Payment of Debts (Rule 88) (1) If there are sufficient properties, the debts shall be paid, thus: (a)

All debts shall be paid in full within the time limited for the purpose (Sec. 1); (b) If the testator makes provision by his will, or designates the estate to be appropriated for the payment of debts they shall be paid according to the provisions of the will, which must be respected (Sec. 2); (c) If the estate designated in the will is not sufficient, such part of the estate as is not disposed of by will shall be appropriated for the purpose (Sec. 2); (d) he personal estate not disposed of by will shall be first chargeable with payment of debts and e!penses (Sec. 3); (e) If the personal estate is not sufficient, or its sale would be detrimental to the participants of the estate, the real estate not disposed of by will shall be sold or encumbered for that purpose (Sec. 3); (f) Any deficiency shall be met by contributions from devisees, legatees and heirs who have entered into possession of portions of the estate before debts and e!penses have been paid (Sec. 6); (g) he e!ecutor or administrator shall retain sufficient estate to pay contingent claims when the same becomes absolute (Sec. 4)" (#) If the estate is insolvent, the debts shall be paid in the following manner: (a) he e!ecutor or administrator shall pay the debts in accordance with the preference of credits established by the $ivil $ode (Sec. 7); (b) %o creditor of any one class shall receive any payment until those of the preceding class are paid (Sec. 8); (c) If there are no assets sufficient to pay the credits of any one class of creditors, each creditor within such class shall be paid a dividend in proportion to his claim (Sec. 8); (d) &here the deceased was a nonresident, his estate in the 'hilippines shall be disposed of in such a way that creditors in the 'hilippines and elsewhere may receive an e(ual share in proportion to their respective credits (Sec. 9); (e) $laims duly proved against the estate of an insolvent resident of the 'hilippines, the e!ecutor or administrator, having had the opportunity to contest such claims, shall e included in the certified list of claims proved against the deceased" he owner of such claims shall be entitled to a )ust distribution of the estate in accordance with the preceding rules if the property of such deceased person in another country is likewise e(ually apportioned to the creditors residing in the 'hilippines and other creditors, according to their respective claims (Sec. 10); (f) It must be noted that the payments of debts of the decedent shall be made pursuant to the order of the probate court (Sec. 11)" (*) Time for paying debts and egacies fi!ed" or e!tended after notice" #it$in #$at periods. +n granting letters testamentary or administration the court shall allow to the e!ecutor 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, e!ceed one (1) year; but the court may, on application of the e!ecutor or administrator and after hearing on such notice of the time and place therefor given to all persons interested as it shall direct, e!tend the time as the circumstances of the estate re(uire not e!ceeding si! (,) months for a single e!tension nor so that the whole period allowed to the original e!ecutor or administrator shall e!ceed two (#) years (Sec. 1%)" (-) Applicable provisions under the $ivil $ode: Art" ##-1" &ith reference to specific movable property of the debtor, the following claims or liens shall be preferred: (1) .uties, ta!es and fees due thereon to the /tate or any subdivision thereof; (#) $laims 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; (*) $laims 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 immobili0ation 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; (-) $redits 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; (1) $redits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed; (,) $laims for laborers2 wages, on the goods manufactured or the work done; (3) 4or e!penses of salvage, upon the goods salvaged; (5) $redits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (6) $redits for transportation, upon the goods carried, for the price of the contract and incidental e!penses, until their delivery and for thirty days thereafter; (17) $redits 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) $redits for seeds and e!penses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (1#) $redits for rent for one year, upon the personal property of the lessee e!isting on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (1*) $laims 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 sei0ure" Art" ##-#" &ith 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) a!es due upon the land or building; (#) 4or the unpaid price of real property sold, upon the immovable sold; (*) $laims 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; (-) $laims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (1) 8ortgage credits recorded in the 9egistry of 'roperty, upon the real estate mortgaged; (,) :!penses for the preservation or improvement of real property when the law authori0es reimbursement, upon the immovable preserved or improved; (3) $redits annotated in the 9egistry of 'roperty, in virtue of a )udicial order, by attachments or e!ecutions, upon the property affected, and only as to later credits; (5) $laims of co;heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (6) $laims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (17) $redits of insurers, upon the property insured, for the insurance premium for two years" Art" ##-*" he 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" a!es mentioned in %o" 1, article ##-1, and %o" 1, article ##-#, shall first be satisfied" Art" ##--" &ith reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: (1) 'roper funeral e!penses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court; (#) $redits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; (*) :!penses 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; (-) $ompensation 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; (1) $redits and advancements made to the debtor for support of himself or herself, and

family, during the last year preceding the insolvency; (,) /upport during the insolvency proceedings, and for three months thereafter; (3) 4ines and civil indemnification arising from a criminal offense; (5) <egal e!penses, and e!penses incurred in the administration of the insolvent2s estate for the common interest of the creditors, when properly authori0ed and approved by the court; (6) a!es and assessments due the national government, other than those mentioned in articles ##-1, %o" 1, and ##-#, %o" 1; (17) a!es and assessments due any province, other than those referred to in articles ##-1, %o" 1, and ##-#, %o" 1; (11) a!es and assessments due any city or municipality, other than those indicated in articles ##-1, %o" 1, and ##-#, %o" 1; (1#) .amages for death or personal in)uries caused by a (uasi;delict; (1*) =ifts due to public and private institutions of charity or beneficence; (1-) $redits which, without special privilege, appear in (a) a public instrument; or (b) in a final )udgment, if they have been the sub)ect of litigation" hese credits shall have preference among themselves in the order of priority of the dates of the instruments and of the )udgments, respectively" Art" ##-1" $redits of any other kind or class, or by any other right or title not comprised in the four preceding articles, shall en)oy no preference" $>A' :9 * +9.:9 +4 '9:4:9:%$: +4 $9:.I / Art" ##-," hose credits which en)oy preference with respect to specific movables, e!clude all others to the e!tent of the value of the personal property to which the preference refers" Art" ##-3" 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, ta!es and fees due the /tate or any subdivision thereof" Art" ##-5" hose credits which en)oy preference in relation to specific real property or real rights, e!clude all others to the e!tent of the value of the immovable or real right to which the preference refers" Art" ##-6" 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 ta!es and assessments upon the immovable property or real right" Art" ##17" he e!cess, if any, after the payment of the credits which en)oy 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" Art" ##11" hose credits which do not en)oy any preference with respect to specific property, and those which en)oy preference, as to the amount not paid, shall be satisfied according to the following rules:

(1) In the order established in article ##--; (#) $ommon credits referred to in article ##-1 shall be paid pro rata regardless of dates"