Heirs are not liable for their parents' debts

In the Philippines, the principle that heirs are not liable for their parents’ debts is a crucial aspect of inheritance law. This principle ensures that the financial obligations of a deceased person do not unduly burden their heirs. Let’s delve into the legal framework and provisions under the New Civil Code of the Philippines that govern this principle.

The Principle Explained

When a person passes away, their estate, which includes all their assets and liabilities, is subject to settlement. The estate is used to pay off any outstanding debts before any distribution to the heirs. However, if the estate is insufficient to cover the debts, the heirs are not personally liable to pay the remaining balance from their own pockets.

Key Provisions in the New Civil Code

The New Civil Code of the Philippines provides clear guidelines on this matter:

1. Article 774: Defines succession as the mode of acquisition by virtue of which the property, rights, and obligations to the extent of the value of the inheritance of a person are transmitted through his death to another or others.

2. Article 776: States that the inheritance includes all the property, rights, and obligations of a person which are not extinguished by his death.

3. Article 774: Emphasizes that the heirs are only liable to the extent of the value of the inheritance they receive. This means that if the inherited estate is insufficient to cover the debts, the heirs are not required to pay the excess from their personal assets.

4. Article 1311: Reinforces that contracts take effect only between the parties, their assigns, and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. This means that personal obligations of the deceased do not automatically transfer to the heirs.

Practical Implications

In practice, this means that if a parent leaves behind debts that exceed the value of their estate, the creditors can only claim up to the value of the estate. The heirs are protected from having to use their personal funds to settle these debts. This protection is vital for ensuring that the financial stability of the heirs is not compromised by the debts of the deceased.

Conclusion

The principle that heirs are not liable for their parents’ debts is a fundamental aspect of Philippine inheritance law. It ensures that the financial responsibilities of the deceased do not unfairly impact the heirs. The New Civil Code provides robust provisions to protect heirs, limiting their liability to the value of the inheritance they receive. This legal framework is essential for maintaining fairness and protecting the rights of heirs in the Philippines.

Source: The Manila Times and RALB Law

Marcos signs Real Property Valuation and Assessment Reform Act

President Marcos on Thursday signed a law he had proposed when he was still a senator to improve the country’s tax collection by streamlining and digitalizing what he called an “outdated” real property valuation and assessment system.

Marcos expressed optimism that Republic Act No. 12001, or Real Property Valuation and Assessment Reform Act (RPVara), will “change our real estate landscape” and raise bureaucratic efficiency through transparency, digitalization and innovation.

“This new law is borne out of necessity and the realization that there is a need to enhance the country’s tax collection system so we can generate revenues, generate jobs and investments all over the country. No longer will we rely on the outdated valuation system,” he said in a speech in Malacañang.

Multiple benefits

Marcos said the law “streamlines and enhances the real property valuation and assessment system through a uniform real property appraisal that is compliant with international standards.”

“It also adopts the prevailing market value as the single real property valuation base for the assessment of real property tax. Furthermore, the law complements our efforts to modernize the services in our local government units (LGUs) through the creation of a Real Property Information System—a comprehensive, digitalized real property tax administration,” he added.

RA 12001 will also “instill and encourage long-term and consistent tax compliance by providing a two-year amnesty on interests and penalties for taxpayers with unpaid real property tax” as a strategy toward efficient tax collection.

Standardizing valuations, plugging tax leaks, and ensuring transparency are among the biggest expected benefits of the newly enacted RPVara, according to industry stakeholders.

In a statement, the Chamber of Real Estate and Builders’ Associations Inc. (Creba) said the new law would hopefully “introduce the needed reforms in real property valuation and assessment.”

“It is a timely opportunity to overhaul the current system of Schedule of Market Values (SMV) formulation which has, for many years, been prone to compromise and corruption and wanting of direct participation by the private sector and professionals with the requisite technical know-how and training,” Creba said.

For real estate investment management firm Colliers Philippines, it will provide “much-needed transparency” in a volatile industry on a post pandemic rebound.

Paul Vincent Ramirez, senior director and head of valuation at Colliers, said that while the law would likely raise acquisition and disposal costs, as well as the real property taxes of all property players across the spectrum, from developers to investors and end-users, “we see its implementation as providing much-needed transparency to the current opacity of the Philippine real estate market.”

IRR up for scrutiny

“The game-changing details will be in the law’s yet-to-be finalized and published implementing rules and regulations (IRR) which all property players need to prudently scrutinize,” he added.

Ovialand Inc. president Pammy Olivares-Vital welcomed the passage of the RPVara, saying it would lead to a balanced property assessment across areas and regions.

“We have seen progressive local city assessors adjust their recent methods in assessing which was beneficial for the municipality or city. Standardizing this method, I believe, will benefit areas that are not yet practicing this,” Olivares-Vital said.

