FACTS:

The antecedent facts of the case are as follows:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M. Santibañez entered into a loan agreement for the purchase of a Ford 6600 Agricultural All-Purpose Diesel Tractor. Efraim and his son, Edmund, executed a promissory note in favor of FCCC for the loan amount.

On December 13, 1980, another loan agreement was entered into between FCCC and Efraim for the purchase of another unit of Ford 6600 Agricultural All-Purpose Diesel Tractor and a Howard Rotamotor Model AR 60K. Efraim and Edmund executed a promissory note and a Continuing Guaranty Agreement for the loan.

Efraim died in February 1981, and testate proceedings commenced before the RTC of Iloilo City in March 1981. Edmund was appointed as the special administrator of the estate.

In July 1981, Edmund and his sister Florence executed a Joint Agreement dividing the tractors and assuming the debt corresponding to the tractor taken by each of them.

In August 1981, FCCC assigned all its assets and liabilities to Union Savings and Mortgage Bank.

Petitioner Union Bank of the Philippines (UBP) sent demand letters to Edmund, but he failed to pay. UBP filed a Complaint for sum of money against the heirs of Efraim Santibañez, namely Edmund and Florence.

Florence filed an Answer, arguing that the loan documents did not bind her as she was not a party thereto. She also claimed that the Joint Agreement was null and void as it was not approved by the probate court.

The RTC of Makati City dismissed the complaint, ruling that the claim of UBP should have been filed with the probate court and that the Joint Agreement was null and void.

UBP appealed to the Court of Appeals, raising various errors of the trial court.

UBP argued that the deceased's obligation passed to his children, and Florence is estopped from denying her liability based on her unconditional signing of the Joint Agreement.

The Court of Appeals affirmed the dismissal of the complaint.

The petitioner filed a complaint against respondent Florence S. Ariola, one of the heirs of the deceased Efraim Santibañez, for the payment of the outstanding balance on promissory notes executed by the deceased. The petitioner argued that the joint agreement entered into by the heirs, including respondent Florence S. Ariola, estopped her from denying her liability. The petitioner also contended that the joint agreement did not need to be presented before the probate court for approval since it did not involve any property enumerated in the holographic will of the deceased. On the other hand, respondent Florence S. Ariola argued that the petitioner's claim should have been presented before the probate court. The appellate court held that the claim should have been filed with the probate court and declared the partition made in the joint agreement as null and void. The appellate court also rejected the petitioner's argument of waiver based on respondent Florence S. Ariola's participation in the present civil action. The CA affirmed the RTC decision in its entirety. The petitioner now raises several errors, including the failure to consider the continuing guaranty agreement executed by the respondents and the fact that the tractors subject of the complaint were not included in the holographic will of the deceased.

ISSUES:

1. Whether or not the partition in the Agreement executed by the heirs is valid.

2. Whether or not the heirs' assumption of the indebtedness of the deceased is valid.

3. Whether the petitioner can hold the heirs liable on the obligation of the deceased.

4. Whether the probate court has jurisdiction over the properties of the deceased and the power to approve or disapprove the partition of said properties.

5. Whether the assumption of the decedent's indebtedness by the heirs is binding.

6. Whether or not the petitioner has the legal personality to file the complaint.

7. Whether or not the petitioner has established its cause of action.

RULING:

1. The partition in the Agreement executed by the heirs is not valid. In testate succession, there can be no valid partition among the heirs until after the will has been probated. The law requires the probate of a will to ensure that the right of a person to dispose of his property by will is not rendered nugatory. In this case, the deceased left a holographic will which included all the properties he owned and those that may be discovered later. This provision encompasses the tractors subject to the partition agreement. Moreover, the partition agreement was executed while there was already a pending probate proceeding for the deceased's holographic will covering the tractors.

2. Yes, the probate court has jurisdiction over the properties of the deceased and the power to approve or disapprove the partition of said properties. Every act intended to put an end to indivision among co-heirs or legatees is considered a partition, and court approval is required for such extra-judicial partition. The heirs cannot divest the court of its jurisdiction over the estate until the probate court has determined the identity of the heirs.

3. No, the assumption of the decedent's indebtedness by the heirs is not binding. The assumption of liability was conditioned upon the happening of an event, namely, the receipt of the tractors according to the invalid partition. As the partition was invalid, the assumption of liability cannot be given any force and effect.

4. The Supreme Court held that the petitioner Union Bank of the Philippines does not have the legal personality to file the complaint. The Court ruled that the parties in the deed of assignment with assumption of liabilities were the FCCC and the Union Savings and Mortgage Bank, with the conformity of Bancom Philippine Holdings, Inc. There is no evidence to show that Union Savings and Mortgage Bank is now the Union Bank of the Philippines. Thus, the petitioner failed to establish its cause of action. The trial court's dismissal of the complaint and the Court of Appeals' affirmation of the dismissal were therefore upheld.

PRINCIPLES:

• A probate court has jurisdiction to determine all the properties of the deceased and to decide whether they should be included in the inventory or list of properties to be administered. The probate court is primarily concerned with the administration, liquidation, and distribution of the estate.

• In testate succession, there can be no valid partition among the heirs until after the will has been probated. The probate of a will and notice thereof to the whole world is required to protect the right of a person to dispose of his property by will. The authentication of a will decides only questions related to the capacity of the testator and compliance with formalities required by law.

• Every act intended to put an end to indivision among co-heirs or legatees is deemed a partition, requiring court approval. The probate court has jurisdiction over all properties of the deceased, and any transaction affecting the estate requires its approval.

• The assumption of liability by heirs is dependent on the validity of the partition. If the partition is invalid, the assumption of liability is not binding.

• Money claims against the decedent's estate must be filed with the probate court. The purpose is to protect the estate by informing the executor or administrator of the claims and facilitating the speedy settlement of the estate's affairs. Failure to file a money claim may bar the claim forever, except if it is set forth as a counterclaim in an action brought by the executor or administrator.

• Only parties to a contract have the legal personality to enforce its terms.

• Judicial notice must be exercised with caution and the requisite notoriety must exist.