2012 Ateneo Civil Law Summer Reviewer

CIVIL LAW BAR REVIEWER FACULTY ADVISER ACADEMICS HEAD SUBJECT HEADS

ATTY. BENJAMIN LERMA PIERRE MARTIN REYES FRANCESCO BENZON ANBOCHI HANNAH STEPHANIE ANG

ATENEO CENTRAL BAR OPERATIONS 2012 ACADEMICS COMMITTEE Academics Head: Pierre Martin Reyes; Understudy: Clariesse Jami Mari Chan REVIEW COMMITTEE Head: Yla Gloria Marie Paras; Understudy: Ken Koga; Members: Catherine Dela Rosa, Eric Lavadia, Iris Lucido, Pearl Charisse Baustista; Mina Reyes CIVIL LAW COMMITTEE Heads: Francesco Benzon Anbochi, Hannah Stephanie Ang; Understudy: Alessandra Vilches, Ken Patrick Habana; Volunteers: Rizza Anne Sy, John Benedict Ty, Rose Angelique Dizon, Geoanne Christi Battad, Paolo de Guzman, Roberto Miguel Ramiro;

CIVIL LAW Table of Contents PRELIMINARY TITLE…………………………………… 5 1. Effect and Effectivity of Law 2. Human Relations PERSONS…………………………………………………… …8 ============================== ===== A. General Provisions B. Natural Persons C. Juridical Persons D. Domicile E. Marriage F. Legal Separation G. Rights and Obligations Between Husband and Wife H. Property Relations Between Husband and Wife I. The Family J. Family Home K. Paternity and Filiation L. Adoption M. Support N. Parental Authority O. Funerals P. Surname Q. Absence R. Civil Register

PRESCRIPTION…………………………………………… ……78 ============================== =====

PROPERTY…………………………………………………… 37 ============================== ===== A. Classification of Property (Arts. 414-418, CC) B. Ownership (Arts. 427-439, CC) C. Accessions D. Quieting Title E. Co-ownership F. Condominium Act (RA 4726) G. Possession H. Usufruct I. Easements J. Modes Of Acquring Ownership K. Occupation L. Intellectual Creation M. Donation N. Other Modes of Acquiring Ownership O. Nuisance

CONTRACTS ………………………………………………… 109 ============================== =====

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A. Definition B. No Prescription Applicable C. Prescription or limitation of actions D. Interruption OBLIGATIONS ………………………………………………… 82 ============================== ===== A. Definition B. Elements of an Obligation C. Different Kinds of Prestations D. Classification of Obligations E. Sources of obligations (Arts. 1156-1157) F. Nature and Effect of Obligations G. Kinds of Civil Obligations H. Joint and Solidary Obligation I. Extinguishment of Obligations

A. Essential Requisites (Art. 1261) B. Kinds of Contracts C. Formality (Arts. 1356, 1357, 1358) D. Defective Contracts E. Effect of contracts (Art. 1311) SALES ……………………………………………… 123 ============================== ===== A. Introduction B. Parties to a Contract of Sale C. Subject Matter D. Obligations of the Seller to Transfer Ownership E. Price F. Formation of Contract of Sale

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G. Transfer of Ownership H. Risk of Loss I. Documents of Title J. Remedies of an Unpaid Seller K. Performance of Contract L. Warranties M. Breach of Contract N. Extinguishment of the Sale O. The Subdivision and Condominium Buyers' Protective Decree P. The Condominium Act SUCCESSION ………………………………………………… 155 ============================== ===== A. General Provisions B. Testamentary Succession C. Legal or Intestate Succession D. Provisions Common to Testate and Intestate Succession E. Partition and distribution of estate LEASE………………………………………………………… 199 ============================== === A. Lease of Things B. Lease of Work or Services C. Lease of Rural and Urban Lands D. Contract for Piece of Work E. Rights and Obligations of Lessor and Lessee PARTNERSHIP……………………………………………… 205 ============================== === A. Contract Of Partnership B. Rights and Obligations of Partnership C. Rights and Obligations of Partners Among Themselves D. Obligations of Partnership/Partnership to Third Persons E. Dissolution F. Limited Partnership AGENCY……………………………………………………… … 221 ============================== === A. Definition of Agency B. Powers C. Express V. Implied Agency D. Agency By Estoppel

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E. General vs. Special Agency F. Agency Couched in General Terms G. Agency Requiring Special Power of Attorney H. Agency by Operation of Law I. Rights and Obligations of Principal J. Modes of Extinguishment CREDIT TRANSACTIONS………………………………………… 235 ============================== === A. Loan B. DEPOSIT C. Guaranty and Suretyship D. Pledge E. Real Mortgage F. Antichresis G. Chattel Mortgage H. Quasi-contracts I. Concurrence and Preference of Credits J. Insolvency Law LAND TITLES AND DEEDS …………………………………… 283 ============================== ===== A. Torrens System B. Regalian Doctrine C. Citizen Requirements D. Non-Registrable Properties E. Original Registration F. Subsequent Registration G. Dealings With Unregistered Land TORTS AND DAMAGES…………………………………… 323 ============================== ===== Book I--Torts A. Principles B. Classification of Torts C. The Tortfeasor D. Act of Omission and Its Modalities E. Proximate Cause F. Legal Injury G. Intentional Torts H. Negligence I. Special Liability in Particular Activities J. Strict Liability Book II--Damages

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A. General Considerations B. Actual and Compensatory Damages C. Moral Damages D. Nominal Damages E. Temperate or Moderate Damages F. Liquidated Damages G. Exemplary or Corrective Damages H. Damages in Case of Death I. Graduation of Damages J. Miscellaneous Rules

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CIVIL LAW When Laws Take Effect (art.2)

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TOPICS UNDER THE SYLLABUS A. PRELIMINARY TITLE 1. Effect and Effectivity of Law a. When laws become effective b. Mandatory effect of laws c. Irretroactivity of laws d. Waiver of rights e. Repeal of laws f. Judicial decisions g. Presumption and Applicability of Custom h. Computation of Time i. Governing laws j. Rules on Prohibitive laws 2. Human Relations a. Application b. Duty to act with justice, observe honesty and good faith c. Actions for breach of promise to marry d. Unjust enrichment at the expense of others e. Rights to personal dignity and privacy f. Liability of Public Officers ========================= ================ CIVIL LAW – branch of law that regulates relations of assistance, authority and obedience among family members as well as members of a society for the protection of private interests NEW CIVIL CODE: took effect on August 30, 1950 ============================== ===================

TOPICS UNDER THE SYLLABUS A. PRELIMINARY TITLE 1. Effect and Effectivity of Laws ========================= ================= 1. EFFECT AND EFFECTIVITY OF LAWS a) When the Laws Become Effective

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General Rule - 15 days after completion of publication in OG or newspaper of general circulation Exception - The law can provide for its own date of effectivity

b) Mandatory Effect of Laws

   

 

Publication is MANDATORY for all statutes, including PDs and Eos AOs and Regulations must also be published if their purpose is to enforce or implement existing law An immediate effectivity clause does not preclude the requirement of publication Publication must be in full (otherwise, it is not deemed published at all) since its PURPOSE is to inform the public of its contents Non-publication of the law would offend due process (persons not aware of laws would be prejudiced) Effect of Publication: The people are deemed to have conclusively been notified of the law even if they have not read them.

Compliance with the Law (art.3): Ignorance of the law excuses no one from compliance therewith (Ignorantia juris neminem excusat) NOTE: Applies only to mandatory and prohibitory laws (Consunji v. CA, [G.R. 137873 April 20, 2001])

c) Irretroactivity of Laws (art. 4) General rule: laws are not retroactive Exceptions: (PIERCER) 1. Penal laws when favorable to the accused who is not a habitual delinquent or recidivist 2. Interpretative statutes 3. When the law itself expressly provides Exception to the exception: a. Ex post facto law b. When retroactivity impairs the obligations of contracts

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4. 5. 6. 7.

Remedial statutes Curative statutes Emergency laws Laws creating new substantive rights

Customs which are contrary to law, public order or public policy shall not be countenanced. A custom must be proved as a fact according to the rules of evidence.

Mandatory and Prohibitory laws (art. 5): General Rule - Acts executed against the provisions of mandatory or prohibitory laws shall be void. Exception - If the law expressly provides for the validity of acts committed in violation of a mandatory or prohibitory provision of a statute.

Exceptions - When waiver is 1. Contrary to law, public order, public policy, morals, good customs (e.g. waiver of future inheritance, political rights, future support) 2. Prejudicial to a third person with a right recognized by law

e) Repeal of Laws (art. 7) Express repeal - repeal of repealing law will not revive the old law (unless expressly provided) Implied repeal - the provisions of the subsequent law are incompatible with those of the previous law Requisites: 1. Both laws cover the same subject matter 2. The latter law is repugnant to the earlier law

Penal Laws

Judgment of the Courts (Arts. 8-9)  Decisions of the SC form part of the law  All judges or courts have the duty to render judgment even in the absence of a law &

Applicability

of

Custom (Arts. 10-12) Construction and interpretation of laws come only after it has been demonstrated that application is impossible or inadequate without them.

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Matters/Perso ns Bound All those who live or sojourn in Philippine territory

Status Laws (relating to family rights and duties, status, legal capacity) Property Laws

Citizens of the Philippines, including those living abroad

Laws on Forms and Solemnitie s

Forms and solemnities of contracts, wills, public instruments

f) Judicial Decisions

g) Presumption

Governing Laws (Arts. 14-17)

LAW

General Rule- Rights may be waived

2.

Legal Periods (Art. 13, as amended by Sec. 31, EO 292) Year = 12 months; Month = 30 days, unless referring to a specific calendar month; Day = 24 hours; Night = sunset to sunrise

i)

d) Waiver of Rights (art.6)

1.

h) Computation of Time

j)

Real and personal property

Principle/ Doctrine Principle of Territoriality: follow laws of the place where crime was committed Principle of Nationality: follow one’s own national laws

Lex rei sitae: follow laws of the place where property is situated Lex loci celebrationis: follow laws of the country in which they are executed

Rules on Prohibitive Laws (art. 17)

General Rule - Prohibitive laws concerning persons, their acts or property and laws which have for their object public order, public policy or good customs are not rendered ineffective by laws, judgments promulgated or conventions agreed upon in foreign country. Exception: Art. 26 (2) of Family Code

2. HUMAN RELATIONS

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a) Application PRINCIPLE OF ABUSE OF RIGHTS (ART. 19) When one’s right is exercised for the purpose of prejudicing or injuring another Requisites/ Elements: 1. There is a legal right or duty 2. Which is exercised in bad faith 3. For the sole intent of prejudicing or injuring another Standards to observe in the exercise of one’s rights: 1. Act with justice 2. Give everyone his due 3. Observe honesty and good faith

b) Duty to Act with Justice, Observe Honesty and Good Faith ACTS CONTRA BONUS MORES (ART.21)When persons wilfully cause loss or injury to another Elements: 1. There is an act which is legal 2. But which is contrary to morals, good customs, public order, or public policy 3. Done with intent to injure Note:

 

Similarities: In Arts. 19-21, at the core is bad faith or malice; and the aggrieved party must be indemnified. Difference: Under Arts. 19 & 21, the act must be done intentionally. Art. 20, however, does not distinguish (the act may be done either willfully or negligently, as long as the act is be contrary to law).

c) Actions for Breach of Promise to Marry General Rule: Breach of promise to marry is not actionable. Exception: When one party has already made real efforts to prepare and spend for the wedding. Such act is unjustifiably contrary to good customs for which the defendant must be held answerable for damages in accordance with Art. 21 of the NCC. (Wassmer v. Velez 12 SCRA 649 (1964))

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d) Unjust Enrichment at the Expense of Others ACCION IN REM VERSO (Art. 22) – action for recovery of what has been paid without just cause. Requisites: 1. Defendant has been enriched 2. Plaintiff suffered a loss 3. Unjust Enrichment of defendant is without just or legal ground 4. Plaintiff has no other action based on contract, quasi-contract, crime, or quasi-delict

 Distinguished from solutio indebiti: Mistake is an essential element in solutio indebiti but not in accion in rem verso. DUTY TO INDEMNIFY ONE FOR DAMAGE TO HIS PROPERTY (Art. 23): when defendant was benefitted even if not due to fault or negligence DUTY OF COURTS TO PROTECT A PARTY IN A CONTRACT (Art. 24): When such party is at a disadvantage on account of his: (MIgIMenTO) Moral dependence Ignorance Indigence Mental weakness Tender age Other handicap THOUGHTLESS EXTRAVAGANCE (Art. 25) May be prevented if the ff requisites are present: 1. During an acute public want or emergency 2. Person seeking to stop it is the gov’t or a private charitable institution e) Rights to Privacy

Personal

Dignity

and

Protection of Human Dignity (Art. 26) Every person shall respect the dignity, personality, privacy and peace of mind of others The following acts produce a cause of action for damages, prevention and other relief: (PryMIVex) 1. Prying into the privacy of another’s residence

2.

Meddling with or disturbing the private life or family relations of another

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3. Intr

4.

iguing to cause another to be alienated from friends Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition f) Liability of Public Officers

Relief Against Public Officials (Art. 27) When one suffers material or moral loss because a public officer fails without cause to perform his duty, the officer is not protected by his office and is personally liable.

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I. PERSONS ============================== ===================

TOPICS UNDER THE SYLLABUS A. General Provisions 1. Juridical Capacity v Capacity to Act 2. Restrictions and Modifications on Capacity to Act B. Natural Persons 1. When Personality Begins and Ends 2. Rules on Survivorship (Art.43, CC v Rule 131 Sec jj) C. Juridical Persons 1. Who are Juridical Persons 2. When Personality Begins and Ends 3. Rights of Juridical Persons D. Domicile ========================= ================= A. GENERAL PROVISIONS

1. Juridical Capacity v. Capacity to Act (Art. 37) JURIDICAL CAPACITY Fitness to be the subject of legal relations Passive Inherent Lost only through death Can exist without capacity to act Cannot be limited or restricted

CAPACITY TO ACT Power to do act with legal effects Active Merely acquired Lost through death and other causes Cannot exist without juridical capacity Can be restricted, modified, or limited

Full Civil Rights: union of both juridical capacity and capacity to act

2. Restrictions (Art. 38)

on

Capacity

to

(MInD - ICIP) Do not exempt the incapacitated person from certain obligations 1. Minortiy

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Act

2. Insanity 3. State of being Deaf-mute 4. Imbecility 5. Civil Interdiction 6. Prodigality – state of squandering money or property with a morbid desire to prejudice the heirs of a person (Martinez v. Martinez, 1 Phil. 182)

Circumstances that Modify or Limit Capacity to Act (art. 39) Age Penalty Absence Insanity Prodigality Insolvency Imbecility Family Relations Trusteeship Deaf-muteness Alienage CIVIL PERSONALITY – the aptitude of being the subject, active or passive, of rights and obligations

B. NATURAL PERSONS NATURAL PERSONS Natural Persons A human being, has physical existence Product of procreation

V. JURIDICAL PERSONS Juridical Persons Exists only in contemplation of law Product of legal fiction

1. When Personality Begins and Ends Civil Personality, Natural Persons (Arts. 4043) General Rule Determined extinguished by death

by

birth,

Exception The conceived child shall be considered born for all purposes favorable to it, provided it be born later under the following conditions: 1. It is alive at the time it is completely delivered from the mother’s womb 2. BUT if it had an inter-uterine life of less than 7 months, only if it lives for at least 24 hours after its complete delivery from the maternal womb

2. Rules on Survivorship Doubts as to Order of Death: As between two or more persons called to succeed each other, if there is doubt as to which of them died first, whoever alleges the death of prior to the other

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shall prove the same. In the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other.  This rule applies only to cases involving succession

C. JURIDICAL PERSONS 1. Who are Juridical Persons Civil Personality, Juridical Persons (Arts. 4447) 1. The state and its political subdivisions 2. Other corporations, institutions, and entities for public interest or purpose, created by law 3. Corporations, partnerships, and associations for private interest or purpose 2. When Personality Begins and Ends  Creation: (1) and (2) are created by the laws creating or recognizing them, private corporations are governed by the Corp. Code (B.P. 68) and partnership and associations are governed by the provisions of the New Civil Code on partnerships  Extinguished: by termination of existence

3. Rights of Juridical Persons 1. 2. 3.

Acquire and possess property of all kinds Incur obligations Bring civil or criminal actions

CITIZENSHIP  In the Philippine jurisdiction, what is followed is the concept of jus sanguinis (citizenship by blood) as opposed to jus soli (citizenship by place of birth)

D. DOMICILE DOMICILE ( Arts. 50-51) For natural persons, it is the place of habitual residence For juridical persons, it is where their legal representation is established or where they exercise their principal functions (when the

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law creating them does not fix the domicile) A minor follows the domicile of his parents  Domicile of origin can only be lost when a change of domicile occurs. Requirements for the acquisition of new domicile: 1. Bodily presence in a new locality 2. Intention to remain therein (animus manendi) 3. Intention to abandon the old domicile (animus non revertendi)  The husband and the wife shall fix the family domicile. In case of disagreement, the court shall decide Kinds of Domicile 1. Domicile of origin – received by a person at birth 2. Domicile of choice – the place freely chosen by a person sui juris 3. Constructive domicile – assigned to a child by law at the time of his birth

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TOPICS UNDER THE SYLLABUS E. Marriage (Arts. 1-54, Family Code) 1. Concept 2. Essential and Formal Requirements 3. Non-Essential Requirements 4. Marriages Celebrated Outside the Philippines a. Validity and Exceptions b. Foreign Divorce 5. Void Marriages a. Void ab initio under Art. 35 b. Void under Art. 36 c. Void for Being Incestuous under Art. 37 d. Void for Reason of Public Policy under Art. 38 e. Imprescriptibility of action or defense for declaration of nullity of marriage. (Art. 39)

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f. Subsequent Marriage Without Judicial Declaration of Nullity of Previous Void Marriage (Art. 40) 6. Annullable Marriages 7. Procedure and Effects of Termination of Marriage ============================== ==================

E. MARRIAGE 1. CONCEPT

Marriage is 1. A special contract 2. of permanent union 3. Between a man and a woman 4. Entered into in accordance with law 5. For the establishment of conjugal and family life

2. ESENTIAL AND FORMAL REQUIREMENTS 1. Legal capacity of contracting parties a. Must be between a man and woman b. Must be at least 18 years old 2. Consent freely given, IN the PRESENCE of the solemnizing officer Formal Requisites of Marriage: (ALC) 1. Authority of solemnizing officer 2. Valid marriage license (except in cases where a marriage license is not required)  valid only for 120 days from issue in any part of the Philippines 3. Marriage ceremony where the contracting parties appear before the solemnizing officer, with their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age Effects: 1. Absence of essential or formal requisites – void ab initio Exceptions: a. If solemnized by unauthorized person, the marriage will still be valid if either or both contracting parties believed in good faith that the solemnizing officer had legal authority (Article 35(2)) Those exempt from the license requirement. If either of the contracting parties are 1. at a point of death (articulo mortis),

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2. or the residence of either party is

located that there is no means of transportation to enable such party to appear personally before the civil registrar, 3. cohabitation for 5 years, then the marriage may be solemnized without the necessity of a marriage license. (Article 27 and 28) 2. Defect in any of the essential requisites – voidable 3. Irregularity in any of the formal requisites – does not affect the validity of the marriage but will make the party responsible civilly, criminally, or administratively liable Authorized Solemnizing Officers: (JPCCCM) 1. Incumbent member of the judiciary within the court’s jurisdiction 2. Duly authorized priest, rabbi, imam or the minister of any church or religious sect 3. Ship captain or airplane chief only in articulo mortis between passengers or crew members while the ship is at sea or the plane is in flight and also during stopover at ports of call 4. Military commander of a unit to which a chaplain is assigned only in articulo mortis between persons within the zone of military operations whether members of the armed forces or civilians and only in the absence of the chaplain 5. Consul-general, consul or vice-consul only when contracting parties are both Filipinos abroad 6. Mayor (Local Government Code of 1991) The vice mayor, in case the mayor is temporarily incapacitated to discharge his duties Marriages Exempt from License Requirements: 1. Marriage in articulo mortis (one of the parties is at the point of death) 2. If the residence of either party is so located that there is no means of transportation to enable such party to appear personally before the civil registrar 3. Marriage solemnized outside the Philippines where no marriage license is required by the country where it was solemnized

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4. Marriage among Muslims or among members of ethnic cultural communities in accordance with their customs 5. Marriage between persons who have lived together as husband and wife for at least five years and without any legal impediment to marry each other Requisites: a. Man and woman must have been living together as husband and wife for at least five years before marriage b. The parties must have no legal impediment to marry each other c. The fact of absence of legal impediment between the parties must be present at the time of marriage d. The parties must execute an affidavit stating that they have lived together for at least five years (and are without legal impediment to marry each other) e. The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage 

No legal impediment during the entire period: This 5-year period should be a period of cohabitation characterized by exclusivity – meaning no third party was involved at any time – that is, unbroken. (Niñal vs. Bayadog, 328 SCRA 122 (2000)) AUTHORIZED VENUES FOR MARRIAGE: General Rule: Must be solemnized publicly, and not elsewhere, in the: 1. Chambers of the judge or in open court 2. Church, chapel or Office of consul-general, consul or viceconsul Exceptions: 1. Marriage at the point of death (articulo mortis) 2. Marriage in remote places

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3. Marriage at a house or place designated by the parties in a sworn statement upon their written request to the solemnizing officer

OTHER REQUIREMENTS: Either or Both Requires Parties 18 years old and Parental consent above but below 21 Marriage counseling 21 years old and Parental advice above but below 25 Marriage counseling

Lack of consent Lack of advice or counselling

EFFECTS parental Marriage is VOIDABLE parental marriage

NO EFFECT on th validity of marriage However, this will suspend the issuance of the marriage license for 3 months from the completion of publication If they get married during the 3-month period without a license, the marriage shall be VOID If they are able to obtain a license during the 3-month period, the marriage will still be valid but civil and criminal liability may attach.

3. NON-ESSENTIAL REQUIREMENTS Marriage Certificate While a marriage certificate is considered the primary evidence of a marital union, it is not regarded as the sole and exclusive evidence of marriage. Jurisprudence teaches that the fact of marriage may be proven by relevant evidence other than the marriage certificate. Hence, even a person’s birth certificate may be recognized as

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competent evidence of the marriage between his parents. (Anonuevo vs. Int. Estate of Jalandoni, [GR 178221, December 1, 2010])

4. MARRIAGES SOLEMNIZED ABROAD a) Validity and Exceptions General Rule: Marriages solemnized outside the Philippines in accordance with the laws of the foreign country shall be valid here (lex loci celebrationis). – Basis: Principle of comity  However, if solemnized inside the Philippine Consulate abroad, Philippinelaws must be observed Exceptions: 1. Where either or both parties are below 18 years old 2. Bigamous or polygamous marriage (except Art. 41 on presumptive death of spouse) 3. Mistake in identity 4. Marriages void under Art. 53 – contracted following the annulment or declaration of nullity of a previous marriage but before partition 5. Psychological incapacity 6. Incestuous marriages 7. Marriage void for reasons of public policy





were Filipino citizens but, later on, one of them becomes naturalized as a foreign citizen and obtains a divorce decree. The Filipino spouse should be allowed to remarry as if the other party was a foreigner at the time of the solemnization of the marriage. Republic v. Orbecido III, 472 SCRA 114 (2005) For the second paragraph of Article 26 to apply, a spouse who obtained the divorce must not be a Filipino at the time of the divorce. Otherwise, the divorce is not recognized in the Philippines. Republic v. Iyoy, G.R. No. 15277, September 21, 2005 Additionally, an action based on the second paragraph of Article 26 of the Family Code is not limited to the recognition of the foreign divorce decree. If the court finds that the decree capacitated the alien spouse to remarry, the courts can declare that the Filipino spouse is likewise capacitated to contract another marriage. No court in this jurisdiction, however, can make a similar declaration for the alien spouse (other than that already established by the decree), whose status and legal capacity are generally governed by his national law. Corpuz vs. Sto. Tomas, G.R. No. 186571, August 11, 2010

5. VOID MARRIAGES a) Void ab initio under Art. 35

b) Foreign Divorce Divorce by Foreigner-Spouse:  If a Filipino is married to a foreigner and the latter subsequently obtains a valid divorce abroad capacitating him/her to remarry, the Filipino spouse shall likewise have the capacity to remarry under the Philippine law. (Art. 26, par. 2)  Requisites: a.) There is a valid marriage that had been celebrated between Filipino citizen and a foreigner b.) A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry The traditional rule applies when parties at the time of celebration are a Filipino and an alien BUT  This includes cases involving parties who, at the time of the celebration of the marriage,

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1. Contracted by any party below 18 years old 2. Solemnized by unauthorized solemnizing officer (Except if either or both parties believed in good faith that the officer had authority) 3. Solemnized without marriage license (Except when license not required) 

A petition to declare the marriage void due to absence of marriage license, filed after the court denied a petition to declare the marriage void due to psychological incapacity, is barred by RES JUDICATA. There is only one cause of action which is the nullity of marriage. Petitioner is estopped from asserting that the first marriage had no marriage license because he impliedly admitted the same when he did not question the absence of a

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marriage license in the first case. Mallion v. Alcantara, G.R. No. 141528, October 31, 2006



Psychological Incapacity must be judged on a case to case basis. It should refer to no less than a mental (not physical) incapacity. It must be characterized by a. gravity b. juridical antecedence c. incurability. Carating-Siaynco v. Siaynco, 441 SCRA 422 (2004)



Mere showing of irreconcilable differences and conflicting personalities does NOT constitute psychological incapacity. Carating-Siaynco v. Siaynco, 441 SCRA 422 (2004)



Mere sexual infidelity or perversion and abandonment do not by themselves constitute psychological incapacity within the contemplation of the Family Code. Neither could emotional immaturity and irresponsibility be equated with psychological incapacity. Dedel v. CA 421 SCRA 461 (2004)



It must be shown that these acts are manifestations of a disordered personality which make respondent completely unable to discharge the essential obligations of a marital state. Root cause must be traceable prior to the marriage ceremony. Dedel v. CA 421 SCRA 461 (2004)



One of the essential marital obligations is "To procreate children based on the universal principle that procreation of children through sexual cooperation is the basic end of marriage." Constant nonfulfillment of this obligation will finally destroy the integrity or wholeness of the marriage. The senseless and protracted refusal of one of the parties to fulfill this marital obligation is equivalent to psychological incapacity. Chi Ming Tsoi v. CA, G.R. No. 119190, January 16, 1997



Psychological incapacity is not equated with insanity or total mental inability to function in all aspects of human life…it is a ground restricted to psychological incapacity “to comply with marital obligations”. Perez-Ferraris v. Ferraris GR No. 162368 (2006)

4. Bigamous or polygamous marriages Exception: Art. 41 – Marriage contracted by a person whose spouse has been absent for 4 years (ordinary absence) or 2 years (extraordinary absence), where such person has a well founded belief that his/her absent spouse is already dead, and after the absent spouse is judicially declared presumptively dead, and at the time of the marriage ceremony is in good faith together with the subsequent spouse 5. Mistake in identity  The contemplated mistake here refers to the actual physical identity of the other party, and not merely mistake in the name, character, age, or other attributes of the person. 6. Subsequent marriage void under Art. 53 - A person whose marriage has been annulled may remarry as long as after the marriage is annulled, the properties of the spouses must be partitioned and distributed and the presumptive legitimes of the children be distributed. Furthermore, the judgment of annulment or absolute nullity, the partition and distribution, and the delivery of the presumptive legitimes must be recorded in the appropriate civil registry and registries of property. Failure to comply with these requisites will make the subsequent marriage void ab initio. Further, failure to record in the proper registries will mean that such will not affect third persons (Arts. 52-53) NOTE: The enumeration of void marriages under Art. 35 is not exclusive. b) Void under Art. 36 Where any of the parties, who at the time of the celebration of the marriage, was psychologically incapacitated to comply with the essential marital obligations, even if incapacity becomes manifest only after solemnization.

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

A finding of psychological incapacity on the part of one spouse shows noncognizance of one’s essential marital obligation, and therefore negates bad faith. As a consequence moral and exemplary damages cannot be awarded against him/her because bad faith is an essential element in awarding moral and exemplary damages. Award of moral damages should be predicated, not on the mere act of entering into the marriage, but on specific evidence that is was done deliberately and with malice by a party who had known of his or her disability and yet willfully concealed the same. Buenaventura v. CA, GR No. 127358, March 31, 2005

The Court emphasizes that the burden falls upon petitioner, not just to prove that private respondent suffers from a psychological disorder, but also that such psychological disorder renders her "truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage." Psychological incapacity must be more than just a "difficulty," a "refusal," or a "neglect" in the performance of some marital obligations. An unsatisfactory marriage is not a null and void marriage. Baccay vs. Baccay, GR No. 117318, December 1, 2010 JURISPRUDENTIAL GUIDELINES (BRE-IGO-IC) (Republic v. CA & Molina 268 SCRA 198 (1997)) 1. Burden of proof to show the nullity of marriage is upon the plaintiff 2. The root cause of the psychological incapacity must be: a. Medically or clinically identified b. Alleged in the complaint c. Sufficiently proven by experts d. Clearly explained in the decision 3. The incapacity must be proven to be existing at the time of the celebration of the marriage 4. Such incapacity must be shown to be medically or clinically permanent or incurable 5. Such illness must be grave enough to bring about the disability of the party to assume the essential obligations of marriage 6. Essential marital obligations must be those embraced by Art. 68-71, as well as Art. 220, 221, and 225 of the Family Code.

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7. Interpretations given by the National Appellate Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling or decisive, should be given great respect by our courts 8. The trial court must order the prosecuting attorney or fiscal and the Solicitor General to appear as counsel for the state 

The foregoing guidelines do not require that a physician examine the person to be declared psychologically incapacitated. What is important is that the totality of evidence can adequately establish the party’s psychological condition. Republic v. CA & Molina, 268 SCRA 198 (1997)



In determining if one of the contracting parties is psychologically incapable, the courts should interpret the provision on a case-to-case basis. Courts should be guided by experience, the findings of experts and researchers in psychological disciplines, and by decisions of church tribunals. Te v. Te, G.R. No. 161793, February 13, 2009 c) Void for Being Incestuous under Art. 37

Whether relationship is legitimate or illegitimate: 1. Between ascendants and descendants of any degree 2. Between brothers and sisters, whether full or half blood d) Void for Reason of Public Policy under Art. 38 1. Between collateral blood relatives up to the 4th civil degree There is no prohibition regarding marriages between collateral blood relatives by half-blood 2. Between step-parents and step-children 3. Between parents-in-law and children-inlaw 4. Between adopting parent and adopted child 5. Between surviving spouse of the adopter and the adopted 6. Between surviving spouse of the adopted and the adopter 7. Between adopted and legitimate child of adopter 8. Between adopted children of same adopter

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9. Between parties where one, with the intention to marry the other, killed that other person’s spouse or his/her own spouse No prior criminal conviction by the court for the killing is required by the law since mere preponderance of evidence is required to prove the killing. Article 38 is an exclusive list. Under the new Family Code, the following can now marry each other: a. Brother-in-law and sister-in-law b. Stepbrother and stepsister c. Guardian and ward d. Adopted and illegitimate child of the adopter e. Parties who have been convicted of adultery or concubinage NOTE: R.A. 6995 (Mail Order Bride Act) declares as unlawful the practice of matching Filipino women for marriage to foreign nationals on a mail-order basis and other similar practices including the advertisement, publication, printing or distribution of brochures, fliers, and other propaganda materials in furtherance thereof. e) Imprescriptibility of action or defense for declaration of nullity of marriage. (Art. 39) A marriage that is invalid from the beginning is non-existent, and in effect, cannot be dissolved. The judicial decree to declare its nullity is a mere confirmation of the voidness of the marriage, hence this petition is imprescriptible. f)

Subsequent Marriage Without Judicial Declaration of Nullity of Previous Void Marriage (Art. 40)

-For the purposes of remarriage, the only legally acceptable basis for declaring a previous marriage an absolute nullity is a final judgment declaring such previous marriage void, whereas, for purposes other than remarriage, other evidence is acceptable

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-In a case for concubinage, the accused need not present a final judgment declaring his marriage void for he can adduce evidence in the criminal case of nullity of his marriage other than proof of final judgment declaring his marriage void. Hence, the pendency of the civil action for nullity of marriage does not pose a prejudicial question in a criminal case for concubinage. However, a judicial declaration of nullity is not needed where no marriage ceremony at all was performed by a duly authorized solemnizing officer as where the parties merely signed a marriage contract on their own. The mere signing of a marriage contract bears no semblance to a valid marriage and thus needs no judicial declaration of nullity. Lucio Morigo v. People, G.R. No. 145226, February 6, 2004 Second marriage is still bigamous even if the first marriage is judicially declared void after contracting the second marriage, only if the first marriage ostensibly transpired as there was a marriage ceremony. However, if the first marriage was void due to the fact that no marriage ceremony was solemnized at all, then the second marriage is not bigamous. Morigo v. People, 422 SCRA 376 (2004) NOTE: Even if a marriage is void, it must be declared void first by final judgment before the parties to such void marriage can remarry. The parties cannot decide for themselves the invalidity of their marriage. EXCEPTION: When the purpose is other than remarriage, a collateral attack of the marriage is allowed. PRESUMPTION OF DEATH FOR REMARRIAGE (Art. 41) General Rule: Marriage contracted by any person during the subsistence of a previous marriage is VOID Exception: If before the celebration of the subsequent marriage: a.The previous spouse had been absent for 4 consecutive years (ordinary absence) or 2 years (extraordinary absence) and

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b.The remaining spouse has a well-founded belief that the absent spouse is already dead c.Judicial declaration of presumptive death - In this case, the subsequent marriage is valid but it shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse. - Without filing of the affidavit of reappearance, there will exist two valid marriages (valid bigamous marriage) Exception to the Exception: If both spouses of the subsequent marriage acted in bad faith, such marriage is void ab initio (Art. 44) Effect of Reappearance  The subsequent bigamous marriage under Art. 41 remains valid despite reappearance of the absentee spouse 



UNLESS, the reappearance made in a sworn statement is recorded in the civil registry in the place where the parties to the subsequent marriage resides. In such case, the subsequent marriage is automatically terminated. HOWEVER, if there was a previous judgment annulling or declaring the first marriage a nullity, the subsequent bigamous marriage remains valid.

NOTE: Summary proceedings under the Family Code are final and executory pursuant to Article 247. Hence, summary proceeding for the declaration of presumptive death of an absent spouse under Article 41 of the Family Code is nonappealable. Republic v. Tango, G.R. No. 161062, July 31, 2009 Effects of Termination of Subsequent Marriage: (LDDRI) 1. Children of the subsequent marriage conceived prior to its termination shall be considered legitimate 2. The absolute community or conjugal partnership shall be dissolved and liquidated 

If either spouse acted in bad faith, his/her share in the net profits shall be forfeited: a. In favor of the common children

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b. If none, in favor of the children of the guilty spouse by previous marriage c. In default of children, in favor of the innocent spouse 3. Donations by reason of the marriage remain valid except if the donee contracted the marriage in bad faith 4. The innocent spouse may revoke the designation of the spouse in bad faith as the beneficiary in any insurance policy, even if designation is stipulated as irrevocable, and 5. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate or intestate succession NOTE: The above effects apply to voidable bigamous marriages. Except for (1), the above effects also apply to marriages which are annulled or declared void ab initio under Art. 40.

6. ANNULLABLE MARRIAGES Grounds for Annulment (art. 45): (PUFFIS) 1. Lack of parental consent 2. Either party is of unsound mind 3. Fraudulent means of obtaining consent of either party 

Circumstances constituting fraud: (Art. 46) a. Non-disclosure of conviction by final judgment of crime involving moral turpitude b. Concealment of pregnancy by another man c. Concealment of sexually transmissible disease, regardless of nature, existing at the time of marriage d. Concealment of drug addiction, habitual alcoholism, homosexuality and lesbianism 4. Force, intimidation or undue influence 5. Physical incapability of either party to consummate the marriage with the other, and such incapacity continues and appears to be incurable Requisites of Annulment due to Impotence: a. Impotence exists at the time of the celebration of marriage b. Permanent

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c. Incurable d. Unknown to the other spouse e. The other spouse must not also be impotent  Doctrine of Triennial Cohabitation: Presumption that the husband is impotent should the wife still remain a virgin after 3 years of living together with her husband. 6. Affliction of Sexually Transmissible Disease found to be serious and which appears incurable Elements: a. Existing at the time of marriage b. Sexually transmissible disease c. Serious d. Appears incurable ARTICLE 45 The STD is a ground for annulment The STD does not have to be concealed

The STD must be serious and incurable

The STD does not have to be serious and appears incurable

ARTICLE 46 The STD is a type of fraud which in turn is a ground for annulment The STD must be concealed

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GROUNDS FOR ANNULMENT Lack of parental consent (PC)

Insanity of (INSANITY)

one

party

EFFECTS OF TERMINATION OF MARRIAGE WHO CAN FILE PRESCRIPTIVE PERIOD a. Underage (18-21)

party

a. Within 5 years after turning 21

b. Parent or guardian

b. Before child reaches 21

Sane spouse

2 views: Sempio-Diy:

RATIFICATION

Free cohabitation after reaching 21

Free cohabitation after insane spouse regains sanity

Before death of other party Dean Del Castillo: Within 5 years from the time the right or action accrues Guardian of insane spouse

Anytime before the death of either party

Insane spouse

During the lucid interval or after regaining sanity also before death of other party

Fraud

Injured Party

Within 5 years after discovery of Fraud

Vitiated consent

Injured Party

Within 5 years from time force, intimidations or undue influence disappeared or ceased

Incapability to Consummate/ Sexually transmissible disease (CONSUMMATE/STD)

Injured Party

Within 5 years after the marriage ceremony

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Free cohabitation even with full knowledge of facts constituting the fraud Free cohabitation after the cause (force, intimidation, undue influence) disappeared or ceased *intimidation can be on the person or the property of the injured party and his/her immediate family No ratification since defect is permanent.

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BASIS Status of children Property Relations

Donations Propter Nuptias

Insurance Successio n

EFFECTS OF VOIDABLE BIGAMOUS MARRIAGE, DECLARATION OF NULLITY, AND ANNULMENT VOIDABLE BIGAMOUS MARRIAGE (ART. 41) DECLARATION OF ANNULMENT NULLITY Children of subsequent marriage conceived before its termination Illegitimate except Children conceived or born before – legitimate Art. 36 and Art. 53 annulment decree – legitimate ACP/CPG shall be liquidated. The share in the net profits of Same Same community property of the spouse who contracted the marriage in bad faith, shall be forfeited in favor of common children or if there are none, children of the guilty spouse by previous marriage or in default, the innocent spouse (common children -> children of guilty spouse by previous marriage -> innocent spouse) Shall remain VALID except Same Same If donee contracted the marriage in bad faith, donations propter nuptias made to the donee are revoked by operation of law. If both spouses acted in bad faith, donations propter nuptias made by one in favor of the other are revoked by operation of law. If one spouse acted in bad faith, innocent spouse may revoke Same Same his designation as beneficiary in the insurance policy even if such designation be stipulated as irrevocable If one spouse contracted the marriage in bad faith, he shall be Same Same disqualified to inherit from the innocent spouse both testate and intestate

CIVIL LAW REVIEWER

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DISTINCTION BETWEEN VOID AND VOIDABLE MARRIAGES VOID VOIDABLE Inexistent from the time of performance Valid until annulled Cannot be ratified Can be ratified either by free cohabitation or prescription

BASIS As to nature As to susceptibility to ratification As to effect on property As to effect on children

As to how marriage may be impugned

a. b. a. b. c.

No community property, only co-ownership (Art 147/148) Children are illegitimate Exceptions: In case of psychological incapacity (Art 36) Children born of subsequent marriage (Art 53) May be attacked directly or collaterally but for purpose of remarriage, there must be judicial declaration of nullity. Can still be impugned even after death of parties Action for nullity does not prescribe

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Absolute community exists unless another system is agreed upon in marriage settlement (Default: ACP) Children are legitimate if conceived before decree of annulment a. Cannot be attacked collaterally, only directly, i.e. there must be a decree of annulment b. Can no longer be impugned after death of one of the parties c. Action prescribes

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7. PROCEDURE AND EFFECTS TERMINATION OF MARRAIGE

A.M. No. 02-11-10-SC PROPOSED RULE ON DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND ANNULMENT OF VOIDABLE MARRIAGES SCOPE:  Petitions for declaration of absolute nullity of void marriages and annulment of voidable marriages under the Family Code  The Rules of Court shall apply suppletorily PETITION FOR DECLARATION OF ABSOLUTE NULLITY: Who may file: solely the husband or wife What to allege: If based on psychological incapacity, complete facts showing either one is incapacitated from complying with marital obligations at the time of the celebration of the marriage including physical manifestations, if any 

Actions or defenses shall NOT prescribe

PETITION FOR ANNULMENT OF VOIDABLE MARRIAGES Who may file: GROUND PARTY TO PRESCRIPTIV FILE THE E PERIOD SUIT 1. No Parental a. Parent or a. Anytime Consent Guardian before charge having Legal reaches 21 Charge of “no- yrs. old consent” party

2. Insanity

b.“NoConsent” Party a. Sane spouse without knowledge of insanity b. Relative, guardian or person having

b. Within 5 years after reaching 21 a. Anytime before death of either party b. Anytime before death of either party

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legal charge of insane

OF

3. Fraud

c. Insane spouse Injured Party

4. Vitiated Consent

Injured Party

5. Incapability to Consummate/ Sexually Transmitted Disease

Injured Party

c. During lucid interval or after regaining sanity Within 5 years from discovery of fraud Within 5 years from time of force, intimidation or undue influence disappeared or ceased Within 5 years after the marriage ceremony

A. Venue: Family Court of the province or city where the petitioner or the respondent has been residing for at least 6 months prior to the date of filing (or non-resident respondent: where he may be found in the Philippines) AT THE ELECTION OF THE PETITIONER. B. Petition shall allege: 1. Complete facts constituting the cause of action 2. Names and ages of the common children of the parties and specify the regime governing their property relations, and the properties involved 3. Verified and accompanied by a certification against forum shopping, which must be signed personally by the petitioner  

Petition may not be signed solely by counsel or through an attorney-in-fact If petitioner is in a foreign country, the verification/certification shall be authenticated by the duly authorized officer of the Philippine embassy or legation, consul general, consul, viceconsul, or consular agent in said country

4. Filed in 6 copies, a copy to be served to the OSG and the Office of the City or Provincial Prosecutor, w/in 5 days from the date of its

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filing and submit to the court proof of such service w/in the same period 

Failure to comply with requirements may be a ground for immediate dismissal of the petition.

C. Service of Summons  Governed by the Rule 14 of the Rules of Court and the following: 1. Respondent cannot be located at his given address or his whereabouts are unknown and cannot be ascertained by diligent inquiry: (a) Service of summons by publication once a week for 2 consecutive weeks in a newspaper of general circulation in the Philippines and in such places as the court may order (b) Served at respondent’s last known address by registered mail or any other means the court may deem sufficient 2. Summons to be published shall be contained in a court order with the following data: (a) title of the case (b) docket number (c) nature of the petition (d) principal grounds of the petition and the reliefs prayed for (e) a directive for the respondent to answer w/in 30 days from the last issue of the publication D. Motion to Dismiss: not allowed, except for lack of jurisdiction over the subject matter or over the parties (however, any ground that might warrant a dismissal may be raised as an affirmative defense in an answer) E. Answer  Verified by the respondent himself & filed w/in 15 days from service of summons or w/in 30 days from the last issue of publication in case of service of summons by publication  Failure to answer shall NOT make him in default  Court will order the public prosecutor to investigate if there is collusion if no answer is filed or when answer does not tender an issue

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F. Investigation Report of the Public Prosecutor  To be made w/in 1 month after the receipt of the court order  Shall state whether the parties are in collusion and basis for such finding, serve copies to parties & counsels (a) there is collusion – parties shall file their respective comments w/in 10 days from receipt of a copy (b) no collusion – set the case for pretrial  Public prosecutor shall represent the State  Investigation is a condition sine qua non for further proceedings in cases where the respondent does not answer. This is true even if during the hearing the fiscal participated and cross-examined the witnesses. Corpus vs. Ochoterena, 435 SCRA 446 (2004) G. Court may require a social worker to conduct a case study and submit report at least 3 days before the pre-trial H. Pre-trial is MANDATORY.  Notice 1. Notice of pre-trial shall be served to the parties, their counsels and the public prosecutor, containing: date of pre-trial conference and order directing the parties to file pre-trial brief, ensuring its receipt by the adverse party at least 3 days before the date of pre-trial 2. Notice of pre-trial shall still be sent to respondent even if he did not file an answer  Personal Appearance 1. Parties should appear personally at the pre-trial 2. Failure of petitioner to appear at the pre-trial personally w/o the valid cause, case dismissed 3. Failure to file the pre-trial brief or to comply with its required contents, case dismissed 4. If respondent filed his answer but fails to appear at the pre-trial, the court shall proceed but public prosecutor required to investigate reason for non-appearance (if due to collusion)

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

Pre-trial conference Court may refer issues to mediator, but should this fail or is not availed of, proceed with pre-trial conference  Pre-trial order 1. Parties are not allowed to raise issues or present witnesses and evidence other than those stated in the pre-trial order 2. Parties have 5 days from receipt of pre-trial order to make corrections or modifications 3. Public prosecutor shall appear for the State to prevent collusion J. Prohibited Compromise (a) Civil status of persons (b) Validity of marriage or legal separation (c) Any ground for legal separation (d) Future support (e) Jurisdiction of courts (f) Future legitimes K. Decision  Copies will be served on the parties, including the SolGen and public prosecutor  Final after expiration of 15 days from notice to the parties  Should be registered in the Civil Registry where the marriage was celebrated and in the Civil Registry of the place where the Family Court is located L. Appeal  Not allowed if no motion for reconsideration or new trial is made w/in 15 days from notice of judgment M. Death  Party dies before entry of judgment: case closed and terminated w/o prejudice to the settlement of the estate in proper proceedings in the regular courts  Party dies after the entry of judgment: binding upon the parties and their successorsin-interest in the settlement of the estate in the regular courts. N. Date of Effectivity: March 15, 2003 ============================ ====================

F. LEGAL SEPARATION 1. Grounds 2. Procedure 3. Defenses 4. Liquidation 5. Effects of Legal Separation Pendente Lite 6. Reconciliation Effects ======================== ================== 1. GROUNDS (PRC-FAL-BILA) 1. Repeated physical violence or grossly abusive conduct directed against petitioner, a common child or a child of the petitioner 2. Physical violence or moral pressure to compel the petitioner to change religious or political affiliation 3. Attempt of respondent to corrupt or induce the petitioner, a common child, or a child of the petitioner, to engage in prostitution, or connivance in such corruption or inducement 4. Final judgment sentencing respondent to imprisonment of more than 6 years (even if pardoned) 5. Drug addiction or habitual alcoholism 6. Lesbianism or homosexuality 7. Subsequent bigamous marriage 8. Sexual infidelity or perversion 9. Attempt by respondent against the life of the petitioner 10. Abandonment for more than 1 year without justifiable cause Grounds to Deny Legal Separation/Defenses to Legal Separation: (C4-D-GRP) 1. Condonation  failure of the husband to look for his adulterous wife is not condonation to wife’s adultery 2. Consent 3. Connivance 4. Collusion 5. Mutual guilt 6. Prescription – action for legal separation must be filed within five years from the time of the occurrence of the cause of action

TOPICS UNDER THE SYLLABUS

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 P

7.

Death of either party during the pendency of the case Lapuz-Sy v. Eufemio, 43 SCRA 177 (1972) 8. Reconciliation of the spouses during the pendency of the case Effects of Separation: 1. Spouses are entitled to live separately 2. Marriage bond is not severed 3. Dissolution of property regime 4. Forfeiture of the share of the guilty spouse in the net profits of the ACP/CPG 5. Custody of minor children to innocent spouse (subject to Art. 213: parental authority shall be exercised by parent designated by the court)  The imposed custodial regime under the second paragraph of Article 213 is limited in duration, lasting only until the child’s seventh year. From the eighth year until the child’s emancipation, the law gives the separated parents freedom, subject to the usual contractual limitations, to agree on custody regimes they see fit to adopt. (Dacasin vs. Dacasin, GR168785, February 5, 2010) 6. Guilty spouse is disqualified from intestate succession and provisions made by innocent spouse in his favor in a will shall be revoked by operation of law 7. Innocent spouse may revoke the donation made by him in favor of the offending spouse. However, alienations, liens and encumbrances registered in good faith before the recording of the complaint for revocation in the registries of property shall be respected. 8. Innocent spouse may revoke designation of guilty spouse as beneficiary in the insurance policy even if such designation be stipulated as irrevocable 2. PROCEDURE FOR LEGAL SEPARATION A.M. No. 02-11-11-SC PROPOSED RULE ON LEGAL SEPARATION 

The Rules of Court shall apply suppletorily

Who may file: solely the husband or wife When to file: within 5 years occurrence of any of the grounds

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from

the

 

rocedure is almost the same as in the Rule on Declaration of Absolute Nullity & Annulment (see above) Creditors are furnished copies of the petition Pre-trial set not earlier than 6 months from filing of the petition for possibility of reconciliation (COOLING OFF PERIOD)

Exception: There is no cooling-off period if the ground alleged are those under R.A. 9262 (Violence Against Women & Children). The court shall proceed in the main case and other incidents of the case as soon as possible. R.A. 9262, Sec. 19. 

The abandonment contemplated is one without justifiable cause for more than one year. As it was established that Lucita left William due to his abusive conduct, such does not constitute abandonment contemplated by the said provision. Ong Eng Kiam vs. Ong, G.R. No. 153206, October 23, 2006

============================ ====================

TOPICS UNDER THE SYLLABUS G. RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE ======================== ==================

Obligations of Husband and Wife (L2H2ds) 1. Live together 2. Observe mutual love, respect and fidelity 3. Render mutual help and support 4. Management of the household 5. Fix the family domicile 6. Joint responsibility for the support of the family Profession General Rule - Either spouse may exercise any legitimate profession/business without the consent of the other Exception - The other spouse may object on valid, serious and moral grounds. In case of disagreement, the court shall decide whether a. The objection is proper AND b. Benefit has accrued to the family before and after the objection.

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  If benefit accrued to the family before the objection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent  If benefit accrued to the family after the objection has been made, the resulting obligation shall be enforced against the community property ============================ ====================

TOPICS UNDER THE SYLLABUS H. PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE 1. How Governed 2. Marriage Settlements 3. Donations by Reason of Marriage 4. Property Relations of Union with Marriage a.System of Absolute Marriage b. Conjugal Partnership of Gains 5. Separation of Properties During Marriage 6. Regime of Separation of Property ======================== ================== 1. WHAT GOVERNS PROPERTY RELATIONS BETWEEN SPOUSES 1. Marriage settlement – future spouses may agree upon the regime of ACP, CPG, complete separation of property, or any other regime 2. Family Code – if there is no marriage settlement or when the regime agreed upon therein is void, the system of ACP shall govern 3. Local customs

2. MARRIAGE SETTLEMENT

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Requisites of a Valid Marriage Settlement: (WSB-TC-CR) 1. In writing 2. Signed by the parties 3. Executed before the celebration of marriage 4. To fix the terms and conditions of their property relations 5. If parental consent is needed for the marriage, the parent/guardian must be made a party to the agreement 6. If the party executing the settlement is under civil interdiction or any other disability, the guardian appointed by the court must be made a party to the settlement 7. Registration (to bind 3rd persons) General Rule: Property Relations are governed by Philippine laws Exceptions: 1. When both are aliens, even if married in the Phils. 2. As to extrinsic validity of contracts 3. Contrary stipulation

3. DONATIONS BY REASON OF MARRIAGE (Donations Propter Nuptias) Before Marriage General Rule: Future spouses cannot donate to each other more than 1/5 of their present property (excess shall be considered void) Requisites: 1. Made before celebration of marriage 2. In celebration of marriage 3. In favor of one or both future spouses Exception: If they are governed by ACP During Marriage General Rule: Donations made by spouses to each other during the marriage are VOID REASON: 1. To protect unsecured creditors from being defrauded 2. To prevent stronger spouse from imposing upon the weaker one the transfer of the latter’s property to the former 3. To prevent indirect modification of the marriage settlement Exceptions: 1. Moderate gifts on the occasion of any family rejoicing 2. Donation mortis causa

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Applies to common law spouses (Art. 87) Grounds to Revoke Donation Propter Nuptias: (CARNIVL) 1. Marriage is not celebrated 2. Marriage is judicially declared void ab initio 3. Marriage without the needed parental consent 4. Marriage is annulled and donee is in bad faith 5. If it is with a resolutory condition and the condition is complied with 6. In legal separation and donee is the guilty spouse 7. Donee commits acts of ingratitude such as: a. Commits an offense against the person, honor or property of the donor, his wife, or his children under his parental authority b. Imputes to the donor any criminal offense or any act involving moral turpitude, unless the crime was committed against the donee himself, his wife, or his children under his authority c. Unduly refuses to support the donor when he is legally or morally bound to give such support DONATION PROPTER NUPTIAS v. ORDINARY DONATION DONATIONS ORDINARY BASIS PROPTER DONATIONS NUPTIAS Governed by the rules on ordinary donations except Governed by Formaliti if future rules on es property, it must donations (Arts. conform with 725-773 NCC) formalities of wills No limit except May be donated that donor shall Present but up to 1/5 of leave property Property donor's present enough for his property support May be included Future provided Cannot be Property donation is included mortis causa Grounds for Art. 86 of Family Arts. 760, 764, revocatio Code 765 NCC n

CIVIL LAW REVIEWER

Prescriptive Periods for Filing Action for Revocation of Donation Propter Nuptias (Based on Sta. Maria) If marriage is not 5 years (Art. 1149 celebrated NCC) from the time marriage is not (Except: donations in solemnized on the marriage settlements fixed date automatically void if marriage not celebrated) If marriage is judicially declared void, it depends: (a) If subsequent marriage is void pursuant to Art. 40 in relation to Arts. 52 and 53, because contracted by a spouse before prior void marriage is judicially declared void (b) Judicially declared void on grounds other than Art. 40 in relation to Arts. 52 and 53 When marriage takes place without the required parental consent If resolutory condition is complied with When marriage is annulled and donee in bad faith If donee commits an act of ingratitude In cases of legal separation

By operation of law if donee-spouse contracted subsequent void marriage in bad faith

5 years from finality of judicial declaration of nullity (if action to recover property) 5 years

5 years from happening of condition 5 years from finality of decree 1 year from donor’s knowledge of that fact 5 years from the time the decree of separation has become final

4. PROPERTY RELATIONS

a.

System of Absolute Community

(acp) The property regime of spouses in the absence of a marriage settlement or when the regime agreed upon is void.

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4. E NOTE: Shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the regime at any other time shall be VOID. No waiver of rights allowed during the marriage except in case of judicial separation of property. The waiver must be in a public instrument. Property acquired during the marriage, whether acquisition appears to have been made in the name of one or both spouses, is PRESUMED to belong to the community. General Rule: The community property consists of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. Exceptions/Exclusions from Community Property: 1. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage and its fruits and income 2. Property for personal and exclusive use, except jewelry 3. Property acquired during the marriage by gratuitous title, except when the donor, testator, or grantor expressly provides otherwise 

Encumbrance or disposition of the community property without the consent of the other spouse is totally void. Benefit to the family must always be proven. Homeowner’s Savings & Loan Bank vs. Dailo, G.R. No. 153802, March 11, 2005

Charges Upon and Obligations of the ACP: 1. Debts and obligations contracted during the marriage: a.) By either spouse without the consent of the other to the extent that it benefited the family b.) By designated administrator-spouse c.) By both spouses d.) By one with the consent of the other 2. Taxes, liens, charges and expenses including major or minor repairs, upon community property 3. Support of spouses, their common children and legitimate children of either spouse

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5. 6.

7. 8.

9.

xpenses of litigation between spouses unless the suit is found to be groundless Ante-nuptial debts which redounded to the benefit of the family Taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the family Expenses for professional or vocational course Other ante-nuptial debts, support of illegitimate child, and liabilities for crime or quasi-delicts in absence of separate property Donated or promised to common legitimate children for profession, vocational course or self improvement

If the community property is insufficient to cover all these liabilities (except those falling under (8) spouses shall be solidarily liable for the unpaid balance with their separate properties Dissolution of the ACP: 1. Upon death of either spouse 2. Decree of legal separation 3. Marriage is annulled or nullified 4. Judicial separation of property during the marriage (Arts. 134-138) Liquidation of the ACP: 1. Inventory of all properties a. Inventory of community property b. Inventory of separate property of the wife c. Inventory of separate property of the husband 2. Debts and obligations of ACP are paid 3. Remainder of the separate properties of the spouses are returned to the owner 4. Net remainder of the ACP is divided equally between husband and wife 5. Presumptive legitimes of children are delivered 6. Adjudication of conjugal dwelling and custody of common children b. System of Conjugal Property of Gains (cpg) The spouses contribute the following to a common fund: 1. Proceeds, products, fruits and income of separate properties of spouses

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7. T 2. Everything acquired by spouses through

their efforts 3. Everything acquired by spouses through chance  Shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the regime at any other time shall be VOID. 

No waiver of rights allowed during the marriage except in case of judicial separation of property. The waiver must be in a public instrument.



Property acquired during the marriage, whether acquisition appears to have been made in the name of one or both spouses, is PRESUMED to be conjugal.



The presumption is not rebutted by the mere fact that the certificate of title of the property or the tax declaration is in the name of one of the spouses. Villanueva v. CA,427 SCRA 439 (2004)



It is not even necessary to prove that the properties were acquired with funds of the partnership. The presumption shall subsist in the absence of clear, satisfactory and convincing evidence to overcome the same. Chine v. CA, 423 SCRA 371 (2004)

Exclusive Property in CPG: 1. That brought into the marriage as his/her own 2. That acquired during the marriage gratuitously 3. That acquired by redemption, barter or exchange with exclusive property 4. That purchased with exclusive money What Constitutes CPG: 1. Fruits of conjugal property due or received during the marriage and net fruits of separate property 2. Those acquired through occupation 3. Livestock in excess of what was brought to the marriage 4. Those acquired during the marriage with conjugal funds 5. Share in hidden treasure 6. Those obtained from labor, industry, work or profession of either or both spouse

CIVIL LAW REVIEWER

hose acquired by chance Rules in Cases of Improvement of Exclusive Property: GENERAL RULE: The ownership of improvements made on the separate property of the spouses at the expense of the partnership or through efforts of both spouses shall pertain to the partnership. 1. Accession – if the cost of the improvement and any resulting increase in value are equal or less than the value of the entire property at the time of the improvement, the entire property remains the exclusive property of the owner-spouse (subject to reimbursement of improvement cost) 2. Reverse Accession – if the cost of the improvement and any resulting increase in value are more than the value of the entire property at the time of the improvement, the property becomes conjugal (subject to reimbursement of the value of the property of the owner-spouse) Charges upon CPG: -Same as that under ACP, except that under taxes and expenses for preservation of separate property of either spouse during the marriage -> property need not be used by the family NOTE: If the conjugal partnership is insufficient, the spouses shall be solidarily liable for the unpaid balance with their separate properties. Dissolution of CPG: Same as under ACP Liquidation of the CPG: 1. Inventory of all property 2. Amounts advanced by CP as payment for personal debts and obligations of either spouse are credited 3. Reimbursement for use of exclusive funds 4. Debts and obligations of the CP are paid 5. Remains of exclusive properties are returned 6. Indemnify loss of deterioration of movables belonging to either spouse used for the benefit of the family 7. Net remainder of conjugal property is divided equally 8. Delivery of children’s presumptive legitimes

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9.