Sharon Saclolo, associate director and head of Research at Leechiu Property Consultants Inc., added that the RPVara would improve the ease of doing business and enhance the country’s appeal to investors.

In July 2013, then Senator Marcos introduced Senate Bill No. 415 to revamp what was considered a flawed land valuation system.

High cost to gov’t

He then noted that with 23 national government agencies, almost 1,300 LGUs and private appraisers performing valuation using different methods and standards, the property sector had been riddled with inconsistent real property values.

As a result, many government-led projects and investments were delayed due to compensation issues and lengthy court litigations, particularly on right-of-way issues.“Such condition has crippled the government, both at the local and the national levels, to fully tap the potential of the land sector, and resulted in foregone revenues from national and local real property-related taxes,” Marcos said.

He also noted that the valuations used for governmental purposes were outdated.

A later version of Marcos’ bill noted that as of 2018, only 38.8 percent of LGUs had updated SMVs, with 93 noncompliant cities and 46 provinces, while only 50.4 percent of Revenue District Offices (RDOs) had updated zonal values, with 65 RDOs still in the process of revising.

Single system for all

According to a briefer from the Bureau of Local Government Finance that was released prior to the signing of the law, the RPVara will provide a single system of valuation to be used by all LGUs and other government agencies for taxation and other purposes.

The new law also transferred the approval of the SMVs from the local government council to the finance secretary, hence insulating the technical function of valuation by local assessors from the political function of setting assessment levels and tax rates by LGUs.

It also mandated the creation of an electronic and comprehensive Real Property Information System which will serve as a database of all real property transactions with the Registry of Deeds, Bureau of Internal Revenue, notaries public, and other agencies.

2-year amnesty program

The new law also provides for a real property tax amnesty lasting two years and will cover penalties, surcharges, and interests from all unpaid real property taxes.

Delinquent owners may settle their dues through a one-time payment or installment payment.

The amnesty does not cover delinquent real properties already disposed of through a public auction, real properties with tax delinquencies being paid under a compromise agreement, and those that have pending court cases on tax delinquencies.

For the first year of effectivity of the approved SMVs, increases in real property taxes will be capped at 6 percent of the real property taxes assessed on such properties prior to the effectivity of the law.

Source: Inquirer

Estafa for selling property you do not own

Only the owner has the right to enjoy and dispose of his or her property, save when the law permits such disposition to be made through an authorized representative. (Article 428 in relation to Article 1878 (5), New Civil Code of the Philippines)

Correspondingly, a person can be sued for estafa if, despite knowing that he or she is neither the owner nor the latter's authorized representative, said person represents one's self as possessing the right or authority to sell a property and eventually sells it to a buyer who relied on such false representation and in due course suffered damages.

Such a manner of swindling is penalized under our law under the following provision:

"Art. 315. Swindling (estafa).— Any person who shall defraud another by any of the means mentioned hereinbelow:

"2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:

"(a) By using fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or by means of other similar deceits." (Article 315 (2)(a), Revised Penal Code, as amended by Republic Act 10951)

It is to be expected that a person who committed a crime, such as estafa, will raise any and all available defenses, which include the assertion of negligence or lack of diligence on the part of the victim. Failure to act with due diligence is generally disadvantageous and prejudicial, and often causes injury or damage to a concerned party.

But if said party earnestly relied on the declarations and assurances given to him/her, and deceit or fraud was in fact committed by the offender, then such failure to exercise due diligence will not shield the offender from criminal responsibility. The Supreme Court, through Associate Justice Ramon Paul Hernando, elucidated in the case of Spouses Isidro Dulay 3rd and Elena Dulay vs. People of the Philippines (GR 215132, Sept. 13, 2021) the following:

"We note that private complainants do not appear to have conducted due diligence in ascertaining actual ownership of the property. However, private complainants' failure to conduct due diligence does not negate petitioners' fraud in pretending to own the subject property and gain by selling it to gullible buyers.

In short, the estafa by deceit was consummated when petitioners received payments for the subject property knowing that they were not the registered owners who could validly transfer title thereto. Time and again we have ruled that the one induced, who must be ignorant of the falsity of the representations, must have relied on the truth thereof and, as a consequence, sustained injury.

"In Virata v. Ng Wee, we defined "fraud" as the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission. In its general sense, fraud is deemed to comprise anything calculated to deceive, including all acts and omissions and concealment involving a breach of legal or ethical duty, trust, or confidence justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another. Fraud is also described as embracing all multifarious means which human ingenuity can device, and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated."

As a victim you should pursue filing a complaint for estafa against the seller who sold you such a property, provided that one can clearly establish that said seller has no right or authority to sell the same, that one bought the property genuinely relying on the representations of the seller, which eventually turned out to be false, and that one in fact suffered damages by reason thereof.