees after publication of the notice of time, place and object of the meeting for 3 consecutive weeks in a newspaper published in the place where the principal office of said corporation is located; and if no newspaper is published in such place, then in a newspaper of general circulation in the Philippines, after sending such notice to each stockholder or member either by registered mail or by personal delivery at least 30 days prior to said meeting. A copy of the resolution authorizing the dissolution shall be certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the certificate of dissolution. Notes: No prejudice to rights of creditors How effected:

o Majority vote of BOD/trusteeso 2/3 vote of stockholder/memberso meeting duly calledo publication

A copy of the resolution authorizing the dissolution shall beo certified by a majority of the BOD or trustees and o counter-signed by the secretary of the corporation.

Requisite votes through adoption of resolutions. Publication once a week for 3 consecutive weeks President signs resolution

Section 119. Voluntary dissolution where creditors are affected. - Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for dissolution shall be filed with the Securities and Exchange Commission. The petition shall be signed by a majority of its board of directors or trustees or other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least 2/3 of the outstanding capital stock or by at least 2/3 of the members at a meeting of its stockholders or members called for that purpose. If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than 30 days nor more than 60 days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for 3 consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for 3 consecutive weeks in 3 public places in such municipality or city. Upon 5 day's notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the


41


material allegations of the petition are true, it shall render judgment dissolving the corporation and directing such disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation. Notes: May prejudice creditors Through a petition for dissolution filed with SEC

o signed by a majority of its BOD or trustees or other officers having the management of its affairs,

o verified by its president or secretary or one of its directors, or trustees, and

o shall set forth all claims and demands against it, and that its dissolution was resolved upon the affirmative

vote of the stockholders representing at least 2/3 stockholers/members, at a meeting of

its stockholders or members called for that purpose.

If the petition is sufficient in form and substance, SEC shall, by an ORDER reciting the purpose of the petition, o fix a date on or before which objections thereto may be

filed by any person, which date shall not be less than 30 days nor more than 60 days after the entry of the order.

Before such date, a copy of the order shall be publishedo at least once a week for 3 consecutive weekso in a newspaper of general circulation (published in the

municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Phil.

o and a similar copy shall be posted for 3 consecutive weeks in 3 public places in such municipality or city.

Upon 5 days notice, Given AFTER the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to o hear the petition and o try any issue made by the objections filed; o and IF

no such objection is sufficient, AND the material allegations of the petition are true, SEC

shall o render judgment dissolving the corporation ando directing such disposition of its assets as justice requires,

and o may appoint a receiver to collect such assets and pay the

debts of the corporation. Just note that the date fixed is a deadline, on or before which

objections to the petition may be filed.

Section 120. Dissolution by shortening corporate term. - A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code. A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with this Code. Upon approval of the amended articles of incorporation of the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation.

Notes: 2 instances when corporation is deemed dissolved:

1. upon approval of the amended AoI2. expiration of the shortened term

Ruleso If expiration date is before approval by SEC corpo

dissolves upon approvalo If expiration date is after approval by SEC corpo

dissolves on the date of expiration of termo If the SEC does not act on petition within 6 mos. from the

date of filing (Sec. 16, Corpo Code) corpo dissolves either on the day after the 6-mo. pd. (if date of expiration was

within the 6-mo. pd.) or on the date of expiration of term (if date is after the

6-mo. pd.). Example: o Date filed petition: Jan. 1, 1998o Expiration of Shortened Term: May 1, 1998o 6 mos. ends on: July 1, 1998

If approved by SEC on April 1 Dissolution on May 1 (exp. Of shortened term)

If approved on May 15 Dissolution on May 15 (date of approval)

Not acted upon within 6 mos. Dissolution on July 2 (day after the 6 mo. pd)

Failure of the SEC to act on the petition within 6 months, as contemplated by above rules, must not be due to the fault of corporation.

Section 121. Involuntary dissolution. - A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on the grounds provided by existing laws, rules and regulations. (n)

Section 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located.Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.

Notes: Winding up purpose for the continuation as boy corporate

CONSUELO METAL CORP V PLANTERS DEVELOPMENT BANK (2008)(The SEC has jurisdiction to order CMC's dissolution but the trial court has jurisdiction over CMC's liquidation.)

While CMC agrees with the ruling of the Court of Appeals that the SEC has jurisdiction over CMC's dissolution and liquidation, CMC argues that the Court of Appeals remanded the case to the SEC on the wrong premise that the applicable law is Section 121 of the Corporation Code. CMC maintains that the SEC retained jurisdiction over its dissolution and liquidation because it is only a continuation of the SEC's jurisdiction over CMC's original petition for suspension


42


of payment which had not been "finally disposed of as of 30 June 2000."

On the other hand, Planters Bank insists that the trial court has jurisdiction over CMC's dissolution and liquidation. Planters Bank argues that dissolution and liquidation are entirely new proceedings for the termination of the existence of the corporation which are incompatible with a petition for suspension of payment which seeks to preserve corporate existence.

K. JUDICIAL APPROVAL OF VOLUNTARY RECOGNITION OF MINOR NATURAL CHILDREN

RULE 105JUDICIAL APPROVAL OF VOLUNTARY RECOGNITION OF MINOR NATURAL CHILDRENSection 1. Venue. — Where judicial approval of a voluntary recognition of a minor natural child is required, such child or his parents shall obtain the same by filing a petition to that effect with the Court of First Instance of the province in which the child resides. In the City of Manila, the petition shall be filed in the Juvenile and Domestic Relations Court.

Section 2. Contents of petition. — The petition for judicial approval of a voluntary recognition of a minor natural child shall contain the following allegations:(a) The jurisdictional facts;(b) The names and residences of the parents who acknowledged the child, or of either of them, and their compulsory heirs, and the person or persons with whom the child lives;(c) The fact that the recognition made by the parent or parents took place in a statement before a court of record or in an authentic writing, copy of the statement or writing being attached to the petition.

Section 3. Order for hearing. — Upon the filing of the petition, the court, by an order reciting the purpose of the same, shall fix the date and place for the hearing thereof, which date shall not be more than 6 months after the entry of the order, and shall, moreover, cause a copy of the order to be served personally or by mail upon the interested parties, and published once a week for 3 consecutive weeks, in a newspaper or newspaper of general circulation in the province.

Section 4. Opposition. — Any interested party must, within 15 days from the service, or from the last date of publication, of the order referred to in the next preceding section, file his opposition to the petition, stating the grounds or reasons therefor.

Section 5. Judgment. — If, from the evidence presented during the hearing, the court is satisfied that the recognition of the minor natural child was willingly and voluntarily made by he parent or parents concerned, and that the recognition is for the best interest of the child, it shall render judgment granting judicial approval of such recognition.

Section 6. Service of judgment upon civil registrar. — A copy of the judgment rendered in accordance with the preceding section shall be served upon the civil registrar whose duty it shall be to enter the same in the register.

Family CodeChapter 2. Proof of FiliationArt. 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned.

In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws.

Art. 173. The action to claim legitimacy may be brought by the child during his or her lifetime and shall be transmitted to the heirs should the child die during minority or in a state of insanity. In these cases, the heirs shall have a period of five years within which to institute the action.

Chapter 3. Illegitimate ChildrenArt. 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children.

L. CONSTITUTION OF FAMILY HOME

Family Code Chapter 2. The Family HomeArt. 152. The family home, constituted jointly by the husband and the wife or by an unmarried head of a family, is the dwelling house where they and their family reside, and the land on which it is situated.

Art. 153. The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law.

Art. 154. The beneficiaries of a family home are: (1) The husband and wife, or an unmarried person who is the head of a family; and (2) Their parents, ascendants, descendants, brothers and sisters, whether the relationship be legitimate or illegitimate, who are living in the family home and who depend upon the head of the family for legal support.

Art. 155. The family home shall be exempt from execution, forced sale or attachment except: (1) For nonpayment of taxes; (2) For debts incurred prior to the constitution of the family home; (3) For debts secured by mortgages on the premises before or after such constitution; and (4) For debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.

Art. 156. The family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the latter's consent. It may also be constituted by an unmarried head of a family on his or her own property. Nevertheless, property that is the subject of a conditional sale on installments where ownership is reserved by the vendor only to guarantee payment of the purchase price may be constituted as a family home.

Art. 157. The actual value of the family home shall not exceed, at the time of its constitution, the amount of the three hundred thousand pesos in urban areas, and two hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by law. In any event, if the value of the currency changes after the adoption of this Code, the value most favorable for the constitution of a family home shall be the basis of evaluation.


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For purposes of this Article, urban areas are deemed to include chartered cities and municipalities whose annual income at least equals that legally required for chartered cities. All others are deemed to be rural areas.

Art. 158. The family home may be sold, alienated, donated, assigned or encumbered by the owner or owners thereof with the written consent of the person constituting the same, the latter's spouse, and a majority of the beneficiaries of legal age. In case of conflict, the court shall decide.

Art. 159. The family home shall continue despite the death of one or both spouses or of the unmarried head of the family for a period of ten years or for as long as there is a minor beneficiary, and the heirs cannot partition the same unless the court finds compelling reasons therefor. This rule shall apply regardless of whoever owns the property or constituted the family home.

Art. 160. When a creditor whose claims is not among those mentioned in Article 155 obtains a judgment in his favor, and he has reasonable grounds to believe that the family home is actually worth more than the maximum amount fixed in Article 157, he may apply to the court which rendered the judgment for an order directing the sale of the property under execution. The court shall so order if it finds that the actual value of the family home exceeds the maximum amount allowed by law as of the time of its constitution. If the increased actual value exceeds the maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home, by the owner or owners of the property, or by any of the beneficiaries, the same rule and procedure shall apply. At the execution sale, no bid below the value allowed for a family home shall be considered. The proceeds shall be applied first to the amount mentioned in Article 157, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor.

Art. 161. For purposes of availing of the benefits of a family home as provided for in this Chapter, a person may constitute, or be the beneficiary of, only one family home.

Art. 162. The provisions in this Chapter shall also govern existing family residences insofar as said provisions are applicable.

M. DECLARATION OF ABSENCE

RULE 107: ABSENTEESSection 1. Appointment of representative. — When a person disappears from his domicile, his whereabouts being unknown, and without having left an agent to administer his property, or the power conferred upon the agent has expired, any interested party, relative or friend may petition the Court of First Instance of the place where the absentee resided before his dis-appearance, for the appointment of a person to represent him provisionally in all that may be necessary. In the City of Manila, the petition shall be filed in the Juvenile and Domestic Relations Court.

Notes: Rule 107 is proper only where the absentee has properties to

be administered. [Regalado]o Rationale: The declaration of absence made according to CC

has the sole purpose of enabling the taking of necessary precautions for the administration of the absentee’s estate.

However, Art. 41-43, FC and Rule 131, Sec. 3 (w)(4) provide that if the spouse was absent for 4 or 2 years and the spouse present has a well-founded belief that the absent spouse is already dead, the spouse present must institute a summary

proceeding for the declaration of presumptive death, for purposes of contracting a subsequent marriage. [Regalado]

Section 2. Declaration of absence; who may petition. — After the lapse of 2 years from his disappearance and without any news about the absentee or since the receipt of the last news, or of 5 years in case the absentee has left a person in charge of the administration of his property, the declaration of his absence and appointment of a trustee or administrative may be applied for by any of the following:(a) The spouse present;(b) The heirs instituted in a will, who may present an authentic copy of the same.(c) The relatives who would succeed by the law of intestacy; and(d) Those who have over the property of the absentee some right subordinated to the condition of his death.

Section 3. Contents of petition. — The petition for the appointment of a representative, or for the declaration of absence and the appointment of a trustee or an administrator, must show the following:(a) The jurisdictional facts;(b) The names, ages, and residences of the heirs instituted in the will, copy of which shall be presented, and of the relatives who would succeed by the law of intestacy;(c) The names and residences of creditors and others who may have any adverse interest over the property of the absentee;(d) The probable value, location and character of the property belonging to the absentee.