Adjudication of conjugal dwelling and custody of children  Prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until after liquidation and settlement. The right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership or after dissolution of the marriage and there are net assets left which can be divided between the spouses or their respective heirs. Abalos v. Macatangay, 439 SCRA 649 (2004) NOTES:  Property bought on installments paid partly from exclusive funds of the spouses and partly from conjugal funds: a. If full ownership is vested before the marriage – it shall belong to the buyer-spouse b. If full ownership was vested during the marriage – it shall belong to the conjugal partnership (In any case, the amount advanced by the partnership or by either/both spouses shall be reimbursed by the owner upon liquidation) 

If the community or conjugal properties are insufficient, the separate properties shall be solidarily and subsidiarily liable for the obligations

 The conjugal partnership property shall likewise be liable for the payment of the personal debts of either spouse insofar as they have redounded to the benefit of the family. Administration and Enjoyment of the ACP/CPG General Rule: It shall belong to both spouses jointly Exceptions: 1. In cases of disagreement, husband’s decision shall prevail  Wife has recourse to the courts within 5 years

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2. In case one spouse is incapacitated or unable to participate in the administration of the common properties, other spouse may assume sole powers  These powers do not include: a. disposition and b. encumbrance - Both spouses must approve any disposition or encumbrance. Any encumbrance or disposition is void if without the written consent of the other spouse or the court approval. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse, which may be perfected as a binding contract upon acceptance by the spouse or court approval. Rules on Games of Chance: (ACP/CPG) LOSS: Borne by the loser spouse and shall not be charged to the community property WINNINGS: Form part of the community property Distinction between ACP and CPG ACP CPG All the properties Each spouse retains owned by the his/her property spouses at the time before the marriage of marriage become and only the fruits community property and income of such properties become part of the conjugal properties during the marriage Upon dissolution and Upon dissolution of liquidation of the the partnership, the community property, separate property of the net remainder is the spouses are divided equally returned and only the between the spouses. net profits of the partnership are divided equally between the spouses of their heirs c.

Separation of Property

 Separation of property between the spouses during the marriage shall not take place except by judicial order.

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

1. O Judicial separation of property may either be voluntary or for sufficient cause.

SUFFICIENT CAUSE FOR SEPARATION OF PROPERTY 1. Petitioner’s spouse sentenced to penalty with civil interdiction 2. Petitioner’s spouse declared an absentee 3. Loss of parental authority of petitioner’s spouse declared by court

4. Abandonment or failure to comply with marital obligations 5. Spouse abused power of administration granted 6. At the time of petition, spouses have been separated in fact for at least one year and reconciliation is highly improbable

GROUNDS FOR REVIVAL OF FORMER PROPERTY REGIME 2. Civil interdiction terminates 2. Absent spouse reappears 3. Parental authority judicially restored

4. When spouse who has left conjugal home without degree of legal separation resumes common life with the other 5. Court authorizes the resumption of administration, being satisfied that there will be no abuse 6. Spouses reconcile and resume common life

7. When after voluntary dissolution of the ACP or CPG has been judicially decreed, spouses agree to revive former regime (no subsequent voluntary separation may be granted) GROUNDS FOR TRANSFER OF ADMINISTRATION OF EXCLUSIVE PROPERTY OF EITHER SPOUSE: (GACA)

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ne spouse becomes guardian of the other 2. One spouse judicially declared absent 3. One spouse sentenced to penalty with civil interdiction 4. One spouse becomes a fugitive from justice or is hiding as an accused in a criminal case PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE BASIS ARTICLE 147 ARTICLE 148 1. Man and woman 2. Living 1. Man and woman together as 2. Living together husband and as husband and wife wife 3. With capacity 3. NOT to marry capacitated to (without legal marry (Art.35(1) impediment) under 18 years  At least 18 old) years old 4. Adulterous  Not Art. 37 Applicabil relationship ity (incestuous (e.g. void concubinage) marriage) 5. Bigamous/polyg amous marriage  Not Art. 38 (Art.35(4)) (void 6. Incestuous marriage by marriages under reason of Art.37 public policy) 7. Void marriages  Not by reason of bigamous public policy 4. Other void under Art.38 marriages / live-in Exclusively owned; married party  Salaries Owned in equal and property of CPG of shares wages legitimate marriage Propertie s Remains acquired exclusive Remains exclusive through provided there exclusive is proof funds Propertie Presumed to be Only the s obtained in properties acquired equal shares acquired by both while since it is parties through living presumed to their actual joint together have been contribution of acquired money, property,

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through joint efforts If one party did not participate in acquisition, presumed to have contributed through care and maintenance of family and household







or industry shall be owned by them in common in proportion to their respective contributions. Properties owned in common shall be presumed to be equal; however, proof may be shown to show that their contribution and respective shares are not equal.

The registration of a property in the name of the paramour who had no income whatsoever at the time of the donation by another’s husband is tantamount to a donation which is void under Article 87 of the Family Code. The paramour then holds the property under a constructive trust under Article 1456 in favor of the conjugal partnership of the husband with the legitimate spouse. Joaquino v. Reyes, 434 SCRA 260 (2004) Under Article 148, there must be proof of actual joint contribution by both the live-in partners before the property becomes coowned by them in proportion to their contribution. Otherwise, there are no presumptions of co-ownership and equal sharing. Villanueva v. CA, 427 SCRA 439 (2004) No co-ownership exists between parties to an adulterous relationship. In such a relationship, it is necessary for each of the partners to prove his or her actual contribution to the acquisition of property in order to be able to lay claim to any portion of it. Presumptions of co-ownership and equal contribution do not apply. Rivera v. Heirs of Villanueva, G.R. No. 141501, July 21, 2006

=========================== ===================

TOPICS UNDER SYLLABUS: I. The Family (Arts 149-151, FC)

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=========================== =================== FAMILY - basic social institution which public policy cherishes and protects  Hence, no suit between members of the family shall prosper unless earnest efforts towards a compromise have been made but failed.  Allegation of “earnest efforts” is JURISDICTIONAL, if it is absent, the court can dismiss the case. BUT this rule is inapplicable to the following cases: (CLVFJF) 1. Civil status of persons 2. Any ground for legal separation 3. Validity of marriage or legal separation 4. Future support 5. Jurisdiction of courts 6. Future legitime FAMILY RELATIONS INCLUDE: 1. Between husband and wife 2. Between parents and children 3. Among other ascendants and descendants 4. Among brothers and sisters, full or half blood ============================ ====================

TOPICS UNDER SYLLABUS J. FAMILY HOME

============================ ====================

FAMILY HOME It is deemed constituted from the time it is occupied as a family residence BENEFICIARIES OF A FAMILY HOME 1. Husband and wife, or unmarried head of the family 2. Parents (may include parent-in-laws), ascendants, brothers and sisters (legitimate/illegitimate) living in the family home and dependent on head of family for support

1. MANNER OF CONSTITUTION GUIDELINES: 1. FH is deemed constituted from time of actual occupation as a family residence 2. FH must be owned by person constituting it

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3.

3. H

FH must be permanent 4. Rule applies to valid, voidable and even to common-law marriages under Arts. 147 and 148 5. FH continues despite death of one or more spouses or unmarried head of family for 10 years or as long as there is a minor beneficiary (Art. 159) 6. Only one FH can be constituted

2. QUALIFIED PROPERTY Actual value of the family home shall not exceed P300,000 in URBAN areas and P200,000 in RURAL areas (Art.157) 3. EXEMPTION FROM EXECUTION General Rule: (Art. 153) The family home (FH) is exempted from: 1. Execution 2. Forced Sale 3. Attachment Exceptions: (Art. 155) 1. Non-payment of taxes 2. Debts incurred prior to constitution of home 3. Debts secured by mortgages on the premises 4. Debts due laborers, mechanics, architects, builders, materialmen, and others who have rendered service or furnished materials for the construction of the building NOTE: The exemption is limited to the value allowed by the Family Code

4. SALE Sale, Alienation, Donation, Assignment, Or Encumbrance Of The Family Home 1. The person who constituted the same must give his/her written consent 2. The spouse of the person who constituted the family home must also give his/her written consent 3. A majority of the beneficiaries of legal age must also give their written consent 4. In case of conflict, the court shall decide Requisites For Creditor To Avail Of The Right To Execute: (Art. 160) 1. He must be a judgment creditor 2. His claim is not among those excepted under Art. 155

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e has reasonable grounds to believe that the family home is worth more than the maximum amount fixed in Art. 157 PROCEDURE: 1. Creditor to file a motion in the court proceeding where he obtained a favorable for a writ of execution against FH. 2. Hearing on the motion where the creditor must prove that the actual value of the FH exceeds the maximum amount fixed by the Family Code, either at the time of its constitution or as a result of improvements introduced thereafter its constitution. 3. If creditor proves that actual value exceeds the maximum amount the, court will order its sale in execution. 4. If FH is sold for more than the value allowed, the proceeds shall be applied as follows: a. First, the obligations enumerated in Art. 155 must be paid (listed above) b. Then the judgment in favor of the creditor will be paid, plus all the costs of execution c. The excess, if any, shall be delivered to the judgment debtor ============================ ==================

TOPICS UNDER SYLLABUS K. Paternity and Filiation (Arts. 163182, FC) 1. Kinds of Filiation 2. Children by Nature a. Legitimate Children b. Illegitimate Children c. Legitimated Children 3. Actions regarding filiation a. To claim filiation i. Proof of filiation ii. Admissibility of Scientific Testing b. To impugn filiation 4. Rights of Legitimate/Legitimated/Illegitimat e Children ======================== ================== TOPICS UNDER SYLLABUS

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probative value. Concepcion v. CA, [G.R. No. 123450, Aug. 31, 2005]

G. PATERNITY AND FILIATION 1.Kinds of Filiation 2 Children by Nature

============================ ====================

1.KINDS OF FILIATION 2.CHILDREN BY NATURE

a. Legitimate Children LEGITIMATE CHILDREN -are those conceived OR born during a valid marriage. INCLUSIONS: Those children who are: 1. Conceived as a result of artificial insemination 2. Born of a voidable marriage before decree of annulment 3. Conceived or born before judgment of annulment or absolute nullity under Art. 36 (psychological incapacity) becomes final & executory 4. Conceived or born of a subsequent marriage under Art. 53 (failure to record the judgment, partition and distribution of properties, and delivery of children’s presumptive legitime) 5. Of mothers who may have declared against their legitimacy or was sentenced as an adulteress (Art.167) 6. Legally adopted 7. Legitimated, conceived and born outside of wedlock of parents without impediment at the time of conception and who subsequently married 



A child born inside a valid marriage is legitimate. Hence a child born inside a bigamous marriage, which is void, is considered a child under the first marriage, which has not been nullified or annulled. Concepcion v. CA, [G.R. No. 123450, Aug. 31, 2005] An agreement by parties as to the status of a child is void. Only the law determines legitimacy or illegitimacy. Thus, the child, in eyes of the law, is legitimate under the first marriage notwithstanding the admission in pleadings by the wife and his second husband that the child is their legitimate son. Similarly, any declaration of the mother that her child is illegitimate has no

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b. Illegitimate Children ILLEGITIMATE CHILDREN -are those conceived AND born outside a valid marriage. Exceptions: Those children who are: 1. Born of marriages which are void ab initio such as bigamous and incestuous marriages and void marriages by reason of public policy 2. Born of voidable marriages born after the decree of annulment

c. Legitimated Children REQUISITES FOR LEGITIMATION: 1. The child was conceived and born outside of wedlock 2. The parents, at the time of child’s conception, were not disqualified by any impediment to marry each other 3. There is a valid marriage subsequent to the child’s birth  



Legitimation takes place by the subsequent marriage of the child’s parents Effect of legitimation: -Confers on the child the rights of legitimate children -Retroacts to the time of the child’s birth Legitimation may be impugned only by those who are prejudiced in their rights within 5 years from the time the cause of action accrues (death of parents of legitimated child)

3. ACTIONS REGARDING FILIATION a. To claim filiation i. Proof of filiation PROOF OF FILIATION General Rule: (Art. 172, Par. 1) Filiation of legitimate or illegitimate children is established by any of the following: 1. The record of birth appearing in the civil register or a final judgment 

Must be prepared by the father. A certificate of live birth purportedly identifying the

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

putative father is not competent evidence of paternity when there is no showing that the putative father had a hand in the preparation of said certificate. The local civil registrar has no authority to record the paternity of an illegitimate child on the information of a third person. Cabatania v. CA, [441 SCRA 96 (2004)] Record of Birth merely prima facie evidence. In Benitez-Badua v. CA, it is wellsettled that a record of birth is merely a prima facie evidence of the facts contained therein. It is not conclusive evidence of the truthfulness of the statements made there by the interested parties. 2. An admission of legitimate or illegitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned

Exception: (Art. 172, Par. 2) In the absence of these evidences, the legitimate filiation may be proved by: 1. Open and continuous possession of the status of a legitimate (or illegitimate) child 

Definition. Continuous does not mean that the concession of status shall continue forever but only that it shall not be of an intermittent character while it continues. The possession of such status means that the father has treated the child as his own, directly and not through others, spontaneously and without concealment though without publicity. Mendoza v. CA, [G.R. No. 86302, Sept. 21, 1991]



How to prove. There must be evidence of the manifestation of the permanent intention of the supposed father to consider the child as his, by continuous and clear manifestations of parental affection and care, which cannot be attributed to pure charity. Such acts must be of such a nature that they reveal not only the conviction of paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not accidentally, but continuously. Jison v. CA, [G.R. No. 124853, February 24, 1998]



The due recognition of an illegitimate child in a record of birth, a will, a statement before a court of record, or in any authentic writing is, in itself, a consummated act of acknowledgement of the child, and no further court action is required. In fact, any authentic writing is treated not just a ground for compulsory recognition; it is in itself a voluntary recognition that does not require a separate action for judicial approval. Eceta v. Eceta, [428 SCRA 204 (2004)]

NOTE: For illegitimate children: when the action is based on the par. 2 of Art. 172, the action may be brought ONLY during the lifetime of the alleged parent

ii. Admissibility of Scientific Evidence REQUISITES FOR CHILDREN BY ARTIFICIAL INSEMINATION TO BE CONSIDERED LEGITIMATE: (Art. 164) 1. The artificial insemination must made on the wife; 2. The sperm of the husband, or of a donor, or both the husband and a donor must be used; 3. The artificial insemination has been authorized or ratified by both spouses on a written instrument executed and signed by them before the birth of the child; AND 4. The written instrument is recorded in civil registry together with the birth certificate of the child

b. To impugn filiation WHO MAY IMPUGN THE LEGITIMACY OF A CHILD: General Rule: Only the husband can impugn the legitimacy of a child Exceptions: The heirs of the husband may impugn the child’s filiation in the following cases: a. If the husband dies before the expiration of period for filing the action b. If the husband dies after filing without desisting c. If the child was born after the death of the husband

2. Any other evidence allowed by the Rules of Court and special laws

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GROUNDS TO IMPUGN THE LEGITIMACY OF THE CHILD: (EXCLUSIVE LIST) (PBA) 1. It was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the birth of the child because of: a. Physical incapacity of the husband to have sexual intercourse with his wife b. Fact that the husband and wife were living separately in such a way that sexual intercourse was not possible, or c. Serious illness of the husband which absolutely prevented intercourse 2. If its proved that for biological or other scientific reasons, the child could not have been that of the husband, except in the case of children conceived through artificial insemination 3. In case of children conceived through artificial insemination, when the written authorization or ratification of either parent was obtained through mistake, fraud, violence, intimidation, or undue influence PERIODS FOR FILING OF ACTION TO IMPUGN LEGITIMACY: 1. If the husband (or his heirs, in proper cases) resides in the SAME city or municipality: within 1 year from knowledge of the birth OR its recording in the civil register 2. If the husband (or his heirs) does NOT RESIDE in the city or municipality where the child’s birth took place or was recorded BUT his residence is IN THE PHILS.: within 2 years 3. If the child’s birth took place or was recorded in the PHILS. while the husband has his residence ABROAD, or vice-versa: within 3 years NOTE:  The period shall be counted from the knowledge of the child’s birth or its recording in the civil register. HOWEVER, if the child’s birth was concealed from or was unknown to the husband or his heirs, the period shall be counted from the discovery or knowledge of the birth of the child or of the act of registration of said birth, whichever is earlier. 

Legitimacy CANNOT be collaterally attacked or impugned. It can be impugned only in a

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direct suit precisely filed for the purpose of assailing the legitimacy of the child. RULE ON STATUS OF A CHILD BORN WITHIN 300 DAYS AFTER TERMINATION OF FORMER MARRIAGE (Art. 168): Rules in the absence of proof to the contrary: 1. If the child was born before 180 days after celebration of 2nd marriage provided born within 300 days after the termination of the 1st marriage: considered to have been conceived during the first marriage. 2. If the child was born after 180 days following the celebration of the 2nd marriage whether born within 300 days after termination of 1st marriage or afterwards: considered to have been conceived during the second marriage. ACTION TO CLAIM LEGITIMACY: 1. The child can bring the action during his lifetime 2. If the child dies after reaching majority without filing an action, his heirs can no longer file the action after death 3. If the child dies during minority or in the state of insanity, his heirs can file the action for him within 5 years from the child’s death 4. If the child dies after commencing the action, the action will survive and his heirs will substitute for him 5. If the child is a minor, incapacitated or insane, his guardian can bring the action in his behalf

4. RIGHTS OF LEGITIMATE/LEGITIMATED/ILLEGITIMATE CHILDREN RIGHTS OF LEGITIMATE AND ILLEGITIMATE CHILDREN LEGITIMAT BASIS ILLEGITIMATE E Use of mother’s surname NOTE: R.A. 9255 Use of amended Art. 176 father and Surname of FC as of March mother’s 19, 2004  can surname use father’s surname

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Legitime

Support

Action for claim for legitimacy or illegitimacy

Transmissi ble to heirs under Art.173? Right to inherit ab intesto

Entitled to legitime and other successional rights granted to them by the NCC Entitled to receive support from parents, ascendants, and in proper cases, brothers and sisters under Art. 174

Entitled only to ½ of legitime of legitimate child

3. Father’s admission in private handwritten document (R.A. 9255, Sec. 1, effective March 19, 2004) NOTE: The father under R.A. 9255, Sec. 1 has the right to file an action to prove nonfiliation during his lifetime.

=========================== ==================

Receive support according to the provision of the FC

His/her whole lifetime regardless of type of proof provided under Art. 172

 His/her whole lifetime regardless of type of proof provided under Art.172 par. 1  ONLY lifetime of alleged parent for Art. 172 par. 2

Yes

No

Yes

No right to inherit ab intesto from legitimate children and relative of father and mother under Art. 992 NCC

NOTE:  Use the surname of the mother if the requisites of R.A. 9255 are not complied with  Use the surname of the father if the child’s filiation has been expressly recognized by the father, either through: 1. Record of birth in civil register 2. Father’s admission in public document

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TOPICS UNDER SYLLABUS L. ADOPTION (Arts 183-193, FC)  Inter-country Adoption Law  Domestic Adoption Law 1. Construction 2. Qualifications and Disqualifications of Adopter 3. Qualifications and Disqualifications of Adopted 4. Rights Granted by Adoption 5. Rules on Succession 6. Rescission of Adoption ======================== ================== R.A. 8043: INTER-COUNTRY ADOPTION ACT OF 1995 1. CONSTRUCTION INTER-COUNTRY ADOPTION -is the sociolegal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of adoption is issued outside the Philippines. 2. QUALIFICATIONS DISQUALIFICATIONS OF ADOPTER

AND

An alien or a Filipino citizen permanently residing abroad may file an application for intercountry adoption of a Filipino child if: 1. At least 27 years of age and at least 16 years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent 2. If married, his/her spouse must jointly file for the adoption

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3.

Has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his/her country 4. Has not been convicted of a crime involving moral turpitude 5. Eligible to adopt under his/her national law 6. In a position to provide the proper care and support and to give the necessary moral values and example to all his children, including the child to be adopted 7. Agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of this Act 8. Comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws 9. Possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws

3. QUALIFICATIONS DISQUALIFICATIONS OF ADOPTED

AND

WHO MAY BE ADOPTED: Only a legally free child may be the subject of inter-country adoption LEGALLY-FREE CHILD - is a child who has been voluntarily or involuntarily committed to the Department, in accordance with the Child and Youth Welfare Code 



No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally Qualified children: Section 25, Article 8 of the Rules and Regulations provide: any child who has been voluntarily or involuntarily committed to the Department as dependent, abandoned, or neglected pursuant to the provisions of the Child and Youth Welfare Code may be the subject of Inter-Country Adoption

R.A. 8552: DOMESTIC ADOPTION ACT

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1. CONSTRUCTION 2. QUALIFICATIONS DISQUALIFICATIONS OF ADOPTER

AND

WHO MAY ADOPT: 1. FILIPINO CITIZEN a. Of legal age b. In possession of full civil capacity and legal rights c. Of good moral character d. Has not been convicted of any crime involving moral turpitude e. Emotionally and psychologically capable of caring for children, f. At least 16 years older than the person to be adopted, unless: i. The adopter is the natural parent of the child to be adopted, or ii. The adopter is the spouse of the legitimate parent of the person to be adopted g. In a position to support and care for his legitimate and illegitimate children, in keeping with the means of the family 2. ALIEN a. Possessing the same qualifications as above stated for Filipino nationals b. His/her country has diplomatic relations with the Philippines c. He/she has been living in the Philippines for at least 3 continuous years prior to the filing of the application for adoption and maintains such residence until the adoption decree is entered, EXCEPT in the case of: i. A former Filipino citizen who seeks to adopt a relative within the 4th degree of consanguinity or affinity; or ii. One who seeks to adopt the legitimate child of his/her Filipino spouse; or iii. One who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the 4th degree of consanguinity or affinity of the Filipino spouse; or 3. GUARDIAN - with respect to the ward after the termination of the guardianship and clearance of his/her financial accountabilities

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RULE ON ADOPTION BY SPOUSES General Rule: Husband and wife shall jointly adopt Exceptions: 1. One spouse seeks to adopt the legitimate son/daughter of the other; or 2. One spouse seeks to adopt his/her own illegitimate son/daughter 3. The spouses are legally separated from each other.

3. QUALIFICATIONS DISQUALIFICATIONS OF ADOPTED

AND

WHO MAY BE ADOPTED: 1. Any person below 18 years of age who has been administratively or judicially declared available for adoption; 2. Legitimate son/daughter of one spouse by the other spouse; 3. Illegitimate son/daughter by a qualified adopter to improve his/her status to that of legitimacy; 4. Person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter as his/her own child since minority; 5. Child whose adoption has been previously rescinded; or 6. Child whose biological or adoptive parents have died provided that no proceedings shall be initiated within 6 months from the time of death of said parents. WRITTEN CONSENT NECESSARY FOR ADOPTION: (A-BLISS-A) 1. Adoptee, if 10 years of age or over; 2. Biological parents of the child, if known, or the legal guardian, or the proper government instrumentality which has legal custody of the child 3. Legitimate children of the adopter, 10 years old or over 4. Illegitimate children of the adopter, 10 years old or over and living with him 5. Spouse of the adopted, if married 6. Spouse of the adopter, if married 7. Adopted children of the adopter, 10 years old or over EFFECTIVITY OF DECREE OF ADOPTION  A decree of adoption is effective as of the date the original petition was filed. This also

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

applies in case the petitioner dies before the issuance of the decree of adoption Where the petition for adoption was granted after the child killed a girl, no retroactive effect may be given to the decree of adoption so as to impose a liability upon the adopting parents accruing at a time when the adopting parents had no actual or physically custody over the adopted child. Retroactive effect may perhaps be given where such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. To hold that parental authority had been retroactively lodged in the adopting parents so as to burden them with liability for a tortuous act that they could not have foreseen nor prevented would be unfair and unconscionable. Tamargo v. CA, [G.R. No. 85044, June 3, 1992]

4. RIGHTS GRANTED BY ADOPTION EFFECTS OF ADOPTION: 1. Severance of all legal ties between the biological parents and the adoptee and the same shall then be vested on the adopters EXCEPT in cases where the biological parent is the spouse of the adopter 2. Deemed a legitimate child of the adopter 3. Acquired reciprocal rights and obligations arising from parent-child relationship 4. Right to use surname of the adopter

5. RULES ON SUCCESSION In legal and intestate succession, the adopters and the adoptee shall have reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parents had left a will, the law on testamentary succession shall govern.

6. RECISSION OF ADOPTION GROUNDS FOR RECISSION OF ADOPTION: (MASA) 1. Repeated physical and verbal maltreatment by the adopters despite having undergone counseling 2. Attempt on the life of the adoptee 3. Sexual assault or violence 4. Abandonment and failure to comply with parental obligations.

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

1. S

Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter  Only the adoptee is given the right to rescind the decree of adoption  However, the adopters may disinherit the adoptee for causes provided in Art. 919 NCC EFFECTS OF THE RESCISSION OF THE ADOPTION: 1. The parental authority of the adoptee's biological parents, if known, OR the legal custody of the DSWD shall be restored if the adoptee is still a minor or incapacitated. 2. The reciprocal rights and obligations of the adopters and the adoptee to each other shall be extinguished. 3. The court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and restore his/her original birth certificate. 4. Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected. ============================ ====================

TOPICS UNDER SYLLABUS M. SUPPORT (Arts 194-208) 1. What constitutes support 2. Persons Obliged to Support each other a. Spouses b. Ascendants and Descendants c. Parents and Legitimate and Illegitimate Children/Descendants d. Legitimate/Illegitimate Brothers and Sisters 2. Contractual Support 3. Basis of Support 4. Options of Giver ======================== ================== 1. WHAT CONSTITUTES SUPPORT SUPPORT consists of everything indispensable for:

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ustenance Dwelling Clothing Medical attendance Education – includes schooling (formal education) or training (non-formal education) for some profession, trade or vocation, even beyond the age of majority 6. Transportation – includes expenses going to and from school, or to and from place of work (art. 194) 2. 3. 4. 5.



Makes no distinction between natural support (basic necessities) and civil support (those beyond the basics)

NOTE: Amount of support shall be in proportion to the means of the giver and to the need of the recipient

2. PERSONS OBLIGED TO SUPPORT EACH OTHER Persons Obliged To Support Each Other To The Whole Extent: (Art. 195)

a. Spouses b. Ascendants and Descendants c. Parents and Legitimate/Illegitimate Children/Descendants d. Legitimate/Illegitimate Brothers and Sisters

RULES REGARDING SUPPORT TO ILLEGITIMATE BROTHERS AND SISTERS (WHETHER FULL OR HALF BLOOD): 1. If the one asking for support is below majority age, he is entitled to support from his illegitimate brother or sister to the full extent, without any condition 2. If the one asking for support is already of majority age, he is entitled to support only if his need for support is not due to a cause imputable to his fault or negligence (Art. 196) PROPERTIES THAT ARE LIABLE FOR THE SUPPORT OF THE RELATIVES (SOURCES OF MUTUAL SUPPORT) Spouses Absolute community of conjugal

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partnership Common children of the spouses

Children of a spouse by another marriage

Illegitimate children of either spouse

Legitimate ascendants, other legitimate and illegitimate descendants, and legitimate and illegitimate brothers and sisters

Absolute community or conjugal property

Absolute community or conjugal property Under ACP, separate property of parentspouse. But if insufficient, absolute community liable but considered as advances on the share of the parent to be paid during liquidation Under CPG, separate property of parentspouse. But if insufficient, conjugal partnership liable if financially capable, but support paid shall be deducted from share of spouse during liquidation Separate property of the obligor-spouse if the same is not sufficient or there is none, the absolute community or conjugal property shall be liable if financially capable, which support shall be deducted from the share of the spouse upon liquidation of the ACP or CPG

2. CONTRACTUAL SUPPORT 3. BASIS OF SUPPORT LEGACY OF SUPPORT Based on law

can be between strangers Not exempt from attachment and execution because it is not a legal obligation

CONTRACTUAL SUPPORT Based on contract, so it

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Exempt from execution and attachment

If contained in a will, apply the rules of contractual support because there is no more obligation of support to speak of since the giver is already dead



Exception: If the giver contracts with a person whom he is obliged by law to support, in which case only the excess of what is obliged (based on need) can be attached or subject to execution Follow rules of contracts which says that obligation must be fulfilled (support must be given) no matter what happens (even if you lose your job). BUT if the change in circumstances are manifestly beyond that contemplation of the parties, support may be adjusted accordingly

Judgment of support is always provisional in character. Res Judicata does not apply. Lam v. Chua, [426 SCRA 29 (2004])

4. OPTIONS OF GIVER Options Of The Person Giving Support: 1. To give a fixed monthly allowance; or 2. To receive and maintain the recipient in the giver's home or family dwelling (Art. 204) Exception to # 2: Existence of legal or moral obstacle ORDER OF LIABILITY IF 2 OR MORE ARE OBLIGED TO SUPPORT: 1. Spouse 2. Descendants in nearest degree 3. Ascendants in nearest degree 4. Brothers and sisters (Art. 199) 

When the obligation to give support falls upon two or more persons, the payment of

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



the same shall be divided between them in proportion to the resources of each. However, in case of urgent need and by special circumstances, the judge may order only one of them to furnish the support provisionally, without prejudice to his right to claim from the other obligors the share due from them. When two or more recipients at the same time claim support from one and the same person legally obliged to give it, and the obligor does not have sufficient means to satisfy all claims: -The order established in the preceding article shall be followed: a. Spouse b. Descendants in nearest degree c. Ascendants in nearest degree d. Brothers and sisters (Art. 200) If the concurrent obligees should be the spouse and a child subject to parental authority, the child shall be preferred

SOURCES OF SUPPORT DURING PENDING AFTER THE LITIGATION LITIGATION MARRIAGE SPOUSES From the community property assets except if Art. 203 applies, i.e. if the claimant spouse is the guilty spouse, No obligation to he/she will not support except if be entitled to there is legal support. From the separation, in communit which case the If the spouses y property court may are under CPG, require the guilty support is spouse to give considered an support advance of such spouses' share; the rule does not apply if the spouses are under ACP, based on Art 153

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CHILDREN From the communit y property

From the community property

From the separate property of the spouses

============================ =================

TOPICS UNDER SYLLABUS N. Parental Authority 1. Contempt 2. Over Person 3. Over Property 4. Substitute and Special Parental Authority 5. Suspension/Termination of Parental Authority 6. Liability of Parents for Acts of Children ======================== ================== 1. CONTEMPT PARENTAL AUTHORITY (PATRIA POTESTAS) -is the mass of rights and obligations which parents have in relation to the person and property of their children until their emancipation, and even after, under certain circumstances. Characteristics Of Parental Authority: 1. It is a natural right and duty of the parents (Art. 209) 2. It cannot be renounced, transferred or waived, except in cases authorized by law (Art. 210) 3. It is jointly exercised by the father and the mother (Art. 211) 4. It is purely personal and cannot be exercised through agents 5. It is temporary

2. OVER PERSON RULES AS TO THE EXERCISE OF PARENTAL AUTHORITY: 1. The father and the mother shall jointly exercise parental authority over the persons of their common children. In case of disagreement, the father's decision shall

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2. I prevail, unless there is a judicial order to the contrary (Art. 211) 2. If the child is illegitimate, parental authority is with the mother. WHO EXERCISES PARENTAL AUTHORITY Absence of either Parent present parent Death of either Surviving parent parent Remarriag e of Surviving parent, unless the court surviving appoints a guardian parent Parent designated by the court, taking into account all relevant considerations, especially the choice of the child over 7 years old, unless the parent chosen is unfit GR: A child under 7 years of age shall not be separated from the mother UNLESS the court Separation finds compelling reasons to of parents order otherwise (TENDER (Art. 213) YEARS DOCTRINE) Paramount consideration in matters of custody of a child is the welfare and well-being of the child Tonog v. Court of Appeals, [G.R. No. 122906, February 7, 2002] 



In case of death, absence or unsuitability of both parents, the surviving grandparent shall exercise substitute parental authority (Art. 214) No descendant shall be compelled, in criminal cases, to testify against his parents or grandparents, except when such testimony is indispensable in a crime against the defendant or by one parent against the other. (Art 215)

3. OVER PROPERTY Effect Of Parental Authority Upon The Property Of The Child: 1. The father and mother shall jointly exercise legal guardianship over the property of the minor common child without court appointment

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n case of disagreement, the father’s decision shall prevail, unless there is judicial order to the contrary 3. If the market value of the property or the annual income of the child exceeds P50,000, the parent is required to furnish a bond of not less than 10% of the value of the child’s property or income

4. SUBSTITUTE AND SPECIAL PARENTAL AUTHORITY Order Of Substitute Parental Authority: 1. The surviving grandparent 2. The oldest brother or sister, over 21 years old, unless unfit or disqualified 3. The child's actual custodian, over 21 years old, unless unfit or disqualified (Art. 216) 

In case of foundlings, abandoned children, neglected children, or abused children, summary judicial proceedings shall be instituted so that they may be entrusted to: a. Heads of children’s homes b. Orphanages, or c. Similar institutions duly accredited by the proper government agency (Art. 217)

Person Exercising Special Parental Authority: 1. School 2. Administrators and teachers 3. Individual, entity, or institution engaged in child care Liability Of Those Exercising Special Parental Authority Over The Child: 1. They are principally and solidarily liable for damages caused by the acts or omissions of the child while under their supervision, instruction or custody. HOWEVER, this liability is subject to the defense that the person exercising parental authority exercised proper diligence. 2. The parents and judicial guardians of the minor or those exercising substitute parental authority over the minor are subsidiarily liable for said acts and omissions of the minor.

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DISTINCTION BETWEEN SUBSTITUTE AND SPECIAL PARENTAL AUTHORITY SUBSTITUTE SPECIAL PARENTAL PARENTAL AUTHORITY AUTHORITY It is exercised concurrently with the parental authority of It is exercised in the parents. The case of death, parents temporarily absence, or relinquish parental unsuitability of authority over the child parents. to the person with special parental authority.

5. SUSPENSION/TERMINATION OF PARENTAL AUTHORITY Grounds For Suspension Of Parental Authority: (CHOBA) 1. Conviction of parent for crime with civil interdiction 2. Treats child with excessive harshness and cruelty 3. Gives corrupting orders, counsel or example 4. Compels child to beg 5. Subjects to or allows him to be subjected to acts of lasciviousness 

The suspension or deprivation may be revoked and the parental authority revived in a case filed for the purpose or in the same proceeding if the court finds that the cause therefore has ceased and will not be repeated

Grounds For The Permanent Termination Of Parental Authority : 1. Death of parents 2. Death of child 3. Emancipation of child 4. Parents exercising parental authority has subjected the child or allowed him to be subjected to sexual abuse  Lesbianism is not compelling reason to deprive the mother of a child below seven years of age. To deprive the wife of custody, the husband must clearly establish that her moral lapses have had an adverse effect on the welfare of the child or have distracted the offending spouse from exercising proper parental care. Writ of habeas corpus has no

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leg to stand on to deprive the mother of a child below seven years of age, unless there are compelling reasons to do so. Gualberto v. Gualberto, G.R. No. 154994, June 28, 2005 Cases Where Parental Authority May Be Revived: 1. Adoption of child 2. Appointment of general guardian 3. Judicial declaration of abandonment 4. Final judgment divesting parental authority 5. Judicial declaration of absence or incapacity or person exercising parental authority

6. LIABILITY OF PARENTS FOR ACTS OF CHILDREN Liability Of Parents For Torts Committed By Their Minor Children:  Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their minors PROVIDED the children are living in their company and under their parental authority  This is subject to the appropriate defenses provided by law NOTE:  Parental authority and responsibility are inalienable and may not be transferred and renounced except in cases authorized by law  Parents may exercise parental authority over their child’s property

=================== ============== TOPIC UNDER SYLLABUS N. Funerals (Arts. 305-310,CC) O. Surname (Arts 364-380, CC) P. Absence (Arts. 381-396,CC) Q. Civil Register (Arts. 407-413,CC)

=================== ============== N. FUNERAL General Guidelines:

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1.

Duty and right to make arrangement in funerals in accordance with Art. 199 FC: a. Spouse b. Descendants in nearest degree c. Ascendants in nearest degree d. Brothers and sisters 2. The funeral shall be in keeping with the social position of the deceased 3. The funeral shall be in accordance with the expressed wishes of the deceased a. In the absence of expressed wishes, his religious beliefs or affiliation shall determine b. In case of doubt, the persons in Art. 199 of FC shall decide 4. Any person who disrespects the dead or allows the same shall be liable for damages

O. SURNAME

USE OF SURNAME

CHILD CONCERNED Legitimate child Legitimated child Adopted child

Illegitimate child

Conceived prior to the annulment of the marriage Conceived after the annulment of the marriage

SURNAME TO BE USED Father’s surname Father’s surname Adopter’s surname 1. Mother’s surname; or 2. Father’s name if they were recognized by their father in the record of birth or in an authentic writing Father’s surname Mother’s surname



Since a legitimate child can ask for a change of name, an adopted child can do the same.



The interest of justice and of the child permits an illegitimate child to change his name adopting the surname of his parent’s other spouse. Calderon vs. Republic, [19 SCRA 721]

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WIFE

Valid marriag e

Husband is living (Art. 370)

Husband is dead (Art. 373) Wife is the guilty party

SURNAME TO BE USED a. First name and maiden name + her husband’s surname b. First name + her husband’s surname c. Her husband’s full name, but prefixing a word indicating that she is his wife, such as “Mrs” d. Retain the use of her maiden name (use of husband’s surname is not a duty but merely an option of the wife) She can use the surname of the husband as if he were still living She shall resume using her maiden name

1. Resume using her maiden name; or 2. Continue employing her husband’s surname Wife is UNLESS: the a. Court decrees innocent otherwise, or party b. She or the former husband is married again to another person Continue using the name and surname she was Legally separated employing prior to the (Art.372) legal separation Laperal v. Republic,[6 SCRA 357 (1962)] IDENTITY OF NAMES AND SURNAMES Between Younger person is obliged to persons (Art. use such additional name OR 374) surname as will avoid confusion Marriag e is annulle d (Art.37 1)

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Between ascendants and descendants (Art. 375)

1. Son may use the word “Junior” 2. Grandsons and other male descendants, shall either : a. Add a middle name b. Add the mother’s surname c. Add the Roman numerals II, III, and so on

P. ABSENCE Persons Who May Be Appointed By Way Of Court Order As The Representative Of An Absentee In Case Of Provisional Absence Or As An Administrator 1. If no legal separation, the spouse present 2. If no spouse or if the spouse present is a minor, any competent person  The spouse who is appointed as administratrix of the absentee spouse’s property cannot alienate or encumber the same, or that of the conjugal partnership, without judicial authority. When Administration Shall Cease 1. Absentee appears personally or by means of an agent; 2. Death of the absentee is proved and his estate or intestate heirs appear; 3. A third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title  The property shall be at the disposal of those who may have a right thereto

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STAGES Provisional Absence - A person disappears from his domicile, whereabouts are unknown and a. He did not leave any agent; or b.He left an agent but agent's power has expired Judicial Declaration of Absence -Necessary for interested persons to be able to protect the interest of the absentee

WHEN TO FILE

No statutory period

Without administrator - After 2 years having elapsed without any news about the absentee or since the last news With administrator - After 5 years from time of disappearance

Presumption of death WHO MAY FILE? ORDINARY ABSENCE  4 years  person presumed dead for purposes of remarriage of the spouse present  7 years  presumed dead for all purposes a. Interested party EXCEPT for those of succession b. Relative  10 years  person presumed dead for purposes c. Friend of opening succession EXCEPT if he disappeared after the age of 75, an absence of 5 years is sufficient EXTRAORDINARY ABSENCE a. 1. If a person rode an airplane or sea vessel lost in b. the course of voyage, from the time of loss of the heirs airplane or sea vessel c. 2. If a person joined the armed forces who has heirs taken part in war, from the time he is considered d. missing in action may have over the 3. Danger of death under other circumstances, property of the absentee from time of disappearance some right subordinated

Spouse

to the condition of the absentee's death 4 years  for all purposes including those of opening succession  2 years  for purposes of remarriage

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Q. CIVIL REGISTER

5.

MATTERS RECORDED/ENTERED IN THE CIVIL REGISTER: 1. Acts, events and judicial decrees concerning the civil status of persons 2. Birth 3. Marriage 4. Death 5. Legal separation 6. Annulment of marriage 7. Judgments declaring marriage void from the beginning 8. Legitimation 9. Adoption 10. Acknowledgement of natural children 11. Naturalization 12. Loss of citizenship 13. Recovery of citizenship 14. Civil interdiction 15. Judicial determination 16. Voluntary emancipation of a minor 17. Change of name



General Rule: Entries in the civil register may be changed or altered only upon a judicial order. Exception: Clerical or typographical errors or change in the name or nickname can be changed administratively through verified petition with the local office of the civil registrar. Who may file petition: Any person having direct and personal interest in any act, event, order or decree concerning the civil status of persons or change of name PROCEDURAL REQUIREMENTS FOR A PETITION FOR CHANGE OF NAME: 1. 3 years residency in the province where change is sought prior to the filing 2. Must not be filed within 30 days prior to an election 3. Petition must be verified PROPER AND REASONABLE CAUSES THAT MAY WARRANT THE GRANT OF A PETITION FOR CHANGE OF FIRST NAME/NICKNAME: 1. Petitioner’s true and official name is ridiculous; 2. Petitioner’s true and official name is tainted with dishonor 3. Petitioner’s true and official name is extremely difficult to write or pronounce 4. New first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by the first names and nicknames in the community

When the change is necessary to avoid confusion (Sec. 4, R.A. 9048) R.A. 9048 does not sanction a change of first name on the ground of sex reassignment. Rather than avoiding confusion, changing the first name to make it compatible with the sex he transformed himself into through surgery may only create grave complications in the civil registry and the public interest. Silverio vs. Republic, G.R. No. 174689, Oct. 22, 2007

6. When the request for change is a consequence of a change of status, such as when a natural child is acknowledged or legitimated USURPATION OF NAME - implies some injury to the interests of the owner of the name. It consists in the possibility of confusion of identity between the owner and the usurper. ELEMENTS OF USURPATION OF NAME: 1. An actual use of another's name by the defendant 2. Use is unauthorized 3. Use of another's name is to designate personality or to identify a person REMEDIES AVAILABLE TO THE PERSON WHOSE NAME HAS BEEN USURPED: 1. Civil (insofar as private persons are concerned) a. Injunction b. Damages (actual and moral) 2. Criminal (when public affairs are prejudiced) WHEN USE OF ANOTHER'S NAME IS NOT ACTIONABLE: Used as stage, screen, or pen name, provided: 1. Use of name is in good faith; and 2. By using the name of another, no injury is caused to that person's right 3. When use is motivated by modesty, a desire to avoid unnecessary trouble, or other reason not prohibited by law or morals 

The law does not allow dropping of middle name from registered name unless there are justifiable reasons to do so. Mere convenience is not justifiable. Middle names serve to identify the maternal lineage filiation of a person as well as further distinguish him from others who may have the same given name and surname as he has.



An illegitimate child whose filiation is not recognized by the father bears only a given name and his mother’s surname, and does not have a middle name, unless legitimated or subsequently acknowledged by the father in a public document or private handwritten

instrument. In Re: Petition for Change of Name of Wang,[G.R. No. 159966, March 30, 2005]

2. Change of first name or nickname 

CHANGE OF ENTRIES IN CIVIL REGISTRY WITHOUT JUDICIAL WITH JUDICIAL AUTHORITY AUTHORITY Matters which may Change of surname be made by the can only be done concerned city or through a court municipal registrar or proceeding consul general (R.A. EXCEPT when the 9048): request for change is 1. Clerical or a consequence of a typographical error change of status, such as when a  NOT nationality, natural child is age, civil status  acknowledged or needs court order





legitimated

If the correction is clerical: summary proceeding If the rectification affects the civil status, citizenship or nationality of a party (substantial): adversarial proceeding Change of sex is not a mere clerical or typographical error. There is no special aw in the Philippines governing sex reassignment and its effects. Silverio vs. Republic, [G.R. No. 174689, Oct. 22, 2007]

NOTE: The new law, R.A. 9048, applies only to clerical and typographical errors in entries of name and does not modify the rules mentioned above

II. PROPERTY ===================== ============== TOPICS UNDER SYLLABUS A. Classification of Property (Arts. 414418, CC) 1. Immovable Property 2. Movable Property 3. According to Ownership a. Public Dominion b. Private Ownership

===================== ==============

4.

5. 6. 7.

PROPERTY: An object or a right which is appropriated or susceptible of appropriation by man, with capacity to satisfy human wants and needs.

A. CLASSIFICATION OF PROPERTY Requisites of Property: (USA) 1. Utility for the satisfaction of some human wants  endows property with value susceptible of pecuniary estimation (e.g. food, shelter, clothing, recreation) 2. Substantivity or individuality  quality of having existence apart from any other thing (e.g. blood, when separated from the body) 3. Appropriability  susceptibility of being possessed by men  not susceptible of appropriation: I. Common things (res communes)  Exception: those that may be appropriated under certain conditions in a limited way (e.g. Electricity, oxygen) II. Due to physical impossibility (e.g. Sun) III. Due to legal impossibility (e.g. Human body) IV. Due to no ownership (e.g. wild animals) or abandonment by the owner. Classification of Property 1. Mobility and Non-mobility A. Movable or personal property B. Immovable or real property 2. Ownership A. Public B. Private 3. Alienability

8.

9.

A. Within the commerce of man (or which may be the objects of contracts or judicial transactions) B. Outside the commerce of man Existence A. Present property (res existents) B. Future property (res futurae) NOTE: Both present and future property may be the subject of sale but generally not the subject of donation. Materiality or Immateriality A. Tangible or corporeal B. Intangible or incorporeal Dependence or Importance A. Principal B. Accessory Capability of Substitution A. Fungible – capable of substitution by other things of the same quality and quantity B. Non-Fungible – incapable of such substitution, hence, the identical thing must be given or returned Nature or Definiteness A. Generic – one referring to a group or class B. Specific – one referring to a single, unique object Whether in the Custody of the Court or Free A. In “custodia legis” – in the custody of the court B. “free” property

1. IMMOVABLE PROPERTY Juridical Classification of Immovable Properties: (NIDA) 1. By nature – cannot be moved from place to place because of their nature (Art. 415 par 1 & 8 NCC) A. land, buildings, roads and constructions of all kinds adhered to soil  a structure which is merely superimposed on the soil may be considered movable. B. mines, quarries, and slag dumps, while the matter thereof forms parts of the bed, and waters either running or stagnant 

Once a house is demolished, its character as an immovable ceases. Bicerra v. Teneza, [6 SCRA 649 (1962)]



A mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings. Still a building by itself may be mortgaged apart

from the land on which it has been built. Such would be a real estate mortgage for the building would still be considered immovable property. Leung Yee v. Strong Machinery, [37 Phil. 644 (1981)]

Requisites: (OP) I. Placed by the owner of the or his agent II. Intent to attach them permanently to the land



A valid real estate mortgage can be constituted on the building erected on the land belonging to another. Prudential Bank v. Panis, [153 SCRA 390 (1987)]



The contracting parties may validly stipulate that a real property be considered as personal. After agreeing, they are consequently estopped from claiming otherwise. However, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. Serg’s Products v. PCI Leasing, [328 SCRA 299 (2000)]

3. By destination – movable placed on immovable for the utility it gives to the activity carried thereon (Art. 415 par 4,5,6,7,9) A. Machinery, receptacles, instruments or implements intended by owner of the tenement or his agent for an industry or works which may be carried on in a building & which tend directly to meet the needs of such works/industry  attachment or incorporation to the immovable is not essential Requisites: (COE) I. industry or works must be carried on inside the building or on the land II. placed by the owner of the building or property or his agent III. machines must be essential and principal elements in carrying out the industry  does not include incidentals (movables without which the businesses can still continue or carry on their functions)

2. By incorporation – essentially movables but attached to an immovable in a fixed manner to be an integral part of it (Art. 415 par 2,3,4,6) A. Trees, plants & growing fruits – while adhered to soil, immovable  once cut or uprooted, they cease to be immovables Except: Uprooted Timber B. Everything attached to an immovable in a fixed manner that it cannot be separated without breaking the material or deterioration of the object  intent to attach permanently is essential  On temporary separation: 2 points of view: I. May still be considered as immovable – If there is intent to put them back. II. Movable – because the material fact of incorporation is what determines its condition C. Statues, reliefs, painting or other objects for use or ornamentation Requisites: (OP) I. Placed by the owner of the immovable or his agent II. Intent to attach them permanently to the tenements D. Animal houses, pigeon houses, beehives, fish ponds, or breeding places of similar nature including the animals in these places



Equipment destined only to repair or service a transportation business may not be deemed real property. Mindanao Bus v. City Assessor, [6 SCRA 197 (1962)]

B. fertilizers – actually used on a piece of land C. docks & floating structures – intended by their nature and object to remain at a fixed place on a river, lake or coast. 4. By analogy/by law – contracts for public works, servitude & other real rights over immovable property (Art. 415 par 10)

2. MOVABLE PROPERTY Movable Property: (SIFTOS) 1. Susceptible of appropriation that are not included in enumeration in immovables. Example−  ½ interest in the business is personal property. Involuntary Insolvency of Strochechker v. Ramirez,[44 Phil 933 (1922)] 2. Immovable that are designated as movable by special provision of law. Examples−  Growing crops are considered immovable under Art. 415(2) but

3.

4. 5.

6.

personal property by Chattel Mortgage Law. Sibal v. Valdez, 50 Phil 512 (1927)  House built on leased land may be treated insofar as the parties are concerned as personal property and be the object of a chattel mortgage. Navarro v. Reyes,[9 SCRA 63 (1963)] Forces of nature brought under control by science. Examples−  Electricity, gas, rays, heat, light, oxygen, atomic energy, water power etc.  Electricity, the same as gas, is an article bought and sold like other personal property and is capable of appropriation by another. United States v. Carlos,[21 Phil. 364 (1946)] Things which can be transported w/o impairment of real property where they are fixed Obligations which have for their object movables or demandable sums (credits)  obligations and actions must be legally demandable  demandable sums must be liquidated Shares of stocks of agricultural, commercial & industrial entities although they may have real estate

Classification Of Movables: 1. According to nature a. Consumable – cannot be utilized w/o being consumed b. Non-consumable 2. According to intention of the parties/purpose (whether it can be substituted by other things of same kind, quality and quantity) a. Fungible (res fungibles) – only the equivalent is returned b. Non-fungible (res nec fungibles) – identical thing is returned, do not admit of substitution Test To Determine Whether Property Is Real Or Personal 1. Whether the property can be transported or carried from place to place (Rule of Description) 2. Whether such change of location can be made without injuring the immovable to which the object may be attached (Rule of Description) 3. Whether the object does not fall within any of the cases enumerated in Art. 415 (Rule of Exclusion)

ACCORDING TO OWNERSHIP a. Public Dominion

3.

Public Dominion – outside the commerce of men.  KINDS: (USD) A. intended for public use– can be used by the public or everybody B. intended for specific public service of state, provinces, cities & municipalities – can be used only by duly authorized persons, such as government buildings and vehicles C. for the development of national wealth  Characteristics: A. Outside the commerce of men – cannot be alienated or leased or be the subject of any contract B. Cannot be acquired by private individual or even municipalities through prescription C. Not subject to attachment & execution D. Cannot be burdened by voluntary easement E. Cannot be registered under the Land Registration Law and be the subject of a Torrens Title F. In general, can be used by everybody NOTE: Fishponds are considered as part of public dominion and cannot be acquired by private persons unless it is converted into patrimonial property. However, fishponds may be leased by the government.  Properties which the government owns for fundamental purposes for rendering government services are properties of public dominion. They are held by the local governments for public service, but at the same time, they can be removed by the State from the LGUs without having to pay just compensation because the LGUs are merely acting as agents. (City of Zamboanga Del Norte v. Province of Zamboanga Del Norte)

b. Private Ownership KINDS: Patrimonial property - the property of the State owned by it in its private or proprietary capacity, the property is not intended for public use, or for some public service, or for the development of the national wealth. G.

- Exist for attaining economic ends of state - Property of public dominion when no longer intended for public use/service – declared patrimonial (Article 422 NCC) - Subject to prescription - May be an object of ordinary contract - Example: property acquired in execution and tax sales, incomes or rents of the State H. Property for LGUs - Property for public use roads, streets, squares, fountains, public waters, promenades and public works for public service paid for by the LGUs - all other properties possessed by LGUs without prejudice to special laws are considered patrimonial NOTE: Patrimonial properties of LGUs cannot be removed by the State without paying just compensation. I. Property of Private Ownership - all properties belonging to private persons and those belonging to the State and any of its political subdivisions which are patrimonial in nature Conversion Of Property Of Public Dominion To Patrimonial Property 1. Property of the National Government  formal declaration by the executive or legislative department that the property is no longer needed for public use or for public service 2. Property of political subdivisions  must be authorized by law NOTE: Sacred and religious objects are outside the commerce of man. They are neither public nor private party. Political subdivisions cannot register as their own any part of the public domain, UNLESS: 1. grant has been made 2. possession has been enjoyed during the period necessary to establish a presumption of ownership Aliens have no right to acquire any public or private agricultural, commercial, or residential lands except by hereditary succession. Private individual has superior right over the property against the state. 

The right of the public to use the city streets may not be bargained away through contract. Rule: Local government

cannot withdraw a public street from public use, unless it has been granted such authority by law. Dacanay v. Asistio Jr.,[208 SCRA 404 (1992)] 

The power to vacate or withdraw a street or alley from public use is discretionary and such will not be interfered with by the courts. The Charter of Cebu City gives such power to the City Council. Such withdrawn portion thus becomes patrimonial property which can be the object of an ordinary contract. Cebu Oxygen v. Bercilles, [66 SCRA 481 (1975)]



A property continues to be part of the public domain until there is a formal declaration on the part of the government to withdraw it from being such. An abandonment of the intention to use the property for public service and to make it patrimonial property must be definite. It cannot be inferred from the non-use alone. Laurel v. Garcia, [187 SCRA 797 (1990)]

============================== ======================

TOPICS UNDER SYLLABUS B. Ownership (Arts. 427-439, CC) 1. Rights of Ownership/Limitations 2. Doctrines of Incomplete Privilege/Self Help 3. Presumption of Ownership 4. Rule of Hidden Treasure ========================== ==================

OWNERSHIP -is the independent right of a person to the exclusive enjoyment and control of a thing including its disposition and recovery subject only to the restrictions or limitations established by law and the rights of others. TITLE -is that which constitutes a just cause of exclusive possession or which is the foundation of ownership of property. Kinds Of Ownership: 1. FULL OWNERSHIP (dominium or jus in re propia) – includes all the rights of the owner 2. NAKED OWNERSHIP (nuda proprietas) – where the right to the use and the fruits has been denied  Naked ownership + usufruct = Full ownership 3. SOLE OWNERSHIP – ownership is vested only in one person

4. CO-OWNERSHIP/TENANCY IN COMMON – ownership is vested in two or more owners; unity of the property, plurality of the subjects

1. RIGHTS OF OWNERSHIP/LIMITATIONS Seven Rights Of Ownership: 1. JUS ABUTENDI – right to consume, transform or abuse by its use 2. JUS ACCESIONES – right to fruits and accessories 3. JUS DISPONENDI – right to dispose, including the right not to dispose, or to alienate 4. JUS FRUENDI – right to fruits 5. JUS POSSIDENDI – right to possess  does not necessarily include the right to use (e.g. contract of deposit) 6. JUS UTENDI – right to use and enjoy  Includes the right to transform and exclude any person from the enjoyment and disposal thereof  Limitation: use in such a manner as not to injure the rights of a third person 7. JUS VINDICANDI – right to vindicate or recover Limitations on the Right of Ownership: (CLOGS) 1. those arising from conflicts of private rights (e.g. those which take place in accession continua) 2. those imposed by law (e.g. Legal easement) 3. those imposed by the owner himself (e.g. Voluntary easement, pledge, lease) 4. those imposed by the grantor of the property on the grantee A. by contract (e.g. donation) B. by last will 5. those imposed in general by the State A. police power B. power of taxation C. power of eminent domain Right of Ownership not absolute  The welfare of the people is the supreme law of the land. Salus populi suprema est lex.  Use your property so as not to impair the rights of other. Sic utere tuo ut alienum non laedas.

ACTIONS FOR POSSESSION: MOVABLES – Replevin/ Manual Delivery (return of a movable)  both principal and provisional remedy  Plaintiff shall state in the affidavit that he is the owner of the property claimed, particularly describing it or that he is entitled to possession, and that it is wrongfully detained by the other.  PERIOD: 4 or 8 years from the time the possession thereof is lost, in accordance with Art. 1132  machinery and equipment used for an industry and indispensable for the carrying on of such industry, cannot be the subject of replevin, because they are considered real properties.  property validly deposited in custodia legis cannot be the subject of a replevin suit ACTION

Accion Interdic tal

GROUND

Forcible entry (detenci on)

GROUND: deprivation of possession through: force, intimidation, strategy, threat, or stealth (FISTS)

De facto or physical possession

Unlawfu l detainer (desahui co)

Lessor/person having legal right over property deprived of such when the lessee/person withholding property refuses to surrender possession of property after expiration of lease/right to hold property Better right of possession

Physical possession

Recovery of dominion of property based on ownership

OWNERSH IP

Accion Publiciana

Accion Reinvindicatoria

I.

IMMOVABLES ISSUE

CAUSE

Possession DE FACTO

PERIOD

COURT

Within 1 year from (1) unlawful deprivation, or from (2) discovery, in case of stealth or strategy Within 1 year from unlawful deprivation: date of last demand or last letter of demand

MTC

Within a period of 10 years, otherwise the real right of possession is lost 30 years

Depends on ASSESSE D VALUE

MTC

Depends on ASSESSE D VALUE

Injunction - Generally not available as a remedy. - When injunction is allowed: A. Actions for forcible entry B. Ejectment - possessor admittedly the owner or in possession in concept of owner - possessor clearly not entitled to property - extraordinary cases – where urgency, expediency and necessity so required II. Writ of possession - When proper:

PROCEEDIN GS Summary proceeding

Summary proceeding

Civil

A. Land registration cases B. Foreclosure, judicial or extra-judicial, of mortgage – provided that the mortgagor has possession and no third party has intervened C. Execution sales D. Eminent domain proceedings E. Ejectment

2. DOCTRINE OF STATE OF NECESSITY STATE OF NECESSITY—is the principle which authorizes the destruction of a property which is lesser in value to avert the danger poised to another property the value of which is much greater. REQUISITES OF STATE NECESSITY: 1. Interference necessary to avert an imminent danger 2. Damage to another much greater than damage to property  COMPARATIVE DANGE— Danger must be greater than damage to property. Consider the economic and sentimental value of the property.  MEASURE OF RATIONAL NECESSITY— the law does not require a person acting in a state of necessity to be free from negligence or mistake. He must be given the benefit of reasonable doubt as to whether he employed rational means to avert the threatened injury.  The owner of the sacrificial property is obliged to tolerate the act of destruction but subject to his reimbursement by all those who benefited.  In case of conflict between the exercise of the right of self-help and a proper and licit state of necessity, the latter prevails because there is no unlawful aggression when a person or group of persons acts pursuant to the right given in a state of necessity.

