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Facts: A decedent died intestate, leaving a house and lot encumbered by a mortgage in favor of Bank Z, plus a bank deposit. Heirs are his widow, Maria, and two children, Ana and Ben. All heirs execute an Extrajudicial Settlement and Partition distributing the estate as follows: Maria 1/2; Ana 1/4; Ben 1/4. The instrument contains a clause that the heirs jointly bind themselves to pay all of the decedent’s debts and a bond in the amount of PHP 2,500,000 is posted to secure payment of these debts. The instrument is notarized, published in a newspaper of general circulation for three consecutive weeks, and filed with the Registry of Deeds. After six months from the extrajudicial settlement, Bank Z files a case against the heirs for collection of the mortgage debt. The heirs contend that the extrajudicial settlement is valid and binding on third parties because the statutory conditions are met, and that Bank Z’s claim is timely. Bank Z contends that (a) the extrajudicial settlement is void as to the inclusion of real property encumbered by a mortgage; and (b) its claim is timely.