Section 4. Time of hearing; notice and publication thereof. — When a petition for the appointment of a representative, or for the declaration of absence and the appointment of a trustee or administrator, is filed, the court shall fix a date and place for the hearing thereof where all concerned may appear to contest the petition.Copies of the notice of the time and place fixed for the hearing shall be served upon the known heirs, legatees, devisees, creditors and other interested persons, at least ten (10) days before the day of the hearing, and shall be published once a week for three (3) consecutive weeks prior to the time designated for the hearing, in a newspaper of general circulation in the province or city where the absentee resides, as the court shall deem best.

Section 5. Opposition. — Anyone appearing to contest the petition shall state in writing his grounds therefor, and serve a copy thereof on the petitioner and other interested parties on or before the date designated for the hearing.

Section 6. Proof at hearing; order. — At the hearing, compliance with the provisions of section 4 of this rule must first be shown. Upon satisfactory proof of the allegations in the petition, the court shall issue an order granting the same and appointing the representative, trustee or administrator for the absentee. The judge shall take the necessary measures to safeguard the rights and interests of the absentee and shall specify the powers, obligations and remuneration of his representative, trustee or administrator, regulating them by the rules concerning guardians.In case of declaration of absence, the same shall not take effect until six (6) months after its publication in a newspaper of general circulation designated by the court and in the Official Gazette.

Section 7. Who may be appointed. — In the appointment of a representative, the spouse present shall be preferred when there is no legal separation. If the absentee left no spouse, or if the spouse present is a minor or otherwise incompetent, any competent person may be appointed by the court.In case of declaration of absence, the trustee or administrator of the absentee's property shall be appointed in accordance with the preceding paragraph.


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Section 8. Termination of administration. — The trusteeship or administration of the property of the absentee shall cease upon order of the court in any of the following cases:(a) When the absentee appears personally or by means of an agent;(b) When the death of the absentee is proved and his testate or intestate heirs appear;(c) When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title.In these cases the trustee or administrator shall cease in the performance of his office, and the property shall be placed at the disposal of whose may have a right thereto.

N. CANCELLATION OR CORRECTION OF ENTRIES IN THE CIVIL REGISTRY

Procedure in the cancellation or correction of entries in the Civil Registrar under Rule 108:1. Petition for change of name2. Court order fixing the date and place for hearing3. Publication of the court order at least once a week for 3

successive weeks in a newspaper of general circulation, with reasonable notice given to persons named in the petition

4. Filing of opposition by civil registrar and any person having/claiming interest under the entry whose cancellation/correction is sought, within 15 days from notice of the petition or from the last date of publication of the notice

5. Hearing on the petition6. Judgment granting/denying the petition. Copy of the judgment

shall be served upon the civil registrar, who shall annotate the same

Rule 103 Rule 108Petition to be filed in the RTC where the petitioner resides

Verified petition filed in the RTC where the corresponding civil registry is located

Civil registrar is not a party to the proceeding

Civil registrar concerned is made a party to the proceeding as a respondent, The OSG must also be served a copy of the petition

Petition is filed by person desiring to change his name

Petition is filed by any person interested in any act, event, order, or decree concerning the civil status of persons

Order for hearing shall be published once a week for 3 consecutive weeks. No mention of causing notice to be sent

Order for hearing shall be published once a week for 3 consecutive weeks AND the court shall cause reasonable notice to be given to persons named in the petition

RULE 108CANCELLATION OR CORRECTION OF ENTRIES IN THE CIVIL REGISTRYSection 1. Who may file petition. — Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register, may file a verified petition for the cancellation or correction of any entry relating thereto, with the Court of First Instance of the province where the corresponding civil registry is located.

Section 2. Entries subject to cancellation or correction. — Upon good and valid grounds, the following entries in the civil register may be cancelled or corrected: (a) births: (b) marriage; (c) deaths; (d) legal separations; (e) judgments of annulments of marriage; (f) judgments declaring marriages void from the beginning; (g) legitimations; (h) adoptions; (i) acknowledgments of natural children; (j) naturalization; (k) election, loss or recovery of citizenship; (l) civil interdiction; (m) judicial determination of

filiation; (n) voluntary emancipation of a minor; and (o) changes of name.

Section 3. Parties. — When cancellation or correction of an entry in the civil register is sought, the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding.

Section 4. Notice and publication. — Upon the filing of the petition, the court shall, by an order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province.

Section 5. Opposition. — The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice, file his opposition thereto.

Section 6. Expediting proceedings. — The court in which the proceeding is brought may make orders expediting the proceedings, and may also grant preliminary injunction for the preservation of the rights of the parties pending such proceedings.

Section 7. Order. — After hearing, the court may either dismiss the petition or issue an order granting the cancellation or correction prayed for. In either case, a certified copy of the judgment shall be served upon the civil registrar concerned who shall annotated the same in his record.

Lee v CA (2001)GR: Rule 108 – adversarial; RA – clericalRule 108 is both adversarial and summary, though generally adversarial

Silverio v Repulic (2007)Sex reassignment is not a valid ground to change one’s first name (applies to both Rule 103 and RA 9048).Rule 108 is not appropriate to change first name because of RA 9048

Republic v Cagandahan (2008)Did not modify SilverioThere was nothing to correct in the birth certificate because he was actually born a male (intersexuality)Determination of sex is a legal/judicial issue; there was no act on the part of Cagandahan to change his sex

O. APPEALS IN SPECIAL PROCEEDINGS

RULE 109APPEALS IN SPECIAL PROCEEDINGSSection 1. Orders or judgments from which appeals may be taken. — An interested person may appeal in special proceedings from an order or judgment rendered by a Court of First Instance or a Juvenile and Domestic Relations Court, where such order or judgment:(a) Allows or disallows a will;(b) Determines who are the lawful heirs of a deceased person, or the distributive share of the estate to which such person is entitled;(c) Allows or disallows, in whole or in part, any claim against the estate of a deceased person, or any claim presented on behalf of the estate in offset to a claim against it;(d) Settles the account of an executor, administrator, trustee or guardian;(e) Constitutes, in proceedings relating to the settlement of the estate of a deceased person, or the administration of a trustee or guardian, a final determination in the lower court of the rights of


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the party appealing, except that no appeal shall be allowed from the appointment of a special administrator; and(f) Is the final order or judgment rendered in the case, and affects the substantial rights of the person appealing unless it be an order granting or denying a motion for a new trial or for reconsideration.

Section 2. Advance distribution in special proceedings. — Notwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of this rules.

Notes: Record on Appeal v Notice of Appeal:

o Record of appeal is required in special proceedingo Original orders are retained by the trial courto Multiple appeals are contemplated


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III. SPECIAL PROCEEDINGS RELATING TO FINANCIAL REHABILITATION AND INSOLVENCY

A. CORPORATE REHABILITATION

1. GENERAL CONSIDERATIONS

FRIA CHAPTER 1: General Provisions

In rem Jurisdiction acquired upon publication of the notice of the

commencement of the proceedings in any newspaper Summary and non-adversarial manner

Definition of Terms

Administrative Expenseso Reasonable and necessary expenseso Incurred from the filing of petition, in connection with the

conduct of the proceedingso Includes those incurred in the ordinary course of business

of the debtor after the commencement date Affiliate

- Corporation that directly/indirectly through intermediaries is controlled by another corporation

Claim- All demands/claims against the debtor or property

Commencement date - When court issues commencement order which shall

retroact to the date of filing the petition for voluntary or involuntary proceedings

Control - Power of a parent corporation to direct/govern financial

and operating policies of an enterprise to obtain benefits- More than ½ of the voting power

Court - Designated by SC to hear and determine at the first

instance Creditor

- Who has a claim against the debtor Date of Liquidation

- When court issues liquidation order Days

- Calendar days Debtor

- Sole prop registered with DTI- registered with SEC- corporation organized and existing under Philippine laws

Encumbered property- Real or personal property of the debtor upon which a lien

attaches General unsecured creditor

- a creditor whose claim or a portion thereof is neither secured, preferred nor subordinated

Group of Debtors- Corporation that are financially related to one another as

parent corporations, subsidiaries or affiliates- Partnerships that are owned more than 50% by the same

person- Single proprietorships that are owned by the same person

Insolvent - Financial condition – liabilities > assets

Insolvent Debtor’s Estate- Estate of the insolvent debtor- Includes: all property and assets found in the possession as

of commencement date as well as other property/assets in which the debtor has an ownership interest w/n in possession

Involuntary proceedings- Proceedings initiated by the creditor

- VOLUNTARY – initiated by the debtor Lien

- Statutory or contractual claim or judicial charge on real or personal property that legality entitles a creditor to resort to said property for payment of the claim or debt secured by such lien.

Liquidator- Natural person or juridical entity appointed as such by the

court and entrusted with powers and duties- If juridical entity, it must designated a natural person who

possesses all the qualifications, none of the disqualifications – both solidarily liable

Officer- Natural person holding a management position described

in juridical entity’s articles- Except for corporate secretary, assistant secretary, external

auditor Party to the proceedings

- Debtor- Creditor- unsecured creditors’ committee stakeholder- party with an ownership interest in property held by the

debtor- secured creditor- rehabilitation receiver- liquidator- any other juridical or natural person who stands to be

benefited or injured by the outcome of the proceedings and whose notice of appearance is accepted by the court

Possessory lien- Lien on property, the possession of which has been

transferred to a creditor or a representative or agent thereof

Rehabilitation- Restoration of the debtor to a condition of successful

operation and solvency Rehabilitation receiver

- Person natural or juridical appointed by the court Rehabilitation Plan

- Plan by which the financial well-being and viability of an insolvent debtor can be restored using various means including, but not limited to, debt forgiveness, debt rescheduling, reorganization, dacion en pago, debt-equity conversion and sale of the business

Unsecured claim v Secured claim- Not secured by a lien. An unsecured creditor is one without

an unsecured claim.- Secured – with a lien on a property. Secured creditor is one

with a secured claim. Secured party

- Secured creditor or the agent or representative of such secured creditor

securities market participant- the broker dealer, underwriter, transfer agent or other

juridical persons transacting securities in the capital market.

voting creditor- member of a class of creditors, the consent of which is

necessary for the approval of a Rehabilitation Plan

Sec. 5. Exclusions

Debtor- does not include banks, insurance companies, pre-need companies, national and local government agencies or units

Sec. 6. Designation of Courts and Promulgation of Procedural Rules – SC will designate

Sec. 7. Substantive and Procedural Consolidation

Each juridical entity considered as a separate entity


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Commingling: GR: prohibited E: related enterprise that is owned or controlled directly or indirectly by the same interests

When allowed: (Four instances)o Commingling prior to commencemento Common creditors – for convenience o Related enterprises voluntarily accedes o Consolidation of A and L is beneficial to all concerned and

promotes the objectives of the rehabilitation

Sec. 10. Liability of individual Debtor, Owner of a SP, Partners, Directors/Officers

Liability: Double the amount/double the value of property sold, embezzled or disposed

When committing the following acts after notice of the commencement of the proceedings or having reason to believe that proceedings are about to be commenced:o Dispose/cause to be disposed of any property of debtor in

fraud of the creditorso Conceal or authorize or approve the concealment of

property of the debtor Court determines the extent of the liability of an owner,

partner, director or officer under this section

Sec. 11. Authorization to exchange Debt for Equity –(not discussed in class)

Any bank may acquire and hold an equity interest or investment in a debtor or its subsidiaries when conveyed to such bank in satisfaction of debts (in accordance with the Rehab/Liquidation Plan)

Such ownership – subject to the ownership limits applicable to universal banks for equity investments

Must be disposed by the bank within a period of 5 years

Veteran’s Bank Employees Union v Vega (2001)

May a liquidation court continue with liquidation proceedings of the Philippine Veterans Bank when Congress had mandated its rehabilitation and reopening? Order of rehabilitation puts a stop to liquidation proceedings

Liquidation, in corporation law, connotes a winding up or settling with creditors and debtors. It is the winding up of a corporation so that assets are distributed to those entitled to receive them. It is the process of reducing assets to cash, discharging liabilities and dividing surplus or loss.

Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency

To allow the liquidation proceedings to continue would seriously hinder the rehabilitation of the subject bank

Panlilio v RTC (2011)

Rehab proceedings doesn’t suspend criminal prosecution against the corporation.

Stay order doesn’t suspend prosecution against corporation for violation of the SSS Law

Corporate rehabilitation connotes the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continued operation is economically feasible and its creditors can recover more, by way of the present value of payments projected in the rehabilitation plan, if the corporation continues as a going concern than if it is immediately liquidated. It contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency, the purpose being to enable the company to gain a new lease on life and allow its creditors to be paid their claims out of its earnings.

Section 18 thereof explicitly provides that criminal actions against the individual officer of a corporation are not subject to the Stay or Suspension Order in rehabilitation proceedings

2. REHABILITATION

CHAPTER II: Court-Supervised Rehabilitation

A. INITIATION PROCEEDINGS1. Voluntary

Sec. 12. Petition to Initiate Voluntary Proceedings by Debtor

Who may file: insolvent debtor OR group of insolvent debtor When approved by (SP, P, Corp): file a petition for

rehabilitation with the court + grounds providedo If corp – 2/3 of the OCS/mems

Verified to establish the insolvency of the debtor and the viability of its rehabilitation

Contentso Identification of the debtor + principal activitieso Statement of the fact and cause of insolvencyo Specific reliefo Groundso Other information required under this acto Schedule of debtor’s debts and liabilitieso Inventory of all its assetso Rehab Plano Names of at least 3 nominees to the position of rehab

receivero Other documents required to be filed with the petition

Group of debtors: when one or more of its members foresee the impossibility of meeting debtso And the financial distress would likely adversely affect the

condition and o Operations of the other members of the group/ and or the

participation of the group is essential under the terms and conditions of the proposed rehabilitation

2. Involuntary

Sec. 13. Circumstances Necessary to Initiate Involuntary Proceedings

Who may file: Any creditor or group of creditors o with a claim of or aggregate of whose claims is at least 1M o or at least 25% of the subscribed capital stock or partners’

contributions, whichever is higher, may initiate involuntary proceedings against the debtor by:

filing a petition for rehabilitation o IF there is no genuine issue of fact on law on the claims of

the petitioners o AND that the due and demandable payments have not been

made for at least 60 days OR o that the debtor has failed generally to meet its liabilities as

they fall dueo ORo By a creditor, other than the petitioners has initiated

foreclosure proceedings against the debtor that will prevent the debtor from paying its debts as they become due or will render it insolvent

Sec. 14. Petition to Initiate Involuntary Proceedings

B. ACTION ON THE PETITION AND COMMENCEMENT OF PROCEEDINGS

Sec. 15 Action on the Petition

if court finds it sufficient in form and substance court will issue a commencement order – within 5 days from

filing of petition


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if deficient – court may in its discretion give petitioner a reasonable time to amend/supplement or to submit necessary documents o time: the 5 working days shall be reckoned from the date of

the filing of the amended or supplemental petition

Sec. 16. Commencement of Proceedings and Issuance of a Commencement Order

rehab proceedings will commence upon the issuance Order shall identify the debtor, principal business or activities

and principal place of business Summarize grounds State the relief + any requirement or procedure particular to

the relief sought State the legal effects of Commencement order (includes Sec

17) Declare debtor is under rehab Direct the publication – newspaper of gen circulation – 1s a

week for 2 consecutive weeks with 1st publication to be made within 7 days from the time of its issuance

If petitioner is debtor: personal delivery on each creditor holding at least 10% of the total liabilities of the debtor as determined from the schedule within 5 days

If petitioner is creditor: personal delivery to the debtor within 5 days

Appoint rehab receiver who may or not be from among the nominees

Summarize the requirements and deadlines for creditors to establish their claims (at least 5 days before the initial hearing)

Direct BIR to file and serve on the debtor its comment /opposition on the petition

Prohibit the debtor’s suppliers of goods/services from withholding the supply of goods for as long as debtor makes payments

Authorize the payment of admin expenses as they become due Set case for initial hearing make available copies for any interested party indicate locations at which documents may be reviewed/copied state that any creditor or debtor who is not the petitioner may

nominate qualified persons to be rehab receiver at least 5 days before the initial hearing

includes STAY or SUSPENSION ordero suspend all actions or proceedings for the enforcement of

claims against the debtoro suspend all actions to enforce any judgment, attachment or

other provisional remedies against the debtoro prohibit the debtor from selling, encumbering, transferring

or disposing in any manner any of its properties except in the ordinary course of business

o prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date

Sec. 17. Effects of the Commencement Order

vest the rehabilitation with all the powers / functions o right to review and obtain records to which the debtor's

management and directors have access including bank accounts or whatever nature of the debtor subject to the approval by the court of the performance bond filed by the rehabilitation receiver

prohibit or render null and void the results of any extrajudicial activity / process to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed in this Act

serve as the legal basis for rendering null and void any setoff after the commencement date of any debt owed to the debtor by any of the debtor's creditors

serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the commencement date; and

consolidate the resolution of all legal proceedings by and against the debtor to the court. o court may allow the continuation of cases on other courts

where the debtor had initiated the suit.

Sec. 18. Exceptions to the Stay or Suspension Order

Stay order not applicable to:

1) cases already pending APPEAL in the SC as of commencement date

2) cases pending or filed at a specialized court or quasi-judicial agency which is capable of resolving the claim more quickly, fairly and efficiently from the court (subject to court’s discretion)- any final and executory judgment of such court shall be

referred to the court and shall be treated as a non-disputed claim

3) enforcement of claims against sureties/other persons solidarily liable and third party or accomodation mortgagors, issuers of letters of credit- unless property is necessary for the rehab

4) to any form of action of customers or clients of a securities market participant to recover or otherwise claim money and securities entrusted to the latter in the ordinary course of business

5) to the actions of a licensed broker/dealer to sell pledged securities of a debtor

6) clearing and settlement of financial transactions

as to criminal actions: not affected by any proceeding under FRIA

Sec. 19. Waiver of Taxes and Fees Dues

upon commencement order by court until approval of the Rehabilitation plan or dismissal of the petition – taxes and fees inc penalties, interests are waived

Sec. 20. Application of Stay or Suspension Order to Government Financial Institutions

right to foreclose or pursue legal remedies shall apply to government financial institutions

Sec. 21. Effectivity and Duration of Commencement Order

Duration - unless lifted by the court – for as long as there is a substantial likelihood that the debtor will be successfully rehabilitated

In determining whether there is substantial likelihood for the debtor to be successfully rehabilitated, court shall ensure ff minimum requirements

1. Proposed Rehab Plan complies with minimum contents2. Sufficient monitoring by rehab receiver of business3. Debtor has met with its creditors to the extent

reasonably possible4. Rehab receiver submits a report, based on prelim

evaluation stating that the underlying assumptions and the goals stated in the RR are realistic reasonable and reasonable or a substantial likelihood for the debtor to be successfully rehabilitated because- There’s sufficient assets with which to rehabilitate- Sufficient cash flow to maintain the operations of the

debtor- Debtors, partners, stockholders, directors, and officers

having been acting in good faith and which due diligence


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- Petition is not a sham filing intended only to delay the enforcement of the rights of the creditor’s or of any group of creditors

- Debtor would likely be able to pursue a viable Rehab Plan

- Petition, rehab plan and the attachments do not complain any materially false or misleading statement

- If the petitioner is debtor, the debtor has met with its creditors representing at least ¾ of its total obligations to the extent reasonably possible and made a good faith effort to reach a consensus on the Rehab plan

- Debtor has not committed acts misrepresentation or in fraud of its creditors or a group of creditors

Sec. 22. Action at the Initial Hearing: court shall determine

Determine the creditors who have made timely and proper filing of their notice of claims

Hear and determine any objection to the qualifications of the appointment of the RR – if necessary: appoint a new one

Direct the creditors to comment on the petition and the Rehab Plan and to submit the same to the court+ receiver within 20 days

Direct the rehab receiver to evaluate the financial condition of the debtor + prepare and submit to court within 40 days from initial hearing

Sec. 23. Effect of Failure to File notice of Claim

If not listed in the schedule of debts and liabilities and who fails to file a notice (even if he files belated claim)o NOT entitled to participate in the rehab proceedings o but shall be entitled to receive distributions

Sec. 24. Report of the Rehab Receiver

Within 40 days from initial hearing Must submit to the court the preliminary

findings/recommendations whether the debtor is insolvent

o if so – the causes thereofo any unlawful or irregular act or acts committed by the SP,

partners in partnership or directors or officers of a corporation in contemplation of the insolvency of the debtor or which may have contributed to the insolvency of the debtor;

whether the underlying assumptions, the financial goals and the procedures to accomplish such goals are realistic, feasible and reasonable

whether there is a substantial likelihood for the debtor to be successfully rehabilitated

whether the petition should be dismissed; and whether the debtor should be dissolved and/or liquidated.

Sec. 25. Giving due Course to or Dismissal of Petition or Conversion of Proceedings

Within 10 days from receipt of the report of the Rehab Receiver, the court may:o give course to the petition upon finding:

debtor is insolvent AND there’s substantial likelihood for debtor to be

successfully rehabilitatedo dismiss the petition upon finding

debtor not insolvent, petition is a sham filing to delay the enforcement of

creditor’s rights, Rehab plan contain materially false or misleading

statements,

debtor has committed acts of misrepresentation or in fraud of creditors

o convert proceedings into liquidation proceedings upon finding debtor is insolvent no substantial likelihood to successful rehabilitate

Sec. 26. Petition Given Due Course

if given due course = court will direct the rehab receiver to review, revise, recommend action

submit same or new one within a period of 90 days may refer to arbitration or other modes of dispute resolution:

any dispute relating to Rehab plan or rehab proceedings

*upon determination that such mode will resolve dispute more quickly, fairly and efficiently

Sec. 27. Dismissal of Petition

court may order the petitioner to pay damages to any creditor who may have been injured

C. The Rehabilitation Receiver, Management Committee and Creditor’s Committee

FIDES

Chas Realty v Development Corp v CA

Not applicable anymore because of FRIA

Required 2/3 votes of outstanding shareholders to file a petition for rehabilitation

BPI v SEC (2007)

Quick Facts: BPI extended credit to ASB group. Secured by REM over 2 properties. ASB group then filed for a petition of rehab + suspension of payments. Rehab plan: dacion en pago by ASB to BPI of 1 of the properties mortgaged. Balance after dacion en pago will be waived - The dacion will constitute full payment of the entire obligation due to BPI. BPI opposed arguing that the plan would constitute an arbitrary violation of its freedom and right to contract since the Rehab Plan compelled BPI to enter into a dacion en pago agreement with ASB.

Doctrine: SEC’s approval of the Rehab Plan did not impair BPI’s right to contract. The non-impairment clause is a limit on the exercise of legislative power and not of judicial power. The mere fact that the Rehab Plan proposes dacion approach does not render it defective on the ground of impairment of the right to contract. Dacion partakes in a sense of the nature of sale, the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debt. If BPI does not find this acceptable, the ASB can propose another way to settle debt. If BPI still refuses, it can assert its rights in the liquidation and distribution of the ASB Group’s assets. It will not lose its status as a secured creditor, retaining its preference over unsecured creditors when the assets of the corporation are finally liquidated.

Leca Realty Corp v Manuela Corp (2007)

W/N the approved Rehab Plan drastically changed the terms of its lease contract. YES. VOID. Gross discrepancy in rent as provided for in the rehabilitation plan compared with the original rates agreed upon by the parties. Even the SC has no right to make new contracts for parties or ignore those already made by them to avoid


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hardships. The change in rate isn’t justified, it impairs stipulation. What is allowed in the rehabilitation proceedings in only the suspension of payments, or the stay of all actions for claims of distressed corporations, and upon its successful rehabilitation, the claims must be settled.

Administrative expenses – costs associated with the general administration of an organization and include RENTS, utilities, postages, furniture and housekeeping charges. Stay order directed the payment of rents in full even those incurred after issuance of stay order.