3. PRESUMPTION OF OWNERSHIP a) Requisites to Raise the Disputable Presumption of Ownership: 1. Actual possession of the property 2. Possession is under the claim of ownership a. Possessor of property has the presumption of title in his favor b. Judicial process contemplated for recovery of property: ejectment suit or reinvindicatory action c. The person claiming better right must prove: a. That he has better title to the property b. Identity of the property d. One must depend on strength of his title and not the weakness of the defense e. Action is founded on positive rights

f.

Evidence evidence.

required:

preponderance

of

b) Eminent Domain EMINENT DOMAIN—is the superior right of the State to acquire private property whether registered or not for public use upon payment of just compensation. It is one of the limitations of the right of ownership. a. Absolute necessity for expropriation is not required. It is enough that reasonable necessity for public use is intended. b. Just compensation is equivalent to the value of the land. (Market value plus consequential damages minus the consequential benefits) c. The market value should be determined at the time of the filing of the complaint or at the time of taking of the property, whichever transpires first. d. The ownership over the property taken is transferred only when the just compensation with proper interest had been made Elements for Taking in Eminent Domain: (CPJD) 1. Taking done by Competent authority a. Executive branch b. Municipal corporations, other government entities, and public service corporations. 2. For Public use a. That only a few actually benefit does not diminish its public use 3. Owner paid Just compensation a. Value at the time of the taking 4. Due process of law observed Computation for Just Compensation under Agrarian Reform LBP v. Cruz, [G.R. No. 175175, Sept. 29, 2008] How will the computation of just computation applied? Section 17 of R.A. No. 6657: In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors, shall be considered. The social and economic benefits contributed by the farmers and the farmworkers and by government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation.

Formula by the DAR in using Section 17 of RA 6657 (DAR A.O. No. 5, series of 1998): LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per declaration LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Procedure of Expropriation under Agrarian Reform: LBP is an agency created primarily to provide financial support in all phases of agrarian reform pursuant to Section 74 of Republic Act (RA) No. 3844 and Section 64 of RA No. 6657. Once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of LBP begins. No judicial determination of just compensation allowed without LBP’s participation. Tabuena v. LBP, [G.R. No. 180557, Sept. 26, 2008]. Abandonment of Property Expropriated: MCIAA v. Tudtud, [G.R. No. 174012, Nov. 14, 2008] When a private land is expropriated for public use and subsequently, the public use was abandoned, it returns to its owner unless there is a statutory provision that prohibits it. MCIAA has the obligation to return to X the land. X has the obligation to return: 1. What he received as just compensation with interest computed from default. 2. Necessary expenses incurred by MCIAA in sustaining lot and monetary value for services in managing insofar as X was benefitted services in managing insofar as X was benefitted Following Article 1187 of the Civil Code, the MCIAA may keep whatever income or fruits it may have obtained from Lot No. 988, and X need not account for the interests that the amounts they received as just compensation may have earned in the meantime. Respondents, as creditors, do not have to settle as part of the process of restitution the appreciation in value of Lot 988 which is a natural consequence of nature and time. x x x,"

c) Police Power

POLICE POWER— is another limitation of the right of ownership wherein property may be interfered with, even destroyed, if so demanded by the welfare of the community. The owner of the property is not entitled to compensation Requisites of Police Power: (PRO) 1. Public interest 2. Reasonably necessary means for the accomplishment of a purpose 3. It is not unduly Oppressive upon individuals a. No taking of property involved b. No financial compensation SURFACE RIGHTS OF A LANDOWNER— right to surface & everything under it only as far as necessary for his practical interest (Benefit or Enjoyment) 1. Rights subject to: a. Existing servitudes or easements b. Special laws c. Local ordinances d. Reasonable requirements of aerial navigation e. Rights of third persons

4. HIDDEN TREASURE Concept of Treasure: (HUM) 1. Hidden and unknown 2. Unknown owner 3. Consists of Money, jewels, or other precious objects. (not raw materials) Right to Hidden Treasure: 1. Finder is the same as owner of the property – treasure totally belongs to him. 2. Finder is third person and he discovered it by chance – finder is entitled to one half of the value of the treasure. 3. Finder is an intruder – he is not entitled to anything 4. Finder was given express permission by the owner – subject to the contract of service and principle of unjust enrichment

BASIS

ACCION REPLEVIN

Definitio n

Where to file Issue involved

Action Prescripti on

Others

Action or provisional remedy where the complainant prays for the recovery of the possession of the personal property * NOT APPLICABLE TO (a) Movables distrained or taken for a tax assessment or fine pursuant to law (b) Those under a writ of execution or preliminary attachment (c) Those under custodia legis MTC or RTC depending on the amount of money involved Recovery of possession of personal property

In Personam

Steps: i. Complaint is filed at commencement or at any time before answer of other party ii. Complaint should allege OWTA (owner, wrongfully taken, taken against law) iii. Pay bond double the amount of property

CIVIL LAW REVIEWER

FORCIBLE ENTRY Summary action to recover material or physical possession of real property when a person originally in possession was deprived thereof by (FISTS) Force, Intimidation, Strategy, Threat, or Stealth

UNLAWFUL DETAINER Action brought when possession by a landlord, vendor or vendee or other person of any land or building is being unlawfully withheld after the termination or expiration of the right to hold possession, by virtue of a contract, express or implied

ACCION PUBLICIANA It is the preliminary action to recover a better right to possess

MTC

MTC

RTC

Material or physical possession of real property Possession de facto

Material or physical possession of real property Possession de facto

Quasi in Rem 1 year from dispossession FIT – from dispossession SS – from discovery

Quasi in Rem 1 year from the time the possession became unlawful – last date of demand or letter of demand



 If there’s a fixed period – 1 year from the expiration of the lease  If the reason is nonpayment of rent or non-fulfillment of the conditions of the lease – 1 year from demand to



May be brought against the owner in some cases such as lease Complaint must state FISTS or else it would just be an accion publiciana which should be filed with the RTC

REINVINDICATORIA Action to recover ownership of real property

RTC

Better right of possession of real property. Possession de jure Quasi in Rem 10 years

Ownership of real property

2 kinds: a) Possession not through FISTS - can be filed Immediately

 Accion reinvindicatoria can be filed simultaneously with FE  Judgment of ownership usually includes the right of possession

b) 1 year period for FE or UD has Elapsed

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Quasi in Rem 10 or 30 years depending on whether it’s ordinary or extraordinary prescription

iv. Sheriff takes property v. Doors broken if necessary Defendant’s remedy: 1. File a bond double the amount, and 2. Give copy to plaintiff Stranger’s remedy – File a 3rd party claim

CIVIL LAW REVIEWER

 vacate Complaint filed 5 days after demand (buildings) or 15 days (land  Refers to any kind of land  It should be alleged that the right to possess had been terminated and that the continued possession was unlawful  Not the remedy if what is sought is specific performance  Demand Necessary - if there is a breach Not necessary – if the fixed period just expires 

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Should remember Article 434. In an action to recover ownership, the property must be identified, and the plaintiff must rely on the strength of his title and not on the weakness of the defendant’s claim

================================

2.

TOPICS UNDER THE SYLLABUS C. Accessions 1. Accession Discreta a. Natural Fruits b. Industrial Fruits c. Civil Fruits 2. Accession Continua a.1 Accession Industrial i. Builder/ Planter/ Sower (BPS) in Good Faith ii. BPS in Bad Faith iii. No Claim of Ownership a.2 Accession Natural a.3 For Personal Property i. Adjucntion/ Conjunction ii. Mixture iii. Specification

Usufruct 3. Lease of rural lands 4. Pledge 5. Antichresis

================================

PRINCIPLES: 1. Accessory follows the principal. 2. The incorporation or union must be intimate that removal or separation cannot be effected without substantial injury to either or both. 3. Good faith exonerates a person from punitive liability but bad faith may give rise to dire consequences. 4. Bad faith of one party neutralizes the bad faith of the other. 5. No one should enrich himself at the expense of another.

C. ACCESSION ACCESSION— is the right of the owner of a thing, real or personal, to become the owner of everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially. NOTE: It is NOT one of the modes of acquiring ownership enumerated in Article 712.

2 KINDS OF ACCESSION: 1. ACCESSION DISCRETA— the extension of the right of ownership of a person to the products of a thing which belongs to such person. It takes place with respect to: a. NATURAL FRUITS – spontaneous products of the soil and the young of animals. b. INDUSTRIAL FRUITS – those produced by lands of any kind through cultivation or labor. c. CIVIL FRUITS – rents of buildings, the price of lease of lands and other property and the amount of perpetual or life annuities or other similar income. GENERAL RULE: All fruits belong to the owner of a thing. EXCEPTIONS: (PULPA) 1. Possession in good faith by another

CIVIL LAW REVIEWER 383

2. ACCESSION CONTINUA — the extension of the right of ownership of a person to that which is incorporated or attached to a thing which belongs to such person. It may take place:

a. With respect to real property b.

a) b)

accession industrial accession natural

With respect to personal property i. adjunction or conjunction ii. commixtion or confusion iii. specification

a.1 Accession Industrial

OBLIGATIONS: i. Gathered Fruits PLANTER

OWNER

Planter in Good Faith (GF)

Keeps fruits

Planter in Bad Faith (BF)

Reimbursed for expenses for production, gathering, and preservation (necessary expenses)

No need to reimburse the planter of expenses since he retains the fruits Gets fruits, pay planter necessary expenses

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ii. Standing Crops Planter in GF

Planter in BF

PLANTER Reimbursed for expenses for production, gathering, and preservation Loses everything. No right to reimburseme nt

OWNER Owns fruits provided he pays planter expenses for production, gathering, and preservation. (forced coownership) Owns fruits

iii. Re: Offsprng of Animals. When the male and female animals belong to different owners, under the Partidas, the owner of the female was considered also the owner of the young, unless there is a contrary custom or speculation. The legal presumption, in the absence of proof to the contrary, is that the calf, as well as its mother belong to the owner of the latter, by the right of accretion. US v. Caballero, [25 Phil 356] This is also in accord with the maxim “pratus sequitor ventrem” (the offspring follows the dam or mother).

Right of Accession with Respect to Immovables Two disputable presumptions as improvements on land: 1. Works made by the owner 2. Works made at the owner’s expense

OM = BF LO = BF (as if both in GF) LO = BF OM = GF

Exception: OM exercises the right of removal

Becomes the owner of the materials but he must pay: 1. Value 2. Damages

removal - provided no injury to the work constructed or destruction of the plantings, etc. will be caused 1. Entitled to the ABSOLUTE right of removal and damages (whether or not substantial injury is caused) 2. Entitled to reimbursement and damages (in case he chooses not to remove)

PLANTING V. SOWING 1. PLANTING— pertains to a perennial fact. Something that will grow and produce fruits year after year without having to be replanted. 2. SOWING— pertains to an annual crop. Something that will grow and produce fruits and then you plant again before it will produce fruits again. ESSENCE OF DISTINGUISHMENT In planting: planter may be required to buy the land. In sowing: sower may be required to pay rents.

to

WHERE LAND AND MATERIALS BELONG TO DIFFERENT OWNERS Land Owner Owner of (LO) Materials (OM) OM = Becomes the 1. Entitled to GF owner of the reimbursement LO = materials but - provided he does GF; he must pay for not remove them their value. 2. Entitled to Or

CIVIL LAW REVIEWER 383

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WHERE A PERSON BUILDS (IN GOOD OR IN BAD FAITH) ON

THE LAND OF ANOTHER

LAND OWNER (LO) LO = GF Builder= GF; Or LO = BF Builder = BF (as if both in GF)

LO = GF Builder= BF

1. Appropriate improvements as his own after paying for indemnity 2. Compel the builder to buy the land where the building has been built Exception: Value of land > Value of improvements  rent to be paid If builder fails to pay the rent: - no right of retention - LO entitled to removal of improvement OPTIONS: 1. Appropriate the improvements - must pay for: - a. necessary expenses for the preservation of the land - b. damages - no need to pay for its value or other expenses 2. right to demolish or removal + damages - at the builder’s expense 3. compel the builder or planter to pay the price of the land, and the sower the proper rent + damages - whether or not the value of the land is considerably more than the value of the house

General Rule: LO has no right of removal or demolition. Exception: Option of right of removal is compulsory on the part of the LO when builder fails to pay. REMEDIES: 1. Demolish what has been built, sown, or planted 2. Consider price of land as an ordinary money debt of the builder

CIVIL LAW REVIEWER 383

BUILDER

OPTIONS:

1. Right to indemnification a. Necessary expenses, w/ right of retention until reimbursed b. Useful expenses, w/ right of retention 2. Right of removal - if the thing suffers no injury, and if his successor in the possession does not prefer to refund the amount expended.

1. Loses what is built, planted, or sown without right to indemnity 2. Liability for damages 3. Entitled to reimbursement for the necessary expenses of preservation of land

-

may enforce payment thru an ordinary action for the recovery of a money debt (levy and execution)

EXCEPTIONS to the Rule on Builders, etc. (HSBC) 1. Builder, etc. does not claim ownership over the land but possesses it as mere Holder, agent, usufructuary or tenant; he knows that the land is not his.

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EXCEPTION TO THE EXCEPTION: Tenant whose lease is about to expire, but still sows, not knowing that the crops will no longer belong to him 2. A person constructs a building on his own land, and then Sells the land but not the building to another a. no question of good faith or bad faith on the part of the builder b. can be compelled to remove the building c. new owner will not be required to pay any indemnity for the building

RULES WHEN INVOLVED:

For Art. 448 of the NCC to apply, the construction must be of a permanent character, attached to the soil with an idea of perpetuity. It is of a transitory character or is transferable, there is no accession, and the builder must remove the construction. Alviola v. CA, [G.R. 117642, April 12, 1998]



A promised to donate a property to B. B constructed his house thereon before the donation. If the property was not donated to him, can B be considered a possessor in good faith? Mere promise to donate the property to B cannot convert him into a builder in good faith. At the time the improvement was built, such promise was not yet fulfilled, but a mere expectancy of ownership that may or may not be realized. If at all, B is a mere possessor by tolerance. A person whose occupation of a realty is by tolerance of its owners are not possessors in good faith. Hence, he is not entitled to the value of the improvements built thereon. Verona PadaKilario v. CA, [G.R. No. 134329, January 19, 2000]

CIVIL LAW REVIEWER 383

ARE

 Rights of LO and Builder  same as set forth in the table  Rights of OM a. Bad faith i. Loses all rights to be indemnified

ii.

Can be liable for consequential damages (as when the materials are of an inferior quality) b. Good faith i. Entitled to reimbursement ii.In case of insolvency on the part of the builder LO is subsidiarily liable, if he makes use of the materials.

RULE: OM bad faith, Builder bad faith, LO good faith

1.

RULES WHEN LANDOWNER SELLS LAND TO A 3RD PERSON WHO IS IN BAD FAITH 1. Builder must go against him. 2. BUT when the 3rd person paid the landowner: a. Builder may still file a case against him b. 3rd person may file a 3rd party complaint against landowner

PARTIES

Parties: 1. Land owner (LO) 2. Builder, planter, sower (builder) 3. Owner of materials (OM)

3. Builder is a Belligerent occupant 4. Builder, etc. is a Co-owner a. even if later on, during the partition, the portion of land used is awarded to another co-owner; 

THREE

2.



Between OM and Builder, good faith must govern.  Builder must reimburse OM, but in case Builder cannot pay, LO will not be subsidiarily liable because as to him, OM is in bad faith. If the builder pays, he cannot ask reimbursement from LO because as to LO, builder is in bad faith LO  Can ask damages from BOTH; has the choice to: a. Appropriate what has been built as his own i. Without payment of any indemnity for useful or necessary expenses for the building ii. With indemnity for the necessary expenses for the preservation of the land b. Demand the demolition at builder’s expense c. Compel builder to pay the price of the land i. Whether the land is considerably more valuable than the building or not. A lessee cannot be a builder in good faith. He is estopped to deny his landlord’s title, or to assert a better title not only in himself, but also in some third person while

Page 44 of

he remains in possession of the leased premises and until he surrenders possession to the landlord. Munar v. CA, [230 SCRA 372]; Frederico Geminiano, et al. v. CA, et al., [G.R. No. 120303, July 24, 1996] 

Estoppel applies even if the lessor had no title at the time. The relation of lessor and lessee was created and may be asserted not only by the original lessor, but also by those who succeed to his title. As lessees, they knew that their occupation of the premises would continue only for the life of the lease. They cannot be considered as possessors nor builders in good faith. Racaza v. Susan Realty, Inc., [18 SCRA 1172]; Vda. De Bacaling v. Laguna, [54 SCRA 243]; Santos v. CA, [221 SCRA 42]



Even if the lessor promised to sell, it would not make the lessee possessor or builder in good faith so as to be covered by the provisions of Art. 448 of the NCC, if he improves the land. The latter cannot raise the mere expectancy of ownership of the land because the alleged promise to sell was not fulfilled nor its existence even proven. (Jurado)



The owner of the land on which a building has been built in good faith by another has the option to buy the building or sell his land to the builder, he cannot refuse to exercise either option. Sarmiento v. Agana, [129 SCRA 122 (1984)]



Owner of the land on which improvement was built by another in good faith is entitled to removal of improvement only after landowner chose to sell the land and the builder refused to pay for the same. Where the land’s value is greater than the improvement, the landowner cannot compel the builder to buy the land. A “forced lease” is then created and the court shall fix the terms thereof in case the parties disagree thereon. Depra v. Dumlao, [136 SCRA 475 (1985)]



The right to choose between the improvement or selling which the improvement of planter or sower stands, is

CIVIL LAW REVIEWER 383

owner of the land (not the court) Balatan v. CA, [304 SCRA 34 (1999)] 

Improvements made prior to the annotation of the notice of lis pendens are deemed to have been made in good faith. After such annotation, P can no longer invoke the rights of a builder in good faith. Should E opt to appropriate the improvements made by P, it should only be made to pay for those improvements at the time good faith existed to be pegged at its current market value. Carrascoso v. CA, [G.R. No. 123672, December 14, 2005]

appropriating the land on the builder, given to the

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ACCESSION

Accession Discreta

Natural Fruits

Spontaneous products of the soil, Young and other products of animals

Industrial Fruits

Accession Continua

Real

Civil Fruits

rents of buildings price of leases of land & other property amount of perpetual or life annuities or other similar income

Accession Industrial

Building Planting Sowing

Accession Natural

Alluvium Avulsion Change of course of rivers Formation of islands

Personal

Adjunction/ Specification Conjunction

(ISTEP) Inclusion or engraftment Soldadura or soldering Tejido or weaving Escritura or writing Pintura or Painting

Mixed

commixtion confusion

Accession Natural i. Alluvium ALLUVION - the accretion which the banks of rivers gradually receive from the effects of the current of the waters and which belong to the owners of lands adjoining the said banks. ACCRETION - act or process by which a riparian land gradually and imperceptively receives addition made by the water to which the land is contiguous. ESSENTIAL ELEMENTS: 1. Deposit or accumulation of soil or sediment must be gradual and imperceptible. 2. Accretion results from the effects or action of the current of the waters of the river. 3. The land where accretion takes place must be adjacent to the bank of a river. 

Registration under the Torrens System does not protect the riparian owner against the diminution of the area of his registered land through gradual changes in the course of an adjoining stream. Viajar v. CA, [168 SCRA 405 (1988)]



Failure to register the acquired alluvial deposit by accretion for 50 years subjected said accretion to acquisition through prescription by third persons. Reynante v. CA, [207 SCRA 794 (1992)]



The rules on alluvion do not apply to man-made or artificial accretions to lands that adjoin canals or esteros or artificial drainage system. Ronquillo v. CA, [195 SCRA 433 (1991)]



Law of Waters: “ART. 4. Lands added to the shores by accretions and alluvium deposits caused by the action of the sea, form part of the public domain. When they are no longer washed by the waters of the sea, and are not necessary for the purposes of public utility, or for the establishment of special industries, or for the coastguard service, the Government shall declare them to be the property of the owners of the estates adjacent thereto and as an increment thereof.” Lanzar v. Dir. Of Lands, [78 SCRA 152]

ii. Avulsion

AVULSION - accretion which takes place when the current of a river, creek, or torrent segregates from an estate on its bank a known portion and transfers it to another estate, in which case, the owner of the estate to which the segregated portion belonged, retain the ownership thereof. ALLUVIUM vs. AVULSION ALLUVIUM AVULSION Deposit of soil is Deposit of soil is sudden gradual and or abrupt. imperceptible. Soil cannot be Soil is identifiable and identified. verifiable. Deposit of soil belongs Deposit of soil belongs to to the owner of the the owner from whose property to which it is property it was detached. attached. ESSENTIAL ELEMENTS: 1. Segregation and transfer must be caused by the Current of a river, creek or torrent. 2. Segregation and transfer must be Sudden or abrupt. 3. The portion of land transported must be Known or identifiable. NOTE: The owner should remove the transferred portion within two years; otherwise, it becomes permanently attached. Uprooted Trees 1. Trees uprooted and carried away by the current of the waters a. Owners do not claim them w/in 6mos  Belong to the owner of the land upon which they may be cast b. Owners claim them  owners pay the expenses incurred in gathering them or putting them in a safe place iii. Change of Riverbed Requisites: 1. There must be a natural change in the course of the waters of the river. 2. The change must be abrupt or sudden. Right of owner of land occupied by new river course: 1. Right to old bed ipso facto in proportion to area lost 2. Owner of adjoining land to old bed: right to acquire the same by paying its value – Value not to exceed the value of area occupied by new bed

New River Banks 1. New river banks created  public dominion 2. New river bed may itself be abandoned, due to natural or artificial causes authorized by law. a. owners will get back this previous property if the course of the river reverts back to its original place iv. Formation of Islands ISLAND BELONGS TO THE STATE: 1. On seas within the jurisdiction Philippines 2. on lakes 3. on navigable or floatable rivers

of

the

Islands formed in Non-navigable or Nonfloatable Rivers: 1. Island  to the owners of the margins or banks of the river nearest to each of them. 2. If in the MIDDLE of the river  divided longitudinally in halves a.3 For Personal Property i. Adjunction/ Conjunction ADJUNCTION OR CONJUNCTION — Is a process whereby two movable things owned by different persons are joined together without bad faith, in such a way that they form a single object. Requisites: 1. The two things belong to different owners. 2. They form a single object. 3. They are inseparable; that their separation would impair their nature or result in substantial injury to either component. CLASSES OF ADJUNCTION: (ISTEP) 1. Inclusion (engraftment) i.e. setting a precious stone on a golden ring 2. Soldadura (soldering) i.e. joining a piece of metal to another metal a. Feruminatio – same metal b. Plumbatura – different metals 3. Tejido (weaving) 4. Escritura (writing) 5. Pintura (painting) a. Owner of the principal: a. By law becomes the owner of the resulting object

b. Indemnifies the owner of the accessories for the values thereof. Test To Determine Principal: 1. Rule of importance and purpose 2. Greater value - If they are of unequal value 3. Greater volume - If they are of equal value 4. Greater merits When Separation Allowed: 1. Separation without injury 2. Separation with injury – accessory is much more precious than the principal; the owner of the former may demand its separation even though the principal may suffer injury. 3. Owner of principal in bad faith

OP GF OA GF

= =

Or OP = BF OA = GF OP =GF OA BF

OP BF OA GF

=

= =

RULES AS TO OWNERSHIP OWNER OF OWNER OF PRINCIPAL ACCESSORY (OA) (OP) Acquires the May demand accessory reparation: - indemnifies a. If no injury will be the former caused owner for its b. If value of value accessory is greater than principal even if damages will be caused to principal (expenses is to the one who caused the conjunction) 1. Owns the 1. Loses the thing accessory incorporated 2. Right to 2. Indemnify the damages OP for the damages OP may have suffered 1. Pay OA Right to choose value of between accessory or 1. OP paying him 2. Principal its value or and accessory 2. That the thing be separated belonging to him be PLUS separated even Liability for though it be damages necessary to destroy the principal thing

ii. Mixture MIXTURE— takes place when two or more things belonging to different owners are mixed or combined to such extent that the components lose their identity.

KINDS: 1. COMMIXTION – mixture of solid things 2. CONFUSION – mixture of liquid things RULES: 1. Mixture by the will of the owners a. Rights governed by stipulations b. Without stipulation: each acquires a right or interest in proportion to the value of his material 2. Mixture caused by an owner in GF or by chance a. Each share shall still be in proportion to the value of their thing 3. Mixture caused by owner in BF a. The actor forfeits his thing b. Liable for damages iii. Specification SPECIFICATION — imparting of a new form to the material belonging to another; or the making of the material of another into a thing of a different kind. RULES: 1. When the maker (considered principal) is in GF a. May appropriate but must indemnify the owner of the material b. May not appropriate – when material transformed > new thing. The OM may: i. Appropriate the new thing subject to the payment of the value of the work, or ii. Demand indemnity for the material with damages b. When the maker is in BF a. OM can appropriate the work without paying for the labor or industry b. OM can demand indemnity plus damages c. OM cannot appropriate if the value of the work is considerably more than the value of the material due to artistic or scientific importance COMPARISON OF THE 3 TYPES OF ACCESSION OF MOVABLES ADJUNCTION MIXTURE SPECIFICATION Involves at Involves at Involves at least 2 least 2 things least 2 things things As a rule, As a rule, As a rule, accessory coaccessory follows follows ownership principal

principal The things joined retain their nature

results May either retain or lose respective natures

The new object retains or preserves the nature of the original object

================================ TOPICS UNDER THE SYLLABUS D. Quieting Title

================================ QUIETING OF TITLE— is a remedy or proceeding which has for its purpose an adjudication that a claim of title to realty or an interest thereon, adverse to the plaintiff, is invalid or inoperative, or otherwise defective and hence, the plaintiff and those claiming under him may forever be free of any hostile claim. Reasons: 1. Prevent litigation

2. 3.

Protect true title & possession Real interest of both parties which requires that precise state of title be known

ACTION TO QUIET TITLE 1. Puts an end to vexatious litigation in respect to property involved; plaintiff asserts his own estate & generally declares that defendant’s claim is w/o foundation 2. Remedial 3. QUASI IN REM - suits against a particular person or persons in respect to the res May not be brought for the purpose of settling a boundary disputes 4. Applicable to real property or any interest therein. The law, however, does not exclude personal property from actions to quiet title. 5. An action to quiet title brought by the person in possession of the property is IMPRESCRIPTIBLE. 6. If he is not in possession, he must invoke his remedy within the prescriptive period. Classifications: 1. Remedial action –to remove cloud on title 2. Preventive action –to prevent the casting of a (threatened ) cloud on the title. Requisites: (TICR) 1. Plaintiff must have a legal or equitable Title or interest in the real property 2. Cloud in such title

3. Such cloud must be due to some Instrument, record, claim, encumbrance or proceeding which is: a) apparently valid b) but is in truth invalid, ineffective, voidable or unenforceable c) prejudicial to the plaintiff’s title 4. Plaintiff must Return to the defendant all benefits received from the latter or reimburse him for expenses that may have redounded to his benefit NO APPLICATION TO: 1. Questions involving interpretation of documents 2. Mere written or oral assertions of claims, EXCEPT a. If made in a legal proceeding b. If it is being asserted that the instrument of entry in plaintiff’s favor is not what it purports to be 3. Boundary disputes 4. Deeds by strangers to the title UNLESS purporting to convey the property of the plaintiff 5. Instruments invalid on their face 6. Where the validity of the instrument involves pure questions of law ACTION TO REMOVE CLOUD 1. Intended to procure cancellation, delivery, release of an instrument, encumbrance, or claim constituting a on plaintiff’s title which may be used to injure or vex him in the enjoyment of his title 2. Preventive CLOUD—is a semblance of title, either legal or equitable, or a claim or a right in real property, appearing in some legal form but which is, in fact, invalid or which would be inequitable to enforce. Existence of Cloud: (AIP) 1. Instrument or record or claim or encumbrance or proceeding which is Apparently valid or effective 2. BUT is, in truth and in fact, Invalid, ineffective, voidable, or unenforceable, or extinguished (or terminated) or barred by extinctive prescription 3. May be Prejudicial to the title DISTINCTIONS BETWEEN ACTION FOR QUIETING OF TITLE AND ACTION FOR REMOVAL OF CLOUD BASIS ACTION TO ACTION TO QUIET TITLE REMOVE CLOUD

Purpose

To end vexatious litigation in respect to the property concerned

Nature

Plaintiff asserts own claim and declares that the claim of the defendant is unfounded and calls on the defendant to justify his claim on the property that the same may be determined by the court

Procure cancellation, release of an instrument, encumbrance or claim in the plaintiff’s titlewhich affects the title or enjoyment of the property Plaintiff declares his own claim and title, and at the same time indicates the source and nature of the defendant’s claim, pointing its defects and prays for the declaration of its invalidity

Except: In one case, a piece of land was owned by as a husband and wife, and it was offered for bail. They executed a mortgage in the land in favor of the Court. Later on, the land was foreclosed and the State was the sole bidder. Deed of Sale was issued in favor of the State. The owner of the land could not redeem it. But the State did not change the title to be under its name. Many years after that, the heirs of the couple brought an action to quiet title. The Supreme Court denied the claim. The Court failure of the State to have it registered does not mean that the title is invalid. The Court also held that the right for action to quiet title is imprescriptible so long as the plaintiff is in possession of the property. Ruinous Buildings and Trees in Danger of Falling Liability for damages: 1. Collapse – engineer, architect or contractor 2. Collapse resulting from total or partial damage; no repair made – owner; state may compel him to demolish or make necessary work to prevent if from falling 3. If no action – done by government at expense of owner 

To constitute an Act of God: Requisites: 1. The cause of the breach of obligation must be independent of the will of the debtor

2. The event must be either unforeseeable or unavoidable 3. The event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4. The debtor must be free form any participation in, or aggravation of the injury to the creditor. Nakpil v. CA, [144 SCRA 595 (1986)]

================================ TOPICS UNDER THE SYLLABUS E. Co-ownership 1. Elements 2. How Created 3. Rights of Co-owners a. Ownership over Whole Property b. Sale/ Alienation i. Of Individual Interest ii. Of Entire Property iii. Redemption by Other Coowners iv. Prescription c. Benefits/ Fruits/ Interest/ Income d. Use/ Possession e. Management/ Administration 4. Partition a. Demandable Anytime b. Prohibition for Indivision 5. Obligations of Co-owners 6. Termination

3. 3. Succession 4. Fortuitous event/chance (i.e., commixtion) 5. Occupancy (i.e.,2 persons catch a wild animal) 6. Donation Kinds of Co-ownership: 1. Ordinary – right of partition exists 2. Compulsory – no right partition exists (party wall) 3. Legal – created by law 4. Contractual – created by contract 5. Universal – over universal things (co-heirs) 6. Singular or Particular – over particular or specific thing 7. Incidental – exists independently of the will of the parties

DISTINGUISHED FROM PARTNERSHIP BASIS Legal personality

Created by contract or other things

Purpose

Collective enjoyment of a thing Agreement for it to exist for 10 years – valid (If more than 10 years, the excess is void)

Term

E. CO-OWNERSHIP CO-OWNERSHIP —is a form of ownership which exists whenever an undivided thing or right belongs to different persons.

2. HOW CREATED 1. Law 2. Contracts

OWNE RSHIP No legal personality

Source

================================

1. ELEMENTS 1. Plurality of subjects – many owners 2. Object of ownership must be undivided 3. Recognition of ideal shares; no one is an owner of a specific portion of the property until it is partitioned.

CO-

Representatio n

Effect of death

Substitution

NOTE: 20 years is the maximum if imposed by the testator or donee of the common property As a rule, no mutual representation Not dissolved by death or incapacity of a co-owner Can dispose of

PARTNERSHI P Has legal or juridical personality Created by contract only (express or implied) Profit No term limit set by law

As a rule, there is mutual representatio n Dissolved by the death or incapacity of a partner Cannot

his share without consent of others Profits

Must always depend on proportionate shares

substitute another as partner in his place without consent of others May be stipulated upon

DISTINGUISHED FROM JOINT TENANCY BASIS Shares

Disposal of shares

Effect of death

Effect of disability

COOWNERSHIP Involves a physical whole. But there is an ideal (abstract) division; each co-owner being the owner of his ideal share Each co-owner may dispose of his ideal or undivided share (without boundaries) without the other’s consent share goes to his own heirs

If a co-owner is a minor, this does not benefit the others for the purpose of prescription, and prescription therefore runs against them

JOINT TENANCY Involves a physical whole. But there is no ideal (abstract) division; each and all of them own the whole thing Each co-owner may not dispose of his own share without the consent of all the rest, because he really has no ideal share share goes by accretion to the other jointtenants by virtue of their survivorship or jus accrecendi If one joint-tenant is under legal disability (like minority), this benefits the other against whom prescription will not run

3. RIGHTS OF CO-OWNERS a. Ownership over Whole Property b. Sale/ Alienation i.

Of Individual Interest o

Right to alienate, assign or mortgage own part; except personal rights like right to use and habitation

ii. iii.

Of Entire Property Redemption owners

by

Other

Co-

Right of redemption i. Right to be adjudicated thing (subject to right of others to be indemnified) ii. Right to share in proceeds of sale of thing if thing is indivisible and they cannot agree that it be allotted to one of them NOTE:  To be exercised w/in 30days from written notice of sale of undivided share of another co-owner to a stranger  Redemption of the whole property by a co-owner does not vest in him sole ownership over said property. Redemption within the period prescribed by law by a coowner will inure to the benefit of all co-owners. Hence, it will not put an end to existing coownership. Mariano v. CA, [222 SCRA 736 (1993)]

iv.

Prescription

General Rule - A co-owner cannot acquire the whole property as against the other coowners by acquisitive prescription. Exception - When there is valid repudiation – prescription shall start from such repudiation Exception to the Exception - In constructive trusts, prescription does not run i.

A co-owner cannot sell the property without the other co-owners’ consent, otherwise, the selling co-owner’s share shall be the only one valid. Paulmitan v. CA, [215 SCRA 866 (1992)]

ii.

While the husband is the recognized administrator of the conjugal property under the Civil Code, there are instances when the wife may assume administrative powers or ask for the separation of property. Where the husband is absent and incapable of administering the conjugal property, the wife must be expressly authorized by the husband or seek judicial authority to assume powers of administration. Thus, any transaction entered by the wife without the court or

the husband’s authority is unenforceable. Being an unenforceable contract, the 2nd Contract is susceptible to ratification. The husband continued remitting payments for the satisfaction of the obligation under the questioned contract. These acts constitute ratification of the contract. Fabrigas v. San Francisco, [G.R. No. 152346, Nov. 25, 2005]

c.

Benefits/ Fruits/ Interest/ Income Right to benefits proportional to respective interest i. Stipulation to contrary is void Right to full ownership of his part and fruits

o o

d.

Use/ Possession Right to use thing co-owned i. For purpose for which it is intended ii. Without prejudice to interest of ownership iii. Without preventing other coowners from making use thereof

o

e.

Management/ Administration o o o o

o

o o

Right to change purpose of coownership by agreement Right to bring action in ejectment in behalf of other co-owner Right to compel co-owners to contribute to necessary expenses for preservation of thing and taxes Right to exempt himself from obligation of paying necessary expenses and taxes by renouncing his share in the pro indiviso interest; but can’t be made if prejudicial to co-ownership Right to make repairs for preservation of things; can be made at will of one co-owner; receive reimbursement therefrom; notice of necessity of such repairs must be given to co-owners, if practicable Right to ask for partition anytime Right of pre-emption

4. PARTITION a. Demandable Anytime General Rule: No co-owner shall be obliged to remain in the co-ownership. Each co-owner may at any time demand the partition of the thing

owned in common, insofar as his share is concerned.

b. Prohibition for Indivision Exception - A co-owner may not successfully demand a partition: 1. If by agreement (for a period not exceeding 10 years, renewable) partition is prohibited 2. When partition is prohibited by a donor or testator (for a period not exceeding 20 years) – from whom the property came 3. When partition is prohibited by law 4. When a physical partition would render the property unserviceable, but in this case, the property may be allotted to one of the co-owners, who shall indemnify the others, or it will be sold, and the proceeds distributed 5. When the legal nature of the common property does not allow partition REQUISITES OF REPUDIATION: 1. Unequivocal acts of repudiation of the coownership amounting to an ouster of the other co-owners 2. Positive acts of repudiation have been made Known 3. Evidence is clear and conclusive 4. Open, continuous, exclusive, notorious possession

5. OBLIGATIONS OF CO-OWNERS 1. Share in charges proportional to respective interest; stipulation to contrary is void 2. Pay necessary expenses and taxes – may be exercised by only one co-owner 3. Pay useful and luxurious expenses – if determined by majority 4. Duty to obtain consent of all if thing is to be altered even if beneficial; resort to court if non-consent is manifestly prejudicial 5. Duty to obtain consent of majority with regards to administration and better enjoyment of the thing; majority means majority in the interest not in the number of co-owners; court intervention if prejudicial – appointment of administrator 6. No prescription to run in favor co-owner as long as he recognizes the co-ownership; requisites for acquisition through prescription i. He has repudiated through unequivocal acts ii. Such act of repudiation is made known to other co-owners

iii. Evidence must be clear and convincing 7. Co-owners cannot ask for physical division if it would render thing unserviceable; but can terminate co-ownership 8. After partition, duty to render mutual accounting of benefits and reimbursements for expenses 9. Under Art. 493 of the NCC, each co-owner has full ownership of his part and of the fruits and benefits pertaining thereto, and he may alienate, assign or mortgage the portion which may be allotted to him upon the termination of the co-ownership. It appears that while there is a single certificate of title, the three lots are distinguishable from each other. RIGHTS OF 3RD PARTIES 1. Creditors of assignees may take part in division and object if being effected without their concurrence, but cannot impugn unless there is fraud or made notwithstanding their formal opposition 2. Non-intervenors – retain rights of mortgage and servitude and other real rights and personal rights belonging to them before partition was made

General Rule: Common areas shall remain undivided, and there shall be no judicial partition thereof Exceptions 1. When the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction 3 years after damage or destruction which rendered a material part thereof unfit for use; 2. When damage or destruction has rendered ½ or more of the units untenable and that the condominium owners holding more than 30% interest in the common areas are opposed to restoration of the projects; 3. When the project has been in existence for more than 50 years, and the condominium owners holding in aggregate more than 50% interest in the common areas are opposed to restoration, remodeling or modernizing; 4. When a project or a material part thereof has been condemned or expropriated and the project is no longer viable or that the condominium owners holding in aggregate more than 70% interest in the common areas are opposed to the continuation of the condominium regime. 5. When conditions for partition by sale set forth in the declaration of restrictions duly registered have been met.

================================ TOPICS UNDER THE SYLLABUS F. Condominium Act (RA 4726)

================================ CONDOMINIUM – an interest in real property consisting of a separate interest in a unit in a residential, commercial or industrial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. a. Any transfer or conveyance of a unit or an apartment office or store or other space therein shall include the transfer and conveyance of the undivided interest in the common areas or in a proper case, the membership or shareholdings in the condominium: provided however, that where the common areas in the condominium project are held by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession.

================================

TOPICS UNDER THE SYLLABUS G. Possession 1. Elements 2. Kinds 3. Requirements—To Ripen into Ownership 4. Acquisitive Prescription 5. Rights of Legal Processor a. Peaceful & Uninterrupted Possession i. Co-possession ii. Actions in Case of Deprivation of Possession b. Fruits i. Civil Fruits ii. Natural/ Industrial Fruits iii. Pending Fruits c. Indemnity for Expenses/ Improvements i. Necessary ii. Useful iii. Luxurious iv. Possession by Lessee

6. Prescription of Just Title a. When Applicable b. Meaning of Just Title 7. Possession of Movables a. When Lost b. Unlawful Deprivation 8. Loss of Possession

================================ POSSESSION— is the holding of a thing or enjoyment of a right

1.

a.

ELEMENTS

Occupancy – actual or constructive (corpus) b. Intent to possess (animus possidendi) c. Must be by virtue of one’s own right Extent of Possession: 1. Physical/actual – occupancy in fact of the whole or at least substantially the whole 2. Constructive – occupancy in part in the name of the whole under such circumstances that the law extends the occupancy to the possession of the whole Subject of possession: things or rights which are susceptible of being appropriated Exceptions: 1. Res communes 2. Property of public dominion 3. Discontinuous servitudes 4. Non-apparent servitudes DEGREES OF POSSESSION: 1. Holding w/o title and in violation of right of owner (grammatical degree) Ex. possession of a thief 2. Possession with juridical title but not that of owner (juridical possession) Ex. that of a lessee, pledge, depositary 3. Possession with just title but not from true owner (possessory right) Ex. A in good faith buys a car from B who delivers the same to A but B merely pretended to be the owner 4. Possession with just title from true owner ACQUISITION OF POSSESSION FROM THE VIEWPOINT OF WHO POSSESSES: 1. Personal Requisites: a. Intent to possess

b. Capacity to possess c. Object must be capable of being possessed 2. Thru authorized person (agent or legal representative) Requisites: a. Intent to possess for principal (not for agent) b. Authority or capacity to possess (for another) c. Principal has intent and capacity to possess 3. Thru Unauthorized person (but only if subsequently ratified) Requisites: a. Intent to possess for another (the principal) b. Capacity of “principal” to possess c. Ratification by principal 2. REQUIREMENTS—TO RIPEN INTO

OWNERSHIP

Classes of Possession: 1. In concept of owner – owner himself or adverse possessor Effects: A. May be converted into ownership through acquisitive prescription B. Bring actions necessary to protect possession C. Ask for inscription of possession D. Demand fruits and damages from one unlawfully detaining property 2. In concept of holder – usufruct, lessee, bailee in commodatum 3. In oneself – personal acquisition A. must have capacity to acquire possession B. intent to possess C. possibility to acquire possession 4. In name of another – agent; subject to authority and ratification if not authorized; negotiorum gestio A. Voluntary – as when an agent possesses for the principal B. Necessary – as when a mother possesses for a child still in the maternal womb C. Unauthorized – this will become the principal’s possession only after there has been a ratification without prejudice to the effects of negotiorum gestio 

Possession and ownership are distinct legal concepts. Ownership confers certain rights to the owner, among which are the right to enjoy the thing owned

and the right to exclude other persons from possession thereof. On the other hand, possession is defined as the holding of a thing or the enjoyment of a right. Literally, to possess means to actually and physically occupy a thing with or without a right. Thus, a person may be declared an owner but he may not be entitled to possession. Heirs of Roman Soriano v. CA, [363 SCRA 86 (2001)]

4. ACQUISITIVE PRESCRIPTION POSSESSOR IN GOOD FAITH is one who is not aware that there exist a flaw in the title or mode w/c invalidates it. POSSESSOR IN BAD FAITH is one who is aware of defect. Notes on Good Faith/Bad Faith  Mistake upon a doubtful/difficult question of law  may be the basis of good faith  Good faith is always presumed. Burden of proof lies on the one alleging bad faith  Possession is presumed to be enjoyed in the same character in which it is acquired, until contrary is proven. Ways of Acquiring Possession 1. Material occupation or exercise of a right a. TRADICION BREVI MANU– when one already in possession of a thing by a title other than ownership continues to possess the same under a new title, that of ownership b. TRADICION CONSTITUTUM POSSESSORIUM— when the owner continues in possession of the property alienated not as owner but in some other capacity. b. By the subjection of the thing or right to our will a. TRADICION LONGA MANU– effected by mere consent or agreement of the parties b. TRADICION SIMBOLICA– effected by delivering an object (such as key) symbolizing the placing of one thing under the control of the vendee c.

By proper acts and legal formalities established for acquiring such right of possession

POSSESSION THROUGH SUCCESSION

1. Possession of hereditary property: a. If ACCEPTED  deemed transmitted w/o interruption from moment of death b. If NOT ACCEPTED  deemed never to have possessed the same 2. Except from date of death of decedent. EFFECTS OF BAD FAITH OF DECEDENT ON HEIR 1. Heir shall not suffer the consequences of the wrongful possession of the decedent (bad faith is personal) EXCEPTION: when he becomes aware of the flaws affecting the decedent’s title 2. Interruption of good faith may take place at the date of summons or that of the answer if the date of summons does not appear. HOWEVER, there is a contrary view espousing that summons is insufficient to make the possessor in bad faith. 3. Effects of possession in good faith  counted only from the date of the decedent’s death MINORS/INCAPACITATED: 1. May acquire MATERIAL possession but not right to possession; 2. May only acquire them through guardian or legal representatives ACQUISITION: cannot be acquired through force or intimidation when a possessor objects thereto – resort to courts 

The execution of a deed of sale is merely a prima facie presumption of delivery of possession of a piece of real property, which is destroyed when the delivery is not effected because of a legal impediment. Said construction or symbolic delivery, being merely presumptive, may be negated by the failure of the vendee to take actual possession of the land sold. Copuyoc v. De Sola, [G.R. No. 151322, October 26, 2006]

5. RIGHTS OF LEGAL POSSESSOR a. Peaceful & Uninterrupted Possession o

o

Right to be respected in his possession; if disturbed – protected by means established by law; spoliation Possession acquired and enjoyed in concept of owner can serve as title for acquisitive prescription

o o

 Possession has to be in concept of owner, public, peaceful and uninterrupted  Title short of ownership Legal presumption of just title (prima facie) – for person in concept of owner Possession of real property presumes that movables are included

i. Co-possession Co-possessors deemed to have exclusively possessed part which may be allotted to him; interruption in whole or in part shall be to the prejudice of all

ii. Actions in Case of Deprivation of Possession

b. Fruits For possessors in good faith: 1. Entitled to fruits received before possession is legally interrupted (natural and industrial – gathered or severed; civil – accrue daily ) 2. Entitled to part of net harvest and part of expenses of cultivation if there are natural or industrial fruits ( proportionate to time of possession ) a. Owner has option to require possessor to finish cultivation and gathering of fruits and give net proceeds as indemnity for his part of expenses; b. If possessor in good faith refuses – barred from indemnification in other manner

c. Indemnity for Expenses/ Improvements For possessors in good faith: 1. Right to be reimbursed for useful expenses with right of retention; owner has option of paying expenses or paying the increase in value of property which thing acquired by reason of useful expenses 2. May remove improvements if can be done w/o damage to principal thing- unless owner exercises option of paying; possessor in bad faith not entitled. Regardless of good faith/bad faith: 1. Right to be indemnified for necessary expenses; 2. Possessor in good faith has right of retention over thing unless necessary expenses paid by owner 3. Not entitled to payment for luxurious expense but may remove them provided principal is not injured – provided owner does not refund the amount expended

4. Im provements caused by nature or time to inure to the benefit of person who has succeeded in recovering possession 5. Wild animals possessed while in one’s control; domesticated – possessed if they retain habit of returning back home 6. One who recovers, according to law, possession unjustly lost is deemed to have enjoyed it w/o interruption Liabilities/ Duties Of Possessors 1. Return of fruits if in bad faith – fruits legitimate possessor could have received 2. Bear cost of litigation 3. Possessor in good faith not liable for loss or deterioration or loss except when fraud and negligence intervened 4. Possessor in bad faith liable for loss or deterioration even if caused by fortuitous event 5. Person who recovers possession not obliged to pay for improvements which have ceased to exist at the time of occupation General Rule Re: possession as a fact: Possession as a fact cannot be recognized at the same time in two different personalities Exceptions: 1. Co-possessor – there is no conflict of interest, both of them acting as co-owners, as in the case of property owned or possessed in common 2. Possession of different concepts or different degrees

SUMMARY OF RULES ON NECESSARY/ USEFUL/ LUXURIOUS POSSESSION & POSSESSION BY LESSEE BASIS

IF IN GOOD FAITH

IF IN BAD FAITH

Necessary Expenses

Useful expenses

Luxurious or Ornamenta l Expenses

1. Right to reimbursemen t 2. Right of retention 1. Right to reimbursemen t of either the amount spent or the increase in value – “plus value” – at owner’s option (art. 546) 2. Right of retention until paid 3. Right of removal (provided no substantial damage or injury is caused to the principal, reducing its value) – UNLESS the winner (owner or lawful possessor) exercises the option in (1) In general, no right to refund or retention but can remove if no substantial injury is caused. However, owner has OPTION to allow: a. Possessor to remove b. Or retain for himself (the owner) the ornament by refunding the amount spent (art. 548)

Right to reimbursement - no right of retention

Taxes and Charges

1. On capital  charged to owner

1. On capital  charged to owner

2. On fruits  charged to possessor

2. On fruits  charged to owner

3. Charges 

No right to reimbursement

In general, no right of refund or retention but can remove if no substantial injury is caused. However, owner has OPTION to allow: 1. Possessor to remove 2. Or retain for himself (the owner) the ornament by refunding the value it has at the time owner enters into possession (art. 549)

Regarding gathered or severed fruits

Regarding pending or ungathered fruits

To possessor

Cultivation expenses of gathered fruits – not reimbursed to possessor pro-rating between possessor and owner of expenses, net harvest, and charges

Possessor must return value of fruits already received as well as value of fruits which the owner or legitimate possessor (not the possessor in BF) could have received with due care or diligence, MINUS necessary expenses for cultivation, gathering, and harvesting, to prevent the to Reimbursed possessor

To owner

Improveme nts no longer existing Liability for accidental loss or deterioratio n Improveme nts due to time or nature

Production expenses of pending fruits – indemnity pro rata to possessor: (owner’s option) money allowing full cultivation and gathering of all fruits; if possessor refused, he shall lose all the right to be indemnified in any other manner. No reimbursemen t

No indemnity

Only if acting w/ fraudulent intent or negligence, after summons To owner or lawful possessor

Liable in every case

No reimbursement

To owner or lawful possessor

Rules in case of conflict or dispute regarding possession 1. Present possessor shall be preferred 2. If both are present, the one longer in possession 3. If both began to possess at the same time, the one who present (or has) title 4. If both present a title, the Court will determine. (Meantime, the thing shall be judicially deposited.) A NOTICE OF LIS PENDENS is proper in the following cases: (PORC-Q) 1. Action to recover possession of real estate 2. Action to quiet title thereto 3. Action to remove clouds thereon 4. Action for partition 5. Any other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof of the buildings thereon

6. PRESCRIPTION OF JUST TITLE 7. POSSESSION OF MOVABLES Requisites:

1. G ood faith 2. Owner voluntarily parted with the possession of the thing 3. In the concept of owner a. Possession in good faith - Equivalent to title b. One who has lost or has been unlawfully deprived of it may recover the thing from whomever possesses it, ordinarily, w/o reimbursement. c. Owner must prove: i. Ownership of the thing ii. Loss or unlawful deprivation or bad faith of the possessor NOTE: Owner acts negligently or voluntarily parts w/ the thing owned  cannot recover from possessor SUMMARY OF RECOVERY OR NONRECOVERY PRINCIPLE Owner may 1. from possessor in bad recover without faith reimbursement2. from possessor in good faith (if owner had lost the property or been unlawfully deprived of it) the acquisition being from a private person [art. 559] Owner may if possessor acquired recover but the object in good faith at should a public sale or auction; REIMBURSE the owner to pay the price possessor paid. Owner cannot 1. if possessor had recover, even if acquired it in good faith by he offers to purchase from a reimburse merchant’s store, or in (whether or not fairs, or markets in the owner had accordance with the Code lost or been of Commerce and special unlawfully laws deprived) 2. if owner is by his conduct precluded from denying the seller’s authority to sell 3. if seller has voidable title which has not been avoided at the time of sale to the buyer in good faith for value and without notice of the sellers defect in title 4. if recovery is no longer possible because of prescription 5. if sale is sanctioned by statutory or judicial authority

6.

if possessor had obtained the goods because he was an innocent purchaser for value and holder of a negotiable document of title to the goods

ANIMALS WILD ANIMALS – possessor is the one who has control over them DOMESTICATED AND TAMED ANIMALS – the possessor does not lose possession as long as habitually they return to the possessor’s premises NOTE: For ownership, the owner must claim them within 20 days from their occupation by another person Loss Of Possession: (PALA) 1. Abandonment of the thing – renunciation of right; intent to lose the thing 2. Assignment made to another by onerous or gratuitous title 3. Destruction or total loss of the thing or thing went out of commerce 4. Possession of another if new possession lasted longer that 1 year (possession as a fact); real right of possession not lost except after 10 years

8. LOSS OF POSSESSION Acts Not Affecting Possession: (not deemed abandonment of rights); possession not interrupted 1. Acts merely tolerated 2. Clandestine and unknown acts 3. Acts of violence Possession Not Lost When: 2. Even for time being he may not know their whereabouts, possession of movable is not deemed lost 3. When agent encumbered property without express authority – except when ratified 4. Possession may still be recovered: a. Unlawfully deprived or lost b. Acquired at public sale in good faith – with reimbursement c. Provision of law enabling the apparent owner to dispose as if he is owner d. Sale under order of the court e. Purchases made at merchant stores, fairs or markets f. Negotiable document of title

Possession Equivalent To Title: 1. Possession is in good faith 2. Owner has voluntarily parted with the possession of the thing - Possessor is in concept of an owner

================================

TOPICS UNDER THE SYLLABUS H. USUFRUCT 1. Nature/Elements 2. Application to Personal and Real Properties 3. How constituted 4. Rights of the Usufructuary a. Fruits b. Possession and enjoyments c. Lease of property d. Sale/Alienation of Usufructuary rights 5. Obligations of the Usufructuary a. Before the Usufruct commences b. During the Usufruct i. Alteration of form and substance ii. Exercise of diligence iii. Repairs iv. Charges and Taxes v. Insurance 6. Termination of Usufruct

================================ USUFRUCT is the right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides Quasi-usufruct is the usufruct pertaining to immovables. 1. NATURE/ELEMENTS Characteristics or Elements 1. Essential – those without which it cannot be termed usufruct a. A real right (whether registered in the Registry of Property or not) b. Of a temporary nature or duration c. Purpose: to enjoy the benefits and derive all advantages from the object

as a consequence of normal use or exploitation 2. Natural – that which ordinarily is present, but a contrary stipulation can eliminate it because it is not essential a. Obligation of conserving or preserving the form and substance (value) of the thing 3. Accidental – those which may be present or absent depending upon the stipulation of the parties a. Whether it be a pure or a conditional usufruct b. The number of years it will exist c. Whether it is in favor of one person or several, etc

Creator

Origin

Can be created only by the owner, or by a duly authorized agent, acting in behalf of the owner May be created by law, contract, last will, or prescription

DISTINGUISHED FROM EASEMENT BASIS Object

Extent

Coverag e

Effect of death

USUFRUCT May be real or personal property. Can also be on rights, but not personal rights What can be enjoyed here are all uses and fruits of the property Cannot be constituted on an easement; but it may be constituted on the land burdened by an easement Usually extinguished by death of usufructuary

EASEMENT Involves only real property Cause

Limited to a particular use

May be constituted in favor or, or burdening, a piece of land held in usufruct Not extinguished by the death of the owner of the dominant estate

DISTINGUISHED FROM LEASE USUFRUCT LEASE Covers all fruits Generally covers and uses as a only a particular or rule specific use Nature Always a real A real right only if, right as in the case of a lease over real property, the lease is registered, or is for more than 1 year, otherwise, it is only a personal BASIS Extent

Repairs

Taxes

As to other things

The owner is more or less passive, and he allows the usufructuary to enjoy the thing given in usufruct The usufructuary has the duty to make the ordinary repairs The usufructuary pays for the annual charges and taxes on the fruits A usufructuary may lease the property itself to another

right The lessor may or may not be the owner as when there is a sub-lease or when the lessor is only a usufructuary May be created as a rule only by contract; and by way of exception by law (as in the case of an implied new lease, or when a builder has built in good faith on the land of another a building, when the land is considerably worth more in value than the building The owner or lessor is more or less active, and he makes the lessee enjoy the thing being leased The lessee generally has no duty to pay for repairs The lessee generally pays no taxes

The lessee cannot constitute a usufruct on the property leased

KINDS: 1. As to Origin a. Legal – created by law such as usufruct of parents over the properties of their children b. Voluntary or conventional i. Created by will of the parties inter vivos ii. Created mortis causa c. Mixed – partly created by law and partly by will

d. Prescriptive – is one acquired by a third person through continuous use of the usufruct for the period required by law 2. As to quantity or extent a. As to fruits i. Total ii. Partial b. As to extent i. Universal – if over the entire patrimony ii. Particular/Singular - if only individual things are included 3. As to the number of persons enjoying the right a. Simple – if only one usufructuary enjoys the right b. Multiple – if several usufructuaries enjoy the right i. Simultaneous – at the same time ii. Successive – one after the other BUT, in this case, if the usufruct is created by donation, all the donees must be alive, or at least already conceived, at the time of the perfection of the donation. 4. As to the quality or kind of objects involved a. Usufruct over rights – rights must not be personal or intransmissible in character, so present or future support cannot be an object of usufruct b. Usufruct over things i. Normal (or perfect or regular) – this involves non-consumable things where the form and substance are preserved ii. Abnormal (or imperfect or irregular) – involves consumable things 5. As to terms or conditions a. Pure – no term or condition b. With a term or period i. Ex die – from a certaign day ii. In diem – up to a certain day iii. Ex die in diem – from a certain day up to a certain day c. With a condition i. Suspensive ii. Resolutory 2. APPLICATION TO PERSONAL AND REAL PROPERTIES Some rules regarding Usufruct: 1. Usufruct can be constituted even if the object is subject to Mortgage

2. Us ufruct CANNOT be constituted on an object subject to Pledge 3. Usufruct can be constituted on an object subjected previously to a Lease. 4. Usufructuary can lease out the property to other parties 5. Usufructuary can construct improvements over property subject to usufruct 3. HOW CONSTITUTED How to constitute Usufruct 1. Legal Usufruct – but is not evident in today’s laws 2. Act Inter Vivos 3. By Prescription 4. RIGHTS OF USUFRUCTUARY a. Fruits b. Possession and enjoyments Right to civil, natural & industrial fruits of property (jus fruendi and jus utendi) a. Civil Fruits accrue daily I. Belong to the usufructuary in proportion in proportion to the time the usufruct may last II. Both stock dividends and cash dividends are considered civil fruits b. Industrial and Natural Fruits I. Fruits pending at the beginning of the usufruct  Belong to the usufructuary  No necessity of refunding the owner for expenses incurred, (for the owner gave the usufruct evidently without any thought of being reimbursed for the pending fruits, or because the value of said fruits must have already been taken into consideration in fixing the terms and conditions of the usufruct, if for instance, the usufruct came about because of contract)  BUT without prejudice to the right of 3rd persons. (Thus, if the fruits had been planted by a possessor in good faith, the pending crop expenses and charges shall be pro-rated between said possessor and the usufructuary) II. Fruits pending at the termination of usufruct  Belong to the owner  BUT the owner must reimburse the usufructuary for ordinary cultivation expenses and for seeds and similar expenses, from the proceeds of the fruits. (Hence, the excess of expenses

over the proceeds reimbursed)

need

not

be

c. Lease of Property Right to lease the property

7. Ri ght of usufructuary of woodland – ordinary cutting as owner does habitually or custom of place; cannot cut down trees unless it is for the restoration of improvement of things in usufruct – must notify owner first

General Rule: The lease expires at the end of the usufruct or earlier Exception: In the case of leases of rural lands which continues for the remainder of the agricultural year;.

8. Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear and remove them – if caused by calamity or extraordinary event – impossible to replace them

If the usufruct should expire before the termination of the lease, he or his heirs and successors shall receive only the proportionate share of the rent that must be paid by the lessees. (Art 568) If the naked owner allows the lease to continue even after the expiration of the usufruct, he will be entitled to the rentals pertaining to such extension.

9. Right to oblige owner to give authority and furnish him proofs if usufruct is extended to recover real property or real right

d. Sale/Alienation rights

of

Usufructuary

Right to transfer usufructuary rights – gratuitous or onerous; but is co-terminus with term of usufruct; but cannot do acts of ownership such as alienation or conveyance except when property is: a. Consumable b. Intended for sale c. Appraised when delivered; if not appraised and consumable – return same quality (mutuum) OTHER RIGHTS OF THE USUFRUCTUARY: 1. Right to hidden treasure as stranger 2. Right not exempt from execution and can be sold at public auction by owner 3. Naked owner still have rights but w/o prejudice to usufructuary; may still exercise act of ownership – bring action to preserve ownership 4. Right to necessary expenses cultivation at end of usufruct

from

5. Right to enjoy accessions and servitudes in its favor and all benefits inherent therein 6. Right to make use of dead trunks of fruit bearing trees and shrubs or those uprooted/cut by accident but obliged to plant anew

10. Right to introduce useful and luxurious expenses but with no obligation of reimbursement on part of owner; may remove improvement if can be done without damage 11. Right to set-off improvements against damages he made against the property 12. Right to administer when property is coowned; if co-ownership cease – usufruct of part allotted to co-owner belongs to usufructuary – not affected 13. Right to demand the increase in value of property if owner did not spend for extraordinary repairs; when urgent and necessary for preservation of thing 5. OBLIGATIONS OF THE USUFRUCTUARY  Pay expenses to 3rd persons for cultivation and production at beginning of usufruct; those who have right to fruits should reimburse expenses incurred  Generally, usufructuary has no liability when due to wear and tear, thing deteriorates, obliged to return in that state; except when there is fraud or negligence, then he shall be liable a. Before the Usufruct commences Before entering into Usufructuary: a. Notice of inventory of property (appraisal of movables and description) b. Posting of security i. Not applicable to parents who are usufructuary of children except when 2nd marriage contracted ii. Caucion Juratoria – promise under oath to deliver:

iii.

A. Furniture necessary for the use of the usufructuary B. House included in the usufruct C. Implements, tools and other movable property necessary for an industry or vocation for which he is engaged Excused – allowed by owner, not required by law or no one will be injured

Failure to give security, owner may demand that: A. Immovables be placed under administration B. Negotiable instruments can be converted into registered certificates or deposited in bank C. Capital and proceeds of sale of movables be invested in safe securities D. Interest on proceeds or property under administration belong to usufructuary E. Owner may retain property as administrator w/ obligation to deliver fruits to usufructuary until he gives sufficient security F. Effect of security is retroactive to day he is entitled to fruits b. During the Usufruct i.

Alteration of form and substance

ii. Exercise of diligence Obligation to exercise diligence: 1. Take care of property as a good father of family 2. Liable for negligence and fault of person who substitute him iii. Repairs Obligation to make ordinary repairs – wear and tear due to natural use of thing and are indispensable for preservation; owner may make them at expense of usufructuary – during existence of usufruct iv. Charges and Taxes Obligation to charges and taxes: A. Obliged to make expenses due to his fault; cannot escape by renouncing usufruct B. Pay legal interest from extraordinary expenses made by owner C. Payment of expenses, charges and taxes affecting fruits D. Payment of interest on amount paid by owner charges on capital E. Expenses, cost and liabilities in suits brought with regard to usufructuary – borne by usufructuary v. Insurance

OTHER OBLIGATIONS OF THE USUFRUCTUARY 1. Obliged to notify owner of act of 3 rd person prejudicial to rights of ownership – he is liable if he does not do so for damages – as if it was caused through his own fault 2.

If usufruct is constituted on animals – duty bound to replace dead animals that die from natural causes or became prey; if all of them perish w/o fault but due to contagious disease / uncommon event – deliver remains saved; if perish in part due to accident – continue on remaining portion; if on sterile animals – as if fungible – replace same kind & quality

RIGHTS OF THE NAKED OWNER 1. Alienate thing 2. Cannot alter form or substance 3. Cannot do anything prejudicial to usufructuary 4. Construct any works and make any improvement provided it does not diminish value or usufruct or prejudice right of usufructuary OBLIGATIONS OF THE NAKED OWNER 1. Extraordinary expenses; usufructuary obliged to inform owner when urgent and there is the need to make them 2. Expenses after renunciation of usufruct 3. Taxes and expenses imposed directly on capital 4. If property is mortgaged, usufructuary has no obligation to pay mortgage; if attached, owner to be liable for whatever is lost by usufructuary 5. If property is expropriated for public use – owner obliged to either replace it or pay legal interest to usufructuary of net proceeds of the same 6. TERMINATION OF USUFRUCT Extinguishment of Usufruct: (PLDTERM) 1. Prescription – use by 3rd person 2. Termination of right of person constituting usufruct 3. Total loss of thing 4. Death of usufructuary – unless contrary intention appears 5. Expiration of period of usufruct 6. Renunciation of usufructuary – express 7. Merger of usufruct and ownership 

Loss in part – remaining part shall continue to be held in usufruct

 Usufruct cannot be constituted in favor of a town, corporation or association for more than 50 years 

Usufruct constituted on immovable whereby a building is erected – and building is destroyed – right to make use of land and materials



If owner wishes to construct a new building – pay usufructuary the value of interest of land and materials



Both share in insurance if both pay premium; if owner only – then proceeds will go to owner only



Effect of bad use of the thing – owner may demand the delivery of and administration of the thing with responsibility to deliver net fruits to usufructuary at termination of usufruct



Thing to be delivered to owner with right of retention for taxes and extraordinary expenses w/c should be reimbursed, security of mortgage shall be cancelled

================================

TOPICS UNDER THE SYLLABUS I. EASEMENTS 1. Kinds of Easements 2. Rights and Obligations 3. Modes of Extinguishment 4. Legal Easements a. Public b. Private i. Waters ii. Right of Way iii. Party Wall iv. Light and View v. Drainage of Building vi. Intermediate Distances vii. Against Nuisance viii. Lateral and Subjacent Support

================================ EASEMENT is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. The immovable in favor of which the easement is established is called the dominant estate; that which is subject thereto, the servient estate.

1. KINDS a) According to purpose of easement or the nature of limitation a. Positive – one which imposes upon the servient estate the obligation of allowing something to be done or of doing it himself b. Negative – that which prohibits the owner of the servient estate from doing something which he could lawfully do if the easement did not exist b) According to party given the benefit a. Real (or predial) – for the benefit of another belonging to a different owner (e.g. easement of water where lower estates are obliged to allow water naturally descending from upper estates to flow into them) b. Personal – for the benefit of one or more persons or community (e.g. easement of right of way for passage of livestock) c) According to the manner they are exercised i. Continuous – their use is incessant or may be incessant a. for legal purposes for acquisitive prescription, the easement of aqueduct is considered continuous; easement of light and view is also continuous ii. Discontinuous – used at intervals and depend upon the acts of man Ex. right of way because it can only be used if a man passes d) According to whether or not their existence is indicated i. Apparent – make known and continually kept in view by external signs that reveal the use and enjoyment of the same Ex. right of way when there is an alley or a permanent path ii. Non-apparent – they show no external indication of their existence Ex. easement of not building to more than certain height DOCTRINE OF APPARENT SIGN - Easements are inseparable from the estate to which they actively or passively pertain. The existence of the apparent sign under Art. 624 is equivalent to

a title. It is as if there is an implied contract between the two new owners that the easement should be constituted, since no one objected to the continued existence of the windows. Amor v. Florentino, 74 Phil 404 (1951) e) According to right given i. Right to partially use the servient estate Ex. right of way ii. Right to get specific materials or objects from the servient estate iii. Right to participate in ownership Ex. easement of party wall iv. Right to impede or prevent the neighboring estate from performing a specific act of ownership f)

According to source or origin and establishment of easement a. Voluntary – constituted by will or agreement of the parties or by a testator b. Mixed – created partly by agreement and partly by law c. Legal – constituted by law for public use or for private interest

How established: 1. By law (Legal) 2. By the will of the owners (Voluntary) 3. Through prescription (only for continuous and apparent easements) 

Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. The court merely declares the existence of an easement created by the parties. La Vista Association v. CA, 278 SCRA 498 (1997)

Essential qualities of easements: 1. Incorporeal 2. Imposed upon corporeal property 3. Confer no right to a participation in the profits arising from it 4. Imposed for the benefit of corporeal property

5.

Has 2 distinct tenements – dominant and servient estate 6. Cause must be perpetual 2. RIGHTS AND OBLIGATIONS a) Rights Of Dominant Owner 1. Exercise all rights necessary for the use of the easement

2. M ake any works necessary for the use and preservation of the servitude; subject to the following conditions: A. The works shall be at his expense, are necessary for the use and preservation of the servitude; B. They do not alter or render the servitude more burdensome; C. The dominant owner, before making the works, must notify the servient owner; and D. They shall be done at the most convenient time and manner so as to cause the least inconvenience to the servient owner 3. Renounce the easement if he desires to exempt himself from contribution to necessary expenses 4. Ask for mandatory injunction to prevent impairment of his use of the easement b) Obligations Of The Dominant Owner 1. Notify the servient owner of works necessary for the use and preservation of the servitude 2. Contribute to the necessary expenses if there are several dominant estates in proportion to the benefits derived from the works 3. Cannot alter or impose added burden on the easement 4. Choose the most convenient time and manner in making the necessary works as to cause the least inconvenience to the servient owner c) Rights Of The Servient Owner 1. Retain ownership of the portion on which the easement is established, and may use it in such a manner as not to affect the exercise of the easement 2. Change the place or manner of the use of the easement, provided it be equally convenient 3. Use the property subject of the easement, unless there is an agreement to the contrary d) Obligations Of The Servient Owner 1. Contribute to the necessary expenses in case he uses the easement, unless there is an agreement to the contrary 2. Not to impair the use of the easement 3. MODES OF EXTINGUISHMENT How extinguished: 1. Merger in the same person of the ownership of the dominant and servient estates; 2. Non-user for 10 years a. If discontinuous easements  period computed from the day it was ceased to be used

3. 4. 5. 6.

b. If continuous  period from the day on which an act contrary to the same took place Expiration of the term or fulfillment of the condition (if temporary or conditional) Renunciation of the owner of the dominant estate Redemption agreed upon between owners of the dominant and servient estates When either or both estates fall into a condition that the easement cannot be used; revived if subsequent condition should again permit its use, unless sufficient time for prescription has elapsed



4.LEGAL EASEMENTS LEGAL EASEMENTS are those imposed by law having for their object either public use or the interest of private persons. They shall be governed by the special laws and regulations relating thereto, and in the absence thereof, by the Civil Code. Kinds Of Legal Easements: 1. Public – for public or communal use

2.









Private – for the interest of private persons/private use, including those relating to: (WRPL-DIAL) a. Waters b. Right of Way c. Party Wall d. Light and View e. Drainage of Building f. Intermediate Distances g. Against Nuisance h. Lateral and Subjacent Support a) Easement Relating To Waters Lower estates are obliged to receive the waters which naturally and without the intervention of man descend from the higher estates, as well as stones or earth which they carry with them Cannot construct works which will impede the easement; neither can the owner of the higher estate make works which will increase the burden Banks of rivers and streams, although of private ownership, are subject throughout their entire length and within a zone of 3 meters along their margins, to the easement of public use in the general interest of navigation, floatage, fishing and salvage Estates adjoining the banks of navigable and floatable rivers are, subject to the easement of towpath, for the exclusive service of river navigation and floatage



 Co mpulsory easements for drawing of water and for watering animals can be imposed for reasons of public use in favor of a town or village, after payment of the proper indemnity Use of any water by anyone can be disposed by having the water flow through the intervening estates but is obliged to do the following: 1. Prove that he can dispose of the water and that it is sufficient for the use intended 2. Show that the proposed right of way is the most convenient and least onerous to 3rd persons 3. Indemnify the owner of the servient estate Easement of aqueduct is continuous and apparent even though the flow of water may not be continuous

b) Easement Of Right Of Way  Right granted to a person or class of persons to pass over the land of another by using a particular pathway therein, to reach the former’s estates, which have no adequate outlet to a public highway, subject, however to payment of indemnity to the owner of the servient estate Requisites: (LIPO NA) 1. Claimant must be an owner of enclosed immovable or one w/ real right 2. No adequate outlet to public highway 3. Right of way is absolutely necessary 4. Least prejudicial 5. Isolation not due to claimant’s own act 6. Proper indemnity a. Not compulsory if the isolation of the immovable is due to the proprietor’s own acts b. Right of Way is granted without indemnity if land was acquired by and is surrounded by the other estates of the vendor, exchanger or co-owner through: i. Sale ii. Exchange iii. Partition 

Burden of proof of proving the requisites on the owner of the dominant estate

EXTINGUISHMENT: Legal or compulsory right of way  When the dominant estate is joined to another estate (such as when the dominant owner bought an adjacent estate) which is

 

abutting a public road, the access being adequate and convenient When a new road is opened giving access to the isolated estate In both cases: must substantially meet the needs of the dominant estate. Otherwise, the easement may not be extinguished.



Extinguishment NOT ipso facto



If extinguished, must return the amount received as indemnity to the dominant owner without any interest. Interest shall be deemed in payment for the rent.





The only servitude w/c a private owner is required to recognize in favor of the government is the easement of a public highway, way, private way established by law, or any government canal or lateral that has been pre-existing at the time of the registration of the land. If the easement is NOT PRE-EXISTING and is sought to be imposed only AFTER the land has been registered under the Land Registration Act, proper expropriation proceedings should be had, and just compensation paid to the registered owner. Eslaban v. Vda. De Onorio, G.R. No. 146062 (2001) Easement of right of way is DISCONTINUOUS. It may be exercised only if a person passes or sets foot on somebody else’s land. An easement of right of way of railroad tracks is discontinuous because the right is exercised only if and when a train operation by a person passes over another’s property. Bomedco v. Valdez, G.R. No. 124669 (2003)

c) Easement Of A Party Wall  A wall erected on the line between two adjoining properties belonging to different persons, for the use of both estates.  Presumed, unless there is a title, or exterior sign, or proof to the contrary: 1. In dividing walls of adjoining buildings up to the point of common elevation 2. In dividing walls of gardens or yards situated in cities, towns, or in rural communities 3. In fences, walls and live hedges dividing rural lands Exterior signs rebutting presumption: 1. There is a window or opening in the dividing wall of buildings

3. 4. 5.

6.

7.

2. Di viding wall is on one side straight and plumb on all its facement, and on the other, it has similar conditions on the upper part but the lower part slants or projects outward Entire wall is built within the boundaries of one of the estates The dividing wall bears the burden of the binding beams, floors and roof frame of one of the buildings, but not those of the others The dividing wall between courtyards, gardens and tenements is constructed in such a way that the coping sheds the water upon only one of the estates The dividing wall, being built by masonry, has stepping stones, which at certain intervals project from the surface of one side only, but not on the other The lands enclosed by fences or live hedges adjoin others which are not enclosed

In all these cases, the ownership is deemed to belong exclusively to the owner of the property which has in its favor the presumption based on any of these signs.



d) Easement Of Light And View Period of prescription for the acquisition shall be counted: 1. From the time of opening of the window, if through a party wall 2. From the time of the formal prohibition upon the proprietor of the adjoining land, if window is through a wall on the dominant estate

4. VOLUNTARY EASEMENTS are those which may be established by the owner of a tenement of piece of land as he may deem suitable, and in the manner and form which he may deem best, provided that he does not contravene the laws, public policy or public order.

================================ TOPICS UNDER THE SYLLABUS J. Modes of Acquiring Ownership 1. Mode v. Title 2. Original/Derivative Modes K. Occupation L. Intellectual Creation M. Donation 1. Essential Elements 2. Kinds 3. Conditional Donations a. Effect of Impossible/Illegal Conditions

4. Inter Vivos/Mortis Causa Donations 5. Form a. Onerous Donations 6. Capacity a. Of Donor b. Of Donee 7. Revocation a. Birth, Survival or Adoption b. Ingratitude c. Non-fulfillment of Condition d. Innoficiousness N. OTHER MODES OF ACQUIRING OWNERSHIP 1. Law 2. Prescription O. NUISANCE

================================ MODES OF ACQUIRING (OLDTIPS) 1. Occupation 2. Law 3. Donation 4. Tradition 5. Intellectual Creation 6. Prescription 7. Succession

OWNERSHIP:

1. MODE V. TITLE Difference between Mode and Title MODE is the process of acquiring or transferring ownership TITLE is the juridical act, right or condition which gives the juridical justification for a mode or means to their acquisition but which in itself is insufficient to produce them Mode Directly and immediately produces a real right The cause Proximate cause Essence of the right which is to be created or transmitted

Title Serves merely to give the occasion for its acquisition or existence The means Remote cause Means whereby that essence is transmitted

2. ORIGINAL/DERIVATIVE MODES Original Mode – independent of any preexisting or preceding title or right of another

Derivative Mode owner

– there was a preceding

Modes Of Extinguising Ownership: 1. Absolute – all persons are affected a. Physical loss or destruction b. Legal loss or destruction (when it goes out of the commerce of man) 2. Relative – only for certain persons for others may acquire their ownership a. Law b. Succession c. Tradition as a consequence of certain contracts d. Donation e. Abandonment f. Destruction of the prior title or right (like expropriation, rescission, annulment, fulfillment of a resolutory condition) g. Prescription OCCUPATION is the acquisition of seizing corporeal things owner, made with the acquiring them, and according to legal rules

ownership by w/c have no intention of accomplished

Requisites: 1. Seizure or apprehension  The holding of the material is not required as long as there is right of disposition 2. Property must be corporeal personal property 3. Property must be susceptible of appropriation a. Abandoned property – res derelicata, a thing is considered abandoned when: i. The spes recuperandi (expectation to recover) is gone ii. The animo revertendi (intention to return or to have it returned) has been given up by the owner b. Unowned property – res nullius 4. Without an owner 5. Intent to appropriate 6. Compliance with the requisites or conditions of the law  Abandonment requires (1) a clear and absolute intention to renounce a right or a claim or to abandon a right or property; and (2) an external act by which that intention is expressed or carried into effect. The intention to abandon implies a departure, with the avowed intent of never returning, resuming or claiming the right and the interest that

have been abandoned. Castellano v. Francisco, [G.R. No. 155640, May 7, 2008]

d. If finder retains the thing found – he may be charged with theft e. If owner is unknown, give to mayor; mayor shall announce finding of the movable for 2 weeks in a way he deems best f. If owner does not appear 6 months after publication, thing found shall be awarded to the finder g. If owner appears, he is obliged to pay the finder 1/10 of value of property as price h. If movable is perishable or cannot be kept w/o deterioration or w/o expenses it shall be sold at public auction 8 days after the publication

Things Susceptible to Occupation 1. Things w/c has no owner – res nullius; abandoned 2. Stolen property cannot be subject of occupation 3. Animals that are the object of hunting and fishing NOTE: Hunting and fishing are regulated by special laws: Act 2590; Fisheries Act 4003 as amended by CA 116, CA 147 and RA 659; Act 1499 as amended by Act 1685; PD 534; Municipal ordinances. Kinds Of Animals a. Wild – considered res nullius when not yet captured; when captured and escaped – becomes res nullius again b. Domesticated animals – originally wild but have been captured and tamed; now belong to their capturer; has habit of returning to premises of owner; becomes res nullius if they lose that habit of returning and regain their original state of freedom c. Domestic/tamed animals – born and ordinarily raised under the care of people; become res nullius when abandoned by owner  

Hidden treasure (only when found on things not belonging to anyone) Abandoned movables

Animals 1. Swarm of bees owner shall have right to pursue them to another’s land (owner to identify latter for damages, if any) land owner shall occupy/retain the bees if after 2 days, owner did not pursue the bees 2. Domesticated animals may be redeemed within 20 days from occupation of another person; if no redemption is made, they shall pertain to the one who caught them 3. Pigeons and fish when they go to another breeding place, they shall be owned by the new owner provided they are not enticed Movables: 1. Treasure found on another’s property 2. Movable found w/c is not treasure: c. Must be returned to owner

Ownership of a piece of land cannot be acquired by occupation  Because when a land is without an owner, it pertains to the State  Land that does not belong to anyone is presumed to be public land  But when a property is private and it is abandoned it can be object of occupation

J. INTELLECTUAL CREATION 



By Article 722 and Decree Intellectual Property (P.D. 49), the author, composer, artist, or scientist can be considered as the owner of the creation or product even if it has not been copyrighted or patented. (Jurado) Letters and other private communications in writing are owned by the person to whom they are addressed and delivered, but they cannot be published or disseminated without the consent of the writer or his heirs EXCEPT when the court so authorize if the public good or the interest of justice so requires.

K. DONATION DONATION is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it 1. ESSENTIAL ELEMENTS Characteristics 1. Unilateral – obligation imposed on the donor 2. Consensual – perfected at time donor knows of acceptance Requisites: (CIDA) 1. The donor must have capacity to make the donation of a thing or right

2. Donative intent (animus donandi) or intent to make the donation out of liberality to benefit the donee 3. Delivery, whether actual or constructive of the thing or right donated 4. donee must accept or consent to donation  The donation is perfected once the acceptance of the donation was made known to the donor. Accordingly, ownership will only revert to the donor if the resolutory condition is not fulfilled. Quijada v. CA, 299 SCRA 695 (1998) Requirements of a Donation: 1. Subject matter – anything of value; present and not future property, must not impair legitime 2. Cause – anything to support a consideration, generosity, charity, goodwill, past service, debt 3. Capacity to donate, dispose and accept donation 4. Form – depends on value of donation 2. KINDS a) As to Effectivity 1. Inter vivos – takes effect during the lifetime of the donor 2. Mortis Causa – takes effect upon the death of the donor 3. Propter Nuptias – made by reason of marriage and before its celebration, in consideration of the same and in favor of one or both of the future spouses. DONATION INTER VIVOS Disposition and acceptance to take effect during lifetime of donor and donee Already pertains to the donee unless there is a contrary intent Formalities required follow law on donations and certain kinds of donations and law on obligations and contracts (suppletory) Irrevocable at the instance of the donor; may be revoked only by reasons provided by law Revoked only for

DONATION MORTIS CAUSA Disposition happens upon the death of donor Even if there is a term of effectivity and effectivity is upon the death of the donor, still entitled to fruits Formalities required follow law on succession to be valid, and donation must be in the form of a will Revocable ad mutuum (exclusive will of donor)

reasons provided for by law (except onerous donations) b) As to Consideration 1. Simple – the cause of which is the pure liberality of the donor in consideration of the donee’s merits 2. Remuneratory or compensatory – it is given out of gratitude on account of the services rendered by the donee to the donor, provided they do not constitute a demandable debt. 3. Modal – imposes upon the donee a burden less than the value of the gift 4. Onerous – the value of which is considered the equivalent of the consideration for which it is given and thus governed by the rules of obligations and contracts c) As to Effectivity of Extinguishment 1. Pure – not subject to any condition (uncertain event) or period 2. Conditional – subject to suspensive or resolutory condition 3. With a Term – subject to a period, suspensive or resolutory 3. CONDITIONAL DONATIONS a. Effect of Conditions Conditional – subject resolutory condition

Impossible/Illegal to

suspensive

or

4. INTER VIVOS/MORTIS CAUSA DONATIONS Inter vivos – takes effect during the lifetime of the donor Mortis Causa – takes effect upon the death of the donor 5. FORM a. Onerous Donations ONEROUS – the value of which is considered the equivalent of the consideration for which it is given and thus governed by the rules of obligations and contracts 6. CAPACITY a. Of Donor Who may give donations All persons who may contract and dispose of their property ― donor’s capacity shall be

determined as of the time of the making of the donation b. Of Donee Who may accept donations 1. Natural and juridical persons not especially disqualified by law 2. Minors and other incapacitated A. By themselves I. If pure and simple donation II. If it does not require written acceptance B. By guardian, legal representatives if needs written acceptance I. Natural guardian – not more than 50,000 II. Court appointed – more than 50,000 4. Conceived and unborn child, represented by person who would have been guardian if already born Who are disqualified to donate 1. Guardians and trustees with respect to property entrusted to them 2. Husband and wife 3. Between paramours/persons guilty of adultery or concubinage at the time of donation 4. Between parties guilty of same criminal offense 5. Made to public officers, wife, descendant, ascendant, by reason of his office The prohibition against donations between spouses must likewise apply to donations between persons living together in illicit relations. Joaquino v. Reyes, [G.R. No. 154645, July 13, 2003] Other persons disqualified to receive donations 1. Priest who heard confession of donor during his last illness 2. Relatives of priest within 4th degree, church, order or community where priest belongs 3. Physician, nurse, etc. who took care of donor during his last illness 4. Individuals, corporations and associations not permitted Acceptance a. Acceptance must be made personally or thru agent b. Donation may be made orally or in writing:  Movable: 5,000 and below – may be oral or written, if oral it must be with simultaneous

c.

delivery of thing/document & acceptance need not be in writing above 5,000 - must be written and accepted also in writing  Immovable must be in a public instrument and acceptance must also be in a public instrument (in same instrument or in other instrument); otherwise it is void Must be made during the lifetime of the donor and donee

In case of doubt with regard to nature of donation: inter vivos Badges of mortis causa: 2. Title remains with donor (full or naked ownership) and conveyed only upon death 3. Donor can revoke ad mutuum 4. Transfer is void if transferor survives transferee  A donation mortis causa must comply with the formalities of a last will and testament otherwise, it would be void and would produce no effect. If the donation is made in such a way that the full and naked ownership will pass to the donee upon the death of the donor, then it is at that time when the donation will take effect and it is the donation mortis causa which should be embodied in the last will and testament. Maglasang v. Cabatingan, [G.R. No. 131953, June 2, 2002] SOME RULES ON DETERMINATION WHETHER MORTIS CAUSA OR INTER VIVOS: 1. A donation made “in consideration of love and affection of the donor and the donee” but further stipulates that “It became effective upon the death of the donor provided that in the event the donee should die before the donor, the present donation shall be deemed automatically rescinded and of no force and effect.”  mortis causa since the right of disposition is not transferred to donee while donor is still alive. Sicad v. CA 5. A donation made stipulating that it will take effect after the death of the donor but further stipulates that (1) the donor will not dispose nor take it away from the donee and that (2) the donor is parting with the beneficial ownership while he lived  inter vivos Donation Of The Same Thing To 2 Or More Different Persons  Rules on double sale will apply

CLASSIFICATION OF DONATION INTER VIVOS 1. From the viewpoint of motive, purpose, or cause PURE/ SIMPLE Consider a-tion Merits of donee

Law to apply/ forms Law on donations

Form of accepta nce Required Reservat ion w/regar d to personal support and legitime Applicabl e Warrant y against eviction and hidden defects In bad faith only Revocati on Applicabl e

REMUNERA TORY

COND ITION AL Valuable considera -tion is imposed but value is less than value of thing donated

ONEROU S

Liberality or merits of donee or burden/ charge of past services provided they do not constitute demanda ble debt Law on donations

Valuable considera -tion given

Extent of burden

Required

Required

Applicabl e

Applicabl e

Law on obligation s imposed > ObliCon excess> donation Required

Not Applicabl e

In bad faith only

In bad faith only

Applies

Applicabl e

Applicabl e

Applicabl e

 

Inter vivos – takes effect before the death

In praesenti – to be delivered in future (also considered inter vivos)  Mortis causa 3. From the viewpoint of occasion  Ordinary donation  Donation propter nuptias 4. From the viewpoint of object donated  Corporeal property A. Donation of real property B. Donation of personal property  Incorporeal property – donation of inalienable rights What may be given  All or part of donor’s present property provided he reserves sufficient means for the support of the ff: a. Himself b. Relatives who by law are entitled to his support c. Legitimes shall not be impaired  when w/o reservation or if inofficious, may be reduced on petition of persons affected  Exception: conditional donation and donation mortis causa  Exception To The Exception: future property (cannot be disposed of at the time of donation) 

A donation would not be legally feasible if the donor has neither ownership nor real rights that he can transmit to the donee. Hemedes v. CA, [G.R. No. 107132, October 8, 2008]

DOUBLE DONATIONS: Rule: Priority in time, priority in right 1. If movable – one who first takes possession in good faith 2. If immovable – one who recorded in registry of property in good faith  No inscription, one who first took possession in good faith  In absence thereof, one who presents oldest title 7. REVOCATION

2. From the viewpoint of the taking effect

Grounds For Revocation 1. Birth, Adoption, Reappearance of a child  Period of 4 years from the time of birth, adoption or reappearance to revoke the donation



Transmissible to the heirs of the donor if the donor dies within the 4 year period, in which case the remaining period shall apply to the donor’s heirs  Reduction shall be based on the inofficiousness of the donation 2. Non-fulfillment of the conditions 3. Ingratitude  Cannot be passed to the donor’s heir  Period of 1 year from knowledge of the act of ingratitude, and it was possible for him to bring the action Grounds For Reduction 1. Failure of the donor to reserve sufficient means for support of himself or dependent relatives 2. Failure of donor to reserve sufficient property to pay off existing debts 3. Inofficiousness, that is, the donation exceeds that which the donor can give by will 4. Birth, appearance or adoption of a child AUTOMATIC REVOCATION  In contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the rescission was proper the stipulation of the parties providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act. Zamboanga Barter Traders v. Plagata, [G.R. No. 148433] Revocation Of Donations  Affects the whole donation  Applies only to donation inter vivos  Not applicable to onerous donations  Donor can revoke donation if the donee fails to comply with the conditions imposed by the donor. Prescription: 4 years from the non-compliance with condition. 

X donated a parcel of land to the University on the condition that the latter will establish a medical college named after X. After 50 years, X’s heirs filed annulment for failure to abide by the condition. Can this be revoked?

General rule is that if the period is not fixed in the contract, the court can fix the period. However, it has been 50 years, more than enough time to comply. The Court refused to fix a period and ruled that the donation can be revoked for failure to comply with condition. Central Philippine University v. CA, 246 SCRA 511 Action for revocation by reason of ingratitude 1. Donee commits offense against person, honor, property of donor, spouse, children under his parental authority 2. Donee imputes to donor any criminal offense or any act involving moral turpitude even if he should prove it unless act/crime has been committed against donee himself, spouse or children under his parental authority 3. Donee unduly refuses to give support to donor when legally or morally bound to give support to donor BIRTH OF CHILD Ipso jure revocation, no need for action, court decision is merely declaratory Extent: portion which may impair legitime of heirs Property must be returned Alienation/mor tgages done prior to recording in Register of Deeds: If already sold or cannot be returned – the value must be returned If mortgaged – donor may redeem the mortgage with right to

NONFULFILLMEN T OF CONDITION Needs court action

Extent: whole portion but court may rule partial revocation only Property in excess Alienations/m ortgages imposed are void unless registered with Register of Deeds

INGRTITAUD E Needs court action

Extent: Whole portion returned

Property to be returned Prior ones are void; demand value of property when alienated and cannot be recovered or redeemed from 3rd persons

recover from donee Fruits to be returned at filing of action for revocation Prescription of action is 4 years from birth, etc.

Action cannot be renounced Right of action transmitted to heirs

Action extends to donee’s heirs

Fruits to be returned at filing of complainant Prescription is 4 years from nonfulfillment

Action cannot be renounced in advance Right of action at instance of donor but may be transmitted to heirs Action does not extend to donee’s heirs

6. Effect of declaration as inofficious: the donation is annulled only as to the portion diminishing the legitime  Prescription is 1 year from knowledge of fact and it was possible for him to bring action

Heirs cannot file action

Exception to rule on intransmissibility of action with regard to revocation due to ingratitude: 1. Personal to the donor; general rule is heir cannot institute if donor did not institute 2. Heirs can only file in the following cases: a. Donor has instituted proceedings but dies before bringing civil action for revocation b. Donor already instituted civil action but died, heirs can substitute c. Donee killed donor or his ingratitude caused the death of the donor d. Donor died w/o having known the ingratitude done e. Criminal action filed but abated by death 3. Can only make heirs of donee liable if complaint was already filed when donee died Inofficious donations: 1. Shall be reduced with regard to the excess 2. Action to reduce shall be filed by heirs who have right to legitime at time of donation 3. Donees/creditors of deceased donor cannot ask for reduction of donation 4. If there are 2 or more donation: recent ones shall be suppressed 5. If 2 or more donation at same time – treated equally and reduction is pro rata but donor may impose preference which must be expressly stated in donation

Cause of action arising from the inofficiousness of donation arises only upon death of the donor, as the value of the donation will be contrasted with the net value of the estate of the donor decedent. Eloy Imperial v. CA,[ G.R. No. 112483 (1999)]

Checklist For Donation: 1. Whether onerous or gratuitous – if onerous, governed by law on contracts 2. If gratuitous, whether mortis causa or inter vivos – if mortis causa, governed by law on succession 3. If inter vivos, whether perfected or not (made known to the donor). If no perfection, donation is void. 4. If perfected, check for the capacity of the donor to give and the donee to receive. If no capacity, donation is void. 5. Compliance with Art 748 (movable) and 749 (immovable) of NCC. Non-compliance, donation is void. ILLEGAL AND IMPOSSIBLE CONDITIONS In Simple/Remunatory donations – shall be considered as not imposed (Art 727) In Onerous/Contract – annuls obligation; obligation and conditions are void (Art 1183)

N. Other Modes of Acquiring Ownership 1. LAW Refers to those instances where the law, independently of the other modes of acquiring ownership, automatically and directly vests the ownership of the thing in a certain individual once the prescribed requisites or conditions are present or complied with (Jurado). 2. PRESCRIPTION PRESCRIPTION is a mode by which one acquires ownership and other real rights thru lapse of time; also a means by which one loses ownership, rights and actions; retroactive from the moment period began to run; founded on grounds of public policy; regarded as a statute of repose Kinds: 1. Acquisitive General Requisites: A. Capacity to acquire by prescription B. Thing capable of acquisition prescription

by

2.

C. Possession of thing under certain conditions D. Lapse of time provided by law Extinctive – also called as limitation of actions Morales v CFI, 97 SCRA 872, 1980

Who may acquire by prescription 1. Person who is capable of acquiring property by other legal modes 2. State 3. Minors – through guardians or personally Against whom prescription may run 1. Minors and incapacitated person who have guardians 2. Absentees who have administrators 3. Persons living abroad who have administrators 4. Juridical persons except the state with regard to property not patrimonial in character 5. Between husband and wife 6. Between parents and children (during minority/insanity) 7. Between guardian and ward (during guardianship) 8. Between co-heirs/co-owners 9. Between owner of property and person in possession of property in concept of holder

Prescription does NOT run 1. Between husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree 2. Between parents and children, during the minority or insanity of the latter 3. Between guardian and ward during the continuance of the guardianship Things subject to prescription: all things within the commerce of men 1. Private property 2. Patrimonial property of the State Things not subject to prescription 1. Public domain 2. Intransmissible rights 3. Movables possessed through a crime 4. Registered land Renunciation of Prescription  Persons with capacity to alienate may renounce prescription already obtained but not the right to prescribe in the future  May be express or tacit  Prescription is deemed to have been tacitly renounced; renunciation results from the acts w/c imply abandonment of right acquired  Creditors and persons interested in making prescription effective may avail it themselves notwithstanding express or tacit renunciation PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS Kinds of Acquisitive prescription 1. Ordinary a. Possession in good faith b. Just title c. Within time fixed by law i. 4 years for movables ii. 8 years for immovables d. In concept of an owner e. Public, peaceful, uninterrupted 2. Extra-ordinary a. Just title is proved b. Within time fixed by law i. 10 years for movables ii. 30 years for immovables 1. In concept of an owner 2. Public, peaceful, uninterrupted GOOD FAITH



 Re asonable belief that person who transferred the thing is the owner and could validly transmit ownership Must exist throughout the entire period required for prescription

JUST TITLE (TRUE and VALID) – must be proved and never presumed; only Titulo Colorado is required  Titulo Colorado – such title where there was a mode of transferring ownership but something is wrong because the grantor is not the owner  Titulo putativo - a person believes he has obtained title but he has not because there was no mode of acquiring ownership, as when one is in possession of a thing in the mistaken belief that it had been bequeathed to him. Doliendo v Biarnesa, 7 Phil. 232, 1906  Title must be one which would have been sufficient to transfer ownership if grantor had been the owner  Through one of the modes of transferring ownership but there is vice/defect in capacity of grantor to transmit ownership IN CONCEPT OF OWNER  Possession not by mere tolerance of owner but adverse to that of the owner  Claim that he owns the property PUBLIC, PEACEFUL & UNINTERRUPTED  Must be known to the owner of the thing  Acquired and maintained w/o violence  Uninterrupted (no act of deprivation by others) in the enjoyment of property INTERRUPTION 1. Natural A. Through any cause, possession ceases for more than 1 year B. If 1 year of less – as if no interruption 2. Civil A. Produced by judicial summons; EXCEPT: i. Void for lack of legal solemnities ii. Plaintiff desists from complaint/allows proceedings to lapse iii. Possessor is absolved from complaint  Express or tacit renunciation  Possession in wartime RULES IN COMPUTATION OF PERIOD  Present possessor may tack his possession to that of his grantor or predecessor in interest

 Present possessor presumed to be in continuous possession even with intervening time unless contrary is proved  First day excluded, last day included TACKING PERIOD  There must be privity between previous and present possessor  Possible when there is succession of rights  If character of possession different: predecessor in bad faith possessor in good faith – use extraordinary prescription PRESCRIPTION OF ACTIONS PRESCRIPTIV ACTION E PERIOD 30 yrs 1. action over immovables from time possession is lost 10 yrs 1. m ortgage action 2. action upon written contract 3. action upon obligation created by law 4. action upon a judgment 8 yrs 1. action to recover movables from time possession is lost 6 yrs 1. action upon an oral contract 2. action upon a quasi-contract 4 yrs 1. upon injury to rights of plaintiff 2. upon a quasi-delict 1 yr 1. forcible entry and unlawful detainer 2. defamation 5 yrs 1. others where periods are not fixed by law Rights not extinguished by prescription: 1. Demand right of way 2. Abate public/private nuisance 3. Declare contract void 4. Recover property subject to expressed trust 5. Probate of a will 6. Quiet title

O. NUISANCE NUISANCE is any act, omission, establishment, business, condition of property, or anything else which: 1. Injures or endangers the health or safety of others 2. Annoys or offends the senses 3. Shocks, defies or disregards decency or morality

4. O bstructs or interferes with the free passage of any public highway or street, or any body of water 5. Hinders or impairs the use of property 

Lapse of time cannot legalize any nuisance, whether public or private

Kinds of Nuisances According To Number of Persons Affected: 1. Public (or common) nuisance – affects a community or neighborhood or considerable number of persons 2. Private nuisance – affects a an individual or few persons only Other Classification: 1. Nuisance Per Se – always a nuisance because of its nature regardless of location or surroundings 2. Nuisance Per Accidens – nuisance by reason of location, surrounding or in the manner it is conducted or managed. DOCTRINE OF ATTRACTIVE NUISANCE: 1. REASON for the doctrine: one who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children in play, and who fails to exercise ordinary care to prevent children from playing therewith or resorting thereto, is liable to a child of tender years who is injured thereby, even if the child is technically a trespasser in the premises. The principal reason for the doctrine is that the condition or appliance in question although its danger is apparent to those of age, is so enticing or alluring to children of tender years as to induce them to approach, get on or use it, and this attractiveness is an implied invitation to such children. Hidalgo Enterprises, Inc. v. Balandan, 91 Phil. 488 (1952) 2. Application to bodies of water – generally not applicable to bodies of water, artificial as well as natural in the absence of some unusual condition or artificial feature other than the mere water and its location. Remedies against a public nuisance: 1. Prosecution under the Penal Code or any local ordinance 2. Civil action 3. Extra-judicial abatement  All remedies may be simultaneously pursued to remove a nuisance

Requirements for abatement of a public/private nuisance by a private person: 1. Demand has been made 2. Demand has been rejected 3. Abatement be approved by the district health officer and executed with the assistance of the local police 4. Value of the destruction does not exceed P3000 5. If public nuisance, it must be specially injurious to him A private person or a public official extrajudicially abating a nuisance shall be liable for damages: 1. If he causes unnecessary injury 2. If an alleged nuisance is later declared by the courts to be not a real nuisance Remedies against a private nuisance: 1. Civil action 2. Abatement, without judicial proceedings NOTE: 1. No legalization of nuisance, whether private or public, by prescription 2. Even if nuisance no longer exists, the aggrieved person may still pursue a civil action for damages for the injuries suffered during the existence of nuisance 3. Subsequent owner of the property, having full knowledge of the existence of the nuisance, did not remove the nuisance is solidarily liable for the injuries and damages caused 4. Owner of nuisance property is not entitled to compensation 5. Civil action against a public nuisance shall be commenced by the mayor of the locality 6. A private person may commence a civil action to eliminate a public nuisance only if he suffered a particular harm or injury which is different from the harm or damage suffered by the general public by reason thereof

OBLIGATIONS A. GENERAL PROVISIONS ================================ TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 1. Definition 2. Elements of an Obligation 3. Different Kinds of Prestation 4. Classification of Obligations 5. Sources of Obligations A. Art. 1157 B. Natural obligations C. Extra-contractual obligations =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 1. Definition =========================================

1. DEFINITION OBLIGATION: 1. A juridical necessity to give, to do or not to do. (Art. 1156) 2. It is a “legal bond whereby constraint is laid upon a person or group of persons to act or forbear on behalf of another person or group of persons.”1 =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 2. Elements of an Obligation =========================================

2. ELEMENTS OF AN OBLIGATION ELEMENTS OF AN OBLIGATION: ARTS. 1156 – 1162 (PAVO) A. PASSIVE SUBJECT (obligor/debtor): one who has the duty of giving, doing or not doing; person bound to the fulfillment B. ACTIVE SUBJECT (obligee/creditor): one in whose favor the obligation is constituted; person entitled to demand C. VINCULUM JURIS/ LEGAL TIE: the efficient cause or the juridical tie between two subjects

1 William F. Elliot, Commentaries on the Law of Contracts,

by reason of which the debtor is bound in favor of the creditor to perform the obligation. It can be established by various sources of obligations (law, contract, quasi-contracts, delicts, and quasi-delicts) and may arise either from bilateral or unilateral acts of persons. D. OBJECT/ SUBJECT MATTER: the prestation or conduct which has to be observed by the debtor/obligor. It is not a thing but a particular conduct of the debtor. REQUISITES OF A VALID PRESTATION: a. Licit b. Possible c. Determinate/ Determinable d. Must have pecuniary value Ang Yu Asuncion vs Court of Appeals [G.R. No. 109125, December 2, 1994]. The obligation is constituted upon the concurrence of the essential elements thereof, viz.: (a) The vinculum juris or the juridical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct, required to be observed (to give, to do, or not to do); and (c) subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.

NOTE: The form in which the obligation is manifested is sometimes added as a fifth element. This element, however, cannot be considered as essential as there is no particular form required to make obligations binding, except in rare cases. =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 3. Different Kinds of Prestation =========================================

3. DIFFERENT KINDS OF OBLIGATION a) To give b) To do c) Not to do – consists in abstaining from some act, includes “not to give,” both being negative obligations

Volume 1, 1913 edition, Indianapolis, The Bobbs-Merrill Company, page 6, citing Anson Cont. 5, 23.

CIVIL LAW REVIEWER

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TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS

4. Classification of Obligations =========================================

4. CLASSIFICATION OF OBLIGATIONS A. Viewpoint of Sanction a. Civil Obligations – give a right of action to compel their performance b. Natural Obligations – not based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize retention of what has been delivered or rendered by reason thereof. c. Moral Obligations – those that cannot be enforced by action but which are binding on the party who makes it in conscience and natural law. B. Viewpoint of Performance a. Positive Obligation – to give; to do. b. Negative Obligation – not to do. C. Viewpoint of Subject Matter a. Personal Obligation b. Real Obligation I. Determinate or Specific II. Generic III. Limited Generic D. Viewpoint of Person Obliged a. Unilateral – only one party is bound b. Bilateral – both parties are bound Distinguish a Civil Obligation from Natural Obligation CIVIL OBLIGATION

NATURAL OBLIGATION

Art. 1156

Arts. 1423- 1430

Based on positive law

Based on equity and natural justice

Enforceable by court action

Cannot be compeled by cour action but depends exclusively upon the good

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conscience of the debtor =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 5. Sources of Obligations =========================================

5. SOURCES OF OBLIGATION A. ARTICLE 1157. OBLIGATIONS ARISE FROM (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts NOTE: The list is exclusive (Sagrado Orden v. Nacoco, [G.R. No. L-37756, June 30, 1952]). However, some writers expressly recognize that a UNILATERAL PROMISE can give rise to obligations (Tolentino, Volume IV, p. 62). A.1. LAW (OBLIGATION EX LEGE)  The law cannot exist as a source of obligations, unless the acts to which its principles may be applied exist.  Once the acts or facts exist, the obligations arising therefrom by virtue of the express provisions of the law are entirely independent of the agreement of the parties. And such obligations and their correlative rights are governed by the law by which they are created.  It must be expressly or impliedly set forth and cannot be presumed. A.2. CONTRACTS (OBLIGATION EX CONTRACTU)  A juridical conventions manifested in legal form, by virtue of which one or more persons bind themselves in favor another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. (Sanchez Roman)  Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (Art. 1159)

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 





The terms of the contracts determine the respective obligations of the parties. If the terms of the contract are clear and leave no doubt upon the contracting parties’ intention, such terms should be applied in their literal meaning. Neither party may unilaterally evade his obligation in the contract, unless the contract authorizes it or the other party assents. Parties may freely enter into any stipulations provided they are not contrary to law, morals, good customs, public order or public policy.

A.3. QUASI-CONTRACTS (Obligation Ex Quasi-Contractu)  Juridical relations resulting from lawful, voluntary and unilateral acts, which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another.  Distinguished from other Sources (LUV) a. The act giving rise to a quasi-contract must be LAWFUL distinguishing it from delict; b. The act must be VOLUNTARY distinguishing it from a quasi-delict which is based on fault or negligence; c. The act must be UNILATERAL distinguishing it from contract which is based on agreement. (Tolentino, Volume IV, p. 68) KINDS OF QUASI-CONTRACT a. Negotiorum Gestio: is the voluntary management of the property or affairs of another without the knowledge or consent of the latter. (Art. 2144) b. Solutio indebiti: is the juridical relation, which is created when something is received when there is no right to demand it and it was unduly delivered through mistake. (Art. 2145) The requisites are: c. There is no right to receive the thing delivered; d. The thing was delivered through mistake. e. Other cases (Art. 2164-2175)

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A.4. DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO)  Article 100 of the Revised Penal Code – Every person criminally liable for a felony is also civilly liable.  The civil liability springs out and is dependent upon the facts which, if true, would constitute a crime.  Such civil liability is a necessary consequence of criminal responsibility, and is to be declared and generally enforced in the criminal proceeding except where the injured party reserves his right to avail himself of it in a distinct civil action or in cases where an independent civil action is allowed by law. GOVERNING RULES: 1. Articles 100-113 of the RPC and other penal laws subject to Art 2177 Civil Code (quasidelict); 2. Chapter 2, Preliminary title, on Human Relations ( Civil Code ) 3. Title 18 of Book IV of the Civil Code on damages SCOPE OF CIVIL LIABILITY 1. Restitution 2. Reparation for damage caused 3. Indemnity for Consequential damages EFFECT OF ACQUITTAL IN CRIMINAL CASE GENERAL RULE: The acquittal of the accused in the criminal case does not prejudice the civil action, in which the offended party may still be able to recover damages by a preponderance of evidence. EXCEPTION: Where the judgment of acquittal contained a declaration that no negligence can be attributed to the accused and that the fact from which the civil action might arise did not exist CRIMES WITHOUT CIVIL LIABILITY 1. Contempt 2. Insults to persons in authority 3. Gambling 4. Violations of traffic regulations (De Leon, 2003 ed.,p. 23) EXTINGUISHMENT OF LIABILITY: The civil liability for crimes is extinguished by the same causes provided by the Civil Code for the extinguishment of other obligations.

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A.5. QUASI-DELICT/TORTS (OBLIGATION EX QUASI-DELICTO/ EX QUASI MALEFICIO)  It is an act or omission arising from fault or negligence which causes damage to another, there being no pre-existing contractual relations between the parties  ELEMENTS: 1. That there exists a wrongful act or omission imputable to the defendant by reason of his fault or negligence; 2. That there exists a damage or injury, which must be proved by the person claiming recovery; 3. That there must be a direct causal connection or a relation of cause and effect between the fault or negligence and the damage or injury; or that the fault or negligence be the cause of the damage or injury. DISTINCT FROM A CRIME: An injured party or his heirs has the choice of either: (a) An action to enforce civil liability arising from crime under Article 100 of the RPC, or (b) An action from quasi-delict under Articles 2176-2194 of the Civil Code. NEGLIGENCE: Failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. US v. Barrias, [23 Phil. 434, (1912)] 



ELEMENTS OF NEGLIGENCE: (DFI) a. A duty on the part of the defendant to protect the plaintiff from the injury of which the latter complains; b. A failure to perform that duty; and c. An injury to the plaintiff through such failure. TEST of NEGLIGENCE: “Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to be pursued?” Picart v. Smith, [37 Phil. 809]

B. NATURAL OBLIGATIONS (Arts. 1423 – 1430) NATURAL OBLIGATIONS 1. They are real obligations to which the law denies an action, but which the debtor may perform voluntarily.

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2. It is patrimonial, and presupposes a prestation. 3. The binding tie of these obligations is in the conscience of man, for under the law, they do not have the necessary efficacy to give rise to an action. EXAMPLES OF NATURAL OBLIGATIONS ENUMERATED UNDER THE CIVIL CODE: 1. Performance after the civil obligation has prescribed 2. Reimbursement of a third person for a debt that has prescribed 3. Restitution by minor after annulment of contract 4. Delivery by minor of money or fungible thing in fulfillment of obligation 5. Performance after action to enforce civil obligation has failed 6. Payment by heir of debt exceeding value of property inherited 7. Payment of legacy after will have been declared void. C. EXTRA-CONTRACTUAL OBLIGATIONS

C.1. ESTOPPEL (Arts. 1431 – 1439) ESTOPPEL - a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. KINDS: 1. Estoppel in pais (by conduct) a. Estoppel by silence b. Estoppel by acceptance of benefits 2. Technical Estoppel a. Estoppel by deed b. Estoppel by record c. Estoppel by judgment d. Estoppel by laches C.2. LACHES OR STALE DEMANDS LACHES – Failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it

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ELEMENTS (CDLI) 1. Conduct on part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complaint seeks a remedy 2. Delay in asserting the complainant’s rights, the complainant having knowledge or notice, of the defendant’s conduct and having been afforded the opportunity to institute a suit 3. Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit 4. Injury to the defendant in the event relief is accorded to the complainant, or the suit in not held to be barred. Distinguish Laches from Prescription LACHES Concerned delay

with

PRESCRIPTION effect

of

Concerned with fact of delay

Question of inequity of permitting the claim to be enforced

Question or matter of time

Not statutory

Statutory

Applies in equity

Applies at law

Not based on a fixed time

Based on a fixed time

END OF DISCUSSION ON TOPIC A. GENERAL PROVISIONS

================================

B. NATURE AND EFFECT OF OBLIGATIONS ================================ TOPICS UNDER THE SYLLABUS B. NATURE AND EFFECT OF OBLIGATIONS 1. Obligation to give A. A determinate or specific thing B. An indeterminate or generic thing

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2. Obligation to do or not to do 3. Breaches of obligations A. Complete failure to perform B. Default or Delay (Art. 1169) B.1. Mora solvendi B.2. Mora accipiendi B.3. Compesatio morae C. Fraud C.1. Waiver of future fraud is void (Art. 1171) D. Negligence D.1. Ordinary Diligence D.2 Exceptions E. Contravention of the tenor of obligation F. Fortuitous Event 4. Remedies of Obligations A. Specific Performance A.1. Substituted performance by a third person on obligation to deliver generic thing and in obligation to do, unless a purely personal act B. Rescission (resolution in reciprocal obligations) C. Damages, in any event D. Subsidiary remedies of creditors (Art. 1177) D.1. Accion subrogatoria D.2. Accion pauliana D.3. Accion directa (Arts. 1652, 1608, 1729, 1893) ========================================

TOPICS UNDER THE SYLLABUS B. NATURE AND EFFECT OF OBLIGATIONS 1. Obligation to give ========================================= Personal Obligations: obligations to do or not to do; where the subject matter is an act to be done or not to be done a. Positive – obligation to do b. Negative – obligation not to do

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Real Obligations: obligations to give; where the subject matter is a thing which the obligor must deliver to the obligee a. Determinate or specific – object is particularly designated or physically segregated from all other things of the same class b. Generic –object is designated by its class or genus c. Limited Generic – generic objects confined to a particular class a. Ex: An obligation to deliver one of my horses (Tolentino, Volume IV, p. 91; De Leon, 2003 ed., p. 7)

1. OBLIGATION TO GIVE A. DUTIES OF OBLIGOR IN AN OBLIGATION TO GIVE A DETERMINATE THING (Arts. 1163, 1164, 1166.) To preserve or take care of the thing due with the diligence of a good father of a family EXCEPTION: if the law requires or the parties stipulate another standard of care B. DUTIES OF OBLIGOR IN AN OBLIGATION TO GIVE A GENERIC THING (Arts. 1246 AND 1170) To deliver the thing of the quality intended by the parties, taking into consideration the purpose of the obligation, intent of the parties, and other circumstances; To be liable for damages in case of fraud, negligence, or delay, in the performance of his obligation, or contravention of the tenor thereof. 1. To deliver the fruits of the thing: Right to the fruits of the thing from the time the obligation to deliver it arises; 2. To deliver its accessions and accessories (Art. 1166) a. Accessions – additions to or improvements upon a thing. Ex: air conditioner in a car. b. Accessories – things joined to, or included with the principal thing for its better use, embellishment or completion. Ex: key of a house; frame of a picture (De Leon, 2003 ed., pp. 37-38) 3. To deliver the thing itself (Specific Performance)

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4. To pay damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation. RIGHTS OF THE CREDITOR TO THE FRUITS 1. Before Delivery – personal right 2. After Delivery – real right RIGHTS OF THE CREDITOR IN REAL OBLIGATION TO GIVE (Art. 1165) 1. GENERIC REAL OBLIGATION (Obligation to deliver a generic thing): a. To ask for performance of the obligation b. To ask that obligation be complied with at the expense of the obligor c. To recover damages in case of breach of obligation NOTE: A generic real obligation can be performed by a third person since the object is expressed only according to its family or genus. 2. DETERMINATE OR SPECIFIC REAL OBLIGATION (Obligation to deliver a determinate thing): a.To demand specific performance or fulfillment (if it is still possible) of the obligation with a right to indemnity for damages b. To demand rescission of the obligation with right to recover damages c.To demand payment of damages when it is the only feasible remedy d. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected delivery. NOTE: In an obligation to deliver a determinate thing, the very thing itself must be delivered and consequently, only the debtor can comply with the obligation. WHEN OBLIGATION TO DELIVER THE THING AND FRUIT ARISES 1. If the source of the obligation is law, quasicontract, delict, quasi-delict, it arises from the time designated by the law creating or regulating them; 2. If the source is contract, it arises from the time of the perfection of the contract (i.e. meeting of the minds between the parties), unless

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a.the parties made a stipulation to the contrary, b. the obligation is subject to a suspensive condition or period; arises upon fulfillment of the condition or arrival of the period c.in a contract to sell, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid =========================================

TOPICS UNDER THE SYLLABUS B. NATURE AND EFFECT OF OBLIGATIONS 2. Obligation to do or not to do ========================================= 2. OBLIGATION TO DO OR NOT TO DO RIGHTS OF A CREDITOR IN PERSONAL OBLIGATION (TO DO OR NOT TO DO) A. POSITIVE PERSONAL OBLIGATIONS: 1. Performance at debtor’s cause: The obligee is entitled to have the thing done in a proper manner, by himself or by a third person, at the expense of the debtor. 2. To demand what has been poorly done be undone 3. To recover damages because of breach of the obligation B. NEGATIVE PERSONAL OBLIGATION 1. To have it undone at the expense of the obligor; and 2. To ask for damages DISTINGUISH PERSONAL RIGHT FROM REAL RIGHT PERSONAL

REAL

Jus ad rem, a right enforceable only against a definite person or group of persons

Jus in re, a right enforceable against the whole world

Right pertaining to a person to demand from another, as a definite passive subject, the

Right pertaining to a person over a specific thing, without a definite passive subject

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fulfillment of the prestation to give, to do or not to do.

against whom the right may be personally enforced

========================================

TOPICS UNDER THE SYLLABUS B. NATURE AND EFFECT OF OBLIGATIONS 3. Breaches of obligations ======================================== 3. BREACHES OF OBLIGATIONS (Arts. 1170 – 1174) A. Voluntary – debtor in the performance of the obligation is guilty of: 1. Delay (Mora) 2. Fraud (Dolo) 3. Negligence (Culpa) 4. Contravention of the tenor of the obligation NOTE: debtor is liable for damages B. Involuntary – debtor is unable to comply with his obligation due to fortuitous event/s NOTE: debtor is not liable for damages A.1. DEFAULT OR DELAY GENERAL RULE: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. (Art. 1169) EXCEPTION: Demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When the demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of

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the parties fulfills his obligation, delay by the other begins. NOTE: Art. 1169 is applicable only when the obligation is to do something other than the payment of money. In case of obligation for payment of sum of money, the interest replaces the damages. KINDS OF DELAY: 1. Mora solvendi – delay or default committed by debtor 2. Mora accipiendi – delay or default committed by creditor 3. Compensatio Morae – default of both parties in reciprocal obligations GENERAL RULE: An action or suit can be filed at anytime after the non-compliance of the other party. However, damages or interest shall only start to run after judicial or extra-judicial demand.

a dishonest purpose or some moral obliquity and conscious doing of wrong. Bad faith is thus synonymous with fraud and involves a design to mislead or deceive another, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.

