Rule 81 – Bonds of Executors and Administrators CFI Negros Occidental
G.R. L-40517 – Luzon Surety v. Quebrar
MAKASIAR, J.
Petitioner Luzon Surety issued two administrator's bonds in favor of Quebrar (as admin for two
cases for settlement of estate). When the CFI of Negros Occidental issued a partition order for the
cases (the administration proceedings were not yet terminated, however), Quebrar believed that
it also meant that the bonds were cancelled as well and thus ceased paying the required premiums
and documentary stamps for the bonds. Thus, Luzon Surety filed a collection case against
Quebrar which the CFI of Manila ruled in favor of Luzon Surety. Quebrar thus appealed to the CA
which certified such case to the SC (since it only involved pure questions of law). The SC ruled
that the bonds were still in effect even after the partition because it was clear that Quebrar's duties
as administrator were not yet done (for example there were still debts to be paid and the estate
was not yet liquidated). The bond contemplates a continuing liability notwithstanding the non-
renewal of the bond by the defendants. Thus, surety remains liable and it follows that the
administrator is still duty bound to respect the indemnity agreements entered into with the surety.
DOCTRINE
The proper determination of the liability of the surety and of the principal on the bond must depend
primarily upon the language of the bond itself.
The bonds herein were required by Section 1 of Rule 81 of the Rules of Court. While a bond is
nonetheless a contract because it is required by statute, said statutory bonds are construed in
the light of the statute creating the obligation secured and the purposes for which the bond is
required, as expressed in the statute. The statute which requires the giving of a bond becomes a
part of the bond and imparts into the bond any conditions prescribed by the statute.
Section 1 of Rule 81 of the Rules of Court requires the administrator/executor to put up a bond
for the purpose of indemnifying the creditors, heirs, legatees and the estate. It is conditioned upon
the faithful performance of the administrator's trust. Having in mind the purpose and intent of the
law, the surety is then liable under the administrator's bond, for as long as the administrator
has duties to do as such administrator/executor. Since the liability of the sureties is co-
extensive with that of the administrator and embraces the performance of every duty he is called
upon to perform in the course of administration, it follows that the administrator is still duty
bound to respect the indemnity agreements entered into by him in consideration of the
suretyship.
The contention of the defendants that the administrator's bond ceased to be of legal force and
effect with the approval of the project of partition and statement of accounts is without merit.
Defendant Pastor T. Quebrar did not cease as administrator then, for administration is for the
purpose of liquidation of the estate and distribution of the residue among the heirs and legatees.
And liquidation means the determination of all the assets of the estate and payment of all the debts
and expenses. It appears that there were still debts and expenses to be paid.
The bond contemplates a continuing liability notwithstanding the non-renewal of the bond by
the defendants. It must be remembered that the probate court possesses an all-embracing power
over the administrator's bond and over the administration proceedings and it cannot be devoid of
legal authority to execute and make that bond answerable for the very purpose for which it was
filed.
IMPORTANT PEOPLE
Luzon Surety Company ("LSC") – surety, plaintiff/ appellee
Pastor T. Quebrar ("Quebrar") – administrator, defendant/ appellant
Francisco Kilayko ("Kilayko") – case did not state, but could be co-administrator
FACTS
1. [August 1954] Plaintiff LSC issued two (2) administrator's bond @ PHP 15,000 each in
behalf of Pastor Quebrar.
2. Quebrar is the administrator in Special Proceedings 3075 and 3076 in CFI Negros
Occidental (Re: Testate Estate of A.B. Chinsuy and Re: Testate Estate of Cresenciana
Lipa respectively)
3. In consideration of the suretyship, LSC was bound jointly and severally with Quebrar.
4. Quebrar, together with Kilayko, executed two (2) indemnity agreements where they
agreed on the following:
a. That LSC shall be paid PHP 300 in advance as premium thereof for every 12
months or fraction thereof
b. That LSC shall be indemnified against any and all damages, losses, costs,
stamps, taxes, penalties, charges and expenses, including the 15% of the
account involved in any litigation for atty's fees
c. That IF Quebrar faithfully does the following…
i. prepares and presents to the Court within 3 mos. From the date of
his appointment a correct inventory of the property of the deceased
ii. faithfully pays all the debts, legacies, and bequests which
encumber the estate
iii. pays whatever dividents which the Court may decide should be
paid
iv. renders a just and true account of his administrations to the Court
within a year/ within his deadline stated
v. executes all orders and decrees of said Court
…the obligation (the surety agreement) shall be VOID, otherwise, it shall
remain in full force and effect.
d. The surety agreement also provided that copies of the Special Proceeding
cases are attached and made an integral part of the surety agreement.
5. [Aug 1954 - Aug 1955] For the first year, defendants paid PHP 304.50 under each
indemnity agreement
6. [June 1957] CFI negros Occidental approved the Project of Partition and Accounts of
defendant. Defendant stopped paying premiums and documentary stamps after this
approval.
7. [May 1962] LSC demanded from Quebrar and Kilayko (hereinafter "defendants") the
payment of the premiums and documentary stamps from August 1955.