Sobrejuanite v ASB Dev Corp (2005)

Approval of reha plan suspends all claims including proceedings under HLURB

Purpose of suspension: prevent a creditor from obtaining an advantage; it preserves the rights of party litigations and interests of investing public

Suspension would enable the management committee or rehab receiver to make business viable. It also effectively exercise powers free from judicial / extrajudicial interference

The court held that the HLURB is bereft of jurisdiction to proceed with the case during the pendency of the rehab proceedings since the spouses Sobrejuanite’s claim involves pecuniary consideration.

Metrobank v SLGT Holdings (2007)

Complaint for delivery of property, nullity of mortgage. ASB DC defaulted and failed to delivery the property considering full payment of the buyer already. Property sold by developer to buyer was already mortgaged to the bank.

Rehab Proceedings in favor of ASB. Will the complaint proceed? YES.

The fact that ASB is under rehabilitation will not preclude the continuance before the HLURB of the case for specific performance of a real estate developer’s obligation. The appointment of a receiver does not dissolve the corporation, nor does it interfere with exercise of corporate rights.

Petitioner’s reliance on Sobrejuanite (previous case) is wrong. This did not seek monetary recovery or to touch the corporate offers of ASB ahead of others. They did not even consider themselves as money claimants. All they ask was for the enforcement of ASB’s statutory and contractual obligations.

PAL v PALEA (2007)

Compensation for EEs are also suspended in rehabilitation proceedings, in this case, their 13th month pay.

To grant the claim to 13th month pay would be to go behind the purpose of preventing dissipation of the distressedcompany’s resources.

Consuelo Metal v Planters (2008)

CMC filed a petition for rehabilitation with SEC that was granted. Later on, the SEC issued an Omnibus Order directing the dissolution and liquidation of CMC. The SEC also directed that "the proceedings on and implementation of the order of liquidation be commenced at the Regional Trial Court to which this case shall be transferred.

ISSUE 1: WON SEC retains jurisdiction over the liquidation proceedings? NO, SEC no longer had jurisdiction upon issuance of the order of liquidation.

The RTC has jurisdiction over liquidation proceedings since the liquidation of a corporation requires the settlement of claims for

and against the corporation, which clearly falls under the jurisdiction of the regular courts. The trial court is in the best position to convene all the creditors of the corporation, ascertain their claims, and determine their preferences.

ISSUE 2: WON the foreclosure proceedings filed by its debtor Planters Bank is valid? YES, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and has a right to foreclose the mortgage.

The right to foreclose such mortgage is merely suspended upon the appointment of a management committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However, the creditor-mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon the lifting of the stay order, which is what occurred in this case.

BDO v JAPRL (2008)

Banco De Oro extended credit facilities to JAPRL Development Corporation that the latter defaulted on. The Bank later learned that JAPRL had altered and falsified its financial statements.

A complaint for collection of sum of money was filed by Banco De Oro. This was opposed by Banco De Oro due to the stay order it was granted upon petition of JAPRL.

ISSUE 1: WON collection for sum of money is suspended? YES, a stay order defers all actions or claims against the corporation seeking rehabilitation from the date of its issuance until the dismissal of the petition or termination of the rehabilitation proceedings.

BUT! If the allegation of fraud committed by JAPRL re its financial statements is true, Banco de Oro can use the finding of fraud to move for the dismissal of the rehabilitation case in the Calamba RTC.

Under the General Banking Law, “Should such statements prove to be false or incorrect in any material detail, the bank may terminate any loan or credit accommodation granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of the obligation.” The protective remedy of rehabilitation was never intended to be a refuge of a debtor guilty of fraud.

Ong v PCIB (2005)

ISSUE: WON a claim filed against the surety of a debtor under rehab proceedings is also suspended?

NO, the right to collect payment from the surety exists independently of its right to proceed directly against the principal debtor. In fact, the creditor bank may go against the surety alone without prior demand for payment on the principal debtor

MWSS v Daway (2004)

ISSUE: WON MWSS can claim the debt of Maynilad through Letter of Credit made by Citicorp as security.

YES, except when a letter of credit specifically stipulates otherwise, the obligation of the banks issuing letters of credit are solidary with that of the person or entity requesting for its issuance, the same being a direct, primary, absolute and definite undertaking to pay the beneficiary upon the presentation of the set of documents required therein

Being a solidary obligation, the letter of credit is excluded from the jurisdiction of the rehabilitation court

Lee V CA (2011)


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Doctrine: Section 418 of the New Civil Code and Rule 108 of the RoC can originally correct BOTH substantial and clerical errors. Now, since RA 9048 was already enacted, 9048 has taken away clerical errors away from the ambit of Rule 108.

In other words… Clerical 9048.When the change is substantial

Rule 108

Facts:

Kek Cheng and Lee Tek Sheng were wife and husband. They had children, herein respondents Unknown to Kek Cheng and her children, Lee Tek Cheng had

extramarital relations with Tui Chan, their housekeeper. They also produced children, herein petitioners. In the BC’s of the petitioners, Lee Tek Cheng, instead of putting

down illegitimate, put down legitimate, and instead of writing Tui Chan’s name as the petitioners’ mother, he wrote down Kek Cheng. This is to make it appear that they are legitimate.

When Lee Tek requested that all his children, including his children with Tui Chan, were to be included in the obituary notice, Kek Cheng became suspicious.

She found out about the BC’s of petitioners. On December 2, 1992, She filed a case to correct the entries in

the BC’s of petitioners based on Article 412 and Rule 108 of the RoC

The petitioners opposed. They argued thato Article 412 and Rule 108 apply only to clerical errors o Article 412 only refers to clerical errors; therefore, Rule

108, being a mere rule of procedure cannot go beyond substantive law.

Issue: Do Article 412 and Rule 108 apply in this case? Yes.

The old cases which state that Article 412 does not apply to substantial errors are WRONG.

We venture to say now that the above pronouncements proceed from a wrong premise. The article does not limit itself to clerical errors only. WHY?

First of all, Article 412 is a substantive law that provides as follows:

"No entry in a civil register shall be changed or corrected, without a judicial order."

Article 412 uses both the terms "corrected" and "changed". In its ordinary sense, to correct means to make or set right"; "to remove the faults or errors from" while to change means "to replace something with something else of the same kind or with something that serves as a substitute". The provision neither qualifies as to the kind of entry to be changed or corrected nor does it distinguish on the basis of the effect that the correction or change may have. Hence, it is proper to conclude that ALL entries in the civil register may be changed or corrected under Article 412.

Thirdly, Republic Act No. 9048 which was passed by Congress on February 8, 2001 substantially amended Article 412 of the New Civil Code, to wit:

"SECTION 1. Authority to Correct Clerical or Typographical Error and Change of First Name or Nickname. — No entry in a civil register shall be changed or corrected without a judicial order, except for clerical or typographical errors and change of first name or nickname which can be corrected or changed by the concerned city or municipal civil registrar or consul general in accordance with the provisions of this Act and its implementing rules and regulations."

The above law speaks clearly. Clerical or typographical errors in entries of the civil register are now to be corrected and changed without need of a judicial order and by the city or municipal civil registrar or consul general. The obvious effect is to remove from the ambit of Rule 108 the correction or changing of such errors in entries of the civil register. Hence, what is left for the scope of

operation of Rule 108 are substantial changes and corrections in entries of the civil register.

It may be very well said that Republic Act No. 9048 is Congress' response to the confusion wrought by the failure to delineate as to what exactly is that so-called summary procedure for changes or corrections of a harmless or innocuous nature as distinguished from that appropriate adversary proceeding for changes or corrections of a substantial kind. For we must admit that though we have constantly referred to an appropriate adversary proceeding, we have failed to categorically state just what that procedure is. Republic Act No. 9048 now embodies that summary procedure while Rule 108 is that appropriate adversary proceeding . Be that as it may, the case at bar cannot be decided on the basis of Republic Act No. 9048 which has prospective application. Hence, the necessity for the preceding treatise.

In the case at bar…Far from petitioners' theory, this Court's ruling in Labayo-Rowe vs. Republic does not exclude recourse to Rule 108 of the Revised Rules of Court to effect substantial changes or corrections in entries of the civil register. The only requisite is that the proceedings under Rule 108 be an appropriate adversary proceeding as contra-distinguished from a summary proceeding .

A special proceeding is not always summary. One only has to take a look at the procedure outlined in Rule 108 to see that what is contemplated therein is not a summary proceeding per se. Rule 108 requires publication of the petition three (3) times, i.e., once a week for three (3) consecutive weeks (Sec.4). The Rule also requires inclusion as parties of all persons who claim any interest which would be affected by the cancellation or correction (Sec. 3). The civil registrar and any person in interest are also required to file their opposition, if any, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice (Sec. 5). Last, but not the least, although the court may make orders expediting the proceedings, it is after hearing that the court shall either dismiss the petition or issue an order granting the same (Sec. 7).

Rule 108, when all the procedural requirements thereunder are followed, is the appropriate adversary proceeding to effect substantial corrections and changes in entries of the civil register.

CHAPTER IV: OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR REHABILITATION PLANS

SEC. 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans.

An out-of-curt or informal restructuring agreement or Rehabilitation Plan that meets the minimum requirements prescribed in this chapter is hereby recognized as consistent with the objectives of this Act.

SEC. 84. Minimum Requirements of Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans.

For an out-of-court or informal restructuring/workout agreement or Rehabilitation Plan to qualify under this chapter, it must meet the following minimum requirements:

a. The debtor must agree to the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan;

b. It must be approved by creditors:

1. representing at least 67% of the secured obligations of the debtor AND

2.representing at least 75%o of the unsecured obligations of the debtor; AND

3. holding at least 85% of the total liabilities, secured and unsecured, of the debtor.


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SEC. 85. Standstill Period.

A standstill period that may be agreed upon by the parties pending negotiation and finalization of the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan contemplated herein shall be effective and enforceable not only against the contracting parties but also against the other creditors:

Provided, That

(a) agreement is APPROVED by creditors representing more than (50%) of the total liabilities of the debtor;

(b) PUBLICATION in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; and

(c) the standstill PERIOD does not exceed (120) days from the date of effectivity.

The notice must:

1. invite creditors to participate in the negotiation for out-of-court rehabilitation or restructuring agreement and

2. notify them that said agreement will be binding on all creditors if the required majority votes prescribed in Section 84 of this Act are met.

SEC. 86. Cram Down Effect.

A restructuring/workout agreement or Rehabilitation Plan that is approved pursuant to an informal workout framework referred to in this chapter shall have the same legal effect as confirmation of a Plan under Section 69 hereof.

The notice of the Rehabilitation Plan or restructuring agreement or Plan shall be published once a week for at least three (3) consecutive weeks in a newspaper of general circulation in the Philippines.

The Rehabilitation Plan or restructuring agreement shall take effect upon the lapse of fifteen (15) days from the date of the last publication of the notice thereof.

Notes: Sir connected this with Sec 69. A rehab court can also force

terms of rehabilitation plan upon all creditors. Creditor agreements are superseded.

SEC. 87. Amendment or Modification.

Any amendment of an out-of-court restructuring/workout agreement or Rehabilitation Plan must be made in accordance with the terms of the agreement and with due notice on all creditors.

SEC. 88. Effect of Court Action or Other Proceedings.

Any court action or other proceedings arising from, or relating to, the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan shall not stay its implementation,

UNLESS the relevant party is able to secure a temporary restraining order or injunctive relief from the Court of Appeals.

SEC. 89. Court Assistance.

The insolvent debtor and/or creditor may seek court assistance for the execution or implementation of a Rehabilitation Plan under this Chapter, under such rules of procedure as may be promulgated by the Supreme Court.

Notes: An out of court agreement is an extraordinary contract that

binds non-parties It has no stay order Vs. pre-negotiated rehabilitation:

o Doesn’t require creditor approvalo Has a stay order

B. INSOLVENCY

CHAPTER V: LIQUIDATION OF INSOLVENT JURIDICAL DEBTORSNotes: Three ways of liquidation:

1. Voluntary liquidation by an insolvent debtor (Sec. 90) 2. Involuntary liquidation by creditors (Sec. 91) 3. Conversion of Rehabilitation proceedings into liquidation by the court (Sec. 92)

Section 90. Voluntary Liquidation. – An insolvent debtor may file for liquidation in two ways: 1. verified petition for liquidation2. verified motion for liquidation (pending rehab proceedings)

Must state the ff: (a) a schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and collaterals, or securities, if any;(b) an inventory of all its assets including receivables and claims against third parties; and(c) the names of at least three (3) nominees to the position of liquidator.