TYPES OF FRAUD: 1. Causal Fraud (Dolo Causante): fraud employed in the execution of the contract 2. Incidental Fraud (Dolo Incidente): fraud in performance of obligation already existing because of a contract

FRAUD IN THE PERFORMANCE/ DOLO INCIDENTE (ART. 1170)

CAUSAL FRAUD/ DOLO CAUSANTE (ART. 1338)

Present during the performance of a pre-existing obligation

Present during the perfection of a contract

Purpose is to evade the normal fulfillment of the obligation

Purpose is to secure the consent of another to enter into the contract

Results in the breach of an obligation

Results in vitiation of consent; voidable contract

A.2. FRAUD (Dolo) It is the deliberate or intentional evasion of the normal fulfillment of an obligation. (8 Manresa 72)

Gives rise to a right in favor of the creditor to recover damages

Gives rise to a right of an innocent party to annul the contract

It is the fraud in the performance or fulfillment of an obligation already existing, as distinguished from the fraud referred to in Article 1338 which is the cause of nullity of contracts and which exists before and at the moment of creating the obligation.

NOTE: Future fraud cannot be waived. However, the law does not prohibit renunciation of the action for damages on the ground of past fraud.

EXCEPTION: In ejectment and consignment cases, the extra-judicial demand should first be made prior to the filing of a civil suit. DEMAND IS NOT NECESSARY WHEN: 1. Law or obligation expressly declares so 2. Time is of the essence 3. Demand would be useless NOTE: In reciprocal obligations, a party does not incur in delay for failure of the other party to assume and perform the obligation imposed upon him/her.

Samson vs Court of Appeals [G.R. No. 108245, November 25, 1994]. Bad faith is essentially a state of mind affirmatively operating with furtive design or with some motive of ill-will. It does not simply connote bad judgment or negligence. It imports

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REMEDIES OF DEFRAUDED PARTY a. Specific performance (Art 1233) b. Resolve contract (Art 1191) c. Damages, in either case A.3. NEGLIGENCE (Culpa)  Any voluntary act or omission, there being no malice which prevents the normal fulfillment of an obligation

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

Consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place (Art. 1173)

KINDS OF NEGLIGENCE a. Quasi-Delict (Culpa aquiliana/culpa extra contractual) – source of obligation; wrong or negligence committed independent of contract and without criminal intent b. Contractual Negligence (Culpa Contractual) – wrong or negligence in the performance of a obligation/contract c. Criminal Negligence (Culpa Criminal) – wrong or negligence in the commission of a crime INSTANCES WHERE THE LAW REQUIRES A HIGHER STANDARD OF CARE: C.1. Banks – as a business affected with public interest, and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. (Simex v. CA, 183 SCRA 360) EXCEPTION: Extraordinary diligence does not cover transactions outside bank deposits, ie: commercial transactions (Reyes v. CA, 363 SCRA 51) C.2. Common Carriers – from the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case (Art. 1733) Diligence of a good father of a family: ordinary care or that diligence which an average or reasonably prudent person would exercise over his own property.) NOTE:   

Rule on Standard of Care That which the law requires; or That stipulated by the parties; or In the absence of the two, diligence of a good father of a family

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DISTINGUISH FRAUD FROM NEGLIGENCE

FRAUD NEGLIGENCE There is deliberate intention to cause damage.

There is no deliberate intention to cause damage.

Liability cannot be mitigated.

Liability may be mitigated.

Presumed from the breach of a contractual obligation

Must be clearly proved

Waiver for future fraud is void.

Waiver for future negligence may be allowed in certain cases

DISTINGUISH NEGLIGENCE FROM CRIME NEGLIGENCE

CRIME

WHAT IT PUNISHABLE

Any act with fault or negligence

Acts punishable by law

CONDITION OF THE MIND LIABILITY FOR DAMAGES

Criminal intent unnecessary

Necessary

Damages may be awarded to injured party

NATURE OF THE RIGHT VIOLATED AMOUNT OF EVIDENCE

Violation of private rights

Some crimes do not give rise to civil liability Public rights

Preponderance of evidence

Proof beyond reasonable doubt

COMPROMIS E

Can be compromised as any other civil liability Presumption of negligence

Criminal liability can never be compromised Presumption of innocence

PRESUMPTIO N

KINDS OF NEGLIGENCE, DISTINGUISHED CULPA AQUILIANA

CULPA CONTRACTUAL

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Negligence substantive independent

is and

Negligence merely an incident of performance of an obligation

impossible condition existence

There may or may not be a pre-existing contractual obligation

There is a pre-existing contractual relation

Source of obligation is negligence itself

the the

Source of the obligation is the breach of the contractual obligation

Condition IMPOSSIBLE BUT Obligation DIVISIBLE

Negligence must be proved

Proof of existing of the contract and its breach is prima facie sufficient to warrant recovery

Diligence in the selection and supervision of the employees is a defense

Diligence selection supervision employees available as a

in

the and of the is not defense

EFFECTS OF CONTRIBUTORY NEGLIGENCE OF THE OBLIGEE GENERAL RULE: Reduces or mitigates the damages which he can recover EXCEPTION: If the negligent act or omission of the creditor is the proximate cause of the event, which led to the damage or injury complained of, he cannot recover. EFFECTS OF CONDITIONS

IMPOSSIBLE

CONDITION

AND

ILLEGAL

EFFECT ON OBLIGATIO N

EFFECT ON CONDITION

VOID

VOID

NOT to Do an Illegal Thing

VALID

VALID

NOT to do an impossible thing

VALID

DISREGARD CONDITION

Condition is preexisting and NOT dependent on the fulfillment of

VALID

VOID

TO impossible illegal

DO OR

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for ONLY THE AFFECTED OBLIGATION IS VOID.

A.4. CONTRAVENTION OF THE TENOR OF THE OBLIGATION B. FORTUITOUS EVENT (Force Majeure) GENERAL RULE: No one should be held to account for fortuitous cases, which are those situations that could not be foreseen, or which though foreseen, were inevitable. EXCEPTION: There concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation. ELEMENTS OF A FORTUITOUS EVENT: 1. The cause of breach is independent of the debtor’s will. 2. The event must be unforeseeable or unavoidable 3. The events render performance impossible 4. The debtor must be free from any participation, or aggravation of the injury. NOTE: In the case of Republic v. Luzon Stevedoring [G.R. No. L-21749, September 29, 1967], the Court held that the person obliged to perform an obligation shall not be excused from a fortuitous event when the nature of the obligation requires the assumption of risk. In other words, it is not enough that the event should not be foreseen or anticipated, but it must be one that is impossible to foresee or to avoid. ========================================

TOPICS UNDER THE SYLLABUS B. NATURE AND EFFECT OF OBLIGATIONS 4. Remedies of obligations ========================================

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GENERAL RULE: The law protects the creditors. The creditors are given by law all possible remedies to enforce such obligations. A. SPECIFIC PERFORMANCE To demand specific performance or fulfillment of the obligation with a right to indemnity for damages B. RESCISSION  It means to abrogate the contract from the beginning and to restore the parties to their relative positions as if no contract has been made.  It is “to declare the contract void at its inception and to put an end to it as though it never was.”2  It is predicated on the breach of faith by any party that violates the reciprocity between them. NOTE: In the case of Adorable v. Court of Appeals [G.R. No. 119466, November 25, 1999], the Court held that unless a debtor acted in fraud of his creditor, the creditor has no right to rescind a sale made by the debtor to someone on the mere ground that such sale will prejudice the creditors’ rights in collecting later on from the debtor. The creditor’s right against the debtor is only a personal right to receive payment for the loan; it is not a real right over the lot subject of the deed of sale transferring the debtor’s property.3 C. DAMAGES To demand payment of damages when it is a feasible remedy D. SUSIDIARY REMEDIES OF CREDITORS 1. Accion Subrogatoria – action which the creditor may exercise in the place of his negligent debtor in order to preserve or recover for the patrimony of the debtor the product of such action, and then obtain therefrom the satisfaction of his own credit 2. Accion Pauliana – action to revoke or rescind acts which the debtor may have done to defraud his creditor.

3. Accion Directa - (Arts. 1652, 1608, 1729, 1893)

END OF DISCUSSION ON TOPIC B. NATURE AND EFFECT OF OBLIGATIONS

================================

C. KINDS OF CIVIL OBLIGATIONS ================================

TOPICS UNDER THE SYLLABUS C. KINDS OF CIVIL OBLIGATIONS 1. Pure Obligations (Arts. 1179-1180) 2. Conditional Obligations (Art. 1181) A. Suspensive Condition B. Resolutory Condition C. Potestative; casual or mixed C.1. Obligations subject to potestative suspensive conditions are void (Art. 1182) D. Effect of the happening of suspensive condition or resolutory condition (Art. 1187) D.1. Extent of retroactivity E. Effect of improvement, loss or deterioration of specific thing before the happening of a suspensive condition in obligation to do or not to do (Art. 1189) F. Effect when a resolutory condition in obligation to do or not to do happens and there is improvement, loss or deterioration of the specific thing (Art. 1190, par. 3) 3. Obligation with a period or a term (Art.1193) A. Presumption that period is for the benefit of both debtor and creditor (Art. 1196)

2 SPOUSES VELARDE V. COURT OF APPEALS, [G.R. NO. 108346, JULY 11,2001]. 3 MELENCIO S. STA. MARIA, JR., OBLIGATIONS AND CONTRACTS: TEXT AND CASES 101 (2 ND ED. 2003).

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B. Effect if suspensive period is for the benefit of both debtor and creditor C. Effect if given to debtor alone C.1. Instances when debtor losses benefit of period (Art. 1198) D. Resolutory period E. Definite or indefinite period E.1. Instances when courts may fix the period (Art. 1197) E.2. Creditor must ask court to set the period before he can demand payment 4. Alternative or facultative (Art. 1199) A. Difference between alternative and facultative obligations B. Effect of loss of specific things or impossibility of performance of alternative, through fault of debtor/creditor or through fortuitous events =========================================

TOPICS UNDER THE SYLLABUS C. KINDS OF CIVIL OBLIGATION 1. Pure Obligations

=========================================

1. PURE OBLIGATIONS It is an unqualified obligation which is demandable immediately. It is an obligation whose performance does not depend upon a future and uncertain event, or past event unknown to the parties. (Art. 1179) =========================================

TOPICS UNDER THE SYLLABUS C. KINDS OF CIVIL OBLIGATION 2. Conditional Obligations

=========================================

2. CONDITIONAL OBLIGATIONS It is exactly the reverse of a pure obligation. The performance in conditional obligations depends upon a future or uncertain event or upon a past event unknown to parties.

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A. RESOLUTORY CONDITION  

 

Demandable at once Once the condition is established or acknowledged, the right to demand performance immediately exists and therefore the obligation concomitant to the right can be demanded at once. It is also known as “condition subsequent” It extinguishes obligations

NOTE: In case of a contract with a reciprocal obligation, the obligation of one is a resolutory condition of the obligation of the other, the nonfulfillment of which entitles the other party to rescind the contract.

B. SUSPENSIVE CONDITION    

Not demandable at once It gives rise to the performance of an obligation (ex. Contract to Sell) It is also known as “condition precedent” It gives birth to obligations

C. POTESTATIVE CONDITION The fulfillment of the condition entirely depends upon the sole will of the debtor. GENERAL RULE: All potestative conditions are void. EXCEPTION: Potestative resolutory conditions are not void. If the potestative condition is imposed not on the birth (suspensive) of the obligation but on its fulfillment (resolutory), only the condition is avoided, leaving unaffected the obligation itself.

D. EFFECT OF SUSPENSIVE RESOLUTORY CONDITIONS

AND

Art. 1187:  When the obligation imposes reciprocal prestations, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated.  If the obligation is unilateral, the debtor or obligor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same is different.

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C. KINDS OF CIVIL OBLIGATION 3. Obligations with a Period or Term

D.1. Extent of Retroactivity  In resolutory conditions, retroactivity is irrelevant. 

=========================================

In suspensive conditions, the effect of a conditional obligation “to give” retroacts to the day of the constitution of the obligation (Art 1187)

3. OBLIGATIONS TERM 

E. IMPROVEMENT, DETERIORATION

LOSS,

AND

Constructive fulfillment - The condition shall be deemed fulfilled when the obligor (debtor) voluntarily prevents its fulfillment (Art. 1186) NOTE: “LOSS” happens when the thing perishes, goes out of commerce, or it disappears in such a way that its existence is unknown or it cannot be recovered. (Art. 1189) E.1. Before the happening of a suspensive condition in an obligation to do or not to do (Art. 1189)  If the thing is lost without the fault of debtor, the obligation shall be extinguished.  If the thing is lost with the fault of debtor, he shall be obliged to pay damages.  If the thing deteriorates without the fault of debtor, the impairment is to be borne by creditor  If the thing deteriorates with the fault of debtor, the creditor may choose between rescission of the obligation and its fulfillment, with indemnity for damages in either case  If the thing improves by its nature or by time, the benefit shall inure to the benefit of the creditor.  If the thing improves at the expense of debtor, he shall have no other right than that granted to the usufructuary. E.2. When a resolutory condition in an obligation to do or not to do happens (Art. 1190, par. 3)  In obligations to do and not to do, the court shall determine the effect of the extinguishment of the obligation =========================================

WITH

A

PERIOD

OR

WITH A PERIOD – An obligation whose demandability or extinguishment depends on a future and certain event; subject to the expiration of a term of period (Arts 1193, 1196)]  PERIOD – Interval of time, which, exerting an influence on an obligation as a consequence of a juridical act, either suspends its demandability or produces its extinguishment REQUISITES: 1. Future 2. Certain 3. Legally and physically possible

WHEN STIPULATION SAYS “PAYABLE WHEN ABLE”  When the obligor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period.  Remedy: 1. Agreement among parties 2. Court shall fix period of payment when parties unable to agree KINDS OF OBLIGATIONS WITH A PERIOD: 1. According to effect: a. Resolutory (in diem) – demandable at once but terminates upon arrival of the day certain  Day certain – that which must necessarily come, although it may not be known when b. Suspensive (ex die) – obligation becomes demandable on the day stipulated 2. According to source a. Legal - when it is provided by laws b. Conventional or Voluntary - when it is agreed to by the parties c. Judicial - when it is fixed by the court 3. According to definiteness:

TOPICS UNDER THE SYLLABUS

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4.

a.Definite - when it is fixed or it is known when it will come b. Indefinite - when it is not fixed or it is not known when it will come

TERM VS. CONDITION, DISTINGUISHED TERM

CONDITION

Interval of time which is future and certain

Fact or event which is future or uncertain or a past event unknown to the parties

Time w/c must necessarily come although it may not be known when

Future and uncertain fact or event which may or may not happen

Exerts an influence upon the time of demandability or extinguishment of an obligation

Exerts an influence upon the very existence of the obligation itself

Does not have any retroactive effect unless there is an agreement to the contrary

Has retroactive effect

When it is left exclusively to the will of the debtor, the existence of the obligation is affected

When it is left exclusively to the will of the debtor, the obligation is void

WHEN COURTS MAY FIX PERIOD: 1. If the obligation does not fix a period, but from its nature and circumstances it can be inferred that a period was intended by the parties 2. If the duration of the period depends upon the will of the debtor 3. In case of reciprocal obligations, when there is a just cause for fixing a period

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If the debtor binds himself when his means permit him to do so PERIOD, FOR WHOSE BENEFIT GENERAL RULE: When a period is designated for the performance or fulfillment of an obligation, it is presumed to have been established for the benefit of both parties. EXCEPTION: When it appears from the tenor of the obligation or other circumstances that the period has been established in favor of one or the other. PERIOD FOR THE BENEFIT OF THE CREDITOR  Creditor may demand the fulfillment of the obligation at any time but the debtor cannot compel him to accept before the expiration of the period PERIOD FOR THE BENEFIT OF THE DEBTOR  Debtor may oppose any premature demand of the creditor but he may renounce the benefit of the period by performing his obligation in advance (Manresa) WHEN DEBTOR LOSES RIGHT TO PERIOD (Art 1198) 1. Insolvency of debtor, unless security provided 2. Did not deliver security promised 3. Impaired security through his own acts or through fortuitous event unless he gives new securities equally satisfactory 4. Violates undertaking in consideration of extension of period 5. Attempts to abscond =========================================

TOPICS UNDER THE SYLLABUS C. KINDS OF CIVIL OBLIGATION 4. Alternative or Facultative Obligation =========================================

4. ALTERNATIVE OR FACULTATIVE OBLIGATION (ARTS. 1199 – 1206) FACULTATIVE - only one prestation has been agreed upon but another may be given in substitution

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EFFECT OF LOSS OR DETERIORA0TION THRU NEGLIGENCE, DELAY OR FRAUD OF OBLIGOR:  Of thing intended as substitute - no liability  Of the substitute after substitution is made – with liability ALTERNATIVE – bound by different prestations but only one is due RIGHT OF CHOICE IN ALTERNATIVE OBLIGATIONS GENERAL RULE: the right of choice belongs to debtor EXCEPTION: 1. Expressly granted to creditor 2. Expressly granted to third person LIMITATIONS ON THE RIGHT OF CHOICE OF THE DEBTOR The debtor shall not have the right to choose the prestations, which are: a. Impossible b. Unlawful c. Those which could not have been the object of the obligation WHEN CONVERTED TO SIMPLE OBLIGATION: 1. When the person who has a right of choice has communicated his choice 2. Only one is practicable EFFECT OF LOSS OF OBJECTS OF ALTERNATIVE OBLIGATIONS 1. If the right of choice belongs to the debtor  If through a fortuitous event all were lost, debtor cannot be held liable for damages  If 1 or more but not all of the things are lost or one or some but not all of the prestations cannot be performed due to fortuitous event or fault of the debtor, creditor cannot hold the debtor liable for damages because the debtor can still comply with his obligation  If all things, except one, were lost, the debtor must comply by performing that which remain  If all were lost by fault of the debtor the later is liable for the value of the last thing or service which became impossible

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2. If right of choice belongs to the creditor  If 1 of the things is lost through a fortuitous event, the debtor shall perform the obligation by delivering that which the creditor should choose from among the remainder or that which remains if only 1 subsists  If the loss of 1 of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting or the price of that which, through the fault of the former, has disappeared with a right to damages  If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any 1 of them, also with indemnity for damages. REQUISITES FOR MAKING THE CHOICE: 1. Made properly so that creditor or his agent will actually know 2. Made with full knowledge that a selection is indeed being made 3. Made voluntarily and freely 4. Made in due time – before or upon maturity 5. Made to all proper persons 6. Made w/o conditions unless agreed by the creditor 7. May be waived, expressly or impliedly DISTINGUISH ALTERNATIVE FROM FACULTATIVE ALTERNATIVE

FACULTATIVE

Various things are due but the giving principally of one is sufficient

Only one thing is due but a substitute may be given to render payment/fulfillment easy

If one of prestations is illegal, others may be valid but obligation remains

If principal obligations is void and there is no necessity of giving the substitute; nullity of P carries with it nullity of S

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If it is impossible to give all except one, the last one must still be given

If it is impossible to give the principal, the substitute does not have to be given; if it is impossible to give the substitute, the principal must still be given

Right to choose may be given either to debtor or creditor

The right of choice is given only to the debtor

END OF DISCUSSION ON TOPIC C. KINDS OF CIVIL OBLIGATION

================================

D. JOINT AND SOLIDARY OBLIGATION ================================ TOPICS UNDER THE SYLLABUS

D. JOINT AND SOLIDARY OBLIGATION 1. Joint (Divisible) Obligation A. Concurrence of two or more creditors and/or two or more debtors A.1. Joint obligation is presumed, unless otherwise indicated by the law or nature of obligation (Art. 1207) A.2. Obligation presumed to be divided into as many equal shares as there are creditors or debtors A.3. Each credit is distinct from one another, therefore a joint debtor cannot be required to pay for the share of another with debtor, although he may pay if he wants to (Art. 1209) A.4. Insolvency of a joint debtor, others not liable for his share (Art. 1209)

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2. Joint (Indivisible) Obligation A. Obligation cannot be performed in parts but debtors are bound jointly B. In case of failure of one joint debtor to perform his part (share), there is default but only the guilty shall be liable for damages 3. Solidary Obligation A. Mutual agency among solidary debtors (Arts. 1214-1215) B. Mutual guaranty among solidary debtors (Arts. 1216, 1217, 1222) C. Each one of solidary creditors may do whatever may be useful to the others, but not anything prejudicial to them (Art. 1212) C.1. Effect of any novation, compensation, confusion or remission of debt executed by a solidary creditor 4. Divisible and Indivisible (Art. 1225) 5. Obligations with a Penal Clause (Arts. 1226, 1228-1230) =========================================

TOPICS UNDER THE SYLLABUS D. JOINT AND SOLIDARY OBLIGATIONS 1. Joint (Divisible) Obligation =========================================

1. JOINT (DIVISIBLE) OBLIGATION JOINT OBLIGATION (Obligacion Mancumunada) – The whole obligation is to be paid or fulfilled proportionately by different debtors or demanded proportionately by the different obligees GENERAL RULE: The presumption of the law is that an obligation is always joint.

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EXCEPTIONS TO THE PRESUMPTION 1. When expressly stated that there is solidarity 2. When the law requires solidarity 3. When the nature of the obligation requires solidarity 4. When a charge or condition is imposed upon heirs or legatees and the testament expressly makes the charge or condition in solidum (Manresa) 5. When a solidary responsibility is imputed by a final judgment upon several defendants (Gutierrez v. Gutierrez) EFFECTS OF JOINT LIABILITY 1. Demand on one produces delay only with respect to the debt 2. Interruption in payment by one does not benefit or prejudice the other 3. Vices of one debtor to creditor has no effect on the others 4. Insolvency of one debtor does not affect other debtors JOINT DIVISIBLE OBLIGATIONS 1. Each creditor can demand for the payment of his proportionate share of the credit, while each debtor can be held liable only for the payment of his proportionate share of the debt 2. A joint creditor cannot act in representation of the other creditors while a joint debtor cannot be compelled to answer for the acts or liability of the other debtors NOTE: Unless there is no specification as to their proportionate share in the credit or in the debt, the creditors and debtors in a joint obligation shall be entitled or shall make payment in equal proportion. =========================================

TOPICS UNDER THE SYLLABUS D. JOINT AND SOLIDARY OBLIGATIONS 2. Joint (Indivisible) Obligation =========================================

2. JOINT (INDIVISIBLE) OBLIGATION 1. If there are 2 or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all the debtors, although each for his own share. The obligation can

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be enforced only by proceeding against all of the debtors. 2. If there are 2 or more creditors, the concurrence or collective act of all the creditors, although each for his own share, is also necessary for the enforcement of the obligation EFFECT OF BREACH If one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. Consequently, it is converted into one of indemnity for damages. Innocent joint debtor shall not contribute to the indemnity beyond their corresponding share of the obligation. INDIVISIBILITY DISTINGUISHED

and

SOLIDARITY,

INDIVISIBILITY

SOLIDARITY

Refers to the prestation which constitutes the object of the obligation

Refers to the legal tie and consequently to the subjects or parties of the obligation

Plurality of subjects is not required

Plurality of subjects is indispensable

In case of breach, obligation is converted into 1 of indemnity for damages because of breach, indivisibility of the obligation is terminated

When there is liability on the part of the debtors because of the breach, the solidarity among the debtors remains

PASSIVE SOLIDARITY

SURETYSHIP

Stands for some other person May be reimbursed after payment liable for his and co- only the debtor's share principal's share Primary Secondary Extension of time, Released not released

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=========================================

TOPICS UNDER THE SYLLABUS D. JOINT AND SOLIDARY OBLIGATIONS 3. Solidary Obligation =========================================

3. SOLIDARY OBLIGATION SOLIDARY OBLIGATION (Obligacion Solidaria) – must be expressed in stipulation or provided by law or by nature of obligation 1. Active – on the part of creditor or oblige EFFECTS:  Death of 1 solidary creditor transmits share to heirs (but collectively)  Each creditor represents the other in the act of recovery of payment  Credit is divided equally between creditors as among themselves  Debtor may pay any of the solidary creditors 2. Passive – on the part of debtors or obligors EFFECTS:  Each debtor may be requested to pay whole obligation with right to recover from codebtors  Interruption of prescription to one creditor affects all  Interest from delay on 1 debtor is borne by all 3. Mixed – on the part of the obligors and obligees, or the part of the debtors and the creditors 4. Conventional – agreed upon by the parties 5. Legal – imposed by law  Instances where law imposes solidary obligation: a. Obligations arising from tort b. Obligations arising from quasi-contracts c. Legal provisions regarding obligation of devisees and legatees d. Liability of principals, accomplices, and accessories of a felony e. Bailees in commodatum 

EFFECTS:

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a. Payment made before debt is due, no interest can be charged, otherwise – interest can be charged b. Insolvency of one – others are liable for share pro-rata c. If different terms and conditions – collect only what is due, later on collect from any d. No reimbursement if payment is made after prescription or became illegal e. Remission made after payment is made – co-debtor still entitled to reimbursement f. Effect of insolvency or death of co-debtor – still liable for whole amount g. Fault of any debtor – everyone is responsible – price, damage and interest h. Complete/ personal defense – total or partial ( up to amount of share only ) if not personal to him EFFECT OF LOSS OR IMPOSSIBILITY OF THE PRESTATION: 1. If without fault – no liability 2. If with fault – there is liability (also for damage and interest) 3. Loss due to fortuitous event after default – there is liability (because of default) NOTE: The law clearly provides that the creditor who may have executed any acts mentioned in Art. 1215 (Novation, Compensation, Merger or Confusion), as well as he or she who collects the debts, shall be liable to the others for the share in the obligation corresponding to them. =========================================

TOPICS UNDER THE SYLLABUS D. JOINT AND SOLIDARY OBLIGATIONS 4. Divisible and Indivisible Obligation ========================================= 4. DIVISIBLE AND INDIVISIBLE OBLIGATION DIVISIBLE - obligation that is capable of partial performance  Execution of certain no of days work  Expressed by metrical units  Nature of obligation – susceptible of partial fulfillment

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INDIVISIBLE - one not capable of partial performance  To give definite things  Not susceptible of partial performance  Provided by law  Intention of parties NOTES:  Divisibility or indivisibility of the obligation refers to the performance of the prestation and not to the thing which is the object thereof  Intention of parties should be taken into account to determine whether obligation is divisible or not =========================================

obligation Debtor may not choose between principal and penalty

Debtor may choose among the prestations

PENAL CLAUSE DISTINGUISHED FROM FACULTATIVE OBLIGATION PENAL CLAUSE FACULTATIVE OBLIGATION Penalty of payment Power to choose in lieu of the prestation is absolute principal must be expressly granted Creditor may Creditor may not demand both if demand both principal expressly granted and penalty

TOPICS UNDER THE SYLLABUS D. JOINT AND SOLIDARY OBLIGATIONS 5. Obligations with a Penal Clause

=========================================

5. OBLIGATIONS WITH A PENAL CLAUSE WITH A PENAL CLAUSE – One to which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. PENAL CLAUSE DISTINGUISHED FROM CONDITION PENAL CLAUSE CONDITION Constitutes an Not an obligation obligation Demandable in default Never demandable Obligation exists No obligation until condition happens Depends on the nonPrincipal itself is performance of the dependent on an principal obligation uncertain event

PENAL CLAUSE DISTIGUISHED FROM ALTERNATIVE OBLIGATIONS PENAL CLAUSE ALTERNATIVE OBLIGATIONS Only 1 prestation Several prestations Impossibility of Impossibility of 1 principal extinguishes prestation does not penalty extinguish the

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PENAL CLAUSE DISTINGUISHED FROM GUARANTEE PENAL CLAUSE GUARANTEE Insure performance of principal obligation Accessory and subsidiary obligations Obligation to pay the Object of the penalty is different from principal and the the principal obligation guarantee is the same Principal and penalty No can be assumed by the same person Penalty is extinguished Guarantee subsists by the nullity of the even if the principal principal obligation is voidable, unenforceable or a natural one, same applies if penal clause is assumed by a guarantee PURPOSE OF PENALTY: 1. Funcion coercitiva o de garantia – to insure the performance of the obligation 2. Funcion liquidatoria – to liquidate the amount of damages to be awarded to the

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injured party in case of breach of the principal obligation (compensatory), and 3. Funcion estrictamente penal – in certain exceptional cases, to punish the obligor in case of breach of the principal obligation (punitive). CHARACTERISTICS OF PENAL CLAUSES: 1. Subsidiary - As a general rule, only penalty can be demanded, principal cannot be demanded, except: Penalty is joint or cumulative 2. Exclusive - takes place of damage, damage can only be demanded in the ff. cases: a. Stipulation – granting right b. Refusal to pay penalty c. With dolo ( not of creditor ) PENALTY AS SUSTITUTE FOR DAMAGES GENERAL RULE: the penalty fixed by the parties is or substitute for damages in case of breach EXCEPTIONS: 1. When there is a stipulation to the contrary 2. When the debtor is sued for refusal to pay the agreed penalty; and 3. When debtor is guilty of fraud DOUBLE FUNCTIONS OF PENALTY 1. to provide for liquidated damages 2. to strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach KINDS OF PENALTIES: 1. Legal – constituted by law 2. Conventional – constituted by agreement of the parties 3. Compensatory – established for the purpose of indemnifying the damages suffered by the obligee or creditor in case of breach of the obligation 4. Punitive – established for the purpose of punishing the obligor or debtor in case of breach of the obligation 5. Subsidiary or alternative- in case of non-performance only the penalty is demandable 6. Joint or cumulative – both the principal undertaking and the penalty may be demanded CAUSES FOR REDUCTION OF PENALTY:

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1. P 2.

artial/irregular performance Penalty provided is iniquitous/ unconscionable

END OF DISCUSSION ON TOPIC D. JOINT AND SOLIDARY OBLIGATION

================================

E. EXTINGUISHMENT OF OBLIGATIONS ================================ TOPICS UNDER THE SYLLABUS

E. EXTINGUISHMENT OF OBLIGATIONS 1. Payment (Arts. 1236-1238) A. Dation in payment (Art. 1245) B. Form of payment (Art. 1249) C. Extraordinary inflation or deflation (Art. 1250) D. Application of payment (Arts. 1252-1254) E. Tender of payment and consignation (Arts. 1256-1261) 2. Loss of determinate thing due or impossibility or difficulty of performance (Arts. 1262, 12661267) 3. Condonation or remission of debt A. Express condonations and required formality thereof (Art. 1270) B. Implied (Arts. 1271, 1272, 1274) 4. Confusion or Merger of Rights (Arts. 1275, 1272) 5. Compensation A. Kinds (Arts. 1278, 1279)

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A.1. Legal compensation (Arts. 1286-1290) A.2. Agreement (Art. 1282) A.3. Voluntary (Art. 1282) A.4. Judicial (Art. 1283) A.5. Facultative B. Obligations not compensable (Arts. 1287-1288) 6. Novation (Arts. 1291-1288) =========================================

TOPICS UNDER THE SYLLABUS E. EXTINGUISHMENT OF OBLIGATIONS 1. Payment ========================================= Principal Modes: (PAL-CoCoCo-No) 1. Payment or performance 2. Loss of the thing due 3. Condonation or remission of debt 4. Confusion or merger of rights 5. Compensation 6. Novation Other Modes: 7. Annulment 8. Rescission 9. Fulfillment of resolutory condition 10. Prescription Not Stated in the Civil Code: 11. Death of a Party in Personal Obligations 12. Mutual Desistance 13. Compromise 14. Impossibility of Fulfillment 15. Happening of Fortuitous Event 16. Arrival of Resolutory Period 17. Will of One of the Parties Due to Indeterminate Duration or Nature of the Prestation/ Unilateral Withdrawal in Partnerships 18. Change of Civil Status 19. Rebus Sic Stantibus (Art. 1267) 20. Want of Interest in Some Circumstances 21. Abandonment in Special Cases 22. Insolvency Judicially Declared and Debtor is Discharged

1. PAYMENT OR PERFORMANCE

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Delivery of money and performance, in any other manner of the obligation REQUISITES FOR PAYMENT/PERFORMANCE 1. With respect to prestation itself a. Identity b. Integrity or completeness c. Indivisibility

VALID

2. With respect to parties - must be made by proper party to proper party a. Payor 1. Payor - the one performing, he can be the debtor himself or his heirs or assigns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditor's consent 2. 3RD person pays/performs - only the creditor's consent; if performance is done also with debtor's consent - he takes the place of the debtor. There is subrogation except if the 3rd person intended it to be a donation 3. 3rd person pays/performs with consent of creditor but not with debtor's consent, the repayment is only to the extent that the payment has been beneficial to debtor b. Payee i. Payee - creditor or obligee or successor in interest of transferee, or agent ii. 3rd person - if any of the ff. concur: a.It must have redounded to the obligee's b. benefit and only to the extent of such benefit c.It falls under art 1241, par 1,2,3 - the benefit is total so, performance is total iii. Anyone in possession of the credit - but will apply only if debt has not been previously garnished PRINCIPLE OF INTEGRITY (Art. 1233) GENERAL RULE: A debt shall not be understood to have been paid unless a thing or service of which the obligation consists has been completely delivered or rendered, as the case maybe. EXCEPTIONS: 1. When the obligation has been substantially performed in good faith (Art. 1234); 2. When the obligee accepts performance despite its incompleteness or irregularity and without expressing any protest or correction. (Art. 1235)

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1.

PERSONS FROM WHOM THE CREDITOR MUST ACCEPT PAYMENT 1. Debtor himself or his legal representative 2. Any person who has interest in the obligation (i.e., guarantor) 3. A 3rd person who has no interest in the obligation, when there is a stipulation to the contrary

P ayment by debtor must be made in good faith 2. Creditor must be in possession of the credit and not merely the evidence of indebtedness

PAYMENT MADE BY 3Rd PERSON  If payment was made without the knowledge or against the will: the recovery is only up to the extent or the amount of the debt at the time of the payment; the defense may only be availed of by the obligor  If payment was with knowledge: the rights of reimbursements and subrogation are acquired by the 3rd person

WHERE PAYMENT SHOULD BE MADE 1. In the place designated in the obligation 2. If there is no express stipulation and the undertaking is to deliver a specific thing – at the place where the thing might be at the moment the obligation was constituted 3. In other case – in the place of the domicile of the debtor  Time of payment - time stipulated  Effect of payment – extinguish obligation Except: order to retain debt

TO WHOM PAYMENY MUST BE MADE 1. The person in whose favor the obligation has been constituted 2. His successor-in-interest 3. Any person authorized by law or by the obligee at the time when payment is due to receive it (not during the time when the obligation is constituted) PAYMENT TO AN INCAPACITATED PERSON, VALID IF: 1. Incapacitated person kept the thing delivered, or 2. Insofar as the payment has been beneficial to him PAYMENT TO 3RD PERSON GENERAL RULE: Payment is not valid, even though made in good faith EXCEPTIONS: 1. Payment which redounded to the benefit of the obligee  Instances when the presumption that the payment redounded to the benefit of the obligee: 1. After payment, 3rd person acquires the creditor’s rights (subrogation) 2. Creditor ratifies payment to 3rd person 3. By creditor’s conduct, debtor has been led to make the payment (estoppel) 2. Payment to the possessor of the credit, when made in good faith  REQUISITES:

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NOTE: With respect to time and place of payment - must be according to the obligation

SUBSTANTIAL PERFORMANCE A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with  Attempt in Good Faith to perform without willful or intentional departure  Deviation is slight  Omission/Defect is technical or unimportant  Must not be so material that intention of parties is not attained EFFECT OF SUBSTANTIAL PERFORMANCE IN GOOD FAITH  Obligor may recover as though there has been strict and complete fulfillment, less damages suffered by the oblige  Right to rescind cannot be used for slight breach SPECIAL RULES/FORMS OF PAYMENT 1. Application of Payments

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2. Dation in Payment/ Dacion en Pago/ Adjudication/ Dacion in Solutum/ Adjudicacion en Pago/ Payment in Kind/ Dation en Paiement 3. Payment by Cession/Cession en Pago 4. Tender of Payment and Consignation A. APPLICATION OF PAYMENTS – the designation of the debt which payment shall be made, out of 2 or more debts owing the same creditor: stipulation or application of party given benefit of period – OK; to be valid: must be debtor’s choice or w/ consent of debtor REQUISITES FOR THE APPLICATION OF PAYMENT: a. There must be only one debtor and only one creditor b. Two or more debts of the same kind c. All debts must be due EXCEPTION: there may be application of payment even if all debts are not yet due if: i. Parties so stipulate ii. When application of payment is made by the party for whose benefit the term has been constituted iii. Payment is not enough to extinguish all debts d. Amount paid by the debtor is insufficient to cover the total amount of all debts. HOW APPLICATION IS MADE: a. Debtor makes the designation b. If not, creditor makes it by so stating in the receipt that he issues – unless there is cause for invalidating the contract c. If neither the debtor nor creditor has made the application or if the application is not valid, then application, is made by operation of law WHO MAKES APPLICATION OF DEBTS GENERAL RULE: Debtor EXCEPTION: Creditor a. Debtor without protest accepts receipt in which creditor specified expressly and unmistakably the obligation to which such payment was to be applied – debtor in this case renounced the right of choice

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b. When monthly statements were made by the bank specifying the application and the debtor signed said statements approving the status of her account as thus sent to her monthly by the bank c. In case no application is made:  Apply payment to the most onerous  If debts are of the same nature and burden, application shall be made to all proportionately B. DACION EN PAGO: mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction of monetary debt; extinguish up to amount of property unless w/ contrary stipulation; A special form of payment because 1 element of payment is missing: IDENTITY REQUISITES FOR A VALID DACION EN PAGO: a. There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person b. There must be some difference between the prestation due and that which is given in substitution (aliud pro alio) c. There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due CONDITIONS FOR A VALID DACION: a. If creditor consents, because a sale presupposes the consent of both parties b. If dacion will not prejudice the other creditors c. If debtor is not judicially declared insolvent NOTE: DACION is governed by the law on sales DACION EN PAGO DISTINGUISHED FROM PACTUM COMMISORIUM DACION EN PAGO PACTUM COMMISORIUM There is an Generally, only one intervening single contract agreement where the parties subsequent and agree that in the event independent from debtor fails to pay, the

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the original contract is entered into by the parties to have the property collaterizes in the original agreement as payment of the debt Valid

mortgaged or pledged property shall automatically be appropriated or owned by the creditor

Void

DACION EN PAGO DISTINGUISHED FROM PLEDGE DACION EN PAGO PLEDGE Delivery and Delivery but no transfer of transfer of ownership ownership Presumed since less transmission of rights DACION EN PAGO DISTINGUISHED FROM SALE DACION EN PAGO SALE Preexisting credit None Obligation extinguished Obligation rises Less freedom in Greater freedom determining the price Total or partial Payment of price extinguishment generally totally extinguishes if done by mistake, ... recovery of the recovery of the thing price paid DACION EN PAGO DISTINGUISHED FROM ASSIGNMENT DACION EN PAGO ASSIGNMENT Substitute forms of performance 1 creditor Several creditors Debtor not partially Debtor partially insolvent insolvent C. CESSION or ASSIGNMENT (IN FAVOR OF CREDITORS) – the process by which debtor transfer all the properties not subject to execution in favor of creditors is that the latter may sell them and thus, apply the proceeds to their credits; extinguish up to amount of net proceeds ( unless w/ contrary stipulation)

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KINDS OF ASSIGNMENT: a. Legal – governed by the insolvency law b. Voluntary – agreement of creditors REQUISITES OF VOLUNTARY ASSIGNMENT: a. More than one debt b. More than one creditor c. Complete or partial insolvency of debtor d. Abandonment of all debtor’s property not exempt from execution e. Acceptance or consent on the part of the creditors EFFECTS OF ASSIGNMENT: a. Creditors do not become the owner; they are merely assignees with authority to sell b. Debtor is released up to the amount of the net proceeds of the sale, unless there is a stipulation to the contrary c. Creditors will collect credits in the order of preference agreed upon, or in default of agreement, in the order ordinarily established by law DATION IN PAYMENT DISTINGUISHED FROM CESSION IN PAYMENT DATION IN PAYMENT

CESSION IN PAYMENT

One creditor

Plurality of creditors

Not necessarily in state of financial difficulty

Debtor must b partially or relatively insolvent

Thing delivered considered equivalent performance

is as of

Universality of property of debtor is what is ceded

Payment extinguishes obligation to the extent of the value of the thing delivered as agreed upon, proved or implied from the conduct of the creditor

Merely releases debtor for net proceeds of things ceded of, assigned, unless there is a contrary intention

D. TENDER AND CONSIGNATION

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TENDER -the act of offering the creditor what is due him together with a demand that the creditor accept the same (When creditor refuses w/o just cause to accept payment, he becomes in mora accepiendi and debtor is released from responsibility if he consigns the thing or sum due) CONSIGNATION – the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment; generally requires prior tender of payment REQUISITES OF VALID CONSIGNATION: a. Existence of valid debt b. Consignation was made because of some legal cause - previous valid tender was unjustly refused or circumstances making previous tender exempt c. Prior Notice of Consignation had been given to the person interested in performance of obligation (1st notice) d. Actual deposit/Consignation with proper judicial authorities e. Subsequent notice of Consignation (2nd notice) EFFECTS: EXTINGUISHMENT OF OBLIGATION a. Debtor may ask judge to order cancellation of obligation b. Running of interest is suspended c. Before creditor accepts or before judge declares consignation has been properly made, obligation remains (debtor bears risk of loss at the meantime, after acceptance by creditor or after judge declares that consignation has been properly made – risk of loss is shifted to creditor) CONSIGNATION W/O PRIOR TENDER – allowed in: a. Creditor absent or unknown/ does not appear at the place of payment b. Incapacitated to receive payment at the time it is due c. Refuses to issue receipt w/o just cause d. 2 or more creditor claiming the same right to collect e. Title of obligation has been lost

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TENDER OF PAYMENT DISTINGUISHED FROM CONSIGNATION TENDER OF CONSIGNATION PAYMENT antecedent act; principal act; preparatory produces the effects of payment extrajudicial judicial =========================================

TOPICS UNDER THE SYLLABUS E. EXTINGUISHMENT OF OBLIGATIONS 2. Loss of determinate thing due or impossibility or difficulty of performance ========================================= 2. LOSS OF DETERMINATE THING OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE LOSS OF THE THING DUE: partial or total/ includes impossibility of performance WHEN a. b. c.

IS THERE A LOSS When the object perishes (physically) When it goes out of commerce When it disappears in such a way that: its existence is unknown or it cannot be recovered

WHEN IS THERE IMPOSSIBILITY OF PERFORMANCE: a. Physical impossibility b. Legal impossibility i. Directly – caused as when prohibited by law ii. Indirectly – caused as when debtor is required to enter a military draft EFFECT OF LOSS IN OBLIGATION DELIVER A SPECIFIC THING

TO

GENERAL RULE: Loss shall extinguish the obligation EXCEPTIONS: a. If by law the obligor is liable even for fortuitous event

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b. If by stipulation the obligor is liable even for fortuitous event c. If the nature of the obligation requires the assumption of the risk d. If the loss of the thing occurs after the obligor incurred in delay e. If the loss of the thing occurs after the obligor incurred delay f. If the obligor promised to deliver the same thing to two or more persons who do not have the same interest g. IF the obligation is generic, unless the object is a particular class or group with specific or determinate qualities OBLIGATION TO DELIVER A GENERIC THING GENERAL RULE: Not extinguished EXCEPTIONS: a. If the generic thing is delimited b. If the generic thing has already been segregated c. Monetary obligation EFFECT OF IMPOSSIBILITY PERFROMANCE IN OBLIGATION TO DO

OF

GENERAL RULE: Debtor is released when prestation becomes legally or physically impossible without fault on part of debtor EFFECT OF PARTIAL LOSS a. When loss is significant – may be enough to extinguish obligation b. When loss insignificant – not enough to extinguish obligation NOTE:  Judicial determination of extent is necessary  Doctrine of Unforeseen Events: The court is authorized to release the obligor, in whole or in part, when the service has become so difficult as to be manifestly beyond the contemplation of the parties.  Doctrine of Subjective Impossibility: The obligation undoubtedly becomes impossible if there is no physical or legal loss but the object obligation belongs to another person; the obligor must indemnify the obligee for the damages suffered by the latter.

Presumption: Loss due to debtor’s fault (disputable) Exception: natural calamity, earthquake, flood, storm REBUS SIC STANTIBUS: agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance; Obligor may be released in whole or in part based on this ground REQUISITES: A. The event or change could not have been foreseen at the time of the execution of the contract B. The performance is extremely difficult, but not impossible (because if it is impossible, it is extinguished by impossibility) C. The event was not due to the act of any of the parties D. The contract is for a future prestation ==========================================

TOPICS UNDER THE SYLLABUS E. EXTINGUISHMENT OF OBLIGATIONS 3. Condonation or Remission of Debt ========================================= 3. CONDONATION OR REMISSION OF DEBT CONDONATION/REMISSION OF THE DEBT – gratuitous abandonment of debt; right to claim; donation; rules of donation applies; express or implied REQUISITES: a. There must be an agreement b. There must be a subject matter (object of the remission, otherwise there would be nothing to condone) c. Cause of consideration must be liberality (Essentially gratuitous, an act of liberality ) d. Parties must be capacitated and must consent; requires acceptance by obligor; implied in mortis causa and expressed inter vivos

WHEN THING IS LOST IN THE POSSESSION OF THE DEBTOR

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e. Formalities of a donation are required in the case of an express remission f. Revocable – subject to rule on inofficious donation ( excessive, legitime is impaired ) and ingratitude and condition not followed g. Obligation remitted must have been demandable at the time of remission h. Waivers or remission are not to be presumed generally FORMS

EXTENT

a. Express – formalities of donation

a. Total

b. Implied – conduct is sufficient

b. Partial

KINDS a. Principal – accessory also condoned b. Accessory – principal still outstanding c. Accessory obligation of pledge – condoned; presumption only, rebuttable

REQUISITES OF IMPLIED CONDONATION 1. Voluntary delivery – presumption; when evidence of indebtedness is w/ debtor – presumed voluntarily delivery by creditor; rebuttable 2. Effect of delivery of evidence of indebtedness is conclusion that debt is condoned – already conclusion; voluntary delivery of private document a. If in hands of joint debtor – only his share is condoned b. If in hands of solidary debtor - whole debt is condoned c. Tacit – voluntary destruction of instrument by creditor; made to prescribe w/o demanding ========================================== TOPICS UNDER THE SYLLABUS

E. EXTINGUISHMENT OF OBLIGATIONS 4. Confusion or Merger

4. CONFUSION OR MERGER CONFUSION OR MERGER: – character of debtor and creditor is merged in same person with respect to same obligation REQUISITES: a. It must take place between principal debtor and principal creditor only b. Merger must be clear and definite c. The obligation involved must be same and identical – one obligation only d. Revocable, if reason for confusion ceases, the obligation is revived =========================================

TOPICS UNDER THE SYLLABUS E. EXTINGUISHMENT OF OBLIGATIONS 5. Compensation

========================================= 5. COMPENSATION COMPENSATION: Set off; it is a mode of extinguishment to the concurrent amount the obligation of persons who are in their own right reciprocally debtors or creditors REQUISITES: a. Both parties must be mutually creditors and debtors - in their own right and as principals b. Both debts must consist in sum of money or if consumable , of the same kind or quality c. Both debts are due d. Both debts are liquidated and demandable (determined) e. Neither debt must be retained in a controversy commenced by 3rd person and communicated w/ debtor (neither debt is garnished) 1. Kinds OF COMPENSATION a. Legal – by operation of law; as long as 5 requisites concur- even if unknown to parties and if payable in diff places; indemnity for expense of exchanges; even if not equal debts – only up to concurring amount

=========================================

CIVIL LAW REVIEWER 383

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b. Conventional – agreement of parties is enough, forget other requirement as long as both consented c. Facultative – one party has choice of claiming/opposing one who has benefit of period may choose to compensate: i. Not all requisites are present ii. Depositum; commodatum; criminal offense; claim for future support; taxes d. Judicial – set off; upon order of the court; needs pleading and proof; all requirements must concur except liquidation e. Total – when 2 debts are of the same amount f. Partial – when 2 debts are not of the same amount EFFECT OF ASSIGNMENT OF CREDIT TO 3 RD PERSON; CAN THERE STILL BE COMPENSATION a. If made after compensation took place – no effect; compensation already perfected b. If made before compensation took place – depends i. With consent of debtor – debtor is estopped unless he reserves his right and gave notice to assignee ii. With knowledge but w/o consent of debtor – compensation may be set up as to debts maturing prior to assignment iii. W/o knowledge – compensation may be set-up on all debts prior to his knowledge

COMPENSATION DISTINGUISHED FROM CONFUSION COMPENSATION CONFUSION 2 persons; each is a only 1 person who is debtor and creditor of creditor and debtor each other of himself 2 obligations indirect payment

one obligation impossibility of payment

COMPENSATION DISTINGUISHED FROM PAYMENT COMPENSATION PAYMENT

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capacity not necessary may be partial performance Simpler more guarantee and less risk may take place by operation of law

capacity to dispose and capacity to receive required must be complete performance

involves action or delivery of the amount paid

COMPENSATION DISTINGUISHED FROM COUNTERCLAIM COMPENSATION COUNTERCLAIM takes place by operation must be pleaded of law and extinguishes to be effectual reciprocally 2 claims as soon as they exist simultaneously to the concurrent amounts 2. Obligations Not Compensable  When one of the debts arises from a depositum or from the obligations of a depositary or of a baliee in commodatum. (Art. 1287) 

Against a creditor who has a claim for support due by gratuitous title, without prejudice to Article 301 par. 2 (Article 1287)



If one of the debts consists in civil liability arising from a penal offense. (Art. 1288)

=========================================

TOPICS UNDER THE SYLLABUS E. EXTINGUISHMENT OF OBLIGATIONS 5. Novation

========================================= 5. NOVATION NOVATION: Extinguishment of obligation by creating/ substituting a new one in its place

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 Changing object or principal conditions  Substituting person of debtor  Subrogating 3rd person in right of creditor REQUISITES: a.Valid obligation b. Intent to extinguish old obligation – expressed or implied: completely/substantially incompatible old and new obligation on every point c.Capacity and consent of parties to the new obligation d. Valid new obligation EFFECTS OF NOVATION: a. Extinguishment of principal carries accessory, except: i. Stipulation to contrary ii. Stipulation pour autrui unless beneficiary consents iii. Modificatory novation only; obliged to w/c is less onerous iv. Old obligation is void b. Old obligation subsists if new obligation is void or voidable but annulled already (except: intention of parties) c. If old obligation has condition i. If Resolutory and it occurred – old obligation already extinguished; no new obligation since nothing to novate ii. If Suspensive and it never occurred –as if no obligation; also nothing to novate d. If old obligation has condition, must be compatible with the new obligation; if new is w/o condition – deemed attached to new e. If new obligation has condition i. If resolutory: valid ii. If suspensive and did not materialize: old obligation is enforced KINDS OF NOVATION: 1. REAL/OBJECTIVE – change object, cause/consideration or principal condition 2. PERSONAL/SUBJECTIVE i. Substituting person (passive)

of

debtor

 EXPROMISION: initiative is from 3rd person or new debtor; new debtor and creditor to consent; old debtor released

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from obligation; subject to full reimbursement and subrogation if made w/ consent of old debtor; if w/o consent or against will , only beneficial reimbursement; if new debtor is insolvent, not responsible since w/o his consent  DELEGACION: initiative of old debtor; all parties to consent; full reimbursement; if insolvent new debtor – not responsible old debtor because obligation extinguished by valid novation unless: insolvency already existing and of public knowledge or know to him at time of delegacion 1. Delegante – old debtor 2. Delegatario - creditor 3. Delegado – new debtor

EXPROMISION DISTINGUISHED FROM DELEGACION EXPROMISIO DELEGACION N Intention: old debtor be released from the obligation Consent of creditor may be express or tacit but not presumed by acceptance of payment from third person Donation cannot be presumed consent of consent of debtor creditor and (initiates), creditor and third person third person; need not be given simultaneously governed by same applies in the the rules of absence of an agreement payment by by old and new debtors third persons if w/o subrogation knowledge of debtor, beneficial reimbursement , no subrogation new debtor's same unless new debtor is insolvency known to the public as does not make insolvent or old debtor

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old debtor liable

knows of such insolvency at the time of delegacion creditor may not recover from old debtor if he knows of such insolvency of the new debtor delegante (old) delegado (new) delegatario (creditor)

quite rare

3rd person has no obligation to pay if insolvent

ii. Subrogating 3 person to rights of creditor ( active ) 1. Conventional - agreement and consent of all parties; clearly established 2. Legal - takes place by operation of law; no need for consent; not presumed except as provided for in law: rd

PRESUMED WHEN • Creditor pays another preferred creditor even w/o debtor’s knowledge • 3rd person not interested in obligation pays w/ approval of debtor • Person interested in fulfillment of obligation pays debt even w/o knowledge of debtor

DIFFERENCE FROM PAYMENT PERSON vs CHANGE OF DEBTOR DIFFERENCE FROM PAYMENT BY 3RD PERSON

BY

3 rd

CHANGE OF DEBTOR

debtor is not necessarily released from debt

debtor is released

can be done w/o consent of creditor

needs consent of creditor – express or implied

one obligation

two obligations; one is extinguished and new one created

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CONVENTIONAL DISTINGUISHED RIGHTS

new debtor is obliged to pay

FROM

SUBROGATION ASSIGNMENT OF

CONVENTIONA L SUBROGATION

ASSIGNMENT OF RIGHTS

Governed by Arts. 1300-1304

Governed by Arts. 1624 to 1627

debtor’s consent is required

debtor’s required

extinguishes the obligation and gives rise to a new one

transmission of right of the creditor to third person without modifying or extinguishing the obligation

defects and vices in the old obligation are cured

defects and vices in the old obligation and not cured

takes effect upon moment of novation or subrogation

as far as the debtor is concerned, takes effect upon notification

consent

is

not

END OF DISCUSSION ON TOPIC

================================

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CONTRACTS A. GENERAL PROVISIONS ================================ TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 1. Essential Requisites (Art. 1261)

(2) Pactum de non alienando (Art. 2130) (3) Pactum leonine (Art. 1799) 7. Effect of contracts (Art. 1311) =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 1. Essential Requisites

2. Kinds of Contracts A. Consensual B. Real C. Formal or solemn C.1. Donations (Arts. 748-749) C.2. Partnership where real property contributed (Arts. 1771, 1773) C.3. Antichresis (Art. 2134) C.4. Agency to sell real property or an interest therein (Art. 1874) C.5. Stipulation to charge interest (Art. 1956) C.6. Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence (Art. 1744) C.7. Chattel mortgage C.8. Sale of large cattle

=========================================

3. Formality (Arts. 1356, 1357, 1358) 4. Reformation of Contracts 5. Interpretation of Contracts 6. Defective Contracts A. Rescissible contracts (Art. 1381) A.1. Difference with rescission (resolution) under Art. 1191 B. Voidable contracts (Arts. 13281344, 1390-1402) C. Unenforceable contracts (Arts. 1403-1408, 1317) D. Void contracts (Arts. 1409, 1346) (1) Pactum commissorium (Arts. 2088, 2130, 1390)

COLLECTIVE CONTRACTS - will of majority binds a minority to an agreement notwithstanding the opposition of the latter

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1. ESSENTIAL REQUISITES ESSENTIAL ELEMENTS: 1. Consent 2. Subject Matter 3. Consideration A. CONSENT CONSENT – meeting of minds between parties on subject matter and cause of contract; concurrence of offer and acceptance REQUIREMENTS: 1. Must be manifested by the concurrence of the offer and payment; 2. Parties are legally capacitate to enter into contracts 3. Consent must be intelligent, free, spontaneous, and real AUTO CONTRACTS - made by a person acting in another’s name in one capacity

CONTRACTS OF ADHESION - one party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract NOTE: We follow the theory of cognition and not the theory of manifestation. Under our Civil Law, the offer and acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance.

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OFFER – a proposal made by one party to another to enter into a contract; must be certain or definite, complete and intentional ELEMENTS OF VALID OFFER / ELEMENTS OF VALID ACCEPTANCE 1. Definite--unequivocal 2. Complete--unconditional 3. Intentional WHEN OFFER BECOMES INEFFECTIVE: 1. Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed 2. Express or implied revocation of the offer by the offeree 3. Qualified or conditional acceptance of the offer, which becomes a counter-offer 4. Subject matter becomes illegal or impossible before acceptance is communicated ACCEPTANCE - manifestation by the offeree of his assent to the terms of the offer; must be absolute

the other necessary. 

and

acceptance

of

both

is

Offer inter praesentes must be accepted IMMEDIATELY. If the parties intended that there should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the manner prescribe by the offeror is NOT EFFECTIVE, BUT A COUNTER-OFFER which the offeror may accept or reject. Malbarosa v. CA, [G.R. No. 125761, April 30, 2003]

RULE ON ADVERTISEMENTS AS OFFERS Business advertisements – Not a definite offer, but mere invitation to make an offer, unless it appears otherwise

constitutes

Advertisement for Bidders – only invitation to make proposals and advertiser is not bound to accept the highest or lowest bidder, unless appears otherwise

PERIOD FOR ACCEPTANCE 1. Stated fixed period in the offer 2. No stated fixed period a. Offer is made to a person present – acceptance must be made immediately b. Offer is made to a person absent – acceptance may be made within such time that, under normal circumstances, an answer can be received from him NOTE: Acceptance may be revoked before it comes to the knowledge of the offeror. (withdrawal of offer)

THE 4 THEORIES IN ACCEPTANCE OF OFFER BY TELEGRAM OR LETTER 1. Manifestation – perfected from the moment the acceptance is declared or made 2. Expedition – perfected from the moment the offeree transmits the notification of acceptance 3. Reception – perfected from the moment the offeror receives the letter 4. Cognition – perfected from the moment the acceptance comes to the knowledge of the offeror

NOTE: A qualified counter-offer

acceptance

AMPLIFIED ACCEPTANCE Under certain circumstances, a mere amplification on the offer must be understood as an acceptance of the original offer, plus a new offer, which is contained in the amplification. RULE ON COMPLEX OFFERS 1. Offers are interrelated – contract is perfected if all the offers are accepted 2. Offers are not interrelated – single acceptance of each offer results in a perfected contract unless the offeror has made it clear that one is dependent upon

CIVIL LAW REVIEWER 383

NOTE: Contracts under the Civil Code generally adhere to the Cognition Theory while transactions under the Code of Commerce use the Manifestation Theory. When the offeror refuses to open the letter or telegram he is held to have a constructive notice of the contents thereof and will be bound by the acceptance of the offeree. (Jurado citing Castan) OPTION: option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration other than purchase price: option money

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EFFECTS OF OPTION:  NOT supported by independent consideration – the offeror can withdraw the privilege at any time by communicating the withdrawal before acceptance  Supported by independent consideration – the offeror cannot withdraw his offer PERSONS WHO CANNOT GIVE CONSENT TO A CONTRACT: 1. Minors 2. Insane or demented persons, unless the contract was entered into during a lucid interval 3. Illiterates/ deaf-mutes who do not know how to write 4. Intoxicated and under hypnotic spell 5. Art 1331 - person under mistake; mistake may deprive intelligence 6. Art 1338 - person induced by fraud (dolo causante) NOTE: Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent RULE ON CONTRACTS ENTERED INTO BY MINORS GENERAL RULE: VOIDABLE EXCEPTIONS: a. Upon reaching age of majority – they ratify the same b. They were entered unto by a guardian and the court having jurisdiction had approved the same c. They were contracts for necessities such as food, but here the persons who are bound to give them support should pay therefor d. Minor is estopped and cannot be absolved from the contract they entered into for having misrepresented his age and misled the other party through his active misrepresentation. Mercado vs. Espiritu, [37 Phil 215] HOWEVER, minors can set up the defense of minority to resist the claim when there is only passive misrepresentation, as they did not disclose their minority because they had no juridical duty to disclose their inability. (Braganza vs. De Villa Abrille, [105 Phil 456]

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DISQUALIFIED TO ENTER INTO CONTRACTS: (contracts entered into are void) 1. Those under civil interdiction 2. Hospitalized lepers 3. Prodigals 4. Deaf and dumb who are unable to read and write 5. Those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming an easy prey for deceit and exploitation (Rule 92, Sec.2, Rules of Court)

INCAPACITY DISTINGUISHED DISQUALIFICATION

FROM

INCAPACITY

DISQUALIFICATION

Restrains the exercise of the right to contract

Restrains the very right itself

May still enter into contract through parent, guardian or legal representative

Absolutely disqualified

Based subjective circumstance certain person

Based upon public policy and morality

Contracts into are voidable

upon of

entered merely

Contracts entered into are void

CAUSES WHICH VITIATE FREEDOM 1. Violence  REQUISITES a. Irresistible physical force b. Such force is the determining cause for giving consent 2. Intimidation  REQUISITES: b. Determining cause for the contract c. Threatened act is unjust and unlawful d. Real and serious

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e.