8. [Oct 1962] Defendants filed a motion for cancellation and/or reduction of executor's
bonds on the ground that "the heirs of the testate estates have already received their
respective shares." Acting on the aforesaid motion, CFI Negros Occidental ordered the
bonds cancelled.
9. LSC's demand amounted to PHP 2,436 per case (total of PHP 4,872) and the
defendants continually refused to pay said amount.
CFI Manila
10. [Jan 1963] LSC filed a collection case with the CFI Manila. It was agreed during the
pre-trial that the ultimate issue is "whether or not the administrator's bonds were in force
and effect from and after the year that they were filed and approved up to the time when
they were cancelled (i.e. 1954 to 1962). Defendants tried to settle and pay PHP 1,800
but LSC refused.
11. CFI Manila decided in favor of LSC and allowed them to recover.
Court of Appeals
12. Defendants appealed to the CA which certified the subject case after finding that this
case involves only errors or questions of law.
13. Hence this petition.
1
 The defendants also presented the following non-SpecPro related arguments which the SC
ISSUE AND HOLDING answered:
1. whether or not the administrator's bonds were in force and effect from and after the year that 1. Contention that the payment of premiums and documentary stamps are conditions
they were filed and approved up to the time when they were cancelled (i.e. 1954 to 1962). – precedent to the bonds' effectivity
YES. Surety is liable under the administrator's bond, for as long as the administrator a. Erroneous. There is no provision/ condition in the bond to that effect. There
has duties to do as such administrator/executor hence, administrator is bound to is no clause by which its obligation is avoided or suspended by mere failure
respect such indemnity agreements as long as his/her duties as administrator lasts. of the oblige to pay an annual premium.
b. Payment of annual premium is enforced as part of the consideration and
a. Proper determination of the liability of the surety should depend primarily upon the not a condition. The premium is the consideration for furnishing the bonds
language of the bond itself (see fact # 4). and the obligation to pay the same subsists as long as the liability of the
b. Bonds herein are required by Section 1 Rule 81 of the ROC. Such statutory bonds surety exists.
should be construed in light of the statute and for the purposes for which the bond 2. Contention that the principle of strictissimi juris should be applied against the insurance
is required. company (contract of adhesion).
c. Bonds herein contain practically the same conditions in Section 1 Rule 81 of the a. Not applicable in this case because there is no ambiguity in the language of
ROC [see fact # 4(c)] the bond and more so when the bond is read in connection with the statutory
d. As seen in Rule 81 of the ROC, the statute requires the administrator/ executor to provision requiring the same.
put up a bond for the purpose of indemnifying the creditors, heirs, legatees and the b. With the payment of the first-year premium, the surety already assumed the
estate. The same is conditioned upon the faithful performance of the risk involved in case Quebrar defaults in his duties. Thus, as long as Quebrar
administrator's trust. is administrator for the estates, the bond is held liable and inevitably LSC's
e. Hence, the surety is liable under the administrators bond for as long as the admin liability subsists.
has duties to do. Such liability is co-extensive with the admin. Hence, the
administrator is duty bound to respect such indemnity agreement until the DISPOSITIVE PORTION
completion of his duties. WHEREFORE, THE DECISION OF THE COURT OF FIRST INSTANCE OF MANILA
f. In this case, it is shown that Quebrar still had duties to do as an administrator/ DATED NOVEMBER 3, 1964 IS HEREBY AFFIRMED. WITH COSTS AGAINST
executor even after the approval of the partition. Thus, the contention of the
DEFENDANTSAPPELLANTS.
defendants that such administrator's bond ceased to have force after the partition
is erroneous.
i. The purpose of administration is for the liquidation of the estate an
distribution of the residue among the heirs and legatees. DIGESTER:
ii. Liquidation means the determination of all the assets and payment of all
the debts and expense – something that has not yet been completed as
tit appears that there were still debts and expenses to be paid after the
partition was ordered.
iii. Also, Montemayor v Gutierrez (114 Phil. 45) held that an estate may be
partitioned even before the termination of the administration
proceedings.
g. The term of the bond does not expire until the administration has been closed and
terminated, thus, as long as the probate court retains jurisdiction of the estate, the
bond contemplates a continuing liability notwithstanding the non-renewal of
the bond by defendants.
h. The probate court possesses an all-embracing power over the administrator's
bond and over the administration proceedings and it cannot be devoid of legal
authority to execute and make that bond answerable for the very purpose for which
it was filed.
i. Moreover, construing the indemnity contracts in that they would cease after the
partition would render futile the purpose for which they were made. To separately
consider the two agreements (administrator's bonds and indemnity agreements)
separately would be contrary to the intent of the parties in making them integrated
as a whole (remember "…and made an integral part therein"?).
j. To allow the defendants to evade their liability under the indemnity agreements
through non-payment of the premiums would lead to giving the administrator the
power to diminish/reduce or nullify his liability under the administrator's bond –
contrary to the intent and purpose of the law.

OTHER NOTES