The MOTION must also state that the debtor is seeking immediate dissolution and termination of its corporate existence.If the petition or the motion, as the case may be, is sufficient in form and substance, the court shall issue a Liquidation Order mentioned in Section 112 hereof.

Section 91. Involuntary Liquidation. – 1. Three (3) or more creditors 2. the aggregate of whose claims is at least either: (Php1,000,000,00) or at least twenty-five percent (25%0 of the subscribed capital stock or partner's contributions of the debtor, whichever is higher, may apply for and seek the liquidation of an insolvent debtor by either:1. filing a petition for liquidation of the debtor with the court OR 2. filing a VERIFED motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings and state that the movants are seeking the immediate liquidation of the debtor.The petition shall show that:(a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the (b)due and demandable payments have not been made for at least one hundred eighty (180) days or that the debtor has failed generally to meet its liabilities as they fall due; and(b) there is no substantial likelihood that the debtor may be rehabilitated.If the petition or motion is sufficient in form and substance, the court shall issue an Order:(1) directing the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks; and(2) directing the debtor and all creditors who are not the petitioners to file their comment on the petition or motion within fifteen (15) days from the date of last publication.If, after considering the comments filed, the court determines that the petition or motion is meritorious, it shall issue the Liquidation Order mentioned in Section 112 hereof.Section 92. Conversion by the Court into Liquidation Proceedings. – During the pendency of court-supervised or pre-negotiated rehabilitation proceedings,


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the court may order the conversion of rehabilitation proceedings to liquidation proceedings pursuant to (a) Section 25(c) of this Act; (court-supervised rehabilitation)(b) Section 72 of this Act; or (rehab plan is not confirmed within 1 year from filing petition)(c) Section 75 of this Act; (failure of rehabilitation) or (d) Section 90 of this Act; or at any other time upon the recommendation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible. Thereupon, the court shall issue the Liquidation Order mentioned in Section 112 hereof.Section 93. Powers of the Securities and Exchange Commission (SEC). – The provisions of this chapter shall not affect the regulatory powers of the SEC under Section 6 of Presidential Decree No. 902-A, as amended, with respect to any dissolution and liquidation proceeding initiated and heard before it.Notes: Q: Can you convert insolvency proceedings into rehab?

o A: Yes, although no basis in law It should be filed in the same court.

Q: How is involuntary and voluntary liquidation different? o A: While both require that the debtor is insolvent, an

involuntary liquidation must contemplate acts of insolvency.

Q: What is the difference between a liquidation order and a commencement order? o A liquidation or order generally functions the same way as

a commencement order. But there is no appointment of a liquidator. He is elected.

o On the other hand, a rehab receiver is by court appointment

Q: What is the difference in suspension in rehab and liquidation?o In rehab proceedings, the stay order is as long as

proceedings are present.o In liquidation, there is a 180 day suspension.

CHAPTER VI: INSOLVENCY OF INDIVIDUAL DEBTORS

(A) Suspension of Payments.

Section 94. Petition. - An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state of suspension of payments by the court of the province or city in which he has resides for six (6) months prior to the filing of his petition. He shall attach to his petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of assess; and (c) a proposed agreement with his creditors.

Section 95. Action on the Petition. - If the court finds the petition sufficient in form and substance, it shall, within five (5) working days from the filing of the petition, issue an Order:

(a) calling a meeting of all the creditors named in the schedule of debts and liabilities at such time not less than fifteen (15) days nor more than forty (40) days from the date of such Order and designating the date, time and place of the meeting;

(b) directing such creditors to prepare and present written evidence of their claims before the scheduled creditors' meeting;

(c) directing the publication of the said order in a newspaper of general circulation published in the province or city in which the petition is filed once a week for two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of the issuance of the Order;

(d) directing the clerk of court to cause the sending of a copy of the Order by registered mail, postage prepaid, to all creditors named in the schedule of debts and liabilities;

(e) forbidding the individual debtor from selling, transferring, encumbering or disposing in any manner of his property, except those used in the ordinary operations of commerce or of industry in which the petitioning individual debtor is engaged so long as the proceedings relative to the suspension of payments are pending;

(f) prohibiting the individual debtor from making any payment outside of the necessary or legitimate expenses of his business or industry, so long as the proceedings relative to the suspension of payments are pending; and

(g) appointing a commissioner to preside over the creditors' meeting.

Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the court may issue an order suspending any pending execution against the individual debtor. Provide, That properties held as security by secured creditors shall not be the subject of such suspension order. The suspension order shall lapse when three (3) months shall have passed without the proposed agreement being accepted by the creditors or as soon as such agreement is denied.

No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of the filing of the petition for suspension of payments and for as long as proceedings remain pending except:

(a) those creditors having claims for personal labor, maintenance, expense of last illness and funeral of the wife or children of the debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and

(b) secured creditors.

Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting to at least three-fifths (3/5) of the liabilities shall be necessary for holding a meeting. The commissioner appointed by the court shall preside over the meeting and the clerk of court shall act as the secretary thereof, subject to the following rules:

(a) The clerk shall record the creditors present and amount of their respective claims;

(b) The commissioner shall examine the written evidence of the claims. If the creditors present hold at least three-fifths (3/5) of the liabilities of the individual debtor, the commissioner shall declare the meeting open for business;

(c) The creditors and individual debtor shall discuss the propositions in the proposed agreement and put them to a vote;

(d) To form a majority, it is necessary:

(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition; and

(2) that the claims represented by said majority vote amount to at least three-fifths (3/5) of the total liabilities of the debtor mentioned in the petition; and

(e) After the result of the voting has been announced, all protests made against the majority vote shall be drawn up, and the commissioner and the individual debtor together with all creditors taking part in the voting shall sign the affirmed propositions.

No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be entitled to vote.


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Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected by the Suspension Order may refrain from attending the meeting and from voting therein. Such persons shall not be bound by any agreement determined upon at such meeting, but if they should join in the voting they shall be bound in the same manner as are the other creditors.

Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be deemed rejected if the number of creditors required for holding a meeting do not attend thereat, or if the two (2) majorities mentioned in Section 97 hereof are not in favor thereof. In such instances, the proceeding shall be terminated without recourse and the parties concerned shall be at liberty to enforce the rights which may correspond to them.

Section 100. Objections. - If the proposal of the individual debtor, or any amendment thereof made during the creditors' meeting, is approved by the majority of creditors in accordance with Section 97 hereof, any creditor who attended the meeting and who dissented from and protested against the vote of the majority may file an objection with the court within ten (10) days from the date of the last creditors' meeting. The causes for which objection may be made to the decision made by the majority during the meeting shall be: (a) defects in the call for the meeting, in the holding thereof and in the deliberations had thereat which prejudice the rights of the creditors; (b) fraudulent connivance between one or more creditors and the individual debtor to vote in favor of the proposed agreement; or (c) fraudulent conveyance of claims for the purpose of obtaining a majority. The court shall hear and pass upon such objection as soon as possible and in a summary manner.

In case the decision of the majority of creditors to approve the individual debtor's proposal or any amendment thereof made during the creditors' meeting is annulled by the court, the court shall declare the proceedings terminated and the creditors shall be at liberty to exercise the rights which may correspond to them.

Section 101. Effects of Approval of Proposed Agreement. - If the decision of the majority of the creditors to approve the proposed agreement or any amendment thereof made during the creditors' meeting is uphold by the court, or when no opposition or objection to said decision has been presented, the court shall order that the agreement be carried out and all parties bound thereby to comply with its terms.

The court may also issue all orders which may be necessary or proper to enforce the agreement on motion of any affected party. The Order confirming the approval of the proposed agreement or any amendment thereof made during the creditors' meeting shall be binding upon all creditors whose claims are included in the schedule of debts and liabilities submitted by the individual debtor and who were properly summoned, but not upon: (a) those creditors having claims for personal labor, maintenance, expenses of last illness and funeral of the wife or children of the debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and (b) secured creditors who failed to attend the meeting or refrained from voting therein.

Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual debtor fails, wholly or in part, to perform the agreement decided upon at the meeting of the creditors, all the rights which the creditors had against the individual debtor before the agreement shall revest in them. In such case the individual debtor may be made subject to the insolvency proceedings in the manner established by this Act.

(B) Voluntary Liquidation.

Section 103. Application. - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts exceeding Five hundred thousand pesos (Php500,000.00), may apply to be discharged from his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing of such petition. He shall attach to his petition a schedule of debts and liabilities and an inventory of assets. The filing of such petition shall be an act of insolvency.

Section 104. Liquidation Order. - If the court finds the petition sufficient in form and substance it shall, within five (5) working days issue the Liquidation Order mentioned in Section 112 hereof.

(C) In voluntary Liquidation.

Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a claim of, or with claims aggregating at least Five hundred thousand pesos (Php500, 000.00) may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides.

The following shall be considered acts of insolvency, and the petition for liquidation shall set forth or allege at least one of such acts:

(a) That such person is about to depart or has departed from the Republic of the Philippines, with intent to defraud his creditors;

(b) That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent;

(c) That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of defrauding his creditors;

(d) That he conceals, or is removing, any of his property to avoid its being attached or taken on legal process;

(e) That he has suffered his property to remain under attachment or legal process for three (3) days for the purpose of hindering or delaying the liquidation or of defrauding his creditors;

(f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or delaying the liquidation or of defrauding any creditors or claimant;

(g) That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or delaying the liquidation or of defrauding his creditors;

(h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors;

(i) That he has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to hinder or delay the liquidation or defraud his creditors;

(j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance or transfer of his estate, property, rights or credits;

(k) That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of thirty (30) days;

(l) That for a period of thirty (30) days, he has failed, after demand, to pay any moneys deposited with him or received by him in a fiduciary; and

(m) That an execution having been issued against him on final judgment for money, he shall have been found to be without sufficient property subject to execution to satisfy the judgment.

The petitioning creditor/s shall post a bond in such as the court shall direct, conditioned that if the petition for liquidation is


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dismissed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the petitioners will pay to the debtor all costs, expenses, damages occasioned by the proceedings and attorney's fees.

Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such creditors' petition, the court shall issue an Order requiring the individual debtor to show cause, at a time and place to be fixed by the said court, why he should not be adjudged an insolvent. Upon good cause shown, the court may issue an Order forbidding the individual debtor from making payments of any of his debts, and transferring any property belonging to him. However, nothing contained herein shall affect or impair the rights of a secured creditor to enforce his lien in accordance with its terms.

Section 107. Default. - If the individual debtor shall default or if, after trial, the issues are found in favor of the petitioning creditors the court shall issue the Liquidation Order mentioned in Section 112 hereof.

Section 108. Absent Individual Debtor. - In all cases where the individual debtor resides out of the Republic of the Philippines; or has departed therefrom; or cannot, after due diligence, be found therein; or conceals himself to avoid service of the Order to show cause, or any other preliminary process or orders in the matter, then the petitioning creditors, upon submitting the affidavits requisite to procedure an Order of publication, and presenting a bond in double the amount of the aggregate sum of their claims against the individual debtor, shall be entitled to an Order of the court directing the sheriff of the province or city in which the matter is pending to take into his custody a sufficient amount of property of the individual debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings. Upon receiving such Order of the court to take into custody of the property of the individual debtor, it shall be the duty of the sheriff to take possession of the property and effects of the individual debtor, not exempt from execution, to an extent sufficient to cover the amount provided for and to prepare within three (3) days from the time of taking such possession, a complete inventory of all the property so taken, and to return it to the court as soon as completed. The time for taking the inventory and making return thereof may be extended for good cause shown to the court. The sheriff shall also prepare a schedule of the names and residences of the creditors, and the amount due each, from the books of the debtor, or from such other papers or data of the individual debtor available as may come to his possession, and shall file such schedule or list of creditors and inventory with the clerk of court.

Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds; Exemptions to Sureties. - In all cases where property is taken into custody by the sheriff, if it does not embrace all the property and effects of the debtor not exempt from execution, any other creditor or creditors of the individual debtor, upon giving bond to be approved by the court in double the amount of their claims, singly or jointly, shall be entitled to similar orders and to like action, by the sheriff; until all claims be provided for, if there be sufficient property or effects. All property taken into custody by the sheriff by virtue of the giving of any such bonds shall be held by him for the benefit of all creditors of the individual debtor whose claims shall be duly proved as provided in this Act. The bonds provided for in this section and the preceding section to procure the order for custody of the property and effects of the individual debtor shall be conditioned that if, upon final hearing of the petition in insolvency, the court shall find in favor of the petitioners, such bonds and all of them shall be void; if the decision be in favor of the individual debtor, the proceedings shall be dismissed, and the individual

debtor, his heirs, administrators, executors or assigns shall be entitled to recover such sum of money as shall be sufficient to cover the damages sustained by him, not to exceed the amount of the respective bonds. Such damages shall be fixed and allowed by the court. If either the petitioners or the debtor shall appeal from the decision of the court, upon final hearing of the petition, the appellant shall be required to give bond to the successful party in a sum double the amount of the value of the property in controversy, and for the costs of the proceedings.

Any person interested in the estate may take exception to the sufficiency of the sureties on such bond or bonds. When excepted to the petitioner's sureties, upon notice to the person excepting of not less than two (2) nor more than five (5) days, must justify as to their sufficiency; and upon failure to justify, or of others in their place fail to justify at the time and place appointed the judge shall issue an Order vacating the order to take the property of the individual debtor into the custody of the sheriff, or denying the appeal, as the case may be.

Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds are presented to the court or a judge thereof, asking for and obtaining an Order of publication and an Order for the custody of the property of the individual debtor and thereafter the petitioners shall make it appear satisfactorily to the court or a judge thereof that the interest of the parties to the proceedings will be subserved by a sale thereof, the court may order such property to be sold in the same manner as property is sold under execution, the proceeds to de deposited in the court to abide by the result of the proceedings.

Notes: Corporations do not need the remedy provided for in Chapter

VI because they already have rehab proceedings

CHAPTER VIIPROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF

INDIVIDUAL AND JURIDICAL DEBTORS

Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor shall include both individual debtor as defined in Section 4(o) and debtor as defined in Section 4(k) of this Act.

(A) The Liquidation Order.

Section 112. Liquidation Order. - The Liquidation Order shall:

(a) declare the debtor insolvent;

(b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it as dissolved;

(c) order the sheriff to take possession and control of all the property of the debtor, except those that may be exempt from execution;

(d) order the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks;

(e) direct payments of any claims and conveyance of any property due the debtor to the liquidator;

(f) prohibit payments by the debtor and the transfer of any property by the debtor;

(g) direct all creditors to file their claims with the liquidator within the period set by the rules of procedure;

(h) authorize the payment of administrative expenses as they become due;

(i) state that the debtor and creditors who are not petitioner/s may submit the names of other nominees to the position of liquidator; and


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(j) set the case for hearing for the election and appointment of the liquidator, which date shall not be less than thirty (30) days nor more than forty-five (45) days from the date of the last publication.

Section 113. Effects of the Liquidation Order. - Upon the issuance of the Liquidation Order:

(a) the juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated;

(b) legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the liquidator or, pending his election or appointment, with the court;

(c) all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety (90) days from the date of his assumption of office, declares otherwise and the contracting party agrees;

(d) no separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court; and

(e) no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days.

Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect the right of a secured creditor to enforce his lien in accordance with the applicable contract or law. A secured creditor may:

(a) waive his right under the security or lien, prove his claim in the liquidation proceedings and share in the distribution of the assets of the debtor; or

(b) maintain his rights under the security or lien:

If the secured creditor maintains his rights under the security or lien:

(1) the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator. When the value of the property is less than the claim it secures, the liquidator may convey the property to the secured creditor and the latter will be admitted in the liquidation proceedings as a creditor for the balance. If its value exceeds the claim secured, the liquidator may convey the property to the creditor and waive the debtor's right of redemption upon receiving the excess from the creditor;

(2) the liquidator may sell the property and satisfy the secured creditor's entire claim from the proceeds of the sale; or

(3) the secure creditor may enforce the lien or foreclose on the property pursuant to applicable laws.

(B) The Liquidator.

Section 115. Election of Liquidator. - Only creditors who have filed their claims within the period set by the court, and whose claims are not barred by the statute of limitations, will be allowed to vote in the election of the liquidator. A secured creditor will not be allowed to vote, unless: (a) he waives his security or lien; or (b) has the value of the property subject of his security or lien fixed by agreement with the liquidator, and is admitted for the balance of his claim.

The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest number of votes cast in terms of

amount of claims, ad who is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator.

Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator if:

(a) on the date set for the election of the liquidator, the creditors do not attend;

(b) the creditors who attend, fail or refuse to elect a liquidator;

(c) after being elected, the liquidator fails to qualify; or

(d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court may instead set another hearing of the election of the liquidator.

Provided further, That nothing in this section shall be construed to prevent a rehabilitation receiver, who was administering the debtor prior to the commencement of the liquidation, from being appointed as a liquidator.

Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his powers, duties and responsibilities, the liquidator shall take an oath and file a bond, In such amount to be fixed by the court, conditioned upon the proper and faithful discharge of his powers, duties and responsibilities.

Section 118. Qualifications of the Liquidator. - The liquidator shall have the qualifications enumerated in Section 29 hereof. He may be removed at any time by the court for cause, either motu propio or upon motion of any creditor entitled to vote for the election of the liquidator.

Section 119. Powers, Duties and Responsibilities of the Liquidator. - The liquidator shall be deemed an officer of the court with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and responsibilities of the liquidator shall include, but not limited to:

(a) to sue and recover all the assets, debts and claims, belonging or due to the debtor;

(b) to take possession of all the property of the debtor except property exempt by law from execution;

(c) to sell, with the approval of the court, any property of the debtor which has come into his possession or control;

(d) to redeem all mortgages and pledges, and so satisfy any judgement which may be an encumbrance on any property sold by him;

(e) to settle all accounts between the debtor and his creditors, subject to the approval of the court;

(f) to recover any property or its value, fraudulently conveyed by the debtor;

(g) to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the functions and which shall have powers as the court deems just, reasonable and necessary; and

(h) upon approval of the court, to engage such professional as may be necessary and reasonable to assist him in the discharge of his duties.

In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall have the right and duty to take all reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings therefrom, to pay creditors and


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stockholders, and to terminate the debtor's legal existence. Other duties of the liquidator in accordance with this section may be established by procedural rules.

A liquidator shall be subject to removal pursuant to procedures for removing a rehabilitation receiver.

Section 120. Compensation of the Liquidator. - The liquidator and the persons and entities engaged or employed by him to assist in the discharge of his powers and duties shall be entitled to such reasonable compensation as may determined by the liquidation court, which shall not exceed the maximum amount as may be prescribed by the Supreme Court.

Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a record of all moneys received and all disbursements mad by him or under his authority as liquidator. He shall render a quarterly report thereof to the court , which report shall be made available to all interested parties. The liquidator shall also submit such reports as may be required by the court from time to time as well as a final report at the end of the liquidation proceedings.

Section 122. Discharge of Liquidator. - In preparation for the final settlement of all the claims against the debtor , the liquidator will notify all the creditors, either by publication in a newspaper of general circulation or such other mode as the court may direct or allow, that will apply with the court for the settlement of his account and his discharge from liability as liquidator. The liquidator will file a final accounting with the court, with proof of notice to all creditors. The accounting will be set for hearing. If the court finds the same in order, the court will discharge the liquidator.

(C) Determination of Claims

Section 123. Registry of Claims. - Within twenty (20) days from his assumption into office the liquidator shall prepare a preliminary registry of claims of secured and unsecured creditors. Secured creditors who have waived their security or lien, or have fixed the value of the property subject of their security or lien by agreement with the liquidator and is admitted as a creditor for the balance , shall be considered as unsecured creditors. The liquidator shall make the registry available for public inspection and provide publication notice to creditors, individual debtors owner/s of the sole proprietorship-debtor, the partners of the partnership-debtor and shareholders or members of the corporation-debtor, on where and when they may inspect it. All claims must be duly proven before being paid.

Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and creditor of each other one debt shall be set off against the other, and only the balance, if any shall be allowed in the liquidation proceedings.

Section 125. - Opposition or Challenge to Claims. - Within 30 days from the expiration of the period for filing of applications for recognition of claims, creditors, individual debtors, owner/s of the sole proprietorship-debtor, partners of the partnership-debtor and shareholders or members of the corporation -debtor and other interested parties may submit a challenge to claim or claims to the court, serving a certified copy on the liquidator and the creditor holding the challenged claim. Upon the expiration of the (30) day period, the rehabilitation receiver shall submit to the court the registry of claims containing the undisputed claims that have not been subject to challenge. Such claims shall become final upon the filling of the register and may be subsequently set aside only on grounds or fraud, accident, mistake or inexcusable neglect.

Section 126. Submission of Disputed to the Court. - The liquidator shall resolve disputed claims and submit his findings thereon to the court for final approval. The liquidator may disallow claims.

(D) Avoidance Proceedings.

Section 127. Rescission or Nullity of Certain Transactions. - Any transaction occurring prior to the issuance of the Liquidation Order or, in case of the conversion of the rehabilitation proceedings prior to the commencement date, entered into by the debtor or involving its assets, may be rescinded or declared null and void on the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue preference of creditors. The presumptions set forth in Section 58 hereof shall apply.

Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his conformity, a creditor may initiate and prosecute any action to rescind, or declare null and void any transaction described in the immediately preceding paragraph. If the liquidator does not consent to the filling or prosecution of such action, any creditor may seek leave of the court to commence said action.

(b) if leave of court is granted under subsection (a) hereof, the liquidator shall assign and transfer to the creditor all rights, title and interest in the chose in action or subject matter of the proceeding, including any document in support thereof.

(c) Any benefit derived from a proceeding taken pursuant to subsection (a) hereof, to the extent of his claim and the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.

(d) Where, before an orders is made under subsection (a) hereof, the liquidator signifies to the court his readiness to the institute the proceeding for the benefit of the creditors, the order shall fix the time within which he shall do so and, in that case the benefit derived from the proceedings, if instituted within the time limits so fixed, belongs to the estate.

(E) The Liquidation Plan.

Section 129. The Liquidation Plan. - Within three (3) months from his assumption into office, the Liquidator shall submit a Liquidation Plan to the court. The Liquidation Plan shall, as a minimum enumerate all the assets of the debtor and a schedule of liquidation of the assets and payment of the claims.

Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court, upon petition and after hearing, to exempt and set apart, for the use and benefit of the said insolvent, such real and personal property as is by law exempt from execution, and also a homestead; but no such petition shall be heard as aforesaid until it is first proved that notice of the hearing of the application therefor has been duly given by the clerk, by causing such notice to be posted it at least three (3) public places in the province or city at least ten (10) days prior to the time of such hearing, which notice shall set forth the name of the said insolvent debtor, and the time and place appointed for the hearing of such application, and shall briefly indicate the homestead sought to be exempted or the property sought to be set aside; and the decree must show that such proof was made to the satisfaction of the court, and shall be conclusive evidence of that fact.

Section 131. Sale of Assets in Liquidation. - The liquidator may sell the unencumbered assets of the debtor and convert the same into money. The sale shall be made at public auction. However, a private sale may be allowed with the approval of the court if; (a) the goods to be sold are of a perishable nature, or are liable to quickly


58


deteriorate in value, or are disproportionately expensive to keep or maintain; or (b) the private sale is for the best interest of the debtor and his creditors.

With the approval of the court, unencumbered property of the debtor may also be conveyed to a creditor in satisfaction of his claim or part thereof.

Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall implement the Liquidation Plan as approved by the court. Payments shall be made to the creditors only in accordance with the provisions of the Plan.

Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its Implementation shall ensure that the concurrence and preference of credits as enumerated in the Civil Code of the Philippines and other relevant laws shall be observed, unless a preferred creditor voluntarily waives his preferred right. For purposes of this chapter, credits for services rendered by employees or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the claims constitute legal liens under Article 2241 and 2242 thereof.

Section 134. Order Removing the Debtor from the List of Registered Entitles at the Securities and Exchange Commission. - Upon determining that the liquidation has been completed according to this Act and applicable law, the court shall issue an Order approving the report and ordering the SEC to remove the debtor from the registry of legal entities.

Section 135. Termination of Proceedings. - Upon receipt of evidence showing that the debtor has been removed from the registry of legal entities at the SEC. The court shall issue an Order terminating the proceedings.

(F) Liquidation of a Securities Market Participant.

Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this chapter shall be without prejudice to the power of a regulatory agency or self- regulatory organization to liquidate trade-related claims of clients or customers of a securities market participant which, for purposes of investor protection, are hereby deemed to have absolute priority over other claims of whatever nature or kind insofar as trade-related assets are concerned.

For purposes of this section, trade -related assets include cash, securities, trading right and other owned and used by the securities market participant in the ordinary course of this business.

COMMENCEMENT ORDER LIQUIDATION ORDER

(a) identify the debtor, its principal business or activity/ies and its principal place of business;

(b) summarize the ground/s for initiating the proceedings;

(c) state the relief sought under this Act and any requirement or procedure particular to the relief sought;

(a) declare the debtor insolvent;

(b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it as dissolved;

(c) order the sheriff to take possession and

(d) state the legal effects of the Commencement Order, including those mentioned in Section 17 hereof;

(e) declare that the debtor is under rehabilitation;

(f) direct the publication of the Commencement Order

in a newspaper of general circulation in the Philippines

o once a week o for at least two (2)

consecutive weeks, o with the first

publication to be made within seven (7) days from the time of its issuance;

(g) If the petitioner is the debtor direct the service by personal delivery of a copy of the petition on each creditor holding at least ten percent (10%) of the total liabilities of the debtor as determined from the schedule attached to the petition within five (5) days; if the petitioner/s is/are creditor/s, direct the service by personal delivery of a copy of the petition on the debtor within five (5) days;

(h) appoint a rehabilitation receiver

who may or not be from among the nominees of the petitioner/s and

who shall exercise such powers and duties defined in this Act as well as the procedural rules that the Supreme Court will promulgate;

(i) summarize the requirements and deadlines for creditors to establish their claims against the debtor and direct all creditors to their claims with the court at least five (5) days before the initial hearing;

(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its comment on or opposition to the petition or its claim/s against the debtor under such procedures as the Supreme Court provide;

(k) prohibit the debtor's suppliers of goods or services from withholding the supply of goods and services in

control of all the property of the debtor, except those that may be exempt from execution;

(d) order the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks;

(e) direct payments of any claims and conveyance of any property due the debtor to the liquidator;

(f) prohibit payments by the debtor and the transfer of any property by the debtor;

(g) direct all creditors to file their claims with the liquidator within the period set by the rules of procedure;

(h) authorize the payment of administrative expenses as they become due;

(i) state that the debtor and creditors who are not petitioner/s may submit the names of other nominees to the position of liquidator; and

(j) set the case for hearing for the election and appointment of the liquidator, which date shall not be less than thirty (30) days nor more than forty-five (45) days from the date of the last publication.


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the ordinary course of business for as long as the debtor makes payments for the services or goods supplied after the issuance of the Commencement Order;

(l) authorize the payment of administrative expenses as they become due;

(m) set the case for initial hearing,

which shall not be more than forty (40) days from the date of filing of the petition

for the purpose of determining whether there is substantial likelihood for the debtor to be rehabilitated;

(n) make available copies of the petition and rehabilitation plan for examination and copying by any interested party;

(o) indicate the location or locations at which documents regarding the debtor and the proceedings under Act may be reviewed and copied;

(p) state that any creditor or debtor who is not the petitioner, may submit the name or nominate any other qualified person to the position of rehabilitation receiver at least five (5) days before the initial hearing;

(q) includes Stay or Suspension Order which shall:

(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;

(2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor;

(3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business; and

(4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein.

Effects of the Commencement Order. - Unless otherwise provided for in this Act, the court's issuance of a Commencement Order shall, in addition to the effects of a Stay or Suspension Order described in Section 16 hereof:

(a) vest the rehabilitation with all the powers and functions provided for this Act, such as the right to review and obtain records to which the debtor's management and directors have access, including bank accounts or whatever nature of the debtor subject to the approval by the court of the performance bond filed by the rehabilitation receiver;

(b) prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed in this Act, subject to the provisions of Section 50 hereof;

(c) serve as the legal basis for rendering null and void any setoff after the commencement date of any debt owed to the debtor by any of the debtor's creditors;

(d) serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the commencement date; and

(e) consolidate the resolution of all legal proceedings by and against the debtor to the court Provided. However, That the court may allow the continuation of cases on other courts where the debtor had initiated the suit.

Attempts to seek legal or other resource against the debtor outside these proceedings shall be sufficient to support a finding of indirect contempt

Effects of the Liquidation Order. - Upon the issuance of the Liquidation Order:

(a) the juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated;

(b) legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the liquidator or, pending his election or appointment, with the court;

(c) all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety (90) days from the date of his assumption of office, declares otherwise and the contracting party agrees;

(d) no separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court; and

(e) no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days.


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of court.

REHAB RECEIVER LIQUIDATOR

Appointed

The court shall initially appoint the rehabilitation receiver, who may or may not be from among the nominees of the petitioner, However, at the initial hearing of the petition, the creditors and the debtor who are not petitioners may nominate other persons to the position. The court may retain the rehabilitation receiver initially appointed or appoint another who may or may not be from among those nominated.

Elected.

The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest number of votes cast in terms of amount of claims, ad who is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator.

Exception:

The court may appoint the liquidator if:

(a) on the date set for the election of the liquidator, the creditors do not attend;

(b) the creditors who attend, fail or refuse to elect a liquidator;

(c) after being elected, the liquidator fails to qualify; or

(d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court may instead set another hearing of the election of the liquidator.

Provided further, That nothing in this section shall be construed to prevent a rehabilitation receiver, who was administering the debtor prior to the commencement of the liquidation, from being appointed as a liquidator.

Who May Serve as a Rehabilitation Receiver. - Any qualified natural or juridical person may serve as a rehabilitation receiver: Provided, That if the rehabilitation receiver is a juridical entity, it must designate a natural person/s who possess/es all the qualifications and none of the disqualification’s as its representative, it being understood that the juridical entity and the representative/s are solidarily liable for all obligations and responsibilities of the rehabilitation receiver.

No similar provision in the subchapter about liquidation. Can we therefore conclude that only natural persons can be liquidators?

Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the following minimum qualifications:

(a)A citizen of the Philippines OR a resident of the Philippines in the six (6) months immediately preceding his nomination;

(b)Of good moral character and with acknowledged integrity, impartiality and independence;

(c)Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a rehabilitation receiver; and

(d)Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly or impliedly, by a party who may be prejudiced thereby.

Other qualifications and disqualifications of the rehabilitation receiver shall be set forth in procedural rules, taking into consideration the nature of the business of the debtor and the need to protect the interest of all

The liquidator shall have the qualifications enumerated in Section 29 hereof. He may be removed at any time by the court for cause, either motu propio or upon motion of any creditor entitled to vote for the election of the liquidator.


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stakeholders concerned.

Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. - The rehabilitation receiver shall be deemed an officer of the court

with the principal duty

of preserving and maximizing the value of the assets of the debtor during the rehabilitation proceedings,

determining the viability of the rehabilitation of the debtor,

preparing and recommending a Rehabilitation Plan to the court, and

implementing the approved Rehabilitation Plan.

To this end, and without limiting the generality of the foregoing, the rehabilitation receiver shall have the following powers, duties and responsibilities:

(a)To verify the accuracy of the factual allegations in the petition and its annexes;

(b)To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation;

(c)To verify and correct, if necessary, the schedule of debts and liabilities of the debtor;

(d)To evaluate the validity, genuineness and true amount of all the claims against the debtor;

(e)To take possession, custody and control, and to preserve the value of all the property of the debtor;

Powers, Duties and Responsibilities of the Liquidator. - The liquidator shall be deemed an officer of the court with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and responsibilities of the liquidator shall include, but not limited to:

(a) to sue and recover all the assets, debts and claims, belonging or due to the debtor;

(b) to take possession of all the property of the debtor except property exempt by law from execution;

(c) to sell, with the approval of the court, any property of the debtor which has come into his possession or control;

(d) to redeem all mortgages and pledges, and so satisfy any judgement which may be an encumbrance on any property sold by him;

(e) to settle all accounts between the debtor and his creditors, subject to the approval of the court;

(f) to recover any property or its value, fraudulently conveyed by the

(f)To sue and recover, with the approval of the court, all amounts owed to, and all properties pertaining to the debtor;

(g)To have access to all information necessary, proper or relevant to the operations and business of the debtor and for its rehabilitation;

(h) To sue and recover, with the. approval of the court, all property or money of the debtor paid, transferred or disbursed in fraud of the debtor or its creditors, or which constitute undue preference of creditor/s;

(i) To monitor the operations and the business of the debtor to ensure that no payments or transfers of property are made other than in the ordinary course of business;

(j) With the court's approval, to engage the services of or to employ persons or entities to assist him in the discharge of his functions;

(k) To determine the manner by which the debtor may be best rehabilitated, to review, revise and/or recommend action on the Rehabilitation Plan and submit the same or a new one to the court for approval;

(1) To implement the Rehabilitation Plan as approved by the court, if 80 provided under the Rehabilitation Plan;

debtor;

(g) to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the functions and which shall have powers as the court deems just, reasonable and necessary; and

(h) upon approval of the court, to engage such professional as may be necessary and reasonable to assist him in the discharge of his duties.

In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall have the right and duty to take all reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings therefrom, to pay creditors and stockholders, and to terminate the debtor's legal existence. Other duties of the liquidator in accordance with this section may be established by procedural rules.

A liquidator shall be subject to removal pursuant to procedures for removing a rehabilitation receiver.


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(m) To assume and exercise the powers of management of the debtor, if directed by the court pursuant to Section 36 hereof;

(n) To exercise such other powers as may, from time to time, be conferred upon him by the court; and

To submit a status report on the rehabilitation proceedings every quarter or as may be required by the court motu proprio or upon motion of any creditor or as may be provided, in the Rehabilitation Plan.

Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation receiver shall not take over the management and control of the debtor but may recommend the appointment of a management committee over the debtor in the cases provided by this Act.

Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the confirmation of the Rehabilitation Plan, the rehabilitation receiver shall provide a final report and accounting to the court. Unless the Rehabilitation Plan specifically requires and describes the role of the rehabilitation receiver after the approval of the Rehabilitation Plan, the court shall discharge the rehabilitation receiver of his duties.

Section 122. Discharge of Liquidator. - In preparation for the final settlement of all the claims against the debtor , the liquidator will notify all the creditors, either by publication in a newspaper of general circulation or such other mode as the court may direct or allow, that will apply with the court for the settlement of his account and his discharge from liability as liquidator. The liquidator will file a final accounting with the court, with proof of notice to all creditors. The accounting will be set for hearing. If the court finds the same in order, the court will discharge the liquidator.

Section 33.Compensation and Terms of Service. The rehabilitation receiver and his

Section 120. Compensation of the Liquidator. - The liquidator and the persons

direct employees or independent contractors shall be entitled to compensation for reasonable fees and expenses from the debtor according to the terms approved by the court after notice and hearing. Prior to such hearing, the rehabilitation receiver and his direct employees shall be entitled to reasonable compensation based on quantum meruit. Such costs shall be considered administrative expenses.

and entities engaged or employed by him to assist in the discharge of his powers and duties shall be entitled to such reasonable compensation as may determined by the liquidation court, which shall not exceed the maximum amount as may be prescribed by the Supreme Court.