3.



Produces a well grounded fear that the person making it will carry it over Reluctant consent – a contract is valid even though one of the parties entered into it against his wishes and desires or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. Martinez vs. Hongkong and Shanghai Bank, [15 Phil 252] Mistake Not only wrong conception of the thing but also the lack of knowledge with respect to it (Manresa)

Two General Kinds of Mistake: a.Mistake of Fact – when one or both of the contracting parties believe that a fact exist when in reality it does not, or that such fact does not exist when in reality it does b. Mistake of Law General Rule: Mistake does not vitiate consent Exception: Mutual error as to the effect of an agreement when the real purpose of the parties is frustrated 4.

Fraud When, through insidious words or machinations of 1 of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. KINDS: o Causal Fraud (Dolo Causante)- Fraud in the PERFECTION of the contract  Deception of serious character, without which the other party would not have entered into  It is the cause which induces the party to enter into a contract  Renders the contract voidable. Insidious words or machinations are employed  Not employed by both or by third person  Ground for annulment 

CIVIL LAW REVIEWER 383

o I ncidental Fraud (Dolo Incidente)- Fraud in the PERFORMANCE of an obligation  Deception which are not serious and without which the other party would still have entered into the contract  It is not the cause which induced the party to enter into a contract  Renders the party liable for damages 5. Undue influence  When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice SIMULATED CONTRACTS 1. Absolute – no intention to be bound at all, fictitious only – void from beginning 2. Relative – there is intention to be bound but concealed; concealed contract binds: c. No prejudice to 3rd persons d. Not contrary to law, morals, etc. B. OBJECT REQUISITES: 1. Within the commerce of man – either existing or in potency 2. Licit or not contrary to law, good customs 3. Possible 4. Determinate as to its kind or determinable w/o need to enter into a new contract 5. Transmissible THINGS WHICH CANNOT BE THE OBJECT OF CONTRACT: 1. Things which are outside the commerce of men 2. Intransmissible rights 3. Future inheritance, except in cases expressly authorized by law

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4. EFFECT

proximate reason of a contract

reasons

ABSENCE OF CAUSA

Void - produce no legal effect

Objective and juridical reason of contract

Psychological or purely personal reason

ILLEGALITY OF CAUSA

Void - produce no legal effect

Cause us always same for each contracting party

The motive differs for each contracting party

FALSITY CAUSA

OF

Voidable – party must prove that cause is untruthful; presumption of validity but rebuttable

Legality or illegality of cause affects the existence or validity of the contract

Legality or illegality of motive does not affect the existence or validity of contract

CAUSA NOT STATED IN CONTRACT

Presumed to Exist - burden of proof is on the person assailing its existence

INADEQUAC Y OF CAUSA

Does not Invalidate Contract per se Exceptions:

WANT OF CAUSE

* * * *

Fraud Mistake Undue influence Cases specified by law

- contracts entered when ward suffers lesion of more than 25% Services which are contrary to law, morals, good customs, public order or public policy 5. Impossible things or services 6. Objects which are not possible of determination as to their kind C. CAUSE (CAUSA) CAUSA- Immediate, direct and most proximate reason why parties enter into contract REQUISITES: 1. It must exist 2. It must be true 3. It must be licit MOTIVE: Purely private reason; illegality does not invalidate contract except when it predetermines purpose of contract; when merged into one CAUSE DISTINGUISHED FROM MOTIVE CAUSE Direct

and

MOTIVE most

Indirect

CIVIL LAW REVIEWER 383

or

remote

CAUSA IN SOME CONTRACTS: 1. Onerous contracts – the prestation of promise of a thing or service by the other 2. Remuneratory contracts – the service or benefit remunerated 3. Pure Beneficence – mere liberality of the donor or benefactor 4. Accessory – identical with cause of principal contract, the loan which it derived its life and existence (ex: mortgage or pledge) Want of Cause - There is a total lack or absence of cause Illegal Cause – The cause is contrary to law, morals, good customs, public order and public policy False Cause – The cause is stated but it is not true Moral Obligation as Cause  Where the moral obligation arises wholly from ethical considerations, unconnected with any civil obligations, it cannot constitute a sufficient cause or consideration to support an onerous contract. Fisher vs. Robb [69 Phil 101]  Where such moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time when the contract is entered into, it constitutes a sufficient cause or consideration to support a contract Villaroel vs. Estrada 71 Phil 14] A contract is a meeting of minds between two persons whereby one binds himself, with respect

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to the other, to give something or to render some service CONTRACT OBLIGATION

DISTINGUISHED

FROM

C.

CONTRACT

OBLIGATION

One of the sources of obligations

Legal tie or relation itself

There must be an obligation

There need not be a contract

CONTRACT AGREEMENT

B. EXCEPTION TO RELATIVITY: 1. Accion Pauliana 2. Accion directa 3. Stipulation pour autrui

DISTINGUISHED

CONTRACT

FROM

AGREEMENT

Agreements enforceable through legal proceedings

Cannot be enforced by action in courts of justice

Should have all the requisites of a contract

Need not have all the requisites

There must be an agreement

There need not be a contract

A. PRINCIPAL CHARACTERISTICS: 1. Autonomy of wills – parties may stipulate anything as long as not illegal, immoral, etc. 2. Mutuality – performance or validity binds both parties; not left to will of one of parties 3. Obligatory Force and Consensuality – parties are bound from perfection of contract; contracts are perfected by mere consent and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature may be in keeping with good faith, usage and law. 4. Fulfill what has been expressly stipulated 5. All consequences w/c may be in keeping with good faith, usage and law 6. Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement

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REQUISITES OF STIPULATION POUR AUTRUI 1. Parties must have clearly and deliberately conferred a favor upon a 3rd person 2. The stipulation in favor of a 3rd person should be a part of, not the whole contract 3. That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever 4. Neither of the contracting parties bears the legal representation or authorization of 3rd party 5. The third person communicates his acceptance before revocation by the original parties 6. Art 1312; Art 1314 In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws D. 1. 2. 3.

REQUISITES: Existence of a valid contract Knowledge of the contract by a 3rd person Interference by the 3rd person

E. TEST OF BENFICIAL SITUATION  The fairest to determine whether the interest of 3rd person in a contract is a stipulation pour autrui or merely an incidental interest is to rely upon the intention of the parties as disclosed by their contract. Determine whether contracting parties desired to tender him such interest Uy Tam vs. Leonard, [30 Phil 471] =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 2. Kinds of Contracts =========================================

2. KINDS OF CONTRACTS 1.

As to perfection or formation

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a. Consensual – perfected by agreement of parties – perfected by delivery (e.g. commodatum, pledge, deposit) c. Formal/solemn – perfected by conformity to essential formalities (donation ) As to cause a. Onerous – with valuable consideration b. Gratuitous – founded on liberality c. Remunerative – prestation is given for service previously rendered not as obligation As to importance or dependence of one upon another a. Principal – contract may stand alone b. Accessory – depends on another contract for its existence; may not exist on its own c. Preparatory – not an end by itself; a means through which future contracts may be made As to parties obliged a. Unilateral – only one of the parties has an obligations b. Bilateral – both parties are required to render reciprocal prestations As to form a. Common or informal – require no particular form b. Special or formal – require some particular Form As to their purpose a. Transfer of ownership b. Conveyance of use c. Rendition of service As to their subject matter a. Things b. Services As to the risk involved a. Commutative – example lease b. Aleatory – example insurance As to name or designation a. Nominate – those which have their own distinctive individuality and are regulated by special provisions of law b. Innominate – those which lack individuality and are not regulated by special provisions of law II. Do ut des – I give that you may give III. Do ut facias – I give that you may do IV. Facio ut des – I do that you may give V. Facio ut facias – I do that you may do

b. Real

2.

3.

4.

5.

6.

7. 8. 9.

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NOTE: According to some authorities, do ut des is no longer an innominate contract. It has already been given a name of its own, i.e. barter or exchange. (Art. 1638)

STAGES IN A CONTRACT: 1. 2. 3.

Preparation - negotiation Perfection/birth Consummation – performance

FORMAL CONTRACTS 1. Donation  The donation of a movable may be made orally or in writing (Article 748)  An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. (Article 748)  If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void. (Article 748)  In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. (Article 749)  The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. (Article 749)  If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. (Article 749) 2. Partnership





A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. (Article 1771) A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (Article 1773)

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3.

Antichresis  The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void

=========================================

4. Agency to Sell Real Property

3. FORM OF CONTRACTS



When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (Article 1874)

5. Interest



No interest shall be due unless it has been expressly stipulated in writing (Article 1876)

6. Ordinary Diligence



A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: o

In writing, signed by the shipper or owner;

o

Supported by a valuable consideration other than the service rendered by the common carrier; and

o

Reasonable, just and not contrary to public policy. (Article 1744)

7. Chattel Mortgage



By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage.

8. Sale of Large Cattle



The form of sale of large cattle shall be governed by special laws. (Article 1581)

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TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 3. Formality =========================================

FORM: in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or manifested 1. Informal – may be entered into whatever form as long as there is consent, object and cause 2. Formal – required by law to be in certain specified form such as: donation of real property, stipulation to pay interest, transfer of large cattle, sale of land thru agent, contract of antichresis, contract of partnership, registration of chattel mortgage, donation of personal prop in excess of 5,000 3. Real – creation of real rights over immovable prop must be written WHEN 1. For 2. For 3. For 



FORM IS IMPORTANT: validity (formal/solemn contracts) enforceability (statute of frauds) convenience

GENERAL RULE: contract is valid and binding in whatever form provided that 3 essential requisites concur EXCEPTIONS a. Law requires contract to be in some form for validity - donation and acceptance of real property b. Law requires contract to be in some form to be enforceable - Statute of Frauds; contract is valid but right to enforce cannot be exercised; need ratification to be enforceable c. Law requires contract to be in some form for convenience - contract is valid and enforceable, needed only to bind 3rd parties Ex: public documents needed for the ff: i. Contracts w/c object is creation, transmission or reformation of real rights over immovables

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ii. Cession, repudiation, renunciation of hereditary rights/CPG iii. Power to administer property for another iv. Cession of action of rights proceeding from an act appearing in a public inst. v. All other docs where amount involved is in excess of 500 (must be written even private docs ) NOTE: RA 8792 (E-COMMERCE ACT) – formal requirements to make contracts effective as against third persons and to establish the existence of a contract are deemed complied with provided that the electronic document is unaltered and can be authenticated as to be useable for future reference. =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 4. Reformation of Instruments

========================================= 4. REFORMATION OF INSTRUMENTS REFORMATION OF CONTRACTS: remedy to conform to real intention of parties due to mistake, fraud, inequitable conduct, accident CAUSES/GROUNDS: 1. Mutual: instrument includes something w/c should not be there or omit what should be there a. Mutual b. Mistake of fact c. Clear and convincing proof d. Causes failure of instrument to express true intention 2. Unilateral a. One party was mistaken b. Other either acted fraudulently or inequitably or knew but concealed c. Party in good faith may ask for reformation 3. Mistake by 3rd persons – due to ignorance, lack of skill, negligence, bad faith of drafter, clerk or typist 4. Others specified by law – to avoid frustration of true intent Requisites: a.There is a written instrument b. There is meeting of minds

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c.True intention not expressed in instrument d. Clear and convincing proof e.Facts put in issue in pleadings NOTE:  Prescribes in 10 years from date of execution of instrument  When one of the parties has brought an action to enforce the instrument, no subsequent reformation can be asked. (principle of estoppel)  Reformation is based on justice and equity  When there is no meeting of the minds, the proper remedy is annulment and not reformation WHEN REFORMATION NOT AVAILABLE: 1. Simple donation inter vivos 2. Wills 3. When real agreement is void 4. Estoppel when party has brought suit to enforce it =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 5. Interpretation of Contracts =========================================

5. INTERPRETATION OF CONTRACTS GENERAL RULE: If the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. (Art. 1370) EXCEPTION: It is alleged and proved that the intention of the parties is otherwise. Sec. 13 Rule 130 of the Rules of Court: “When an instrument consists partly of written words and partly of a printed form, and the two are inconsistent, the former controls the latter.” NOTE: 1. If the law is clear, there is no room for interpretation 2. In case of ambiguity, the most important guideline is intention of the parties. 3. Ambiguity is construed against the one who caused it because he had control (e.g. contract of adhesion). However, this rule does not apply to all contracts of adhesion (e.g. if contract is negotiated) 4. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (Art. 1371)

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5. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. (Art. 1375) 6. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (Art. 1377) 7. If the court cannot resolve the ambiguity based on the elements of the contract: a. If a gratuitous contract, the least transmission of rights and interests shall prevail b. If an onerous contract, doubt shall be settled in favor of the greatest reciprocity of interest 8. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts In the case of Felipe v. Heirs of Maximo Aldon [G.R. No. L-60174, February 16, 1983], the Court stated that the description that a contract is “invalid” is no longer precise, since the Civil Code uses specific names in designating defective contract (e.g. rescissible, voidable, unenforceable, and void or inexistent contracts) =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 6. Defective Contracts =========================================

6. DEFECTIVE CONTRACTS KINDS OF DEFECTIVE CONTRACTS: A. RESCISSIBLE CONTRACTS RESCISSIBLE CONTRACTS - Those which have caused a particular economic damage either to one of the parties or to a 3rd person and which may be set aside even if valid. It may be set aside in whole or in part, to the extent of the damage caused REQUISITES: (a) Contract must be rescissible Under Art 1381: Contracts entered into by persons exercising fiduciary capacity: 1. Entered into by guardian whenever ward suffers damage by more than 1/4 of value of object

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2. A greed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property 3. Contracts where rescission is based on fraud committed on creditor (accion pauliana) 4. Objects of litigation; contract entered into by defendant w/o knowledge or approval of litigants or judicial authority 5. Provided for by law – Arts 1526, 1534, 1539, 1542, 1556, 1560, 1567 and 1659  Art. 1526 – Unpaid seller of goods, notwithstanding that the ownership in the goods may have passed to the buyer, subject to other provisions on Sales  Art. 1534 – Unpaid seller having the right of lien or having stopped the goods in transit, where he expressly reserved his right to do so in case the buyer should make default, or the buyer has been in default in the payment of the price for an unreasonable time  Art. 1539 – In the sale of real estate at a rate of a certain price for a unit of measure or number, at the will of the vendee, when the inferior value of the thing sold exceeds onetenth of the price agreed upon, or if the vendee would not have bought the immovable had he known of its smaller area or inferior quality  Art. 1542 – In the sale of real estate, made for a lump sum, where the boundaries are mentioned and the area or number within the boundaries exceed that specified in the contract, when the vendee does not accede to the failure to deliver what has been stipulated  Art. 1556 – Should the vendee lose, by reason of eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part  Art. 1560 – Vendee may ask for recession if the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the

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



agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof Art. 1567 – In cases of breach of warranty against hidden defects of or encumbrances upon the thing sold Art. 1658 – If the lessor or lessee should not comply with their obligations, the aggrieved party may ask for rescission

ART 1191 COMPARED TO ART 1381 RESCISSION IN ART 1191

RESCISSION PROPER IN ART 1381

It is a principal action retaliatory in character

it is a remedy

subsidiary

Only ground is nonperformance of one’s obligation or what is incumbent upon him

There are 5 grounds to rescind. Nonperformance by the other is not important

Applies only to reciprocal obligation

Applies to both unilateral and reciprocal obligations

Only a party to the contract may demand fulfillment or seek the rescission of the contract

Even a third person who is prejudiced by the contract may demand the rescission of the contract.

Court may fix a period or grant extension of time for the fulfillment of the obligation

Court cannot grant extension of time for fulfillment of the obligation

Its purpose is to cancel the contract

Its purpose is to seek reparation for the damage or injury caused, thus allowing partial rescission of the contract

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Under Art. 1382 - Payments made in a state of insolvency 1. Plaintiff has no other means to obtain reparation. 2. Plaintiff must be able to return whatever he may be obliged to return due to rescission 3. The things must not have been passed to 3rd parties who did not act in bad faith 4. It must be made within the prescribed period (of 4 years) REQUISITES before a contract entered into in fraud of creditors may be rescinded: 1. There must be credit existing prior to the celebration of the contract. 2. There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking rescission 3. The creditor cannot in any legal manner collect his credit (subsidiary character of rescission) 4. The object of the contract must not be legally in the possession of a 3rd person who did not act in bad faith. OBLIGATION CREATED BY THE RESCISSION OF THE CONTRACT: Mutual Restitution a. Things w/c are the objects of the contract and their fruits b. Price with interest MUTUAL RESTITUTION NOT APPLICABLE WHEN a. creditor did not receive anything from contract b. thing already in possession of party in good faith; subject to indemnity only; if there are 2 or more alienations – liability of 1st infractor BADGES OF FRAUD a. consideration of the conveyance is inadequate or fictitious b. transfer was made by a debtor after a suit has been begun and while it is pending against him c. sale upon credit by an insolvent debtor d. evidence of indebtedness or complete insolvency e. transfer of all his property by a debtor when he is financially embarrassed or insolvent

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f.

g.

transfer made between father and son where there is present any of the above circumstances failure of the vendee to take exclusive possession of the property

B. VOIDABLE CONTRACTS VOIDABLE CONTRACTS -intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity CHARACTERISTICS: a. Effective until set aside b. May be assailed or attacked only in an action for that purpose c. Can be confirmed (NOTE: confirmation is the proper term for curing the defect of a voidable contract) d. Can be assailed only by the party whose consent was defective or his heirs or assigns WHAT CONTRACTS ARE VOIDABLE: a. Minors b. Insane unless acted in lucid interval c. Deaf mute who can’t read or write d. Persons specially disqualified: interdiction e. In state of drunkenness f. In state of hypnotic spell

civil

MISTAKE False belief of something which is contrary to the real intention of the parties REQUISITES: a. Refers to the subject of the thing which is the object of the contract b. Refers to the nature of the contract c. Refers to the principal conditions in an agreement d. Error as to person - when it is the principal consideration of the contract e. Error as to legal effect - when mistake is mutual and frustrates the real purpose of parties

spouse, ascendants coercion)

or

descendants

(moral

UNDUE INFLUENCE Person takes improper advantage of his power over will of another depriving latter of reasonable freedom of choice The doctrine on reluctant consent provides that a contract is still valid even if one of the parties entered it against his wishes or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. Martinez vs. HSBC, [12 Phil 252] FRAUD Thru insidious words or machinations of contracting parties, other is induced to enter into contract w/o w/c he will not enter (dolo causante) KINDS OF FRAUD IN THE PERFORMANCE OF OBLIGATION OR CONTRACTS a. Causal Fraud (dolo causante) – deception of serious character without which the other party would not have entered into; contract is VOIDABLE (Art. 1338) b. Incidental Fraud (dolo incidente) – deception which are not serious and without which the other party would still have entered into the contract; holds the guilty party liable for DAMAGES (Art. 1344) c. Tolerated Fraud – includes minimizing the defects of the thing, exaggeration of its god qualities and giving it qualities it does not have; LAWFUL misrepresentation NOTE: Expression of an opinion – not fraud unless made by expert and other party relied on the former’s special knowledge

VIOLENCE Serious or irresistible force is employed to wrest consent

Fraud by third person – does not vitiate consent; only action for damages except if there is collusion between one party and the third person, or resulted to substantial mistake, mutual between parties.

INTIMIDATION One party is compelled by a reasonable and well-grounded fear of an imminent and grave danger upon person and property of himself,

CAUSES OF EXTINCTION OF ACTION TO ANNUL a.PRESCRIPTION - Period to bring an action for Annulment

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i. Intimidation, violence, undue influence - 4 years from time defect of consent ceases ii.Mistake, fraud – 4 years from time of discovery iii. Incapacity From time guardianship ceases 

Discovery of fraud must be reckoned to have taken place from the time the document was registered in the office of the register of deeds. Registration constitutes constructive notice to the whole world. Carantes v. CA, [76 SCRA 514]

b. RATIFICATION REQUISITES: i. Knowledge of reason rendering contract voidable ii. Such reason must have ceased, except in case of ratification effected by the guardian to contracts entered into by an incapacitated, iii. The injured party must have executed an act which expressly or impliedly conveys an intention to waive his right c. LOSS OF THE THING which is the object of the contract through fraud or fault of the person who is entitled to annul the contract NOTE: Object is lost through a fortuitous event, the contract can still be annulled, but the person obliged to return the same can be held liable only for the value of the thing at the time of the loss, but without interest thereon. Ratification cleanses the contract of its defects from the moment it was constituted. C. UNENFORCEABLE CONTRACT UNENFORCEABLE CONTRACT – valid but cannot compel its execution unless ratified; extrinsic defect; produce legal effects only after ratified KINDS: a. Unauthorized or No sufficient authority – entered into in the name of another when: i. No authority conferred ii. In excess of authority conferred (ultra vires)

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b. Curable by Ratification - Both parties incapable of giving consent -2 minor or 2 insane persons c. Curable by Acknowledgment - Failure to comply with Statute of Frauds STATUTE OF FRAUDS: Agreement to be performed within a year after making contract Special promise to answer for debt, default or miscarriage of another Agreement made in consideration of promise to marry Agreement for sale of goods, chattels or things in action at price not less than 500; exception: auction when recorded sale in sales book Agreement for lease of property for more than one year and sale of real property regardless of price Representation as to credit of another TWO WAYS OF CURING UNENFORCEABLE CONTRACTS: a. Failure of defendant to object in time, to the presentation of parole evidence in court, the defect of unenforceability is cured b. Acceptance of benefits under the contract. If there is performance in either part and there is acceptance of performance, it takes it out of unenforceable contracts; also estoppel sets in by accepting performance, the defect is waived NOTES:  The contracts/agreements under the Statute of Frauds require that the same be evidenced by some note or memorandum or writing, subscribed by the party charged or by his agent, otherwise, the said contracts shall be unenforceable.  The Statute of Frauds applies only to executory contracts, not to those that are partially or completely fulfilled. D. VOID OR INEXISTENT VOID OR INEXISTENT – of no legal effect CHARACTERISTICS: a. It produces no effect whatsoever either against or in favor of anyone

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b. There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration c. It cannot be confirmed, ratified or cured d. If performed, restoration is in order, except if pari delicto will apply e. The right to set up the defense of nullity cannot be waived f. Imprescriptible g. Anyone may invoke the nullity of the contract whenever its juridical effects are asserted against him KINDS OF VOID CONTRACT: a. Those lacking in essential elements: no consent, no object, no cause (inexistent ones) – essential formalities are not complied with ( ex: donation propter nuptias – should conform to formalities of a donation to be valid ) i. Those w/c are absolutely simulated or fictitious – no cause ii. Those which cause or object did not exist at the time of the transaction – no cause/object iii. Those whose object is outside the commerce of man – no object iv. Those w/c contemplate an impossible service – no object v. Those w/c intention of parties relative to principal object of the contract cannot be ascertained b. Prohibited by law c. Those expressly prohibited or declared void by law - Contracts w/c violate any legal provision, whether it amounts to a crime or not d. Illegal/Illicit ones – Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy ; Ex: Contract to sell marijuana OTHER VOID CONTRACTS: 1. PACTUM COMMISSORIUM (Arts. 2088, 2130, 1390) ELEMENTS: 1. There should be a property mortgaged by way of security for the payment of the principal obligation.

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2. There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. 2. PACTUM DE NON ALIENANDO (Art. 2130) 

A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.



It is a clause in a mortgage giving the mortgagee the right to foreclose by executory process directed solely against the mortgagor, and giving him or her the right to seize and sell the mortgaged property, regardless of any subsequent alienations.

3.

PACTUM LEONINA (Art. 1799)

A stipulation which excludes one or more partners from any share in profit or loss is void.

KINDS OF ILLEGAL CONTRACTS PARI DELICTO DOCTRINE Both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts and not to inexistent contracts; does not apply when a superior public policy intervene EXCEPTION TO PARI DELICTO RULE - If purpose has not yet been accomplished and if damage has not been caused to any 3rd person OTHER EXCEPTIONS: a. Payment of Usurious interest b. payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before the purpose has been accomplished, or before any damage has been caused to a 3rd person c. payment of money or delivery of property made by an incapacitated person d. agreement or contract which is not illegal per se and the prohibition is designed for the protection of the plaintiff

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e. payment of any amount in excess of the maximum price of any article or commodity fixed by law or regulation by competent authority f. contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law g. One who lost in gambling because of fraudulent schemes practiced on him is allowed to recover his losses (Art. 313 RPC) even if gambling is prohibited. REQUISITES OF ILLEGAL CONTRACTS: a. Contract is for an illegal purpose b. Contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to 3rd parties c. Court believes that public interest will be served by allowing recovery (discretionary upon the court) – based on remorse; illegality is accomplished when parties entered into contract; before it takes effect – party w/c is remorseful prevents it WHERE LAWS ARE ISSUED TO PROTECT CERTAIN SECTORS: CONSUMER PROTECTION, LABOR, AND USURY LAW a. Consumer protection – if price of commodity is determined by statute, any person paying an amount in excess of the maximum price allowed may recover such excess b. Labor – if law sets the minimum wage for laborers, any laborer who agreed to receive less may still be entitled to recover the deficiency; if law set max working hours and laborer who undertakes to work longer may demand additional compensation c. Interest paid in excess of the interest allowed by the usury law may be recovered by debtor with interest from date of payment EFFECTS OF ILLEGAL CONTRACTS a. If one party is incapacitated, courts may allow recovery of money, property delivered by incapacitated person in the interest of justice; pari delicto cannot apply because an incapacitated person

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does not know what he is entering into; unable to understand the consequences of his own action b. If agreement is not illegal per se but merely prohibited and prohibition is designated for the protection of the plaintiff – may recover what he has paid or delivered by virtue of public policy MUTUAL RESTITUTION IN VOID CONTRACTS GENERAL RULE: parties should return to each other what they have given by virtue of the void contract in case  Where nullity arose from defect in essential elements a. return object of contract and fruits b. return price plus interest EXCEPTION: No recovery can be had in cases where nullity of contract arose from illegality of contract where parties are in pari delicto; except when incapacitated – not obliged to return what he gave but may recover what he has given other party is less guilty or not guilty =========================================

TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 7. Effect of Contracts =========================================

7. EFFECT OF CONTRACTS Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. (Article 1311) If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (Article 1311)

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SALES A. INTRODUCTION ================================ TOPICS UNDER THE SYLLABUS A. Introduction 1. Definition of sales (Arts. 1458, 1470) 2. Essential requisites of a contract of sale (Art. 1505) 3. Stages of contract of sale 4. Obligations created (Art. 1165) 5. Characteristics of a contract of sale 6. Sale is title and not mode 7. Sale distinguished from other contracts 8. Contract of sale/contract to sell =========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 1. Definition of Sales =========================================

1. DEFINITION OF SALES (Arts. 1458 & 1470)

=========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 3. Stages of Contract of Sale

=========================================

3. STAGES IN LIFE OF CONTRACT OF SALE 1. 2. 3.

Negotiation Perfection Consummation

=========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 4. Obligations created

=========================================

4. OBLIGATIONS CREATED 2 sets of real obligations to give Obligation of the Seller: a. to transfer ownership and b. to deliver possession =========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 5. Characteristics of Contract of Sale =========================================

5. CHARACTERISTICS OF CONTRACT OF SALE:

CONTRACT OF SALE – One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional.

1. 2. 3. 4. 5. 6. 7. 8.

=========================================

=========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 2. Elements of a Contract of Sale =========================================

2. ELEMENTS OF A CONTRACT OF SALE 1. Consent 2. Determinate subject matter

Nominate Principal Consensual Bilateral Reciprocal Onerous Commutatitve Title and not a mode

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 6. Sale is Title and not Mode =========================================

6. SALE IS TITLE AND NOT MODE =========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION

3. Price certain in money or its equivalent

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Lease Use of thing is for a specified period only with an obligation to return Consideration is rent Lessor need not be owner

Sale Obligation to absolutely transfer ownership of thing Consideration is price Seller needs to be owner of thing to transfer ownership

If consideration consists partly in money and partly by thing – look at manifest intention; If intention is not clear: If intention is not value of thing is clear: value of thing more than amount of is equal or less than money – barter amount of money – sale

7. Sale distinguished from other contracts ========================================

Contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market (whether on hand or not) Essence is service Essence is object Real obligation Personal obligation Tests under Jurisprudence: GR: IF YES, Contract for piece of work, IF NO, SALE

DATION IN PAYMENT DISTINGUISHED FROM SALE Dation in Payment Sale Pre-existing credit No pre-existing credit Obligations are Obligations are extinguished created Debtor’s consideration: Consideration of extinguishment of the seller: price debt Consideration of Creditor’s consideration: buyer: acquisition acquisition of the object of the object offered in lieu of the original credit Less freedom in Greater freedom determining the price in determining the price Payment is received by Buyer still has to the debtor before the pay the price contract is perfected

1. Timing test - Under art 1467: whether the thing transferred only existed upon special order

AGENCY TO SELL DISTINGUISHED FROM SALE Agency to Sell Sale

CONTRACT FOR PIECE OF WORK DISTINGUISHED FROM SALE Contract for piece of work Goods are to be manufactured specially for a customer and upon special order and not for the general market

Sale

2. Habituality test - if manufacturer engages in activity with the need to employ extraordinary skills and equipment (Celestino v CIR) 3. Nature of the object test - Each product’s nature of execution differs from the others; products are not ordinary products of Manufacturer (EEI v CIR)

BARTER DISTINGUISHED FROM SALE Barter Sale Consideration: giving Consideration: giving of a thing of money as payment Governed by law on sales: species of the genus sales

CIVIL LAW REVIEWER 383

Agent not obliged to pay for price, merely obliged to deliver price received from buyer. Preparatory contract Principal remains owner even if object delivered to agent Agent assumes no risk/liability as long as within the authority given May be revoked unilaterally because fiduciary and even if revoked w/o ground Agent not allowed to

Buyer pays for price of object

Principal contract Buyer becomes owner of thing; in agency Seller warrants

Not unilaterally revocable Seller receives profit

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profit Personal Contract; Rescission is not available

================================

Real Contract

DONATION DISTINGUISED FROM SALE Donation Sale Gratuitous or Onerous onerous Formal contract Consensual contract NOTE: Lease with option to buy: really a contract of sale but designated as lease in name only; it is a sale by installments

B. PARTIES TO A CONTRACT OF SALE ================================ TOPICS UNDER THE SYLLABUS B. Parties to a Contract of Sale 1. Capacity of parties (Arts. 14891492) 2. Absolute incapacity (Arts. 1327, 1397, 1399) 3. Relative incapacity: married persons 4. Special disqualifications (Arts. 1491-1492) =========================================

=========================================

TOPICS UNDER THE SYLLABUS A. INTRODUCTION 8. Contract of Sale/Contract to Sell =========================================

8. Contract of Sale/Contract to Sell Contract of Sale Absolute Real obligation – obligation to give Title passes to the buyer upon delivery

Non-payment of the price is a negative resolutory condition

Remedies available: Specific Performance Rescission Damages

Contract to Sell Conditional Personal obligation – obligation to do Ownership is reserved in the seller and will pass to the buyer only upon full payment of the price Full payment is a positive suspensive condition, the failure of which is not a breach but prevents the obligation of the vendor to convey title to arise Remedies available: Resolution Damages

END OF DISCUSSION ON TOPIC A. INTRODUCTION

CIVIL LAW REVIEWER 383

TOPICS UNDER THE SYLLABUS B. PARTIES TO A CONTRACT OF SALE 1. Capacity of Parties ========================================= GENERAL RULE - All persons who are authorized in this Code to obligate themselves may enter into a contract of sale =========================================

TOPICS UNDER THE SYLLABUS B. PARTIES TO A CONTRACT OF SALE 2. Absolute Incapacity

=========================================

2. ABSOLUTE INCAPACITY MINORS, INSANE AND DEMENTED PERSONS, AND DEAF-MUTES 

Contracts are voidable, subject to annulment or ratification



Also includes: -

State of drunkenness

-

Hypnotic spell

-

NECESSARIES: Those sold and delivered to a minor or other person without

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capacity to act, he must pay a reasonable price therefore =========================================

TOPICS UNDER THE SYLLABUS B. PARTIES TO A CONTRACT OF SALE 3. Relative Incapacity =========================================

3. RELATIVE INCAPACITY A. SPOUSES - A spouse may, without the consent of the other spouse, enter into sales transactions in the regular pursuit of their profession, vocation, or trade. These contracts are void. GENERAL RULE: The husband and the wife cannot sell property to each other. EXCEPTION:  When a separation of property was agreed upon in the marriage settlement 

When there has been a judicial separation of property under Art. 191

NOTE: Prohibition likewise applies to commonlaw spouses B. OTHERS - TRUST RELATIONSHIPS I. Art. 1491 - Two groups of parties prohibited from acquiring by purchase certain properties:

property involved in litigation (reason is that the transfer or assignment of the property takes effect only after the finality of a favorable judgment II. Legal Status of Contract 1. Void (case law) – guardian/ executor/public officers / officers of the court 2. Voidable (civil code) – agent; VALID if with consent =========================================

TOPICS UNDER THE SYLLABUS B. PARTIES TO A CONTRACT OF SALE 4. Special Disqualifications

========================================= 4. SPECIAL DISQUALIFICATIONS

END OF DISCUSSION ON TOPIC B. PARTIES TO A CONTRACT OF SALE

================================

C. SUBJECT MATTER OF SALE ================================ TOPICS UNDER THE SYLLABUS

a. Guardian/Agent/Executors and Administrators  Direct or indirect

C. Subject Matter 1. Requisites of a valid subject matter (Arts. 1459-1465) 2. Particular kinds



=========================================

May be ratified since only private wrong is involved

b. Public Officers & Employees/Officers of Court i. Cannot be ratified since public wrong is involved ii. Requisites for the prohibition to apply to attorneys: 1. Existence of attorney client relationship; 2. Property is the subject matter in litigation; 3. While in litigation (from filing of complaint to final judgment)

TOPICS UNDER THE SYLLABUS C. SUBJECT MATTER OF SALE 1. Requisites of a valid subject matter =========================================

NOTE: Exception to the prohibition against attorneys: contingent fee arrangement where the amount of legal fees is based on a value of

CIVIL LAW REVIEWER 383

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1. REQUISITES OF A VALID SUBJECT MATTER

=========================================

TOPICS UNDER THE SYLLABUS

Requisites: 1. Things A. “Possible” - existing, future, and contingent i. Whether the subject matter is of a type and nature that exists or could be made to exist to allow the seller reasonable certainty of being able to comply with his obligations ii.

Minimum requirement of potential existence: taking into consideration the state of science and technology at the time of perfection of the contract

B. Licit B.1. Not outside the commerce of man B.2. If illicit, contract is void B.3. Prohibited: i. Animals with contagious diseases ii. Sale of future inheritance

a)

Thing is capable of being made determinate

b)

Without the necessity of a new or further contract between the parties. NOT

2. Rights – Must be transmissible, except: a. Future inheritance b. Service

CIVIL LAW REVIEWER 383

Sale of a mere hope or expectancy that the thing will come to existence; sale of the hope itself Sale is effective even if the thing does not come into existence, unless it is a vain hope (Art 1461 Sale of a vain hope or expectancy is void) The uncertainty is with regard to the existence of the thing

Object is a present thing which is the hope or expectancy

=========================================

ii. Determinable: always generic

CAN

Sale is subject to the condition; that the thing will exist; if it does not, there is no contract Uncertainty is with regard to the quantity and quality of the thing and not the existence of the thing Object is a future thing

Emptio spei

C. SUBJECT MATTER OF SALE 2. Particular Kinds

C. Determinate or determinable i. Determinate: particularly designated or physically segregated from all others of the same class; always specific

NOTE: Subject matter DETERMINED BY a 3rd PARTY.

Emptio rei speratae Sale of an expected thing

be

2. PARTICULAR KINDS GOODS THAT MAY BE THE OBJECTS OF SALE 1. Existing goods – goods owned or possessed by the seller at the time of perfection 2. Future goods – goods to be manufactured, raised or acquired by the seller after the perfection of the contract NOTES:  Quantity of subject matter is not essential for perfection; must determine nature and quality of subject matter  Generic things may be the object of sale, but the obligation to deliver the subject matter can only be complied with when the subject matter has been made determinate (either by physical segregation or particular designation)

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END OF DISCUSSION ON TOPIC C. SUBJECT MATTER OF SALE

================================

D. OBLIGATIONS OF THE SELLER TO TRANSFER OWNERSHIP ================================ TOPICS UNDER THE SYLLABUS D. Obligations of the Seller to Transfer Ownership 1. Sale by a person not the owner at time of delivery (Arts. 1462, 1505, 1459); Exceptions 2. Sale by a person having a voidable title (Arts. 1506, 559) =========================================

TOPICS UNDER THE SYLLABUS D. OBLIGATIONS OF THE SELLER TO TRANSFER OWNERSHIP 1. Sale by a person not the owner at the time of delivery =========================================

1. OBLIGATION OF THE SELLER TO TRANSFER OWNERSHIP GENERAL RULE: Seller need not be the owner of the subject matter at the time of perfection: sufficient that he is the owner at the time of delivery. EXCEPTION: Foreclosure sale (mortgager must be absolute owner) RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER GENERAL RULE: Sale by non-owner, buyer acquires no better title than seller had. EXCEPTIONS: 1. Owner by his conduct is precluded from denying seller’s authority (ESTOPPEL) 2. Contrary is provided for in recording laws (PD 1529) 3. Sale is made under statutory power of sale or under order of a court of competent jurisdiction 4. Sale is made in a merchant’s store in accordance with code of commerce and special laws.

CIVIL LAW REVIEWER 383

But subject to ANTI-FENCING LAW TITLE AS TO MOVABLE PROPERTIES GENERAL RULE: Possession is equivalent to title REQUISITES: Possession of movable and Good Faith EXCEPTIONS: 1. Owner lost movable – owner can recover without reimbursing price 2. Owner is unlawfully deprived – owner can recover w/o reimbursing price EXCEPTIONS TO THE EXCEPTIONS: 1. Movable is bought at public sale – owner can only recover after reimbursing price 2. Acquired in good faith and for value from auction =========================================

TOPICS UNDER THE SYLLABUS D. OBLIGATIONS OF THE SELLER TO TRANSFER OWNERSHIP 1. Sale by a person having a voidable title ========================================

END OF DISCUSSION ON TOPIC D. OBLIGATIONS OF THE SELLER TO TRANSFER OWNERSHIP

================================

E. PRICE ================================ TOPICS UNDER THE SYLLABUS E. Price 1. Meaning of price (Arts. 14691474) 2. Requisites for a valid price 3. How price is determined 4. Inadequacy of price (Arts. 1355, 1470) 5. When no price agreed (Art. 1474) 6. Manner of payment must be agreed upon 7. Earnest money vs. Option money (Art. 1482)

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e. But never by one party to the contract (unless the price is accepted by the other party)

=========================================

TOPICS UNDER THE SYLLABUS E. PRICE 1. Meaning of Price

=========================================

1. MEANING OF PRICE PRICE – The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. =========================================

TOPICS UNDER THE SYLLABUS E. PRICE 2. Requisites for a Valid Price =========================================

Note: When the 3rd party is unwilling to set the price, the parties may not ask the court to fix the price because the condition imposed on the contract has not happened yet and thus, no enforceable contract has arisen. EFFECT WHERE PRICE IS SIMULATED  The act may be shown to have been in reality a donation, or some other act or contract 

If not and neither party had any intention whatsoever that the amount will be paid (absolutely simulated): the sale is void

2. REQUISITES FOR A VALID PRICE: A. Real When at the perfection of the contract of sale, there is every intention on the buyer to pay the price, and every expectation on the part of the seller to receive such price as the value of the subject matter he obligates himself to deliver. (Test of intention) B. In money or its equivalent Consideration for a valid contract of sale can be the price and other valuable consideration; at the very least, a true contract of sale must have price as part of its consideration (Test of value consideration) C. Certain or ascertainable i. Certain: expressed and agreed in terms of specific pesos and/or centavos ii. Ascertainable: a. Set by third persons b. Set by the courts – in cases where the third person fixes the price in bad faith or by mistake c.

Set by reference to a definite day, particular exchange or market

d. Set by reference to another thing certain

CIVIL LAW REVIEWER 383

If there is a real price but what is stated in the contract is not the one intended to be paid (only relatively simulated): the contract of sale is valid but subject to reformation (false price) EFFECT OF NON-PAYMENT OF PRICE NOTE: Non-payment of price does not cancel sale, as the sale is still considered perfected. But it is a cause for either: 1. Specific performance or 2. Rescission. =========================================

TOPICS UNDER THE SYLLABUS E. PRICE 3. How price is determined =========================================

3. HOW PRICE IS DETERMINED

=========================================

TOPICS UNDER THE SYLLABUS E. PRICE 4. Inadequacy of price =========================================

4. INADEQUACY OF PRICE

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EFFECT OF GROSS INADEQUACY OF PRICE NOTE: Mere inadequacy of the price does not affect the validity of the sale, except

EARNEST MONEY 1. Money given as part of purchase price 2. Acceptance is the proof that contract of sale exists

(1) When there is fraud, mistake, or undue influence indicative of a defect in consent is present,

3. Nothing in law prevents parties from treating earnest money differently

(2)When it shows that the parties really intended a donation or some other act or contract.

4. Old concept: subject to forfeiture when BUYER backs out

(3)Judicial sale, where the inadequacy is shocking to the conscience of man and there is showing that in event of resale, a better price can be obtained.

5. New concept: cannot be forfeited – part of purchase price; must be restored

=========================================

TOPICS UNDER THE SYLLABUS E. PRICE 5. When no price agreed

6. Qualification: if old concept is stipulated – VALID 7. Presumption of perfection of contract of sale and such earnest money as part of purchase price is disputable

=========================================

5. WHEN NO PRICE AGREED Note: If there was a failure of the contract to set a price but the BUYER has already APPROPRIATED IT, then the buyer must pay a reasonable price (Article 1474) =========================================

TOPICS UNDER THE SYLLABUS E. PRICE 6. Manner of payment must be agreed upon

=========================================

OPTION MONEY DISTINGUISHED FROM EARNEST MONEY OPTION MONEY EARNEST MONEY Money given as distinct consideration for an option contract

Part of the purchase price

Applies to a sale not perfected

Given only when there is already a sale

Not required to buy

When given, buyer is bound to pay the balance

6. MANNER OF PAYMENT MUST BE AGREED UPON Manner of payment must be agreed upon Marnelego v. Banco Filipino Savings and Mortgage Bank, [G.R. No. 161524, January 27, 2006 =========================================

TOPICS UNDER THE SYLLABUS E. PRICE 7. Earnest money vs. Option money

END OF DISCUSSION ON TOPIC E. PRICE

================================

F. FORMATION OF CONTRACT OF SALE ================================ TOPICS UNDER THE SYLLABUS

=========================================

7. EARNEST VS. OPTION MONEY

CIVIL LAW REVIEWER 383

F. Formation of Contract of Sale 1. Preparatory (Art. 1479)

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1.1. Offer (Art. 1475) 1.2. Option contract (Arts. 1479, 1324) 1.3. Right of first refusal 1.4. Mutual promise to buy and sell (Art. 1479) 2. Perfection (Arts. 1475, 1319, 1325, 1326) 3. Formalities of the contract (Art. 1403 (d)&(e)) =========================================

TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE 1. Preparatory =========================================

1. PREPARATORY

4. Offer floated without period/without condition 5. Offer is floated and there is counter-offer 6. Offer is floated 7. Offer accepted absolutely

Continues to be valid depending upon circumstances of time, place and person Original offer is destroyed, there is a new offer; can not go back to original offer No authority of offeror to modify offer Proceed to perfected stage

OPTION CONTRACT - a contract granting an exclusive right in one person, for which he has paid a separate consideration, to buy a certain object within an agreed period

3 STAGES IN LIFE OF A CONTRACT OF SALE A. Policitacion/Negotiation Stage - offer is floated, acceptance is floated but they do not meet; the time when parties indicate their interest but no concurrence of offer and acceptance. B. Perfection - concurrence of all requisites; meeting of the minds. C. Consummation - parties perform their respective undertakings

NOTE: There is no presumption of consideration, it needs to be proven

A. PREPARATORY

b. Nominate

I.

RULES:

Characteristics of Option Contract a. Not the contract of sale by itself, separate and distinct

c.

1. Offer is floated

Prior to acceptance, may be withdrawn at will by offeror

2. Offer floated with a period

Without acceptance, extinguished when period has ended and maybe withdrawn at will by offeror; right to withdraw must not be arbitrary otherwise, liable to damage under Art 19, 20, 21 of Civil Code

3. Offer floated w/ condition

OPTION- an unaccepted or unexercised contractual offer

Extinguished by happening/non-happening of condition

CIVIL LAW REVIEWER 383

Principal - but can be attached to other principal contracts

d. Onerous e. Commutative f.

Unilateral – versus contract of sale which is bilateral

g. Preparatory

Consideration in an option contract may be anything of value, unlike in sale where it must be price certain in money. (San Miguel Philippines v. Cojuangco)

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a How EXERCISED: Notice of acceptance should be communicated to offeror without actual payment as long as there is delivery of payment in consummation stage ELEMENTS OF VALID OPTION CONTRACT a. Consent – meeting of the minds b. Subject matter – an option right, or accepted unilateral offer to buy, or accepted unilateral offer to sell: i. a determinate object ii. for a price certain (including manner of payment) c. Prestation – a consideration separate from purchase price for option given SITUATIONS IN AN OPTION CONTRACT:

i. Option contract is valid ii. Offeror cannot withdraw offer until after expiry period iii. Subject to rescission, damages but not to specific performance because this is not an obligation to give Without separate consideration i. OLD RULE - offer is still valid, but option contract is void and not subject to rescission, damages ii. NEW RULE: Right of first refusal recognized as a valid offer RIGHT OF FIRST REFUSAL: 1. Creates a promise to enter into a contract of sale and it has no separate consideration, not subject to specific performance because there is no contractual relationship here and it is not an obligation to give (not a real contract) 2. New doctrine: May specific performance.

be

subject

to

The right of first refusal is only subject to specific performance insofar as it is attached to

CIVIL LAW REVIEWER 383

Effect of new doctrine: turned the world of policitacion upside down because while valid option contract is not subject to specific performance, right of first refusal which does not even have a separate consideration may be subject to specific performance Recognizes recovery of damage based on abuse of rights doctrine OPTION CONTRACT DISTINGUISHED FROM RIGHT OF FIRST REFUSAL Option Contract Right of First Refusal

a. With separate consideration

b.

valid written principal contract (e.g. lease). RFR becomes one of the considerations in the contract. If RFR is violated, and property sold to another buyer in bad faith, the sale to the 3 rd party buyer is rescissible. The price for the 3rd party buyer is to be the basis for the price of the sale back to the one with the RFR. Equatorial Dev’t v. Mayfair Theater, [370 SCRA 56]

Principal contract; stands on its own Needs separate consideration Subject matter and price must be valid Not conditional Not subject to specific performance

Accessory; can not stand on its own Does not need separate consideration There must be subject matter but price not important Conditional Subject to specific performance

=========================================

TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE 2. Perfection of Sales =========================================

2. PERFECTION OF SALES GENERAL RULE: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price; consensual contract EXCEPTION: When the sale is subject to a suspensive condition

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REQUIREMENTS:

-

1. When parties are face to face – when there is absolute acceptance of an offer that is certain 2. When thru correspondence or telegram – when the offeror receives or had knowledge of the acceptance 3. When the sale is subject to a suspensive condition – from the moment the condition is fulfilled NOTES: Qualified acceptance: mere counteroffer which needs to be absolutely accepted to give rise to perfected contract of sale Business ads are mere invitations to make an offer except when it appears to be otherwise Rules governing auction sales: 1. Sales of separate lots by auction are separate contracts of sale 2. Sale is perfected by the fall of the hammer 3. Seller has the right to bid at the auction provided such right was reserved and notice was given to that effect

=========================================

TOPICS UNDER THE SYLLABUS F. FORMATION OF CONTRACT OF SALE 3. Formalities of the Contract

=========================================

3. FORMALITIES OF THE CONTRACT Form not important in validity of sale A. Sale being consensual, may be oral or written, perfected by mere consent as to price and subject matter B. If particular form is required under the statute of frauds: -

valid and binding between parties but not binding to 3rd persons

CIVIL LAW REVIEWER 383

Reason: purposes of convenience only and not for validity and enforceability; cause of action is granted to sue and compel other party to execute the document

When form is important for validity; exception by specific provision of law; 1. Power to sell a piece of land granted to an agent – otherwise VOID 2. Sale of large cattle; must also be registered with Municipal treasurer – otherwise VOID 3. Sale of land by non-Christian if not approved by Governor– VOID When form is important for enforceability [STATUTE OF FRAUDS Article 1403 (2)] a. Performed 1 Year: A sale agreement which by its terms is not to be performed within a year from the making thereof; b. 500 and Above: An agreement for the sale of goods, chattels or things in action, at a price not less than P500.00; and c.

Sale Land: A sale of real property or of an interest therein.

EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS: 1. WRITTEN: When there is a note or memorandum in writing and subscribed to by party or his agent (contains essential terms of the contract) 2. PARTIAL EXECUTION: When there has been partial performance/execution (seller delivers with intent to transfer title/receives price) 3. FAILURE TO OBJECT: When there has been failure to object to presentation of evidence (oral)

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4. E-COMMERCE: When sales are effected through electronic commerce While a sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons if not embodied in a public instrument and recorded in the Registry of Deeds. Secuya v. Vda. De Selma, [G.R. No. 136021, February 22, 2000]

END OF DISCUSSION ON TOPIC E. FORMATION OF CONTRACT OF SALE

G. TRANSFER OF OWNERSHIP 1. Manner of Transfer =========================================

1. MANNER OF TRANSFER NOTE: Stage where parties both comply with their obligation. OBLIGATIONS OF THE SELLER 1. Preserve subject matter (proper diligence of a good father of a family unless law or parties stipulate another standard) 2. Deliver – transfer ownership and deliver object 3. Deliver fruits and accessories 4. Warrant subject matter against eviction and hidden defects A. Delivery of the Thing - Transfer ownership (tradicion) covers twin obligations of the seller which are: 1. To transfer the ownership; and 2. To deliver a determinate thing

================================

G. TRANSFER OF OWNERSHIP ================================ TOPICS UNDER THE SYLLABUS G. Transfer of Ownership 1. Manner of Transfer (Arts. 1477, 1496-1501) 2. When delivery does not transfer title 3. Kinds of delivery 4. Double sales (Art. 1544) 5. Property Registration Decree 5.1. Requisites for registration of deed of sale in good faith 5.2. Accompanied by vendors duplicate certificate of title, payment of capital gains tax, and documentary tax registration fees =========================================

TOPICS UNDER THE SYLLABUS

CIVIL LAW REVIEWER 383

B. Delivery of the thing together with the payment of the price, marks the consummation of the contract of sale. PNB v. Ling, [69 Phil 611, October 5, 1927] The act of delivery must be coupled with the intention of delivering the thing and putting the buyer under control. Norkis Distributor v. CA, [195 SCRA 694, February 7, 1991] =========================================

TOPICS UNDER THE SYLLABUS G. TRANSFER OF OWNERSHIP 2. When Delivery does not transfer Title

=========================================

2. WHEN DELIVERY DOES NOT TRANSFER TITLE =========================================

TOPICS UNDER THE SYLLABUS G. TRANSFER OF OWNERSHIP 3. Different Kinds of Delivery =========================================

3. DIFFERENT KINDS OF DELIVERY Different Kinds of Delivery:

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1. Actual or real - when thing sold is placed in the control and possession of the buyer 2. Legal or Constructive- can take several forms and may be any manner signifying an agreement that the possession is transferred from the vendor to the vendee. C. Different forms of Constructive Delivery Constructive delivery has same legal effect as actual or physical delivery

over the thing sold that, at the moment of sale, its material delivery could have been made. Addison v. Felix, [38 Phil. 404]

A. WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT PRODUCE THE EFFECTS OF DELIVERY

Gives rise only to a prima facie presumption of delivery which is destroyed when actual delivery is not effected because of a legal impediment. Ten Forty Realty v. Cruz

1.

When there is stipulation to contrary, execution does not produce effect of delivery

2.

When at the time of execution of instrument, subject matter was not subject to control of the seller

3.

Subject matter should be within control of seller; he should have capacity to deliver at the time of execution of public instrument when he wants to effect actual delivery

4.

Such capacity should subsist for a reasonable time after execution of instrument (reasonable time depends on circumstances of persons, places and things)

1. Traditio Longa Manu Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering 2. Traditio Brevi Manu Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee) 3. Symbolic delivery As to movables – ex: delivery of the keys to a car 4. Constitutum possessarium When at the time of the perfection of the contract of sale, seller had possession of the subject matter in the concept of owner and pursuant to the contract, seller continues to hold physical possession no longer in the concept of an owner but as a lessee or any other form of possession other than in the concept of owner.

5. Quasi-tradition Delivery of rights, credits or incorporeal property, made by: Placing titles of ownership in the hands of the buyer Allowing buyer to make use of rights 6. Tradition by operation of law The execution of a public instrument is equivalent to delivery. But to be effective, it is necessary that the vendor have such control

CIVIL LAW REVIEWER 383



The presumption of delivery when the sale is made through a public instrument can be rebutted by clear and convincing evidence. Presumptive delivery through a public instrument can be negated by the failure of the vendee to take actual possession of the land or the continued enjoyment of possession by the vendor. Santos v. Santos, [366 SCRA 395]

B. Delivery of Accessories

Fruits

and

Accessions/

Right to fruits and accessions/accessories accrue from time sale is perfected but no real right over it until it is delivered C. Delivery Through Carrier GENERAL RULE: Where the seller is authorized or required to send the goods to the buyer, delivery to the carrier is delivery to the buyer.

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I.

II.

EXCEPTIONS: a contrary intention appears or implied reservation of ownership under pars. 1,2, 3 of Art. 1503

GENERAL RULE: The ownership of the thing sold shall be transferred to the buyer upon the actual or constructive delivery thereof.

FAST – FREE ALONG SIDE - When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed fulfilled)

EXCEPTION: When the contrary is stipulated such in the cases of: 1. Contract to sell 2. Sale on acceptance/approval – ownership only passes to the buyer when:

FOB - FREE ON BOARD - Shipment – when goods are delivered at ship at point of shipment; delivery to carrier by placing goods on vessel is delivery to buyer Destination – when goods reach the port even if not disembarked yet from the vessel, there is delivery to the buyer

III.

When buyer pays for services of carrier – delivery to carrier is delivery to buyer; carrier is agent of the buyer.



When buyer pays seller the price – from moment the vessel is at port of destination, there is already delivery to buyer.

See Arts. 1522, 1539, 1540, 1541, 1542, 1543. D.

TIME AND PLACE OF DELIVERY a. Follow stipulation in contact, or b. Follow usage in trade, or c. Seller’s place of business or his residence d. Specific goods – place where the thing is



The buyer does not signify his rejection but retains the goods

NOTE: Who Bears Expenses of Delivery? Seller F.

SALE DESCRIPTION/SAMPLE

BY

1. Sample – goods must correspond with sample shown 2. Description – goods must correspond with description or sample 3. Effect if there is no compliance: RESCISSION may be availed of by the buyer

G.

OBLIGATIONS OF BUYER

1. Pay the price o

Buyer is obligated to pay price according to terms agreed upon regarding time, place and amount

o

If payment of interest is stipulated – must pay; if amount of interest not mentioned – apply legal rate

e. At reasonable hour E. EFFECTS OF DELIVERY

CIVIL LAW REVIEWER 383

The buyer signifies approval to the seller, or

3. Sale on return – ownership passes to the buyer but he may re-vest ownership to the seller by returning the goods within time fixed. If no time is fixed, within reasonable time.

CIF – COST, INSURANCE, FREIGHT 



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o

2.

When buyer defaults – constitutes breach: subject to specific performance/rescission and damages; interest to be paid also from default

GENERAL RULE: FIRST IN TIME, PRIORITY IN RIGHT When does it apply: when not all requisites embodied in Art. 1544 concur. I.

REQUISITES FOR EXIST: (VOCS)

a. Where to accept: at time and place

3. Two or more buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and

i. He intimates to seller that he has accepted ii. When delivered and does any act inconsistent with ownership of seller

Sale of Goods on installment 1. Goods must be delivered in full,

except when stipulated 2. When not examined by buyer – not

accepted until examined or at least had reasonable time to examine 

Acceptance of goods in general, absent contrary express stipulation, does not discharge seller from liability in case of breach of warranties (unless no notice or failure to give it within reasonable time)

4. When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is stipulation to the contrary =========================================

TOPICS UNDER THE SYLLABUS G. TRANSFER OF OWNERSHIP 4. Double Sale =========================================

4. DOUBLE SALE

CIVIL LAW REVIEWER 383

TO

2. Two or more sales transactions must pertain to the same object or subject matter;

stipulated in the contract; if none specified – at the time and place of delivery goods; there is acceptance when:

3.