CHAPTER VIII: PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION PROCEEDINGS

(A) Banks and Other Financial Institutions Under Rehabilitation Receivership Pursuant to a State-funded or State-mandated Insurance System.

Section 137. Provision of Assistance. - The court shall issue orders, adjudicate claims and provide other relief necessary to assist in the liquidation of a financial under rehabilitation receivership established by a state-funded or state-mandated insurance system.

Section 138. Application of Relevant Legislation. - The liquidation of bank, financial institutions, insurance companies and pre-need companies shall be determined by relevant legislation. The provisions in this Act shall apply in a suppletory manner.

(B) Cross-Border Insolvency Proceedings.

Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject to the provision of Section 136 hereof and the rules of procedure that may be adopted by the Supreme Court, the Model Law on Cross-Border Insolvency of the United Nations Center for International Trade and Development is hereby adopted as part of this Act.

Section 140. Initiation of Proceedings. - The court shall set a hearing in connection with an insolvency or rehabilitation proceeding taking place in a foreign jurisdiction, upon the submission of a petition by the representative of the foreign entity that is the subject of the foreign proceeding.

Section 141. Provision of Relief. - The court may issue orders:

(a) suspending any action to enforce claims against the entity or otherwise seize or foreclose on property of the foreign entity located in the Philippines;

(b) requiring the surrender property of the foreign entity to the foreign representative; or

(c) providing other necessary relief.

Section 142. Factors in Granting Relief. - In determining whether to grant relief under this subchapter, the court shall consider;

(a) the protection of creditors in the Philippines and the inconvenience in pursuing their claim in a foreign proceeding;

(b) the just treatment of all creditors through resort to a unified insolvency or rehabilitation proceedings;


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(c) whether other jurisdictions have given recognition to the foreign proceeding;

(d) the extent that the foreign proceeding recognizes the rights of creditors and other interested parties in a manner substantially in accordance with the manner prescribed in this Act; and

(e) the extent that the foreign proceeding has recognized and shown deference to proceedings under this Act and previous legislation.

CHAPTER IX: FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS

Section 143. Funds for Rehabilitation of Government -owned and Controlled Corporations. - Public funds for the rehabilitation of government-owned and controlled corporations shall be released only pursuant to an appropriation by Congress and shall be supported by funds actually available as certified by the National Treasurer.

The Department of Finance, in collaboration with the Department of Budget and Management, shall promulgate the rules for the use and release of said funds.

CHAPTER X: MISCELLANEOUS PROVISIOS

Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as they are applicable, shall likewise apply to proceedings in Chapters II and IV.

Section 145. Penalties. - An owner, partner, director, officer or other employee of the debtor who commits any one of the following acts shall, upon conviction thereof, be punished by a fine of not more than One million pesos (Php 1, 000,000.00) and imprisonment for not less than three(3) months nor more than five (5) years for each offense;

(a) if he shall, having notice of the commencement of the proceedings, or having reason to believe that proceedings are about to be commented, or in contemplation of the proceedings hide or conceal, or destroy or cause to be destroyed or hidden any property belonging to the debtor or if he shall hide, destroy, after mutilate or falsify, or cause to be hidden, destroyed, altered, mutilated or falsified, any book, deed, document or writing relating thereto; if he shall, with intent to defraud the creditors of the debtor, make any payment sale, assignment, transfer or conveyance of any property belongings to the debtor

(b) if he shall, having knowledge belief of any person having proved a false or fictitious claim against the debtor, fail to disclose the same to the rehabilitation receiver of liquidator within one (1) month after coming to said knowledge or belief; or if he shall attempt to account for any of the debtors property by fictitious losses or expense; or

(c) if he shall knowingly violate a prohibition or knowingly fail to undertake an obligation established by this Act.

Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation Cases. - This Act shall govern all petitions filed after it has taken effect. All further proceedings in insolvency, suspension of payments and rehabilitation cases then pending, except to the extent that in opinion of the court their application would not be feasible or would work injustice, in which event the procedures set forth in prior laws and regulations shall apply.

Section 147. Application to Pending Contracts. - This Act shall apply to all contracts of the debtor regardless of the date of perfection.

Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended is hereby repealed. All other laws, orders, rules

and regulations or parts thereof inconsistent with any provision of this Act are hereby repealed or modified accordingly.

Section 149. Separability Clause. - If any provision of this Act shall be held invalid, the remainder of this Act not otherwise affected shall remain in full force effect

Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspaper of general circulation.

THE CIVIL CODE

CHAPTER II: CLASSIFICATION OF CREDITS

Art. 2241. With reference to specific movable property of the debtor, the following claims or liens shall be preferred:

(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;

(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them;

(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally;

(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof;

(5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed;

(6) Claims for laborers' wages, on the goods manufactured or the work done;

(7) For expenses of salvage, upon the goods salvaged;

(8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest;

(9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter;

(10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests;

(11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested;

(12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit;

(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale.

In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor, within thirty days from the unlawful seizure. (1922a)


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Art. 2242. With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right:

(1) Taxes due upon the land or building;

(2) For the unpaid price of real property sold, upon the immovable sold;

(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works;

(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works;

(5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged;

(6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved;

(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits;

(8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided;

(9) Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated;

(10) Credits of insurers, upon the property insured, for the insurance premium for two years. (1923a)

Art. 2243. The claims or credits enumerated in the two preceding articles shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency. Taxes mentioned in No. 1, Article 2241, and No. 1, Article 2242, shall first be satisfied. (n)

Art. 2244. With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named:

(1) Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court;

(2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency;

(3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own;

(4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment;

(5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency;

(6) Support during the insolvency proceedings, and for three months thereafter;

(7) Fines and civil indemnification arising from a criminal offense;

(8) Legal expenses, and expenses incurred in the administration of the insolvent's estate for the common interest of the creditors, when properly authorized and approved by the court;

(9) Taxes and assessments due the national government, other than those mentioned in Articles 2241, No. 1, and 2242, No. 1;

(10) Taxes and assessments due any province, other than those referred to in Articles 2241, No. 1, and 2242, No. 1;

(11) Taxes and assessments due any city or municipality, other than those indicated in Articles 2241, No. 1, and 2242, No. 1;

(12) Damages for death or personal injuries caused by a quasi-delict;

(13) Gifts due to public and private institutions of charity or beneficence;

(14) Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively. (1924a)

Art. 2245. Credits of any other kind or class, or by any other right or title not comprised in the four preceding articles, shall enjoy no preference. (1925)

CHAPTER 3: ORDER OF PREFERENCE OF CREDITS

Art. 2246. Those credits which enjoy preference with respect to specific movables, exclude all others to the extent of the value of the personal property to which the preference refers.

Art. 2247. If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof. (1926a)

Art. 2248. Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent of the value of the immovable or real right to which the preference refers.

Art. 2249. If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the immovable property or real right. (1927a)

Art. 2250. The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or personal, shall be added to the free property which the debtor may have, for the payment of the other credits. (1928a)

Art. 2251. Those credits which do not enjoy any preference with respect to specific property, and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules:

(1) In the order established in Article 2244;

(2) Common credits referred to in Article 2245 shall be paid pro rata regardless of dates. (1929a)

Significance of Preferences in Liquidation


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For guidance. To know which debts should be paid first.

Juridical Persons

Technical Insolvency

Actual Insolvency

Voluntary Section 90 Section 90

Involuntary Section 91 Section 91

Natural persons

Technical Insolvency

Actual Insolvency

Voluntary Section 94-102 Section 103-104

Involuntary Sections 105-110

*Sections 107-110 apply if the debtor is absent

Sections 105-110

*Sections 107-110 apply if the debtor is absent

State Investment vs. Citibank (1991)

Quick Facts: CMI owed a substantial amount of money to respondent banks. The latter filed a petition from involuntary insolvency of CMI. State Investment, which had already filed collection claims against CMI, opposed the petition on the ground that the banks do not have the required personality because they are non-resident foreign corporations. They argue that only resident creditors can file an insolvency case since there is no law granting the same right to foreign banks

Doctrine: There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins at least two other residents in presenting the petition to the Bankruptcy Court.

Doctrine2: No need to prove reciprocity before a Philippine court can take cognizance of an insolvency case filed by a foreign corporation. It also seems to the Court quite apparent that the Insolvency Law contains no requirement that the laws of the state under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof.

Radiola-Toshiba vs. IAC (1991)

Quick Facts:

Subject proprety belonged to spouses Gatmaytan Property was foreclosed Toshiba was the highest bidder March 4: 1980: The CFI of Rizal awarded the subject properties

to Toshiba July 2, 1980: Creditors of Gatmaytans filed the present petition

for insolvency in Angeles City Angeles court issued a suspension order and it alos prohibited

Toshiba from transferring title to its name.

Issue: Can the court prohibit Toshiba from consolidating its ownership over the properties?

Held: NO.

Section 32 of the Insolvency law

[The assignment of all the properties of the insolvent to the assignee] shall dissolve any attachment levied within one month next preceding the commencement of the insolvency proceedings and vacate and set aside any judgment entered in any action commenced within thirty days immediately prior to the commencement of insolvency proceedings and shall set aside any judgment entered by default or consent of the debtor within thirty days immediately prior to the commencement of the insolvency proceedings.

Relative thereto, the findings of the then Intermediate Appellate Court are undisputed that the levy on attachment against the subject properties of the Gatmaytans, issued by the then Court of First Instance of Pasig in Civil Case No. 35946, was on March 4, 1980 while the insolvency proceeding in the then Court of First Instance of Angeles City, Special Proceeding No. 1548, was commenced only on July 2, 1980, or more than four (4) months after the issuance of the said attachment. Under the circumstances, petitioner’s lien on the subject properties overrode the insolvency proceeding and was not dissolved thereby.

Notes: Sir: Does this ruling still apply in FRIA? Does the FRIA also

prescribe a cut-off period? I apologize. I was not able to catch Sir’s answer. May nakakuha

ba? But as far as I know, there is only one cut-off period in the FRIA

The date when the commencement order (if Rehab Proceeding) or Liquidation Order (if Liquidation Proceeding) is issued. o Commencement Order

All claims before the CO are suspended All claims after CO will be treated as admin expenses

o Liquidation Order All contracts prior to LO shall be deemed terminated

and/or breached unless the liquidator, within ninety (90) days from the date of his assumption of office, declares otherwise and the contracting party agrees. Section 113(c)

Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest. Section 113(d)

no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days. Section 113(e)

No more claims other than admin exepnses after LO. WHY?

If juridical persons, recall corpo. If corporation is already in liquidation, it cannot enter into any other contract for its business

If natural persons, such person is prohibited from transferring any of its properties even in the ordinary course of its business.o WHY?

Unlike the provision of the CO where there is a qualifying clause (“prohibiting the individual debtor from making any payment outside of the necessary or legitimate expenses of his business or industry”), there is none in the LO provision

Besides, the object of a liquidation proceeding is to lump all assets of the debtor and give the assets to the creditors.

Great Asian Sales vs. CA (2002)

Quick Facts: Great Asian (GA) loaned a substantial amount of money from Bancasia. Grans Asian paid by endorsing 17 checks which was done through GA’s agent). All but 2 checks bounced. Bancasia now claims the balance. GA argued that the checks were void because there was no consideration involved.


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Held: In its verified petition for voluntary insolvency, Great Asian admitted its debt to Bancasia when it listed Bancasia as one of its creditors, an extra-judicial admission that Bancasia proved when it formally offered in evidence the verified petition for insolvency.22

The Insolvency Law requires the petitioner to submit a schedule of debts that must "contain a full and true statement of all his debts and liabilities."23 The Insolvency Law even requires the petitioner to state in his verification that the schedule of debts contains "a full, correct and true discovery of all my debts and liabilities x x x."24

Great Asian cannot now claim that the listing of Bancasia as a creditor was not an admission of its debt to Bancasia but merely an acknowledgment that Bancasia had sent a demand letter to Great Asian.


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specpro reviewer

Documents

banco de oro

dacion en

lee tek cheng

informal restructuring

inheritance

subscribed

outstanding

securities