SALES

1. Two or more sales transactions must constitute valid sales;

Accept delivery of thing sold

iii. Retains without intimating to seller that he has rejected

DOUBLE

4. Two or more buyers must each have bought from the very same seller. 

If not all the elements are present for Art. 1544 to apply, the priniciple of prior tempore, potior jure or simply “he who is first in time is preferred in right” should apply. Undisputably, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to as a second vendee. Consolidated Rural Bank v. CA, [Jan. 17, 2005]

II. RULES ACCORDING TO 1544: 1. MOVABLE First to posses in good faith 2. IMMOVABLE 1. First to register in good faith 2. No inscription, first to possess in good faith 3. No inscription and no possession in good faith – Person who presents oldest title in good faith 4. Good Faith - one who buys property without notice that another person has a right or interest in such

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property; one who has paid price before notice that another has claim or interest III. LIS PENDENS – notice that subject matter is in litigation IV. ADVERSE CLAIM – notice that somebody is claiming better right V. POSSESSION - Both actual or constructive VI. REGISTRATION: any entry made in the books of the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights.  Registered under Torrens system 1544 applies  Not registered under the system 1544 still applies

Torrens

If 2nd sale is a judicial sale (by way of levy on execution), buyer merely steps into the shoes of the judgment debtor. Outside of such situation – must apply to conflicting sales over the same unregistered parcel of land. If sale 1 occurs when land is not yet registered and sale 2 is done when land is already registered – apply FIRST IN TIME, PRIORITY IN RIGHT. Good faith must concur with registration. To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith. Gabriel v. Mabanta, [GR 142403, March 26, 2003] CONDITION 1. Effect of Non-Fulfillment of Condition The other party may a. refuse to proceed with the contract

CIVIL LAW REVIEWER 383

b. proceed with the contract, waiving the performance of the condition If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by the other party as breach of warranty. 2. Effect if buyer has already sold the goods GENERAL RULE: The unpaid seller’s right to lien or stoppage in transitu remains even if buyer has sold the goods EXCEPTION:  When the thereto, or 

seller

has

given

consent

When the buyer is a purchaser in good faith for value of a negotiable document of title.

=========================================

TOPICS UNDER THE SYLLABUS G. TRANSFER OF OWNERSHIP 4. Property Registration Decree =========================================

4. PROPERTY REGISTRATION DECREE

END OF DISCUSSION ON TOPIC G. TRANSFER OF OWNERSHIP

================================

H. RISK OF LOSS ================================ TOPICS UNDER THE SYLLABUS H. Risk of Loss 1. General Rule (Arts. 1263, 1189) 2. When loss occurred before perfection 3. When loss occurred at time of perfection (Arts. 1493 and 1494) 4. When loss occurred after perfection but before delivery

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5. When ownership is transferred (Art. 1504) =========================================

TOPICS UNDER THE SYLLABUS H. RISK OF LOSS

 Paras: BUYER 

Tolentino: SELLER

 Deterioration and fruits - Buyer bears loss;

========================================= 4. AFTER DELIVERY

1. GENERAL RULE

 Legal consequences from point of perfection are the same in both legal systems: upon perfection of an unconditional contract of sale involving specific or determinate subject matter, the risk of loss deterioration and the benefits of fruits and improvements, were fro the account of the buyer.  If Subject matter is GENERIC, Simply replace item.

 Res perit domino  Delivery extinguishes ownership visa-vis the seller and creates a new one in favor of the buyer

END OF DISCUSSION ON TOPIC H. RISK OF LOSS

================================

I. DOCUMENTS OF TITLE

================================ TOPICS UNDER THE SYLLABUS WHO BEARS RISK DETERIORATION/ FRUITS:

OF

LOSS/

1. BEFORE PERFECTION 

Res perit domino



Owner is seller so seller bears risk of loss

2. AT PERFECTION 

Res perit domino



Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale



Seller cannot anymore comply with obligation so buyer cannot anymore be compelled.

I. Documents of Title 1. Definition (Art. 1636) 2. Purpose of documents of title 3. Negotiable documents of title 4. Non-negotiable documents of title 5. Warranties of seller of documents of title (Art. 1516) 6. Rules on levy/garnishment of goods (Arts. 1514, 1519, 1520) =========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 1. Definition

=========================================

3. AFTER PERFECTION DELIVERY 

BUT

Loss – confused state

CIVIL LAW REVIEWER 383

BEFORE

1. DEFINITION DOCUMENTS OF TITLE 1. Not creation of law but by merchants to allow them to deal with merchandise without having to physically carry them around 2. Pertains to specific type of movables only: GOODS

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a. Documents of functions:

title

serve

two

(2)

i.

Evidence of existence and possession of goods described therein

ii.

Medium by which seller is able to transfer possession of goods

3. A document of title which states that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document 4. Negotiable by delivery or indorsement =========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 2. Purpose of documents of title =========================================

2. PURPOSE OF DOCUMENTS =========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 3. Negotiable documents of title

=========================================

4. NON-NEGOTIABLE TITLE

DOCUMENTS

OF

Effects of Unauthorized Negotiation The validity of the negotiation of a negotiable document is not impaired by the fact that negotiation was done in breach of duty or that the owner of the document was deprived of the same by loss, theft, accident, fraud, mistake if the person to whom the document is delivered is in good faith and without notice of the said irregularities. Important Considerations 1. Negotiation gives better assignment

right

than

2. Assignee takes document with defects of the assignor 3. Obligation of bailee – bailee immediately bound to the document

is

=========================================

=========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 5. Warranties of seller of documents of title

3. NEGOTIABLE DOCUMENTS OF TITLE

=========================================

1.

Deliver to bearer (negotiation by mere delivery)

2.

Deliver to specific person or his order (negotiation by endorsement + delivery)

Even if face of instrument says NONNEGOTIABLE, it is still NEGOTIABLE; limiting words does not destroy negotiability. If order instrument and no endorsement was made – equivalent to assignment =========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 4. Non-negotiable documents of title

Warranties on Negotiation 1. The document is genuine 2. He has legal transfer it

right

to

negotiate

or

3. He has knowledge of no fact which would impair the validity or worth of the document 4. He has right to transfer title to goods and goods are merchantable/fit =========================================

TOPICS UNDER THE SYLLABUS I. DOCUMENTS OF TITLE 6. Rules on Levy or Garnishment of Goods

=========================================

CIVIL LAW REVIEWER 383

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6. Rules of Levy/Garnishment of Goods Covered by Documents of Title 

d. Law on estoppel further bolsters it: title passes by operation of law to grantee when person who is not owner of the goods sold delivers it and later on acquires title thereto

NON NEGOTIABLE: o

o

Notification is operative act to transfer title/possession of goods in favor assignee

e. Since valid, action to annul improper; there is already perfected contract

Before notification – can still be garnished

is a

2. CONSUMMATION STAGE 

a. Contract of sale is valid because it has passed perfected stage, despite seller not being the owner or seller having no authority to sell

NEGOTIABLE: o

Cannot be levied or garnished when documents are already with purchaser in good faith, unless:

o

Document is first surrendered

o

Document is pounded by court

o

Negotiation is enjoined

NEGOTIATION

b. What is void is the transfer of title/ ownership did not pass c. Effect: buyer acquired no better right than transferor d. Legal effect: CAVEAT BUYER BEWARE

ASSIGNMENT

Transferor/holder acquires title to goods

Acquires title to goods against transferor

Bailee has direct obligation to holder as if directly dealt with him

Acquires right to notify bailee so that he acquires obligation of bailee to hold goods for him

A. SALE BY NON-OWNER OR BY ONE HAVINGVOIDABLE TITLE 1. PERFECTION STAGE a. Sale by owner – VALID b. Sale by non-owner – VALID; c. Reason why both sales are valid: ownership is necessary only at time when transfer title to goods; at perfection stage, no obligation on part of seller to transfer ownership

CIVIL LAW REVIEWER 383

EMPTOR

–

e. Sale of co-owner of whole property or definite portion GENERAL RULE:  Co-owner sells whole property prior to partition – sale of property itself is void but valid as to his spiritual share 

Co-owner sells definite portion to partition – sale is void as to other co-owner but valid as to his spiritual share if the buyer would have still bought such spiritual share had he known that the definite portion sold would not be acquired by him.

EXCEPTIONS TO THE RULE ON THE EFFECT OF SALE OF A DEFINITE PORTION BY A COOWNER 1. Subject matter is indivisible in nature or by intent; 2. Sale of a particular portion of a property is with consent of other co-owners; 3. Co-owner sells 1 of 2 commonly-owned lands and does not turn over ½ of the proceeds, other co-owner, by law and equity, has exclusive claim over remaining land.

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B. SALE BY SELLER WITH VOIDABLE TITLE IN GOOD FAITH and WITHOUT NOTICE OF THE DEFECT 1. PERFECTION STAGE a. Valid sale – buyer acquires title of goods 2. CONSUMMATION STAGE o Valid sale – if title has not yet been avoided, buyer buys goods under following condition: 

in good faith



for value



without notice of seller’s defect of title

END OF DISCUSSION ON TOPIC I. DOCUMENTS OF TITLE

================================

J. REMEDIES OF UNPAID SELLER ================================ TOPICS UNDER THE SYLLABUS

 SPECIAL REMEDIES

REQUISITES: 1. Subject matter – goods 2. Seller is unpaid – not completely paid or received negotiable instrument under a condition and condition has been breached by reason of dishonor 3. Physical possession is with seller =========================================

TOPICS UNDER THE SYLLABUS J. REMEDIES OF UNPAID SELLER 2. Remedies of unpaid seller

=========================================

2. REMEDIES OF UNPAID SELLER The following are the special remedies of unpaid seller: 1. Possessory lien 2. Stoppage in transitu 3. Special right of re-sale 4. Special right to rescind NOTE: Hierarchical Application - only when unpaid seller has exercised possessory lien or stoppage in transitu can the seller proceed with his other special rights of resale or to rescind. Possessory Lien

J. Remedies of an Unpaid Seller 1. Definition of unpaid seller (Art. 1525) 2. Remedies of unpaid seller

1. Seller not bound to deliver if buyer has not paid him the price

=========================================

3. Exercisable only circumstances:

TOPICS UNDER THE SYLLABUS J. REMEDIES OF UNPAID SELLER 1. Definition of unpaid seller

2. Right to retain; cannot be availed when seller does not have custody

goods sold without stipulation as to credit

b.

goods sold on credit but term of credit has expired

c.

buyer becomes insolvent

d.

When part of goods delivered, may still exercise right on goods undelivered

1. DEFINITION OF UNPAID SELLER

EXCEPTION:  DOCTRINE OF SELF HELP

CIVIL LAW REVIEWER 383

following

a.

=========================================

GENERAL RULE: Any man may not take law in his own hands, must seek remedy through courts.

in

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3. Notice by seller to buyer is not required; notice to carrier is essential

Instances when possessory lien lost: 1. seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them 2. buyer or his agent lawfully possession of goods

obtains

3. Waiver 4. loses lien when he parts with goods (still has stoppage in transitu) 5. notice by seller to buyer not essential Stoppage In Transitu  Goods are in transit  Requisites when goods are in transit

1. From the time goods are delivered to carrier for purpose of transmission to buyer 2. Goods rejected by buyer and carrier continues to possess them When goods no longer in transit

III. Special Right to Resell the Goods 1. Goods are perishable 2. stipulated the right of resale in case buyer defaults in payment 3. Buyer in default for unreasonable time 4. Notice by seller to buyer not essential Why special? There are things which seller cannot do in ordinary sale: A. ownership is with buyer but seller can sell goods B. title accorded to buyer is destroyed even without court intervention Special Right to Rescind 1. Expressly stipulated 2. Buyer is in default for unreasonable time 3. Notice needed to be given by seller to buyer

1. Reached point of destination 2. Before reaching destination, buyer obtains delivery of the goods 3. Goods are supposed to have been delivered to buyer but carrier refused 4. Shown by seller that buyer is insolvent (failure to pay when debts become due) How is right exercised 1. Obtain actual possession of goods 2. Give notice of claim to carrier / bailee in possession thereof

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Why special – ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court intervention but in ordinary sale, need to go to court to destroy transfer of ownership Remedies of Buyer When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT OF DAMAGES

END OF DISCUSSION ON TOPIC J. REMEDIES OF UNPAID SELLER

================================

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K. PERFORMANCE OF CONTRACT

to sell the buyer has the following options:

================================

i. Accept per contract and reject

TOPICS UNDER THE SYLLABUS

the rest ii. Accept the whole – pay price

K. Performance of Contract 1. Delivery of thing sold (1) Sale of movables (Arts. 1522, 1537, 1480) (2) Sale of immovables (Arts. 1539, 1543) (3) Inspections and Acceptance 2. Payment of price

stipulated iii. Eject whole if subject matter is

indivisible d. When the seller delivers to

the buyer the goods he contracted to sell, MIXED with goods of a different description not included in the contract, buyer has 2 options:

=========================================

TOPICS UNDER THE SYLLABUS K. PERFORMANCE OF CONTRACT 1. Delivery of thing sold

i.

=========================================

1. DELIVERY OF THING SOLD

ii. Reject

goods indivisible

A. MOVABLES a. Delivery of thing plus accessories and accessions in the condition in which they were upon the perfection of the contract including the fruits b. When the seller delivers to the buyer a quantity of goods LESS than he contracted to sell, buyer has the option to reject or accept it. a.When accepts with knowledge that seller is not going to perform contract in full, he must pay at price stipulated

Accept good w/c are in accordance with contract and reject the rest entirely

–

if

Obligations of a Vendor (Art. 1537) 1. To deliver the subject matter 2. To deliver the fruits and accessories 

Those which pertains to the vendee from the day on the perfection of contract

3. To preserve the subject matter 

In the condition in which they were upon the perfection of the contract.

b. When accepts and consumes before knowledge that buyer will not perform contract in full, liable only for fair value of goods delivered

Article 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.

When seller delivers to the buyer a quantity of goods LARGER than he contracted

This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure.

c.

CIVIL LAW REVIEWER 383

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Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay.

C. INSPECTIONS AND ACCEPTANCE Accept delivery of thing sold 

Where to accept: at time and place stipulated in the contract; if none specified – at the time and place of delivery goods;



There is acceptance when: He intimates to seller that he has accepted



When delivered and does any act inconsistent with ownership of seller



Retains without intimating to seller that he has rejected

B. IMMOVABLES o Sold per unit or number i.

If the sale should be made with statement of its area, rate at certain price, deliver all that may have been stated in the contract if impossible, remedies of buyer:

ii. If Less in area:

 Rescission  Proportional reduction of price: LACK IN AREA SHLD NOT BE LESS THAN 1/10 OF AREA AGREED UPON iii. If Greater in area: Accept per stipulation and reject the rest

=========================================

TOPICS UNDER THE SYLLABUS K. PERFORMANCE OF CONTRACT 2. Payment of price

=========================================



Accept whole area – pay at contract rate 

Not applicable to judicial sales

2. PAYMENT OF PRICE  Buyer is obligated to pay price according to terms agreed upon regarding time, place and amount



iv. Sold for lump sum 





When price indicated

per

unit

not

If area delivered is either greater or lesser – price will not be adjusted accordingly

The actions arising from above in delivery of immovables shall prescribe in six months, counted from the day of delivery.



CIVIL LAW REVIEWER 383

 If payment of interest is stipulated – must pay; if amount of interest not mentioned – apply legal rate

When buyer defaults – constitutes breach: subject to specific performance/rescission and damages; interest to be paid also from default

END OF DISCUSSION ON TOPIC K. PERFORMANCE OF CONTRACT

================================

L. WARRANTIES ================================ Page 152 of

TOPICS UNDER THE SYLLABUS L. Warranties 1. Express warranties 2. Implied warranties (Art. 1547) 3. Effects of warranties 4. Effects of waivers 5. Buyer’s options in case of breach of warranty (Art. 1599) =========================================

TOPICS UNDER THE SYLLABUS L. WARRANTIES 1. Express warranties =========================================

1. EXPRESS WARRANTIES I. Condition

3. Buyer purchases relying thereon

the

4. When breached, damages

seller

subject

is

matter

liable

for

=========================================

TOPICS UNDER THE SYLLABUS L. WARRANTIES 2. Implied warranties =========================================

2. Implied Warranties Deemed included in all contracts of sale whether parties are actually aware or not, whether they were intended or not; by operation of law 1. Warranty that seller has a right to sell

1. When a contract contains a condition, the non happening of which would not constitute a breach but extinguishes the obligation



Refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition

2. However, if party to the sales contract has promised that the condition should happen or be performed, the non-performance of which may be treated by parties as breach



Not applicable to sheriff, auctioneer, mortgagee, pledge

2. Warranty against eviction II. Warranties A statement or representation made by the seller contemporaneously and as a part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents Express Warranties REQUISITES: 1. It must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. Natural tendency of affirmation or promise is to induce buyer to purchase subject matter

CIVIL LAW REVIEWER 383

a. Implied, unless contrary appears in contract

provision

b. When ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing c.

Requisites of breach of warranty against eviction: 

Buyer is evicted in whole or in part from the subject matter of sale



There is a final judgment



Basis of eviction is a right prior to sale or an act imputable to vendor



Seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant

Page 153 of

through 3rd party complaint brought by buyer Vendor’s liability shall consists of (Total Eviction) (VICED) 1. Value of the thing at the time of eviction; 2. Income or fruits if he has been ordered to deliver the to the party who won the suit 3. Cost of the suit 4. Expenses of the contract; and 5. Damages and interests if the sale was in bad faith

REQUISITES: a. Immovable sold is encumbered with non– apparent burden or servitude not mentioned in the agreement b. Nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof c. When breach of warranty exist: buyer may ask for rescission of indemnity d. Warranty not applicable when non– apparent burden or servitude is recorded in the Registry of Property – unless there is express warranty that the thing is free from all burdens and encumbrances

Partial Eviction 1. To enforce vendor’s liability for eviction (VICED); 2.

To demand rescission of contract.

4. Warranty against hidden defects

a. No appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with b. Warranty cannot be enforced aforementioned requisites concur

until

c. Applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment d. Vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer e. Rights of buyer when deprived of only part of the subject matter but would not have bought such part if not in relation for the whole: 1. Rescission 2. Mutual restitution 3. Warranty against encumbrances (non-



SELLER does not warrant defect; caveat emptor



Except when hidden

patent

1. subject matter may be movable or immovable 2. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish its fitness 3. had the buyer been aware, he would not have acquired it or would have given a lower price a. When defect is visible or even if not visible but buyer is an expert by reason of his trade or profession, seller is not liable b. Obligation of seller for breach depends on whether he has knowledge of such defect or not

apparent)

CIVIL LAW REVIEWER 383

Page 154 of

c. Seller is aware – seller should return price and refund expenses of contract with damages d. Seller is not aware - seller should return price and interest and refund expenses (no damages)

contract and they are found to be unfit therefor 

Prescription of action: 40 days from date of delivery to buyer



If sale is rescinded, animals to be returned in same condition when they were acquired; buyer shall answer for injury / loss due to his fault



Buyer may elect between withdrawing from sale and demanding proportionate reduction of price with damages in either case

e. Buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages in either case f.

Applicable to judicial sale except that judgment debtor not liable for damages

g. Action to prescribe 6 months delivery of subject matter

5.

from

Defects on animals a. Even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it - defect shall be considered as REDHIBITORY b. If vet fails to discover through ignorance or bad faith, he is liable for damages c. Sale of animals on teams (2 or more) 





When only one is defective, only one is prohibited and not the others Exception: when it appears buyer would not have purchased the team without the defective one Apply to sale of other things

d. Animals at fair or public auction 

Sale of unfit animals 

A. Warranty as to fitness and quality; requisites: 1. Buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the seller’s skill or judgment 2. Goods are bought by description from seller who deals in goods of that description 3. in case of sale of specified article under its patent or trade name, no warranty unless there is a stipulation to the contrary 4. measure of damage: difference between value of goods at time of delivery and value they would have had if they had answered to the warranty

No warranty against hidden defects

e. Sale of animals with contagious disease is void f.

Specific Implied Warranties in the Sale of Goods

Void if use / service for which they are acquired has been stated in the

SALE OF GOODS BY SAMPLE If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample =========================================

CIVIL LAW REVIEWER 383

Page 155 of

TOPICS UNDER THE SYLLABUS L. WARRANTIES 3. Effects of warranties =========================================

3. EFFECTS OF WARRANTIES =========================================

Buyer’s Option Warranty

in

Case

of

Breach

of

1. Accept goods and set up breach warranty by way of recoupment diminution or extinction of the price.

of in

2. Accept goods and maintain action against seller for damages

TOPICS UNDER THE SYLLABUS L. WARRANTIES 4. Effects of waivers

3. Refuse to accept goods and maintain action against seller for damages

=========================================

4. Rescind contract of sale and refuse to receive goods/return them when already received.

4. EFFECTS OF WAIVER Waiver in Warranty against eviction Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on the part of the seller. o

Seller in bad faith and there is waiver against eviction – null and void

o

Buyer without knowledge of a particular risk, made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction)

o

Buyer with knowledge of risk of eviction assumed its consequences and made a waiver – vendor not liable (applicable only to waiver of warranty against eviction) 1. Waiver to a specific case of eviction wipes out warranty as to that specific risk but not as to eviction caused by other reasons.

Waiver against Hidden Defects i. If there has been a stipulation exempting seller from hidden defects ii. If seller not aware of hidden defects – loss of the thing due to such defect will not make seller liable iii. If seller aware – waiver is in bad faith, thus seller still liable

CIVIL LAW REVIEWER 383

When rescission by buyer not allowed: 1. If the buyer accepted the goods knowing the breach of warranty WITHOUT protest 2. If he fails to notify the seller within a reasonable time of his election to rescind 3. If he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him

END OF DISCUSSION ON TOPIC L. WARRANTIES

================================

M. BREACH OF CONTRACT

================================ TOPICS UNDER THE SYLLABUS M. Breach of Contract 1. Remedies of the seller (Arts. 1636, 1594) (1) Sale of movables 2. Recto Law: sale of movables on installment (Arts. 1484-1486) 3. Sale of immovables (1) PD 957, sec. 23, 24 (2)Maceda Law: sale of immovables on Installment 4. Remedies of the Buyer (1) Sale of movable

Page 156 of

Coverage: sale and financing transaction and contracts of lease with option to purchase

(2) Sale of immovables =========================================

TOPICS UNDER THE SYLLABUS M. BREACH OF CONTRACT 1. Remedies of the seller

GENERAL RULE: If already chose specific performance, can no longer choose other remedies

=========================================

EXCEPTION: After choosing, it has become impossible, rescission may be pursued

1. REMEDIES OF THE SELLER



Remedies of Unpaid Seller (Art. 1484) 1. Exact fulfillment should the buyer fail to pay. 2. Cancel the sale if buyer fails to pay 2 or more installments. 3. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments =========================================

TOPICS UNDER THE SYLLABUS M. BREACH OF CONTRACT 2. Recto Law: Sale of Movables on Installment =========================================

2. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT Incidents: 1. If buyer chooses foreclosure, no further action against buyer to recover any unpaid balance of the price 2. When is the law applicable? Sale on movables by installment o

Sale on installment: payment by several partial payments in small amount

Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment and at the same time remedy abuse of commercial houses Nature of cumulative

remedies:

alternative

CIVIL LAW REVIEWER 383

and

not

The fact that the seller did not foreclose the chattel mortgage constituted on the movable purchased on credit, but opted specific performance, with a plea for a writ of replevin, does not amount to a foreclosure of the chattel mortgage to be covered by Art. 1484. Tajanglangit v. Southern Motors, [101 Phil. 606]

Rescission 1. When chosen, there is correlative obligation to restitute 2. But stipulations that installments paid are forfeited are valid if not unconscionable 3. Deemed chosen when: Notice of rescission is sent -

Takes possession of subject matter of sale

-

Files action for rescission

-

Barring effect on recovery of balance

Foreclosure i. Barring effect on recovery of balance ii. Extent of barring effect: purchase price iii. Exception: mortgagor refuses to deliver property to effect foreclosure, recover also expenses incurred in attorneys fees, etc. (Perverse Buyer-Mortgagor) =========================================

TOPICS UNDER THE SYLLABUS M. BREACH OF CONTRACT 3. Sale of Immovables

=========================================

3. SALE OF IMMOVABLES Remedies of Seller

Page 157 of

o B

Anticipatory breach

uyer paid at least 2 years installment

1. Seller has reasonable grounds to fear loss of immovable sold and its price, sue for RESCISSION

1. Pay without interest the balance within grace period of 1 month for every year of installment payment

2. Non–payment of price, sue for RESCISSION

2. Grace to be exercised once every 5 years

IMMOVABLES (BY INSTALLMENT)

3. When no payment - cancelled; buyer entitled to 50% of what he has paid + if after 5 years of installments, 5% for every year but not to exceed 90% of total payments made

Art 1592 – Applies only to contract of sale MACEDA LAW 1. applies to COS and CTS and Financing 2. Coverage: REAL ESTATE – defined space vs. CONDO – not defined space (w/ common areas)

4. Cancellation to be effected 30 days from notice and upon payment of cash surrender value

1. Excluded: o

a. Industrial b. Commercial c.

Sale to tenants under agrarian laws

========================= ================ TOPICS UNDER THE SYLLABUS M. BREACH OF CONTRACT 3. Remedies of the Buyer ========================================= 4. REMEDIES OF THE BUYER  In case of subdivision or condo projects, suspend payment.  If real estate developer fails to comply with obligation according to approved plan: -

RESCIND

-

SUSPEND PAYMENT COMPLIES

UNTIL

SELLER

Buyer paid installment

less

than

2

years

1. 1st Grace period is 60 days from date installment became due 2. 2nd grace period of 30 days from notice of cancellation/demand for rescission  buyer can still pay within the 30 day period  with interest  No payment after 30 day period, can cancel.

Purpose of law - Protect buyers in installments against oppressive conditions Notice needed oppressive

-

waiver

thereof

Applies to contracts even before law was enacted  Stipulation to contrary is void

Rights Granted to Buyers:

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if

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================================

Other rights: o

N. EXTINGUISHMENT OF SALE

Sell rights to another o

================================

Reinstate contract by updating during grace period and before actual cancellation

TOPICS UNDER THE SYLLABUS

REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES (Articles 1191 & 1592)

N. Extinguishment of Sale 1. Causes (Arts. 1600, 1231) 2. Conventional redemption (Art. 1601) 3. Equitable mortgage (Arts. 16021604) 4. Distinguish from option to buy (Art. 1602) 5. Period of redemption (Art. 1606) 6. Exercise of the right to redeem (Art. 1616) 7. Legal redemption (Art. 1619) 8. Age redemption (Art. 1619)

GENERAL RULE: Judicial

=========================================

o

Deed of Sale to be done by notarial act

o

To pay in advance any installment or the full balance of price anytime without interest

o

Have full payment certificate of title

annotated

in

EXCEPTION: Extra judicial Rescission allowed but SUBJECT to COURT Confirmation. a. allowed if stipulated; burden to sue shifts to party who does not like rescission b. court still has final say as to propriety of rescission c.

Forfeiture of amounts valid being in nature of penal clause

TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 1. Causes =========================================

1. CAUSES I. GROUNDS (same grounds whereby obligations in general are extinguished) 1. Payment or performance 2.

Loss of the subject matter

3.

Condonation or remission



Contract of Applicable

is

4.

Confusion or merger of rights of creditor and debtor



Contract to Sell – Rescission not Applicable

5.

Compensation

6.

Novation



Non–payment of purchase price would automatically cancel even without further action for rescission

7.

Annulment

8.

Rescission

9.

Fulfillment of a resolutory condition

Sale

–

Rescission

Exception: If subject matter is residential lots, law on rescission applies when there is substantial breach. Maceda law applies.

10. Prescription

END OF DISCUSSION ON TOPIC M. BREACH OF CONTRACT

CIVIL LAW REVIEWER 383

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========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 2. Conventional Redemption ========================================= 2. CONVENTIONAL REDEMPTION  Only extinguishes obligations pertaining to contract of sale, not extinguish contract itself; only applies to contract of sale 

b. Seller remains in possession as lessee or otherwise c.

Upon or after expiration of right to repurchase, another instrument extending the period of redemption or granting new period is executed

e. Seller binds himself to pay taxes on thing sold

Other legitimate payments, expenses

e. And fulfills other stipulations which may have been agreed upon 

a. Price of sale with right to repurchase is unusually inadequate

d. Buyer retains for himself a part of the purchase price

b. Expenses of contract,

d. The necessary and useful made on the thing sold

Cachola v. CA,

1.A contract with right to repurchase is deemed to be an equitable mortgage if the following requisites concur (IPERTI):

The right which the vendor reserves to himself to reacquire the property sold provided he returns to the vendee:

a. The price of the sale,

c.

impossible contrary to law. [208 SCRA 496]

The right is exercised only be seller in whom right is recognized in the contract or by any person to whom right was transferred; must be in the same contract

f.

Real intention of parties is to secure the payment of a debt or performance of other obligation

NOTE: In case of doubt – in determining whether it is an equitable mortgage or a sale a retro, the sale shall be construed as an equitable mortgage. 2.What to Look for in Determining Nature of Contract a. Language of the contract

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE

b. Conduct of parties – to reveal real intent

3. Equitable Mortgage =========================================

4.Rationale behind provision on Equitable Mortgage:

3. EQUITABLE MORTGAGE

a. Circumvention of usury law

One which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing

b. Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage; remedy here is foreclosure. The real intention of parties is that the pretended purchase price is

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3.Remedy available to reformation of contract

vendor:

ask

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for

money loaned and to secure payment of the loan, sale with pacto de retro is drawn up

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 4. Distinguish from option to buy =========================================

4. DISTINGUISH FROM OPTION TO BUY OPTION TO PURCHASE - Right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 5. Period of Redemption =========================================

5. PERIOD OF REDEMPTION a. No period agreed upon – 4 years from date of contract b. Period agreed upon – should not exceed 10 years; if it exceeded, valid only for the first 10 years. c.

When period to redeem has expired and there has been a previous suit on the nature of the contract – seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro:

d. Rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. e. This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with the right to repurchase; not to cases where the transaction is conclusively a pacto de retro sale.

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f.

Example: Where a buyer a retro honestly believed that he entered merely into an equitable mortgage, not a pacto de retro transaction, and because of such belief he had not redeemed within the proper period.

NOTE: When period has expired and seller allowed the period of redemption to expire – seller is at fault for not having exercised his rights so should not be granted a new period Tender of payment is SUFFICIENT to compel redemption, but is not in itself a payment that relieves the vendor from his liability to pay the redemption price. Paez v. Magno, G.R. No. :792, April 27, 1949

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 6. Exercise of the Right to Redeem ========================================= EFFECT WHEN THERE IS NO REDEMPTION MADE i.

Jurisprudence before the NCC: buyer a retro automatically acquires full ownership

ii.

Under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro

HOW IS REDEMPTION EFFECTED Seller a retro must first pay the following: o

The price of the thing sold

o

Expenses of the contract and other legitimate payments made by reason of the sale

o

Necessary and useful expenses made on the thing sold

o

Valid tender of payment is sufficient

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o

Mere sending of notice without valid tender is insufficient

o

Failure to pay useful and unnecessary expenses entitles vendee to retain land unless actual reimbursement is made

IN CASE OF MULTI-PARTIES 1. When an undivided thing is sold because co-owners cannot agree that it be allotted to one of them – vendee a retro may compel the vendor to redeem the whole thing 2. When an undivided thing is sold by coowners / co-heirs, vendors a retro may only exercise his right over his respective share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption 3. When rights of co-owners over an undivided thing is sold as regards to their own share – vendee retro cannot compel one to redeem the whole property 4. Should one of the co-heirs/co-owners succeed in redeeming the property – such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/co-heirs. FRUITS What controls is the stipulation between parties as regards the fruits; If none: a. At time of execution of the sale a retro there are visible or growing fruits – there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro b. At time of execution sale a retro there be no fruits but there are fruits at time of redemption – pro-rated between vendor a retro and vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land.

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PRE-EMPTION 1. Arises before sale 2. No rescission because no sale exists yet 3. The action is directed against prospective seller

REDEMPTION Arises after sale There can be rescission of the original sale Action is directed against buyer

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 7. Legal Redemption ========================================= 7. LEGAL REDEMPTION LEGAL REDEMPTION  Only applies to contracts of sale.  The right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by (1) purchase OR (2) by dation in payment OR (3) by other transaction whereby ownership is transmitted by onerous title.  Types of Legal Redemption: a. Among co-heirs i.

Any of the heirs sell his hereditary rights to stranger before partition

ii.

Any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale

iii. Co-heirs has 1 month from receipt of notice in writing b. Among co-owners

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i. any or all of co-owners sells their shares to 3rd person

paid therefor interest

ii. any co-owner may exercise right of redemption by paying reasonable price of property to the buyer iii. if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they respectively have in thing owned in common

plus

judicial

costs,

ii. debtor may exercise right within 30 days from the date assignee demands payment from him Other Instances When Right of Legal Redemption is Granted a. Redemption of homesteads b. Public Land Act

c.

Among adjoining owners i. Rural land

o

Where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless grantee does not own a rural land

o

If two or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred

o

If two or more adjacent lit owners desire to exercise right to redeem and both have same lot area, one who first requested shall be granted ii. Urban land o

o

when piece of land is small and cannot be used for any practical purpose and bought merely for speculation, owner of adjoining land can redeem 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred.

d. Sale of credit in litigation i. when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter

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c.

Land acquired under free patent homestead subject to repurchase by wife, legal heirs within 5 years from date of conveyance granted by law, need not be stipulated

1. Redemption in tax sales i. in case of tax delinquency/failure to pay tax assessments, property is foreclosed ii. delinquent payer has 1 year from date of sale to redeem by paying to the revenue District Officer the amount of tax delinquencies, and interest or purchase price. 2. Redemption by judgment debtor - 1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest 3. Redemption in extrajudicial foreclosure 1 year from date of sale and registration 4. Redemption in judicial foreclosure of mortgage - no right to redeem is granted to debtor mortgagor except when mortgagee is bank of a banking institution 90 days after finality of judgment 5. When Period of Redemption Begins to Run - Right of legal pre-emption of redemption shall be exercised within 30 days from notice by the seller

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6. How exercised - tender of payment is not necessary; offer to redeem is enough. i.

ii.

consideration of a price certain in money or its equivalent

There is no prescribed form for an offer to redeem to be properly effected. Hence, it can either be through a formal tender with consignation of the redemption price within the prescribed period. What is paramount is the availment of the fixed and definite period within which to exercise the right of legal redemption. Deeds of sale are not to be recorded in Register of Deeds unless accompanied by affidavit of seller that he has given notice to all possible redemptioners

NOTE: Written notice under Art. 1623 is mandatory for the right of redemption to commence (PSC vs. Sps. Valencia, [August 19, 2003].

1. Transfers the right to collect the full value of the credit, even if he paid a price less than such value 2. Transfers all the accessory rights (e.g. guaranty, mortgage, pledge, preference) 3. Debtor can set up against the assignee all the defenses he could have set up against the assignor II.

III.

EXCEPTION: When actual knowledge is acquired by co-heirs living in same land with purchaser, or co-owner was middleman in sale to 3rd party. Art. 1623 does not prescribe any distinctive method for notifying the redemptioner. Etcuban v. CA, [148 SCRA 507]

Sale of credits and other incorporeal things EFFECTS OF ASSIGNMENT

4. Compensation unless assignor was notified by debtor that he reserved his right to the compensation 5. Debtor has knowledge but no consent may still set up compensation of debts previous to assignment but not the subsequent ones.

9. ASSIGNMENT (See Arts . 1624 – 1634)

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2.

3. Debtor has consented to assignment – cannot set up

=========================================

ASSIGNMENT: The owner of a credit transfers to another his rights and actions in

Technical term but basically a sale

2. Assignment of rights made w/o knowledge of debtor – debtor may set up against assignee the compensation w/c would pertain to him against assignor of all credits prior to assignment and of later ones until he had knowledge of the assignment

========================= ================ TOPICS UNDER THE SYLLABUS N. EXTINGUISHMENT OF SALE 8. Age Redemption

I.

1.

1. Lack of knowledge or consent of debtor not essential for validity but has legal effects (“meeting of minds” in assignment contemplates that between assignor of the credit and his assignee)

GENERAL RULE: Actual knowledge notwithstanding, written notice is still required

o

WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE?

IV.

TRANSFER OF OWNERSHIP

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1. By tradition and not by perfection

be answerable for his character as an heir

2. By execution of public instrument because intangibles cannot be physically transferred 3. Without necessity of delivering document evidencing the credit.

the

4. This rule does not apply to negotiable documents and documents of title which are governed by special laws. V.

d. One who sells whole of certain rights for a lump sum, shall be answerable for legitimacy of the whole in general but not for each of the various parts VII.

EFFECT OF PAYMENT OF DEBTOR AFTER ASSIGNMENT OF CREDIT

BREACH OF WARRANTY: LIABILITIES OF THE ASSIGNOR OF CREDIT FOR VIOLATION OF HIS WARRANTIES 1. Assignor in good faith Liability is limited to price received, expenses of the contract and other legitimate payments made by reason of the assessment 2. Assignor in bad faith

1. Before Notice of the Assignment Payment to the original creditor is valid and debtor shall be released from his obligation

Liable ALSO for (expenses of contract and other legitimate payments plus useful and necessary expenses) damages

2. After Notice a. Payment to the original creditor is not valid as against the assignee

VIII.

b. He may be made to pay again by the assignee

ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION REQUISITES:

1. There must be a sale or assignment of credit VI.

WARRANTIES OF THE ASSIGNOR OF CREDIT 1. NO warranty against hidden defect - N/A because intangibles has no physical existence

2. There must be a pending litigation 3. The debtor must pay the assignee: a. Price paid by him AND b. Judicial costs incurred by him AND

2. He warrants the existence and legality of credit - there is warranty except when expressly sold as a doubtful account a. NO warranty as to the solvency of debtor unless it is expressly stipulated OR unless the insolvency was already existing and of public knowledge at the time of the assignment b. Warranty shall last for 1 year only c.

One who assigns inheritance right w/o enumerating rights shall

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c. Interest on the price from the date of payment 4. The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him NOTE: 

Presumption: buyer’s purpose is speculation and; law would rather benefit the debtor of

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such credits rather than the one who merely speculates for profit. 

IX.

When credit or incorporeal right in litigation is assigned or sold, debtor has a right to extinguish it by reimbursing the assignee for the price the buyer paid plus interest Right to redeem by debtor not available in the following instances (not considered speculative

1. Assignment of credit / incorporeal right to co-heir or co-owner; the law does not favor co-ownership 2. Assignment to creditor in payment for his credit  Presumption is that the assignment is

above suspicion; assignment is in the form of dacion en pago, thus perfectly legal 3. Assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned  Purpose is to presumably preserve the

O. THE SUBDIVISION AND CONDOMINIUM BUYER’S PROTECTIVE DECREE =========================================

P.D. 957: LAW ON SALE OF SUBDIVISION AND CONDOMINIUM

REMEDIES FOR FAILURE OF THE DEVELOPER TO DEVELOP THE SUBDIVISION OR CONDOMINIUM ACCORDING TO THE APPROVED PLAN AND TO COMPLY WITH SUCH WITHIN THE TIME LIMIT. 

The buyer may desist from further payment any installments. Also, there would be no forfeiture of past payments in favor of the developer after due notice has been given. 

The buyer may demand reimbursement of the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. (Sec. 23, P.D. 957) Otherwise: RA 6552 (Maceda Law) will apply. REQUISITES OF SEC 3 OF RA 6552:

tenement 

END OF DISCUSSION ON TOPIC N. EXTINGUISHMENT OF SALE

================================

O. THE SUBDIVISION AND CONDOMINIUM BUYER’S PROTECTIVE DECREE ================================

Failure to pay installments was due to reasons, other than failure of the developer to develop the subdivision or condominium according to the approved plan and to comply with such within the time limit, and, 

Only covers residential lots including condominium units, excluding, sales to tenants. 

The buyer has paid at least two years of installments

TOPICS UNDER THE SYLLABUS The Subdivision and Condominium Buyer’s Protective Decree (P.D. 957) ========================= ================ TOPICS UNDER THE SYLLABUS

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RIGHTS OF THE BUYER UNDER RA 6552 WITH AT LEAST TWO (2) YEARS OF INSTALLMENT: 

To pay, without additional interest, the unpaid installments due within the total grace period earned by him. Said grace period is fixed at the rate of one month grace period for every

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one year of installments payments made. Thus, here the buyer has at least two months grace for he should have paid at least two years of installments to avail of the rights under this section. This rights can only be exercised only once in every five (5) years of the life of the contract and its extensions, if any. 

To be refunded of the cash surrender value of this payments equal to 50% of his total payments if the contract is cancelled. But if he has paid five years or more, he is entitled to an increase of 5% every year and so on but the cash surrender value shall not exceed 90% of his total payments. McLaughlin v CA, [G.R. No. L-57552, Oct 10, 1986]

THE ACTUAL CANCELLATION OF THE CONTRACT REFERRED TO ABOVE SHALL TAKE PLACE ONLY: 1. After 30 days from receipt by the buyer of the notice of cancellation or demand for rescission, AND 2. Upon full payment to the buyer of the cash surrender value

the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act. Here the buyer is not entitled to any refund

END OF DISCUSSION ON TOPIC O. THE SUBDIVISION AND CONDOMINIUM BUYER’S PROTECTIVE DECREE

================================

P. THE CONDOMINIUM ACT ================================ TOPICS UNDER THE SYLLABUS

The Condominium Act (R.A. 4726) ========================= ================ TOPICS UNDER THE SYLLABUS P. THE CONDOMINIUM ACT =========================================

R.A. 4726: THE CONDOMINIUM ACT Restrictions and Additional requirements transfer of condominiums: 

It shall include the transfer or conveyance of the undivided interests in the common areas or membership or shareholdings in the condominium corporation.



Membership in a condominium corporation, regardless whether stock or non-stock, shall not be transferable separately from the condominium unit of which it is an appurtenance.



No condominium owner’s copy of the certificate of title shall, subsequent to the original conveyance, be registered unless accompanied by a certificate of the management body of the project that such conveyance is in accordance with the provisions of the declaration of restrictions of such project.

In the computation of the total number of installment payments the following are included: 1. downpayment and 2. deposit or option money RIGHTS OF THE BUYER UNDER RA 6552 WITH LESS THAN 2 YEARS OF INSTALLMENTS: 

If he has paid less than two (2) years of installments, he still has the right to pay within a grace period of not less than sixty (60) days from the date the installment became due.



If the buyer fails to pay the installment due at the expiration of the grace period, i.e. 60 days, the seller may cancel the contract after 30 days from receipt by

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on

END OF DISCUSSION ON TOPIC

Page 167 of

P. THE CONDOMINIUM ACT

================================

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H. SUCCESSION

of the inheritance either by will or by operation on law (Art. 782)

================================= TOPICS UNDER THE SYLLABUS I. General Provisions (Arts. 774-780) A. Definition/what is transmitted (Arts. 774, 776, 781) B. When succession occurs (Art. 777) C. Kinds of successors: heirs, devisees, legatees (Art. 782) ================================= I. GENERAL PROVISIONS SUCCESSION – 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 either by his will or by operation of law. (Art. 774)

KINDS OF HEIRS 1. Compulsory – those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law, of which they cannot be deprived by the testator, except by a valid disinheritance 2. Voluntary or Testamentary – those who are instituted by the testator in his will, to succeed to the portion of the inheritance of which the testator can freely dispose 3. Legal or Intestate – those who succeed to the estate of the decedent who dies without a valid will, or to the portion of such estate not disposed of by will ii.

KINDS OF SUCCESSION (Balane) 1. Compulsory—succession to the legitime (this prevails over all kinds)

Devisees or Legatees – persons to whom gifts of real or personal property are respectively given by virtue of a will (Art. 782)

NOTE: The distinction between heirs and devisees/legatees are important in these cases:

2. Testamentary—succession by will

a. Preterition

3. Intestate—succession in default of a will

b. Imperfect disinheritance

4. Mixed—not a distinct kind really, but a combination of any two or all of the first three

c.

ELEMENTS OF SUCCESSION I.

Subjective Element A. Decedent — person whose property is transmitted through succession (Art. 775) B. Successors i.

Heirs – those who are called to the whole or to an aliquot portion

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After-acquired properties

d. Acceptance or non-repudiation successional rights

of

II. Causal Element (Art. 777) Death of the Person – However, a person may be presumed dead for the purpose of opening his succession (see rules on presumptive death). In this case, succession is only of provisional character because there is always the chance that the absentee may be alive. III. Objective Element (Art. 776)

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Inheritance – is the subject matter of Succession it includes: i.

Property and transmissible rights and obligations

RIGHTS EXTINGUISHED (NOT TRANSMISSIBLE)

BY

DEATH

2. Usufruct from

personal

4. Personal easements 5. Partnership rights 6. Agency 7. Life Annuity ii. Existing at the time of his death iii. AND those which have accrued thereto since the opening of succession (Art. 781) After-Acquired Property (Art. 793) GENERAL RULE: Property acquired during period between the execution of the will and death of the testator is NOT included among property disposed of with REGARD LEGACIES and DEVISEES, not to heirs. EXCEPTION: When a contrary expressly appears in the will

the the the to

intention

Succession distinguished from Inheritance Succession

Inheritance

Refers to the legal mode by which inheritance is transmitted to the persons entitled to

Refers to the universality or entirety of the property, rights and obligations of a

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person who died.

================================= TOPICS UNDER THE SYLLABUS II. Testamentary Succession A. Wills

1. Support

3. Those arising consideration

it.

(1) In General (a) Definition and characteristics (Arts. 783-787) (2) Testamentary capacity and intent (Arts. 796-803) (a) Age requirement (Art. 797) (b) Soundness of mind (Arts. 798-801) (3) Form (a) Rules governing the formal validity of wills (Arts. 17, 815817, 819) (b) Common requirements (Art. 804) (c) Notarial wills (d) Holographic wills (e) Joint wills (Arts. 818-819) (4) Codicils (Arts. 825-826) (a) Definition and formal requirements (5) Incorporate by reference (Art. 827) (6) Revocation (Arts. 828-834) (a) Kinds (Art. 830) (7) Allowance and disallowance of wills (Arts. 838-839) (a) Probate requirement (Art. 838) (b) Grounds for denying probate (Art. 839) =================================

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II. TESTAMENTARY SUCCESSION

iii.

Determination of whether or not the testamentary disposition is to be operative

A. WILLS CONCEPT OF A WILL (Art. 783)

b.

Acts which may be entrusted to third persons (Article 787);

1. It is an act; 2. Whereby a person is permitted;

i.

Distribution of specific property or sums of money that he may leave in general to specified classes or causes; and

ii.

Designation of the persons, institutions or establishments to which such property or sums are to be given or applied.

3. With the formalities prescribed by law; 4. To control to a certain degree; 5. he disposition of his estate; 6. To take effect after his death. KINDS OF WILLS: 1. Notarial – an ordinary or attested will 2. Holographic – a handwritten will

3. FREE AND VOLUNTARY ACT — any vice affecting testamentary freedom can cause the disallowance of the will

COMMON REQUISITES BETWEEN THE TWO WILLS: 1. Must be in writing and

4. FORMAL AND SOLEMN ACT — the formalities are essential for validity

2. In a language or dialect known to the testator

CHARACTERISTICS OF A WILL: 1. UNILATERAL — does not need the approval of any other person (implied in Art. 783) 2. STRICTLY PERSONAL ACT (Art. 784-785) a.

Acts which may not be left to the discretion of third persons (Arts. 785 and 787): i.

ii.

Duration or efficacy of the designation of heirs, devisees or legatees; Determination of the portions which they are to take, when referred to by name; and

5. ACT MORTIS CAUSA (Art. 783)— takes effect only after the death of the testator 6. AMBULATORY AND REVOCABLE during the testator’s lifetime 7. INDIVIDUAL ACT — two or more persons cannot make a single joint will, either for their reciprocal benefit or for another person. However, separate or individually executed wills, although containing reciprocal provisions (mutual wills) are not prohibited, subject to the rules on disposicion captatoria. 8. Executed with ANIMUS TESTANDI 9. Executed with TESTAMENTARY CAPACITY 10. DISPOSITIVE OF PROPERTY

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11. STATUTORY

INTERPRETATION OF WILLS (Art. 788-794) Underlying Principle: Testacy is always preferred to intestacy, because the former is the express will of the decedent whereas the latter is only his implied will.

disposed of. EXCEPT: When a contrary intention expressly appears on the will.

NOTE: This rule applies only to legacies and devisees and not to institution of heirs NOTE: The validity of a will as to its form depends upon the observance of the law at the TIME it was MADE (Art. 795)

1. Animus Testandi - The testator’s intent (animus testandi), as well as giving effect to such intent is primordial.

TESTAMENTARY CAPACITY—the ability as well as the power to make a will (must be present at the TIME of EXECUTION):

EXCEPT: when the intention of the testator is contrary to law, morals or public policy.

1. All persons who are not expressly prohibited by law (Art. 796)

2. In case of doubt, the interpretation by which the disposition is to be operative or will sustain and uphold the will in all its parts shall be adopted, provided that it can be done consistently with the established rules of law.

2. 18 years old and above (Art. 797) 3. Of sound mind, at the time of its execution (Art. 798); A testator is considered of sound mind if he knows at the time of making of the will the following: a. Nature of the estate to be disposed of

3. Ambiguities in Wills – Intrinsic or extrinsic evidence may be used to ascertain the testatorial intent of the testator. EXCEPT: The oral declarations of the testator as to his intentions must be excluded because such testimony would be hearsay. KINDS OF AMBIGUITIES (Art. 789) I.

II.

Latent or Intrinsic Ambiguities— those which do not appear on the face of the will and is discovered only by extrinsic evidence Patent or Extrinsic Ambiguities— those which appear on the face of the will itself

4. After Acquired Property - Property acquired during the period between the execution of the will and the death of the testator is NOT included among the property

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b. Proper objects of his bounty c.

Character of the testamentary act (Art. 799)

LEGAL PRESUMPTION IN FAVOR SOUNDNESS OF MIND (Art. 800):

OF

General Rule: The law presumes that every person is of sound mind, in the absence of proof to the contrary. Exceptions: 1. When the testator, one month or less before the execution of the will, was PUBLICLY KNOWN to be INSANE (Art. 800); 2. When the testator executed the will after being placed under guardianship Torres and Lopez de Bueno vs. Lopez, [48 Phil. 772] or ordered committed, in either case, for insanity (under Rules 93 and 101,

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respectively of the Rules of Court), and before said order has been lifted. 

Supervening capacity or incapacity does not invalidate an effective will, nor is the will of an incapable validated by supervening capacity (Art. 801).

FORMS OF WILL COMMON FORMALITIES: 1. Every will must be in WRITING; and 2. Executed in a LANGUAGE or DIALECT KNOWN to the TESTATOR (Art. 804) SPECIAL FORMALITIES: I.

NOTARIAL WILL – a valid notarial will: (Art. 805)



C. Each and every page, except the last, must be signed by the testator or by the person requested by him to write his name, and by the instrumental witnesses of the will, on the left margin. Signatures on the left margin on each and every page NOT REQUIRED: i.

In the last page, when the will consists of two or more pages;

ii.

When the will consists of only one page;

iii.

When the will consists of two pages, the first consists of all the testamentary disposition and is signed at the bottom by the testator and the witnesses and the second contains only the attestation clause duly signed at the bottom by the witnesses.

A. Subscribed at the end by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction Physical end- where the writing stops Logical end- where the last testamentary disposition ends B. Attested & subscribed by three or more credible witnesses in the presence of the testator and of one another 

Mandatory Part: The signing on every page in the witnesses’ presence NOTE: Test of presence is not whether they actually saw each other sign, but whether they might have seen each other sign had they chosen to do so considering their mental and physical condition and position with relation to each other at the moment of inscription of each signature.

CIVIL LAW REVIEWER 383

Directory Part: The place of the signature, i.e. the left margin; the signature can be affixed anywhere on the page.

NOTE: A statute requiring a will to be signed is satisfied if the signature is made by the testator's mark. A thumbmark is sufficient signature. Payad v. Tolentino, [62 Phil 846] But a mere sign of the cross cannot be accepted as it does not have the trustworthiness of a thumbmark Garcia v. Lacuesta, [90 Phil 489] D. Each and every page of the will must be numbered correlatively in letters placed on the upper part of each page. 

Mandatory Part: Pagination means of a conventional system.



Directory Part: The pagination in letters on the upper part of each page

by

E. It must contain an attestation clause, stating the following:

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a. The number of pages used upon which the will is written b. The fact that the testator signed the will and every page, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses c.

All the instrumental witnesses witnessed and signed the will and all its pages in the presence of the testator and of one another

F.

It must be acknowledged before a notary public by the testator and the witnesses (Art. 806)



The notary public cannot be counted as one of the attesting witnesses. Cruz v. Villasor, [54 SCRA 31]

ATTESTATION v. SUBSCRIPTION Attestation – An act of witnessing execution of will by testator in order to see and take note mentally those things are done which the statute requires for the execution of a will and that the signature of the testator exists as a fact Subscription – manual act of instrumental witnesses in affixing their signature to the instrument ATTESTATION

SUBSCRIPTION

1. act of the senses

1. act of the hand

2. mental act

2. mechanical act

3. Purpose is to render available proof during the probate that such will had been executed in accordance with the formalities prescribed by law

3. Purpose is for identification

CIVIL LAW REVIEWER 383

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4. Found after the attestation clause at the end or last page of the will

4. Found at the left side margin of every page of the will



The attestation clause need not be written in a language or dialect known to the testator nor to the witnesses since it does not form part of the testamentary disposition



The attestation clause need only be signed by the witnesses and not by the testator as it is a declaration made by the witnesses.

ADDITIONAL REQUISITES FOR VALIDITY a. If the Testator be Deaf or Deaf-Mute:

o

forgery

o

fraud

o

undue and improper and influence

ii.

Otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, its contents (Art 807)

i.

Once by witnesses

one

of

the

subscribing

ii.

Once by the notary public before whom the will is acknowledged (Art 808)

NOTE: Articles 807 and 808 are mandatory, failure to comply with either would result in nullity and denial of probate.

1. In the absence of bad faith

Testator must personally read the will, if able to do so;

b. If the Testator be Blind: The will shall be read to the testator twice –

RULE ON SUBSTANTIAL COMPLIANCE (ART. 809)

o

i.



The inadvertent failure of one witness to affix his signature to one page of the original will due to the simultaneous lifting of two pages in the course of signing is not per se sufficient to justify denial of probate when the duplicate will shows such signatures. Icasiano v. Icasiano, [11 SCRA 422]

II.

HOLOGRAPHIC WILL – a holographic will is valid if it is:

pressure

2. Defects and imperfections o

in the form of attestation or in the language used therein

3. Shall not render the will invalid 4. If it is proved that the will was in fact executed and attested in substantial compliance with all the requirements of Article 805. 

Defects and imperfections can be supplied by an examination of the will itself. Caneda v. CA [222 SCRA 781]

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A.

Entirely written, dated, and signed by the hand of the testator himself

B.

Dispositions of the testator written below his signature must be dated and signed by him in order to validate the testamentary dispositions. (Art 812) EXCEPT: In case of dispositions appearing in a holographic will which are signed without being dated, where the last disposition has a signature and a date, such date validates the

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dispositions preceding it, whatever be the time of prior dispositions 

PROBATE OF HOLOGRAPHIC WILL A.

A holographic will is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed. (Art 810)

EXCEPTION: If the will is contested, at least three of such witnesses shall be required (merely directory). In the absence of such competent witness and if the court deems it necessary, expert testimony may be resorted to.

ELEMENTS OF A CODICIL (ART. 825)

1. It is a supplementary or addition to a will

B.

Who knows the handwriting signature of the testator

C.

Must explicitly declare that the will and the signature are in the handwriting of the testator. (Art 811)

2. Made after the execution of the will 3. Annexed to be taken as a part thereof 4. By which any disposition in the original will may be explained, added to or altered REQUISITES FOR INCORPORATION REFERENCE (Art. 827)

BY

1. the document or paper referred to in the will must be in existence at the time of the execution of the will 2. the will must clearly describe and identify the same, stating among other things the number of pages thereof 3. it must be identified by clear and satisfactory proof as the document or paper referred to therein 4. it must be signed by the testator and the witnesses on each and every page, except in case of voluminous books of account or inventories

NOTE: The text of Art, 827 suggests that holographic wills cannot incorporate documents by reference. Paragraph 4 requires the signatures of the testator and witnesses on every page of the incorporated document. It seems, therefore, that only attested wills can incorporate documents by reference, since only these are witnessed (unless the testator has his holographic will superfluously witnessed)

CIVIL LAW REVIEWER 383

There must be at least one witness.

and

NOTE: This article applies only to post mortem probates and not to ante mortem probates since in such cases the testator himself files the petition and will identify the document himself. 

in the probate of a holographic will, the document itself must be produced; a lost holographic will cannot be probated. Gan v. Yap, [104 Phil 509] Exception: When copy of the will is produced or survives Rodelas v. Aranza, [G.R. No. L-58509, December 7, 1982]

INSERTION, CANCELLATION, ERASURE OR ALTERATION IN A HOLOGRAPHIC WILL A. If made after the execution of the will, but without the consent of the testator, such insertion is considered as not written because the validity of the will cannot be defeated by the malice or caprice of a third person B. If the insertion after the execution of the will was with the consent of the testator, the will remains valid but the insertion is void. C. If the insertion after the execution is validated by the testator by his signature thereon then the insertion becomes part

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of the will, and, the entire will becomes void, because of failure to comply with the requirement that it must be wholly written by the testator

2. SUBSTANTIVE VALIDITY ASPECTS OF THE WILL GOVERNED NATIONAL LAW OF THE DECEDENT:

D. If the insertion made by a third person is made contemporaneous to the execution of the will, then the will is void because it is not written entirely by the testator

BY

A. Order of succession B. Capacity to succeed C. Amount of successional rights

WHO MAY BE A WITNESS TO A WILL – Any person may be a witness provided he is:

D. Intrinsic validity

A. Of sound mind

VALIDITY OF JOINT WILLS

B. Of the age of 18 years or more



C. Not blind, deaf or dumb D. Able to read and write E. Domiciled in the Philippines F.

Have not been convicted of falsification of a document, perjury or false testimony

LAWS GOVERNING VALIDITY OF A WILL 1. FORMAL VALIDITY

Two or more persons cannot make a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person. NOTE: Joint wills executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been executed.

AMENDMENT, REVOCATION AND REPUBLICATION OF WILLS AMENDMENT OF WILLS

FORMAL VALIDITY EXECUTED IN PHILIPPINES

FILIPINO

ALIEN 1. Notarial – only through a codicil

(a) CC of Philippines

(a)CC of the Philippines

2. Holographic – in three ways A.

Dispositions may be added below the signature, PROVIDED that said dispositions are also dated and signed, and everything is written by the hand of the testator himself

B.

Certain dispositions or additional matter may be suppressed or inserted PROVIDED that said cancellation is signed by the testator and written by the hand of the testator himself

C.

Through a codicil which may either be notarial or holographic

(b)Law of His Country FOREIGN COUNTRY

(a) CC of Philippines

(a) CC of Philippines

(b) Law where Made

(b) Law of his Country

*CC – Civil Code

CIVIL LAW REVIEWER 383

(c) Law of Country where he resides

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R E VOCATION OF WILLS

d.

Completion of the subjective phase; AND

1. By operation of law – instances of revocation by operation of law:

e.

Performed by the testator himself or by some other person in his presence and express direction

a. decree of legal separation

(The list is NOT exclusive.)

b. preterition c.

legacy or credit against third person or remission of debt was provided in will and subsequently, testator brings action against debtor

d. substantial transformation thing bequeathed

of

DOCTRINE of PRESUMED REVOCATION: 

Where the will cannot be found following the death of the testator and it is shown that it was in the testator's possession when last seen, the presumption is that he must have destroyed it with animus revocandi.



Where the will cannot be found following the death of the testator and it is shown that the testator had ready access to it, the presumption is that he must have destroyed it with animus revocandi.



Where it is shown that the will was in the custody of the testator after its execution, and subsequently, it was found among the testator's effects after his death in such a state of mutilation, cancellation, or obliteration, as represents a sufficient act of revocation within the meaning of the applicable statute, it will be presumed, in the absence of evidence to the contrary, that such act was perfomed by the testator with animus revocandi.



Art. 832 A revocation made in a subsequent will shall take effect, even if the new will should become inoperative by reason of the incapacity of the heirs, devisees or legatees designated therein, or by their renunciation.

specific

e. when heir, devisee or legatee commits any of the acts of unworthiness

2. By the execution of a will, codicil or other writing executed as provided in case of wills a.

b.

EXPRESS – When there is a revocatory clause expressly revoking the previous will or a part thereof IMPLIED – When the provisions thereof are partially or entirely inconsistent with those of the previous wills

3. By burning, tearing, canceling, obliterating the will with the intention revoking it, by the testator himself, or some other person in his presence, and his express direction.

or of by by

REQUISITES: a.

Testamentary capacity at the time of performing the act of destruction;

b.

Intent to revoke (animus revocandi);

c.

Actual physical act of destruction;

CIVIL LAW REVIEWER 383

EXCEPTION: Doctrine of Dependent Relative Revocation – when the testator provides in the subsequent will that the revocation of the prior one is dependent on the capacity or acceptance of the heirs, devisees, or legatees instituted in

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the subsequent will. (Molo v, Molo, [90 Phil 37])

which can be revived only by another will or codicil.

LAWS WHICH GOVERN REVOCATION LAW FOR REVOCATION IN PHILIPPINES



LAW

FACTS DEMONSTRATING ART 837 Philippine Law



Philippine Law OUTSIDE PHILIPPIN ES

Domicil e Non Domicil e

REVOCATION BASED ILLEGAL CAUSE 

 Philippine Law (a) Where will was made (b)Where DOMICILED at time of revocation

ON

A

FALSE

CONCLUSION ON THE FACTS 

The Revocation of Will 2 by Will 3 does not revive Will 1



This demonstrates the theory of instant revocation because the revocatory effect of the second will is immediate upon the first will

OR

NOTE: This article only applies where the revocation of the first will by the second will is express.

a. The cause must be concrete, factual and not purely subjective b. It must be false The testator must not know of its falsity

d. It must appear from the will that the testator is revoking because of the cause which is false. 

Art. 834. The recognition of an illegitimate child does not lose its legal effect, even though the will wherein it was made should be revoked.



Art. 837. If after making a will, the testator makes a second will expressly revoking the first, the revocation of the second will does not revive the first will,

CIVIL LAW REVIEWER 383

In 1990, X executed Will 3, revoking Will 1

REQUISITES:

c.

In 1987, X executed Will 2, expressly revoking Will 1



Revocation based on a false or illegal cause is null and void.



In 1985, X executed Will 1

REPUBLICATION AND REVIVAL OF WILLS 

If the testator wishes to republish a will that is void as to form, the only way to republish it is to execute a subsequent will and reproduce it



The testator need only execute a subsequent will or codicil referring to the previous will if the testator wishes to republish a will that is either: a.

b.

Void for reason other than a formal defect Previously revoked

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REPUBLICATION

REVIVAL

Takes place by an act of the testator

Takes place operation of law

Corrects extrinsic and extrinsic defects

Restores will

a

by

revoked

ALLOWANCE AND DISALLOWANCE OF WILLS I.

PROBATE OF A WILL 1. A special proceeding required for the purpose of establishing the validity of the will. 2. Probate of a will is mandatory 3. The probate court can only inquire into the extrinsic validity of testamentary provisions, which include the following:

II. II. DISALLOWANCE OF WILL - grounds for disallowance of a will: 1. If the formalities required by law have not been complied with; 2. If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution; 3. If it was executed through force or under duress, or the influence of fear, or threats; 4. If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; 5. If the signature of the testator was procured by fraud;

b. That his consent was not vitiated

6. If the testator acted by mistake or did not intend that the instrument should be his will at the time of affixing his signature thereto.(Art 839)

c.

REVOCATION

a. That the testator was of sound and disposing mind

That the will was signed by the required number of witness

d. That the will is genuine EXCEPTION: The probate court may pass upon the intrinsic validity of the will when its probate might become an idle ceremony if on the will’s face it appears to be intrinsically void. Nuguid v. Nuguid, [17 SCRA 449]

Voluntary act of the testator

Given decree

by

With or without cause

Always cause

for

May be partial or total

Always total EXCEPT when the ground of fraud or influence for example affects only certain portions of the will

KINDS OF PROBATE 1. Post-Mortem death

–

after

the

DISALLOWANCE

testator’s

judicial a

legal

2. Ante-Mortem – during his lifetime FINAL DECREE OF PROBATE

B. INSTITUTION OF HEIRS INSTITUTION OF HEIR



Once a decree of probate becomes final in accordance with the rules of procedure it becomes Res Judicata

1. It is an act by virtue of which a testator designates in his will



It is conclusive as to the due execution of the will (extrinsic validity only)

2. The person or persons who are to succeed him in his property and transmissible 3. Rights and obligations

CIVIL LAW REVIEWER 383

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1. If

REQUISITES FOR A VALID INSTITUTION OF HEIR

one has no compulsory heirs:

1. Designation in will of person/s to succeed

a. He can give his estate to any person qualified to inherit under him

a.

Directory - designation of name and surname

b.

Mandatory – identity of the heir must be established, otherwise void disposition, unless his identity becomes certain.

b. However, he must respect restrictions imposed by special laws 2. If one has compulsory heirs:

NOTE: If there is ambiguity in the designation, the designation must be resolved by discerning the testator’s intent. If the ambiguity cannot be resolved, intestacy to that portion results. 2. Will specifically assigns to such person an inchoate share in the estate.

a.

He can give only the disposable portion to strangers

b.

Legitimes of compulsory heirs must be respected

REQUISITES FOR THE INSTITUTION OF HEIRS:

ANNULMENT

OF

3. The person so named has capacity to succeed

1. Cause of institution of the heirs must be stated in will

4. The will is formally valid

2. Cause must be shown to be false

5. No vice of consent is present

3. It appears from the face of the will that the testator would not have made the institution had he known the falsity of the cause.

6. No preterition results from the effect of such will

THREE PRINCIPLES IN THE INSTITUTION OF HEIRS 1. Equality – heirs who are instituted without a designation of shares inherit in equal parts 2. Individuality – heirs collectively instituted are deemed individually named unless a contrary intent is proven 3. Simultaneity – when several heirs are instituted, they are instituted simultaneously and not successively

RULES ON A PERSON’S RIGHT TO DISPOSE OF HIS ESTATE

CIVIL LAW REVIEWER 383

RULES ON INSTITUTION OF ALIQUOT SHARE LESS THAN OR IN EXCESS OF THE WHOLE ESTATE: 1.

Intestacy Results if a. the heir institutes an aliquot portion of the estate b. to only one heir If the heir institutes several heirs to an aliquot part of the

2. Each heir’s share shall be proportionally increased: a. There are more than one instituted heir b. The testator intended the heirs to inherit the whole estate

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c.

3.

The aliquot parts of each share do not cover the whole inheritance

Each heir’s share shall be proportionally decreased: a. There are more than one instituted heir b. The testator intended the heirs to inherit the whole estate c. The aliquot parts of each share exceed the whole inheritance

ELEMENTS OF PRETERITION 1. There must be an omission of one, some or all of the heir/s in the will 2. The omission must COMPULSORY HEIR

be

that

of

a

3. Compulsory heir omitted must be of the DIRECT LINE 4. The omitted compulsory heir must be LIVING at the time of testator’s death or must at least have been CONCEIVED before the testator’s death

DISTINGUISH PRETERITION FROM DISINHERITANCE PRETERITION

DISINHERITANCE

Deprivation of a compulsory heir of his legitime is tacit

Deprivation of compulsory of legitime is express

the his

May be voluntary but the law presumes that it is involuntary

Always voluntary

Law presumes that there has been merely an oversight or mistake on the part of the testator

Done with a legal cause

Omitted heir gets not only his legitime but also his share in the free portion not disposed of by way of legacies or devises

If disinheritance is unlawful, compulsory heir is merely restored to his legitime

5. The omission must be complete and total in character. : There is no omission if a.

A devise or legacy has been given to the heir

b.

A donation inter vivos has been previously given to the heir

c.

Anything is left from the inheritance which the heir may get by way of intestacy

C. SUBSTITUTION OF HEIRS CLASSES OF SUBSTITUTION 1. Vulgar or Simple – the testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should:

EFFECTS OF PRETERITION:

a. die before him (PREDECEASE)

1. The institution of heir is annulled

b. should not wish, (RENOUNCE) or

2. Devises and legacies shall remain valid as long as they are not inofficious 3. If the omitted compulsory heir should die before the testator, the institution shall be effectual, without prejudice to the right of representation

CIVIL LAW REVIEWER 383

c.



should be incapacitated to accept the inheritance (INCAPACITATED)

Restricted simple substitution- The testator may limit the operation of simple substitution by specifying only one or two of the three causes.

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2. Brief or Compendious – two or more persons may be substituted for one; and one person for two or more heirs 3. Reciprocal – if heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there are more than one substitute, they shall have the same share in the substitution as in the institution 4. Fideicommissary Substitution - if the testator institutes an heir with an obligation to deliver to another the property so inherited. The heir instituted to such condition is called the first heir or fiduciary heir, the one to receive the property is the fideicommissary or second heir

REQUISITES FOR SUBSTITUTION: 1. A fiduciary or with the dual transmit to a second heir inheritance

A

FIDEICOMMISSARY

first heir instituted entrusted obligation to preserve and to fideicommissary substitute or the whole or part of the

2. Such substitution must not go beyond one degree from the heir originally instituted 3. The fiduciary or first heir and the second heir are living and qualified to succeed at the time of the death of the testator 4. The fideicommissary substitution must be expressly made 5. The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime NOTE: Pending the transmission of the property, the fiduciary is entitled to all the rights of a usufructuary although the fideicommissary is entitled to all the rights of a naked owner.

CIVIL LAW REVIEWER 383

D. CONDITIONAL TESTAMENTARY DISPOSITIONS AND DISPOSITIONS WITH A TERM TESTAMENTARY DISPOSITIONS 1. Condition – future or uncertain event, or a past event unknown to the parties, upon which the performance of an obligation depends 2. Term – the day or time when an obligation either becomes demandable or terminates 3. Modal Institution – the statement of the institution; application of the property left by the testator or the charge imposed on him 4. Disposicion Captatoria/Scriptura Captatoria – condition that the heir shall make some provision in his will of the testator or of any other person (prohibited because it will make the making of the will a contractual act) 5. Causal Condition – condition us casual if it depends upon chance and/or upon the will of a third person 6. Mixed Condition - It is mixed if it depends both partly upon the will of the heir himself and upon chance and/or the will of a third person 7. Potestative Condition – one the fulfillment of which depends purely on heir 8. Suspensive term – one that merely suspends the demandability of a right. It is sure to happen 9. Caucion Muciana – bond or security that should be given in favor of those who would get the property if the condition not be complied with

INTERPRETATION

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 When in doubt whether there is a condition or merely a mode, consider the same as mode

ii.

If testator unaware of fact of fulfillment- deemed fulfilled



iii.

If testator aware thereof –



When in doubt as to whether there is a mode or merely a suggestion, consider same only as a suggestion The condition suspends but does not obligate, the mode obligates but does not suspends (for he who inherits with a mode is already an heir; one who inherits conditionally is not yet an heir.)

i.

If it can no longer be fulfilled again – deemed fulfilled

ii.

If it can be fulfilled again – must be fulfilled again

Constructive Compliance a. if casual – not applicable

RULES ON POTESTATIVE, MIXED CONDITIONS 1.

CASUAL

AND

POTESTATIVE

Positive Potestative Condition: General Rule – must be fulfilled as soon as the heir learns of the testator’s death EXCEPTION a.

the condition was already complied with at the time the heir learns of the testator’s death

b.

the condition is of such nature that it cannot be fulfilled again

Negative Potestative Condition: 

2.

Heir must give security to guarantee the return of the value of property, fruits, and interests, in cases of contravention CASUAL OR MIXED

b. if mixed – i. If dependent partly on chance – not applicable ii. If dependent partly on will of third party – 1. if 3rd party applicable

interested

–

2. if 3rd party not interested – not applicable

EFFECTS OF SUSPENSIVE CONDITION OR TERM The estate shall be placed under administration until 1. condition is fulfilled 2. until it becomes certain condition will never be fulfilled 3. until arrival of the term

Positive 



GENERAL RULE – may be fulfilled at any other time (before testator’s death), unless testator provides otherwise. If ALREADY FULFILLED at the time of execution of the will

CIVIL LAW REVIEWER 383

CONDITIONS PROHIBITING MARRIAGE 1. If a first marriage is prohibited – condition considered always as not imposed 2. If a subsequent marriage is prohibited as imposed by the deceased spouse or by his/her ascendants or descendants - valid

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3. if a subsequent marriage is prohibited and imposed by anyone else- considered not written

c.

Death of either spouse during the pendency of a petition for legal separation – dismissal of the case  Illegitimate children and descendants (legitimate or illegitimate)

E. LEGITIMES



The portion of the decedent’s estate reserved by law is called the legitime.



The heirs for whom the law reserves such portion are called compulsory heirs.

CLASSES OF COMPULSORY HEIRS 1. Primary – those who have precedence over and exclude other compulsory heirs 

Legitimate children and descendants (legitimate), with respect to their legitimate parents and ascendants

2. Secondary – those who succeed only in the absence of the primary heirs 

Legitimate parents and ascendants (legitimate), with respect to their legitimate children and descendants

3. Concurring – those who succeed together with the primary or the secondary compulsory heirs 

Widow or widower (legitimate) – the surviving spouse referred to is the spouse of the decedent.

Testator is a Legitimate Person

Testator is an Illegitimate Person

Legitimate children and descendant

Legitimate children and descendants

In default of the foregoing, legitimate parents and ascendants

Illegitimate parents and ascendants

Surviving spouse

In default of the foregoing, illegitimate parents only

Illegitimate children and descendant

Surviving spouse

GENERAL LEGITIMES

IN

1.

RULES

ASCERTAINING

Direct descending line a. Rule of preference between lines b. Rule of proximity

NOTE: a. Mere estrangement is not a ground for the disqualification of the surviving spouse as heir b. Effect of decree of legal separation: i. On the offending spouse – disqualified ii.On the innocent spouse – no effect

c.

2.

Right of representation ad infinitum in case of predecease, incapacity or disinheritance Direct ascending line

a. Rule of division by line b. Rule of equal division

CIVIL LAW REVIEWER 383

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3. Non-impairment of legitime a. Any compulsory heir who was given title less than his legitime may demand that the same be completed (Art 906)

4. C ollation or addition of the value of all donations inter vivos to the net value of the estate; 5. Determination of the amount of the legitime from the total thus found;

EXCEPTIONS: a. If the predecessor gave the compulsory heir a donation inter vivos and provided that it was not charged against the legitime (Art 1062) b. Testamentary dispositions made by the predecessor to the compulsory heir, unless the testator provides that it should be considered part of the legitime.

6. Imputation of all the value of all donations inter vivos made to compulsory heirs against their legitimes and of the value of all donations inter vivos made to strangers against the disposable free portion and restoration to the hereditary estate if the donation is inofficious. 7. If legitime is impaired, reductions shall be made:

the

following

STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS:

a. First, reduce pro-rata non-preferred legacies and devises, and the testamentary dispositions.

1. Determination of the gross value of the estate at the time of the death of the testator;

b. Second, reduce pro rata the preferred legacies and devises

2. Determination of all debts and charges which are chargeable against the estate;

c.

Third, reduce the donations inter vivos according to the inverse order of their dates

3. Determination of the net value of the estate by deducting all the debts and charged from the gross value of the estate;

8. Distribution of the residue of the estate in accordance with the will of the testator.

CIVIL LAW REVIEWER 383

Page 186 of

SHARES OF COMPULSORY HEIRS

HEIR

LEGITIME

FREE PORTION

LEGITIMATE CHILDREN & DESCENDANTS

1/2

1/2

LEGIMITATE PARENTS & ASCENDANTS

1/2

1/2

CHILDREN – 1/2

1/4

1 (ONE) LEGITIMATE CHILDREN/DESCENDANT & SURVIVING SPOUSE LEGITIMATE CHILDREN (LC) & SPOUSE

SPOUSE -1/4 CHILDREN – 1/2 – SPOUSE – EQUAL TO SHARE

WHAT REMAINS

OF 1 (ONE) LC LEGITIMATE CHILDREN (LC) & ILLEGITIMATE CHILDREN (ILC)

LEGITIMATE PARENTS/ASCENDANT & SURVIVING SPOUSE

LC -1/2 ILC – 1/2 OF SHARE OF 1 (ONE)

WHAT REMAINS (IF

LC

ANY)

LEGITIMATE PARENTS/ASCENDANT – 1/2

1/4

SPOUSE – 1/4 LEGIMITATE PARENTS/ASCENDANTS &

LEGITIMATE

ILLEGIMTATE CHILDREN

PARENTS/ASCENDANTS – 1/2

1/4

ILLEGIMITATE CHILDREN – 1/4 ILLEGITIMATE CHILDREN & SURVIVING SPOUSE

ILC – 1/3

1/3

SPOUSE – 1/3 LEGIMIATE CHILDREN/DESCENDANTS, SURVIVING SPOUSE & ILLEGITIMATE CHILDREN

LC –1/2 SPOUSE – EQUAL TO 1 (ONE)

WHATEVER REMAINS

LC ILC – 1/2 OF SHARE OF ONE (1) LC

CIVIL LAW REVIEWER 383

Page 187 of

LEGITIMATE PARENTS/ASCENDANTS,

LEGIMIATE

SURVIVING SPOUSE, & ILLEGITIMATE

PARENTS/ASCENDANTS –1/2

1/8 ESTATE

CHILDREN SPOUSE – 1/8 ILC –1/4 SURVIVING SPOUSE

GENERALLY

1/2

1/2

ARTICULO

1/3

2/3

ILLEGITIMATE CHILDREN ONLY

1/2

1/2

ILLEGITIMATE PARENTS

1/2

1/2

ILLEGITIMATE PARENTS & SURVIVING

ILLEGITIMATE PARENTS – 1/4

1/2

MORTIS

SPOUSE

CIVIL LAW REVIEWER 383

SPOUSE – 1/4

Page 188 of

RESERVA TRONCAL RESERVA TRONCAL: The reservation by virtue of which an ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant or a brother or sister, is obliged to reserve the property for the benefit of relative within the 3rd degree and who belong from the same line from which the property came from.  It constitutes as an exception to both the system of legitime and the order of intestate succession. PURPOSE OF RESERVA TRONCAL: 1. To reserve certain properties in favor of certain persons; 2. To prevent person outside a family from acquiring, by some chance or accident, property which otherwise would have remained with the said family; 3. To maintain a separation between paternal and maternal lines.

1.

ORIGINATOR – the ascendant, brother or sister from whom the propositus had acquired the property by gratuitous title

2.

PROPOSITUS – The descendant who died and from whose death the reservistas in turn had acquired the property by operation of law. The so-called “ARBITER OF THE FATE OF THE RESERVA TRONCAL.” NOTE: Prepositus can terminate the reserva by: a. Substituting or alienating the property b. By bequeathing or devising it either to the potential reservista or to other third person c. By partitioning it and assigning the property to parties other than the reservista

3.

RESERVISTA – The ascendant, not belonging to the line from which the property came that is the only compulsory heir and is obliged to reserve the property. (Justice Vitug’s View) NOTE: Tolentino is of the view that even if the reservista and the originator belong to the same line, there is still an obligation to reserve.

4.

RESERVATARIOS – The relative of the propositus within the 3rd degree and who belong to the line from which the property came and for whose benefit reservation is constituted. They must be related by blood not only to the propositus but also to the originator.

REQUISITES OF RESERVA TRONCAL 1. The property should have been acquired by operation of law by an ascendant (RESERVISTA) from his descendant (PROPOSITUS) upon the death of the latter. NOTE: by operation of law is limited to succession, either by legitime or intestacy 2.

The property should have been previously acquired by gratuitous title by the propositus from another ascendant or from a brother or sister (ORIGINATOR). NOTE: gratuitous encompasses transmissions by donation, remission, and testate or intestate succession.

3.

The propositus should have died without any legitimate issue in the direct descending line who could inherit from him.  All relationships must be legitimate. Nieva v. Alcala, [41 Phil 495]

4. That there are relatives within the third degree belonging to the line from which said property came. PERSONAL ELEMENTS

NOTE: The Civil Code did not provide for the rules on how the reservatarios would succeed to the reservista. However, the following rules on intestacy have been consistently applied: a. Rule of preference between the lines b. Rule of proximity c. Right of representation – provided that the representative is a relative within the 3rd degree, and that he belongs to the line from which the reservable property came

d.

“full blood/double share” rule in Article 1006



The reservista had no power to appoint, by will, which reservatarios were to get the reserved property. Gonzales v. CFI, [104 Phil 479]

2 EVENTS TO BE CONSIDERED TO DETERMINE THE RIGHT OF THE RESERVATARIOS OVER THE RESERVABLE PROPERTY 1.

Death of Propositus – all qualified reservatario merely acquire an inchoate right. The reservistas own the property subject to the resolutory condition 2. Death of Reservista – surviving reservatarios acquire a perfect right. OBLIGATIONS OF A RESERVISTA AND THE CORRESPONDING RIGHTS OF THE RESERVATARIOS (A-I-S-A) 1. To inventory reserved properties 2. To annotate the reservable character (if registered immovables) in the Registry of Property within 90 days from acceptance by the reservista 3. To appraise the movables 4. To secure by means of mortgage: 1. The indemnity for any deterioration of or damage to the property occasioned by the reservista’s fault or negligence, and 2. The payment of the value of such reserved movables as may be alienated by the reservista onerously and gratuitously 3. As restitution for movables not alienated RIGHT OF THE RESERVISTA OVER THE RESERVABLE PROPERTY 1. The right of the reservista over the reserved property is one of ownership 2. The ownership is subject to a resolutory condition 3. The right of ownership is alienable 4. The right of ownership is registrable RIGHT OF THE RESERVASTARIOS OVER THE RESERVABLE PROPERTY 1. The reservatarios have a right of expectancy over the property

2. The right is subject to a suspensive condition 3. The right is alienable, but subject to the same suspensive condition 4. The right is registrable PROPERTY SUBJECT TO RESERVATION: GENERAL RULE: It must be the same property which the reservista had acquired by operation of law from the propositus upon the latter’s death and which the latter, in turn had acquired by gratuitous title during his lifetime from another ascendant, brother or sister. EXCEPTION: Substitution of the reservable property through unavoidable necessity: 1. Property is consumable 2. Lost or destroyed through the fault of the reservista 3. Deteriorated through the same cause 4. It has been alienated Reserva Maxima Much of the potentially reservable property as possible must be deemed included in the part that passes by operation of law

Maximizes the scope of reserve

Reserva Minima Every single property in the Prepositus estate must be deemed to pass, partly by will and partly by operation of law, in the same proportion that the part given by will bears to the part not so given Minima finds wider acceptance here

EXTINGUISHMENT OF RESERVA TRONCAL 1. The death of the Reservista 2. The death of the all the Reservatorios 3. Waiver or renunciation by all Reservatorios, provided none is born subsequently 4. Total fortuitous loss of the reserved property 5. Confusion or merger of rights 6. Prescription or adverse possession IMPORTANT NOTES:  A reservatario may dispose of his expectancy to the reservable property during the pendency of the reserva in its uncertain and conditional form. If he dies before the reservista, he has not transmitted anything, but if he survives such reservista, the transmission shall become effective.



A will may prevent the constitution of a reserva. In testate succession, only the legitime passes by operation of law. The propositus may, by will, opt to give the legitime of his ascendant without giving to the latter properties he had acquired by gratuitous title from another ascendant, or brother or sister. In such case, reserva troncal is avoided. Howerver, if the ascendant was not disentitled in the will to receive such properties, the reserva minima rule (proportional reserva) should be followed. The rule holds that all properties passing to the reservista must be considered as passing partly by operation of law and partly by will of the propositus. Thus, one-half of the properties acquired by gratuitous title should be reservable and the other half should be free.



PRINCIPLE OF UNIMPAIRMENT OF THE LEGITIME OF THE COMPULSORY HEIR 1. General Rule: The testator cannot deprive his compulsory heirs of their legitime. Exception: valid disinheritance 2. General Rule: He cannot impose upon the same any burden, encumbrance, condition, or substitution of any kind whatsoever. Exception: express prohibition of the partition of the estate for a period not exceeding 20 years.  Renunciation or compromise as regards future legitime between the person owing it and his compulsory heir is void. i.

ii.

The rights of the heirs are merely inchoate because it is only perfected upon the testator’s death. Hence, there is still nothing to renounce. No contract may be entered into with respect to future inheritance except in cases expressly authorized by law.

EFFECTS OF INCOMPLETE LEGITIME Incomplete Legitime Preterition Heir not entirely Total omission of the forgotten heir Less than the portion Total deprivation of of the legitime legitime Remedy is to demand Effect is the total for completion of annulment of the

legitime

institution of heirs

STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS IF THERE ARE DONATIONS: 1. Determination of the gross value of the estate at the time of the death of the testator; 2. Determination of all debts and charges which are chargeable against the estate – this refers to the pre-existing obligations of the testator during his lifetime, and not to the charges or burdens which are created by the testamentary dispositions found in the will; 3. Determination of the net value of the estate by deducting all the debts and charges from the gross value of the estate; 4. Collation or addition of the value of all donations inter vivos to the net value of the estate; 5. Determination of the amount of the legitime from the total thus found; NOTE: proceeds of an insurance policy where the beneficiary is a third person or even a compulsory heir belongs exclusively to the beneficiary and not to the estate of the insured. Hence, not subject to collation. 6. Imputation of the value of all donatioins inter vivos made to compulsory heirs against their legitime and of the value of all donations inter vivos made to strangers against the disposable free portion and restoration to the hereditary estate if the donation is inofficious; and 7. Distribution of the residue of the estate in accordance with the will of the testator. REDUCTION OF TESTAMENTARY DISPOSITIONS AND DONATIONS The order of preference is as follows: 1. Legitime of compulsory heirs 2. Donation inter vivos 3. Preferential legacies or devises 4. All other legacies or devises If after satisfying the legitime of the compulsory heirs, the disposable portion is sufficient to cover donations inter vivos but not the legacies and devises, the rule is that such legacies and devises will be reduced pro rate, after satisfying those preferential ones. DISINHERITANCE CAUSES OF VACANCY IN SUCCESSION

1. Disinheritance - The testator creates it himself 2. Repudiation - The heir does something 3. Incapacity/Predecease - Something happens to the heir HOW VACANCIES ARE FILLED 1. Substitution 2. Representation 3. Accretion DISINHERITANCE 1. Heir is being deprived of his legitime. 2. Only in cases of testate succession. NOTE: Counterpart in intestate is unworthiness. 3. Even if validly disinherited, heir can still be validly restored in the legitime by RECONCILIATION. 4. Reconciliation – when in “speaking terms again,” no particular form 5. In unworthiness, there must a pardon in writing to remove incapacity to inherit. However, it does not have to be in a will. 6. If grounds for disinheritance and unworthiness are common, reconciliation does not erase the fact that the heir is unworthy. 7. As long as there is reconciliation, it should be considered to have revoked the inheritance as well as the unworthiness. 8. Ineffective disinheritance v. Preterition REQUIREMENTS FOR VALID DISINHERITANCE 1. Effected only through a valid will; NOTE: Will containing disinheritance must be probated. 2. For a cause expressly stated by law; 3. Cause must be expressly state in the will itself; 4. Cause must be certain and true; 5. Unconditional; 6. Total; AND 7. The heir disinherited must be designated in such a manner that there can be no doubt as to his identity. EFFECTS OF DISINHERITANCE 1. Total exclusion of the compulsory heir in from the inheritance, which includes his legitime, his intestate portion, and any testamentary disposition made in a prior will.

NOTE: Therefore, the heir loses his legitime. As to the free portion, it passes through Substitution, Accretion, and Intestacy. 2. The children or descendants of the person disinherited shall take his or her place and shall preserve the rights of compulsory heirs with respect to the legitime. NOTE: The disinherited heir can be represented in the legitime. a. Only in the descending line, never in the ascending b. In collateral line, only with respect to nephews and nieces. 3. The disinherited parents shall not have the usufruct or administration of the property which constitutes the legitime. GROUNDS FOR DISINHERITANCE Grounds for Disinheritance Common To All Compulsory Heirs 1. Attempt on the life of testator, spouse, ascendant, descendant a. Conviction necessary b. In case of spouse, giving cause for legal separation, no conviction needed c. Include both attempted and frustrated. d. Attempt on life of relatives, may be consummated. 2. Accusation of a crime with penalty of six years or more. a. Penalty imposable, not actually imposed. b. Made by the heir in a proceeding as a complainant or witness in a criminal case. c. Found to be groundless, false. d. Groundless – court should make a positive finding that the testator has not committed the crime. It is then false. e. Chismis – not the one referred here, it is outside criminal proceeding. 3. Induce testator to make/change the will. a. Will – purely personal b. Vices of consent. c. It does not punish the result but the interference in the making/changing of the will. d. Will + disinheritance (will making)

e.

Will + amended will + disinheritance (will changing) 4. Support unjustifiably not given. a. Must prove obligation to give support b. Spouses: mutual obligation to give support c. Reason must be unjustifiable Grounds for Disinheritance Common between Ascendants and Descendants  Adultery and Concubinage – with the spouse of the testator 1. It must be the heir who committed such liaison 2. With the legal spouse of the testator 3. Not necessarily incestuous 4. Applicable to both legitimate and illegitimate descendant Grounds for Disinheritance Common Ascendant and Spouse Loss of parental authority 1. Causes: Arts. 230, 231, 232 of the Family Code 2. Ascendant of testator 3. Spouse has given cause for loss of parental authority. 4. No actual deprivation, but it must exist. It means that the act is committed which may be a cause for loss of parental authority over their common children, EXCEPT for those enumerated in A. 5. There are no common grounds between spouse and descendants. Grounds for Disinheritance Only against Descendant 1. Maltreatment of testator a. By word – slander, offensive language, insult, libel. May be spoken or written. b. By deed – no need for violence, something which caused the testator to be humiliated. Laying hands if not under attempt on life. 2. Leading a disgraceful life (or dishonest) i.e., daughter living with a married man, estafadora, prostitutes, drug dealers, drug addict. 3. Commission of crime which carries with it the penalty of civil interdiction

a. Descendant convicted of crime with civil interdiction. Necessarily imposable, not actually imposed. b. Reclusion temporal, reclusion perpetua. Ground for Disinheritance Only against Ascendants (Parents) 1. Abandonment by parents a. Willfully left the children to fend for themselves b. Abdication of parental duties. c. Only refers to abandoned child. d. Induced daughters to lead a disgraceful life – also applicable to sons. 2. Attempt on the life of against another parent.

one

parent

a. b.

Parent v. parent Even if parents are not married, it is still a ground. c. No need for conviction. As long as the heir can prove that there is an attempt. d. They do not need to be spouses. However, the testator must be a common child. Grounds for Disinheritance Only against spouse – refers to legal spouses only, legally married to each other 1. Giving cause for legal separation a. No need for previous conviction b. Prove infidelity if cause is contested c. No need to prove grounds unless contested by the heir. d. Legal separation instituted but not terminated, OK e. If there is already a decree: i. Ground is conclusive ii. But, there is a need to disinherit iii. Effects: Guilty spouse is not entitled to inherit. f. See 10 causes under the Family Code. 2. Support – refusal to give support to the children a. Offended the testator b. Common children of the testator and the spouse

c.

Spouse refuses to give support to the child d. Parents share in support of their common children. Refusal of the other spouse causes damage to the other. (testator)

GROUND

CHILD/

PARENT/

DESCEND

ASCEND

SPOUSE

√

√

√

√

√

√

to

√

√

√

not

√

√

√

Adultery and Concubinage

√

√

N/A

Loss of parental authority

N/A

√

√

Attempt against the life of the

testator,

spouse,

ascendant, descendant Accusation of a crime with penalty of six years Induce

testator

make/change the will.

Support

unjustifiably

given

Grounds

Specific

Particular Heir

to

a

1.Maltreatment

1. Abandonment

of testator 2.

parents

Leading

a

disgraceful life 3.

of crime which the

2. Attempt

with

it

penalty

of

civil interdiction

against parent.

1 Giving Cause Legal

on

the

life of one parent

Commission

carries

by

another

Separation 2. Support

IMPERFECT DISINHERITANCE: Disinheritance which does not have one or more of the essential requisites for its validity. EFFECTS OF IMPERFECT DISINHERITANCE 1. If the testator had made disposition of the entire estate; annulment of the testamentary disposition only in so far as they prejudice the legitime of the person disinherited; does not affect the dispositions of the testator with respect to the free portion 2. If the testator did not dispose of the free portion; compulsory heir given all that he is entitled to receive as if the disinheritance has not been made, without prejudice to lawful dispositions made by the testator in favor of others 3. Devisees, legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime











 IMPERFECT DISINHERITANCE Person disinherited may be any compulsory heir EXPRESS INTENTIONAL partial annulment institution of heirs

of

PRETERITION The person omitted must be a compulsory heir in the direct line IMPLIED EITHER intentional or unintentional Effect: total annulment of institution of heirs

REVOCATION OF DISINHERITANCE 1. Reconciliation NOTE: This refers to the resumption of genuine cordial relationship between the testator and the disinherited heir, approximating that which prevailed before the testator learned of the cause for disinheritance, reciprocally manifested by their actions subsequent to the act of disinheritance. 2. Subsequent institution of the disinherited heir 3. Nullity of the will which contains the disinheritance NOTES:

Even if validly disinherited, heir can still be validly restored in the legitime by RECONCILIATION. A subsequent reconciliation between the offender and the offended person deprives the latter of the right to disinherit and renders ineffectual any disinheritance that may have been made. (Art. 922) Reconciliation – when in “speaking terms again,” no particular form required, it may be express or tacit. However, mere civility which may characterize their relationship is not enough. In order for reconciliation to be effective, the testator must pardon the disinherited heir. Such pardon must specifically refer to the heir and to the acts causing the disinheritance. The heir must accept the pardon. In unworthiness, there must a pardon in writing to remove incapacity to inherit. However, it does not have to be in a will. If grounds for disinheritance and unworthiness are common, reconciliation does not erase the fact that the heir is unworthy. What then is the effect of a subsequent reconciliation upon the heir’s capacity to succeed? 1. If disinheritance has been made: Rule on reconciliation applies, the disinheritance becomes ineffective 2. If disinheritance has not been made: The rule on reconciliation does not apply, the heir continues to be incapacitated to succeed unless the testator pardoned him under Art. 1033.

LEGACIES AND DEVISES PERSONS CHARGED WITH LEGACIES AND DEVISES: 1. 2. 3. 4.

Compulsory heir; Voluntary heir; Legatee or devisee; Estate.



If the will is silent as to who shall pay or deliver the legacy/devise, 1. If there is an administration proceedings, there is a presumption that such legacy or devise







constitutes a charge against the decedent’s estate 2. If there is no administration proceedings, it is a charge upon the heirs (Art. 926, par. 2) Since legacies and devises are to be taken from the disposable free portion of the estate, the provisions on institution of heirs are generally applicable to them The legatees/devisees shall be liable for the charge to the extent of the value of the legacy/devise received. The compulsory heir shall NOT be liable for the charge beyond the disposable portion given to him. It should not affect his legitime.

ORDER OF PAYMENT IN CASE ESTATE IS INSUFFICIENT TO COVER ALL LEGACIES AND DEVICES 1. Remuneratory legacies or devises 2. Legacies or devises declared by the testator to be preferential 3. Legacies for Support 4. Legacies for Education 5. Legacies or devises of a specific, determinate thing which forms a part of the 6. estate 7. All others, pro-rata

WHEN LEGACY/DEVISE CAN BE REVOKED BY OPERATION OF LAW 1. If the testator transform the thing bequeathed or devised in such a manner that it does not retain its form and denomination 2. If the testator, by any title or for any cause, alienates the thing bequeathed or devised or any part thereof 3. If the thing bequeathed or devised is totally lost during the lifetime of the testator, or after his death without the heir’s fault 4. If the legacy is a credit against a third person or the remission of a debt, and the testator, subsequent to the making of the will brings an action against such debtor for payment GROUNDS FOR REVOCATION OF LEGACIES OR DEVISES

1. Testator transforms the thing bequeathed in such a manner it does not retain either the form or the denomination it had. 2. The testator by any title or for any cause alienates the thing bequeathed, or any part thereof, it being understood that in the latter case the legacy or devise shall be without only with respect to the part alienated EXCEPT: when the thing should again belong to the testator after alienation. 3. The thing bequeathed is totally lost during the lifetime of the testator, or after his death without the heirs fault; 4. Other Causes: nullity of the will; noncompliance with suspensive conditions affecting the bequests; sale of the thing to pay the debts of the deceased during the settlement of his estate.

VALIDITY AND EFFECT OF LEGACY Thing owned in part by testator (Art. 929)

General Rule: Conveys only interest or part owned by testator Exception: if testator otherwise provides – 1. He may convey more than what he owns - the state should try to acquire the part or interest owned by other parties. If other parties are unwilling to alienate, the estate should give the legatee/devisee the monetary equivalent (analogy with Article 931) 2. He may convey less than what he owns (Article 794)

Thing owned by another (Arts. 930-931)

General Rule: 1. If testator ordered acquisition of the thing - the order should be complied with. If the owner is unwilling to part with the thing, the legatee/devisee should be given the monetary equivalent 2. If testator erroneously believed that the thing belonged to him - legacy/device is void Exception: if testator acquire the thing onerously or gratuitously after making of the disposition, disposition is validated 3. If testator knew that the thing did not belong to him but did not order its acquisition - code is silent but disposition should be considered valid - there is an implied order to acquire and doubts must be resolved in favor of intestacy

Thing already owned to the legatee/devisee (Arts 932-933)

1.

If thing already belonged to legatee/devisee at time of execution of will – legacy/devise is void

2.

If thing was owned by another person at time of making the will and thereafter it is acquired by legatee/devisee: a.

If testator erroneously believed that he owned the thing – legacy /devise is void

b.

If testator was not in error – i.

If thing was acquired onerously by L/D – L/D entitled to be reimbursed

ii.

If thing was acquired gratuitously by L/D – nothing is due

3.

If thing was owned by testator at time will was made and L/D acquired the thing from him thereafter – law is silent *Balane – L/D deemed revoked *Tolentino – no intention to revoke (BUT if the testator has not alienated the thing directly to the L/D, but to a 3rd person and the former just acquired it from the latter, there is an intention to revoke)

Legacy/Devise to remove an encumbrance over a thing belonging to testator (Art 932 par 2)

Valid, if the encumbrance can be removed for a consideration

Legacy/Devise of a thing pledged or mortgaged (Article 934)

The encumbrance must be removed by paying the debt unless the testator intended otherwise

BASIC PRINCIPLES SUCCESSION

================================= TOPICS UNDER THE SYLLABUS III. Legal or Intestate Succession (Arts. 960-1014) A. General provisions (Arts. 960969) (1) Relationship (Arts. 963-969) (2) Right of representation (Arts. 970-977) B. Order of intestate succession (Arts. 978-1014, 992) ================================= III. GENERAL PROVISIONS ON LEGAL OR INTESTATE SUCCESSION LEGAL OR INTESTATE SUCCESSION: That which is effected by operation of law in the absence or default of a will. CAUSES OF GENERAL 1.

2.

INTESTATE

SUCCESSION

IN

In the absence of applicable valid will a. Annulment of institution of heirs. b. When will loses its validity. c. Testator did not make any will. d. Will not probated. e. Revocation. f. Preterition In the absence of qualified heirs a. Partial institution of heir. In such case, intestacy takes place as to the undisposed portion (mixed succession) b. Ineffective disinheritance (a portion) c. Predecease d. Repudiation (one or all) e. Incapacity f. Disinheritance g. Institution subject to conditions i. Suspensive condition did not happen ii. Resolutory condition happens. iii. Expiration of term or period of institution iv. Non-compliance or impossibility of compliance with the will.

IN

INTESTATE

1. Intestate heirs always related by blood. Except: a. Spouse - not related by blood, stranger in the family b. Adoptive relation – adopter/adopted, fiction by law created by adoption, purely personal c. State – in the event no heir can inherit. 2. Rule of Proximity – The nearer excludes the farther – the relative nearest in degree exclude the farther one, saving the right of representation when it properly takes place. NOTE: This is subject to rule of preference between lines. In case of disposition made under Art. 959 in general terms in favor or the testator’s relatives, only rule of proximity applies. 3. Rule of Preference Between Lines – Direct line is always preferred over collateral lines. The direct descending line shall exclude those in the direct ascending and collateral lines, and those in the direct ascending line shall, in turn, exclude those in the collateral line. 4. Rule of equal division – the relatives who are in the same degree shall inherit in equal shares same class Exception: a. Descending line – difference in class in the cases of legitimate or illegitimate filiation. i. In case of paternal/maternal lines ii. Collateral – half or full blood b. Ascending line – the shares are divided equally between maternal and paternal lines, which could result to unequal shares when there is only one grandparent in the maternal line while both grandparents survived in the paternal side. c. Division among brothers and sisters, some of whom are of the full and others of half blood; and d. Division in cases where the right of representation takes place. 5. Rule of Barrier between the legitimate family and the illegitimate family – the illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa.

6. Rule of Double Share for full blood collaterals – when full and half-blood brothers or sisters, nephews or nieces, survive, the full blood shall take a portion in the inheritance doubt that of the half-blood. NOTE: In all cases where there has been an institution of heirs, follow the [I.S.R.A.I.] order of Justice Paras. If the Institution fails, Substitution occurs. If there is no substitute, right of Representation applies in the direct descending line to the legitime of the vacancy is caused by predecease, incapacity or disinheritance. The right of Accretion applies to the free portion when the requisites in Article 1016 are present. If there is no substitute, and the right of representation or accretion does not apply, the rule of Intestate succession shall take over. RULES ON RELATIONSHIP 1.

Number of generations determines proximity 2. Each generation forms a degree 3. A series of degrees forms a line 4. A line may be direct or collateral. A direct line is that constituted by the series of degrees among ascendants and descendants (ascending and descending) 5. A collateral line is that constituted by the series of degrees among persons who are not ascendants or descendants, but who come from a common ancestor. 6. Full blood: same father and mother, half blood: only one of either parent is the same. 7. In adoption, the legal filiation is personal and exists only between adopter and the adopted. The adopted is deemed a legitimate child of the adopter. EFFECTS OF INCAPACITY OR REPUDIATION 1. If there are several relatives of the same degree and on or more of them are unwilling or incapacitated to succeed, his portion shall accrue to the others of the same degree (right of accretion) save the right of representation when it should take place. 2. If the inheritance should be repudiated by the nearest relative, should there be only one, or by all the nearest relatives called by law to succeed, should there be several,

those of the following degree shall inherit in their own right (per capita) and cannot represent the person repudiating the inheritance. REPRESENTATION: A right created by fiction of law, by virtue of which the representative is raised to the place and degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited. INSTANCES OCCURS:

WHEN

REPRESENTATION

1. Predecease 2. Incapacity of Unworthiness 3. Disinheritance NOTE: In case of repudiation, accretion takes place. 

Although a renouncer cannot be represented, he can represent the person whose inheritance he has renounced. Sayson v. CA, [205 SCRA 324]

CHARACTERISTICS OF REPRESENTATION 1. A right of subrogation 2. Exception to the rule on proximity and equal division 3. Called to succession by law 4. Representative succeeds the decedent and NOT the person represented 5. Takes place when there is vacancy in the inheritance brought about by predecease, incapacity, or disinheritance 6. As a general rule, exercised only by the grandchildren of the decedent TESTAMENTARY INTESTATE When Takes Place COMPULSORY HEIR: LEGAL HEIR: dies before the testator

dies before testator

is unworthy to succeed

is unworthy succeed

the to

is disinherited Effects Upon The Division Acquires the right Acquires the right with respect to the with respect to the legitime entire legal portion Per stirpes Per stirpes

IN WHAT KINDS OF REPRESENTATION OPERATES 1.



2. 

SUCCESSION

Legitimes The children and descendants of the person disinherited shall take his or her place and shall preserve the rights of compulsory heir with respect to the legitime (Art 923) And only when the heir to be represented: a. Predecease, becomes incapacitated, or was disinherited by the testator. b. Is a compulsory heir. c. No right of representation if the heir to be represented is a voluntary heir. Intestate succession Representation occurs in all intestate estate. All legal heirs may be represented when proper. (It is not proper only when the heir to be represented repudiated his share in the inheritance)

OUTLINE OF RULES: KIND OF HEIR Compulsory

Voluntary

Legal

Predecease

Incapacity

Renunciation

Transmits nothing;

Transmits nothing;

Transmits nothing;

Transmits nothing;

Representation

Representation

NO Representation

Representation

Transmits nothing;

Transmits nothing;

Transmits nothing;

Not applicable

NO Representation

NO Representation

NO Representation

Transmits nothing;

Transmits nothing;

Transmits nothing;

Representation

Representation

NO Representation

IN WHAT LINES DOES REPRESENTATION OBTAIN

3.

1. Legitime - in the direct descending line only.

The rationale why an adopted child can neither represent or be represented is because the legal relationship created by the adoption is strictly between the adopter and the adopted. Teotica v. Del Val, [13 SCRA 406]

Intestacy: a. In the direct descending line.

QUALIFICATIONS TO REPRESENT

b.

1. The representative himself must capacity to succeed the decedent

In the collateral line, it takes place only in favor of the children of brother or sisters (nieces and nephews of the decedent, not grand-nieces or grandnephews), whether of the full or half blood, and only if they concur with at least 1 uncle or aunt.

NOTE: If all the brothers and sisters are disqualified, the nephews and nieces shall inherit per capita. REPRESENTATION OF ADOPTED CHILDREN 1.

Not applicable

An adopted child can neither represent nor be represented 

Representation does not exist in the ascending line. Hence, the father cannot represent the son in the inheritance from the grandfather. 2.

Disinheritance

ILLEGITIMATE

OR

If the child to be represented is legitimate – only legitimate children and descendants can represent him. 2. If the child to be represented is illegitimate – both legitimate and illegitimate children/descendants can represent him.

have

2. The representative need not be qualified to succeed the person represented. HOW REPRESENTATION OPERATES



Division shall be made PER STIRPES.

Factual Situation

Division

If all the children are disqualified

All grandchildren still inherit per stirpes

If all the brothers /sisters are disqualified

Nephews and nieces inherit per capita

THE SUCCESSIONAL BARRIER





An illegitimate child has no right to inherit ab intestato from the legitimate children and relatives of his father or mother; nor shall such children or relatives inherit in the same manner from the illegitimate child. (Art 992) The Barrier rule only applies if there is a legitimate and illegitimate relation. Example: A is the legitimate son of B. C is the illegitimate son of A. C cannot inherit from B if A predeceases, or becomes incapacitated or be disinherited by B.

EFFECTS OF REPUDIATION 1. By representative – right of representation is present Example: A child who repudiates his inheritance when his father died may still represent the latter when his grandfather dies. 2. By heir – no right of representation ORDER OF INTESTATE SUCCESSION INTESTATE HEIRS: Those who are called by law to the succession either in the absence of a will or of qualified heirs, and who are deemed called based on the presumed will of the decedent. REGULAR ORDER OF SUCCESSION 1. Legitimate Children/Descendants 2. Illegitimate Children/Descendants 3. Legitimate Parents/ Ascendants 4.

Illegitimate Parents

5. Surviving Spouse 5. Brothers, Sisters, Nephews, Nieces 6. Other Collaterals – to the 5th degree 7. State NOTE: Decedent is a legitimate person ORDER OF SUCCESSION (If descendent is a legitimate person) 1. Legitimate Children/Descendants 2. Illegitimate Children/Descendants 3. Illegitimate Parents 4. Surviving Spouse

5. Brothers, Sisters, Nephews, Nieces 6. State

RULES OF EXCLUSION AND CONCURRENCE Intestate Heir

EXCLUDES

CONCURS WITH EXCLUDED BY

Legitimate children and Legitimate descendants

Ascendants, collaterals and state

No one

Surviving spouse

Illegitimate children and Descendants

Illegitimate parents, collaterals and state

No one

Legitimate parents and legitimate ascendants

Collaterals and state

Legitimate children

Illegitimate children and surviving spouse

Illegitimate parents

Collaterals and state

Legitimate children and illegitimate children

Surviving spouse

Surviving spouse

Collaterals other than siblings, nephews and nieces

No one

Legitimate children

Illegitimate children Surviving spouse Legitimate children and legitimate parents

Illegitimate children Legitimate parents and Illegitimate parents

Siblings, nephews nieces

All other collaterals and state

Legitimate children, illegitimate children,

Surviving spouse

Legitimate parents and illegitimate parents Other collaterals within 5th degree

Collateral remoter in degree and state

Legitimate children Illegitimate children Legitimate parents Illegitimate parents and

Collaterals in the same degree

Surviving spouse State

No one

Everyone

No one

SUMMARY OF INTESTATE SHARES HEIR

LEGITIME

FREE PORTION

TOTAL

LEGITIMATE CHILDREN & DESCENDANTS

(1/2)

(1/2)

100%

LEGIMITATE PARENTS & ASCENDANTS

(1/2)

(1/2)

100%

1 (ONE) LEGITIMATE CHILDREN/DESCENDANT & SURVIVING SPOUSE LEGITIMATE CHILDREN (LC) & SPOUSE

LEGITIMATE CHILDREN (LC) & ILLEGITIMATE CHILDREN (ILC)

LEGITIMATE PARENTS/ASCENDANT & SURVIVING SPOUSE

CHILDREN – 1/2 SPOUSE -1/4

SPOUSE -1/4

CHILDREN – 1/2

LC -1/2 ILC – 1/2 OF SHARE OF 1 (ONE) LC

WHAT REMAINS (IF ANY)

LEGITIMATE PARENTS/ASCEN DANT – 1/2

WHOLE ESTATE DIVIDED BY THE RATIO OF 2:1 FOR EACH LEGITIMATE CHILD AS COMPARED TO THE ILLEGITIMATE CHILD PARENT – 1/2

SPOUSE -1/4

LEGITIMATE PARENTS/ASCEN DANTS – 1/2 ILLEGIMITATE CHILDREN – 1/4

SPOUSE - 1/2 ENTIRE ESTATE IS DIVIDED EQUALLY BETWEEN TOTAL NUMBER OF CHILDREN & SPOUSE

SPOUSE – EQUAL TO SHARE OF 1 (ONE) LC

SPOUSE – 1/4 LEGIMITATE PARENTS/ASCENDANTS & ILLEGIMTATE CHILDREN

CHILDREN – 1/2

SPOUSE - 1/2 PARENTS - 1/2

ILLEGITIMATE CHILDREN - 1/4

ILC - 1/2

ILLEGITIMATE CHILDREN & SURVIVING SPOUSE

LEGIMIATE CHILDREN/DESCENDANTS, SURVIVING SPOUSE & ILLEGITIMATE CHILDREN

ILC – 1/3

ILC - 1/6

ILC - 1/2

SPOUSE – 1/3

SPOUSE - 1/6

SPOUSE - 1/2 WHOLE ESTATE DIVIDED BY THE RATIO OF 2:1 FOR EACH LEGITIMATE CHILD AS COMPARED TO THE ILLEGITIMATE CHILD

LC –1/2 SPOUSE – EQUAL TO 1 (ONE) LC ILC – 1/2 OF SHARE OF ONE (1) LC

LEGITIMATE PARENTS/ASCENDANTS, SURVIVING SPOUSE, & ILLEGITIMATE CHILDREN

LEGIMIATE PARENTS/ASCEN DANTS –1/2 SPOUSE – 1/8

LEGITIMATE PARENTS - 1/2 SPOUSE - 1/4 ILC - 1/4 SPOUSE - 1/8

ILC –1/4 SURVIVING SPOUSE

GENERA LLY

(1/2)

(1/2)

100%

ARTICUL O MORTIS

(1/3)

(2/3)

100%

ILLEGITIMATE CHILDREN ONLY

(1/2)

(1/2)

100%

ILLEGITIMATE PARENTS

(1/2)

(1/2)

100%

ILLEGITIMATE PARENTS & SURVIVING SPOUSE

ILLEGITIMATE PARENTS – 1/4

ILLEGITIMATE PARENTS - 1/4 SPOUSE - 1/4

ILLEGIMITATE PARENTS - 1/2 SPOUSE - 1/2

SPOUSE – 1/4 SIBLINGS, NEPHEWS & NIECE

(1/2)

(1/2)

100% SPOUSE – 1/2

SURVIVING SPOUSE, SIBLINGS, NEPHEWS & NIECES

SPOUSE (1/2)

NEPHEWS/SIBLINGS (1/2)

NEPHEWS/SIB LINGS 1/2

WHEN DECEDENT HAS NO HEIRS 1. Assignment and Disposition of Assets a. if decedent is a resident of the Philippines at any time i. Personal property – to the municipality of last residence ii. Real property – where situated b. If decedent was never a resident of the Philippines Personal and real property – where respectfully situated 2.

How Property is to be Used a. For the benefit of public educational and charitable institutions in the respective municipalities/cities b. Alternatively, at the instance of an interested party, or motu proprio, the court may order the permanent trust for the benefit of the institutions concerned

CARDINAL PRINCIPLES OF INTESTATE SUCCESSION (By Justice Paras) 1. Even if there is an order of intestate succession, the compulsory heirs are never excluded. The Civil Code follows the concurrence theory, not the exclusion theory. 2. Right of Representation in the collateral line occurs only in intestate succession, never in testamentary succession because a voluntary heir cannot be represented (collateral relatives are not compulsory heirs) 3. The intestate shares are either equal to or greater than the legitime. 4. General Rule: Grand Children always inherit by Right of Representation, provided representation is proper. Exception: Whenever all the children repudiate, the grandchildren inherit in their own right because Right of Representation would not be proper 5. Nephews and nieces inherit either by Right of Representation or in their Own Right a. Right of Representation when they concur with aunts and uncles (provided that Right of Representation is proper) b. Own Right: when they do not concur with aunts and uncles 6. Illegitimate Children and Descendants of legitimates cannot represent because of the barrier, but both the Illegitimate and Legitimate Children and Descendants of Illegitimates can. 7. There can be reserva troncal in intestate succession 8. A renouncer can represent, but cannot be represented

9. A person who cannot represent a near relative cannot also represent a relative father in degree. MIXED SUCCESSION OR PARTIAL INTESTACY Mixed Succession: Succession that is effected partly by will and partly by operation of law. Rules: 1. The law of legitimes must be brought into operation in partial intestacy because the testamentary dispositions can affect only the disposable free portion but never the legitimes. 2. If among the concurring intestate heirs there are compulsory heirs, whose legal or intestate portions exceed their respective legitmes, then the amount of the testamentary disposition must be deducted from the disposable free portion, to be borne by all the intestate heirs in the proportions that they are entitled to receive from such disposable free portion as intestate heirs. 3. If the intestate share of a compulsory heir is equal to his legitime, then the amount of the testamentary disposition must be deducted only from the intestate shares of the others, in the proportions stated above. 4. If the testamentary dispositions consume the entire disposable free portion, then the intestate heirs who are compulsory heirs will get only their legitime, and those who are not compulsory heirs will get nothing.

================================= TOPICS UNDER THE SYLLABUS IV. Provisions Common to Testate and Intestate Succession (Arts. 10151105) A. Right of accretion (Arts. 10151023) (1) Definition and requisites (Arts. 1015-1016) B. Capacity to succeed by will or intestacy (Arts. 1024-1040) (1) Persons incapable of succeeding (Arts. 1027, 739, 1032) (2) Unworthiness vs. Disinheritance C. Acceptance and repudiation of the inheritance (Arts. 1041-1057) D. Collation (Arts. 908-910, 10611062) E. Partition and distribution of estate (Arts. 1078-1105) (1) Partition (Arts. 1079, 1080) (2) Partition inter vivos

(3) Effects of partition (Arts. 1091, 1097, 1100, 1104-1105) ================================= IV. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION RIGHT TO ACCRETION: When two or more persons are called to the same inheritance, devisee, or legacy, the part assigned to one who renounce or cannot receive his share or who died before the testator, is added or incorporated to that of his co-heirs, codevisees, or co-legatees 1. In Testamentary Succession a. Predecease b. Incapacity c. Repudiation d. Non-fulfillment of suspensive condition imposed upon instituted heir e. Ineffective testamentary disposition 2. In Intestate Succession a. Predecease of a legal heir (only when representation does not apply) b. Incapacity of legal heir (only when representation does not apply) c. Repudiation by a legal heir ELEMENTS OF ACCRETION IN TESTAMENTARY SUCCESSION 1. Two or more persons are called to the same inheritance, or to the same portion thereof, pro indiviso (aliquot share) a. In cases of legacy or devise, as long as there is no specific designation of the specific share of each legacy or devise. b. Not necessarily equal. c. Once a certain specific part of the free portion has already been specifically earmarked, there is no accretion and there is no express provision on accretion. d. But, it is okay to earmark parts of the free portion as long as no specific property has been designated. NOTE: The heir to whom the portion goes by the right of accretion takes it in the same proportion that they inherit 2. Renunciation, predecease or incapacity of one (or more but less than all) of the instituted heirs that result to a vacancy in the inheritance, legacy or devise. FUNDAMENTAL PRINCIPLES IN ACCRETION

1. Accretion in testate succession only takes place in the free portion. No accretion in the legitime because when the compulsory heir repudiates his legitime, the other cocompulsory heir inherits the repudiated share in their own right and not through accretion. If the cause of the vacancy is PID, representation will occur. 2. Accretion also takes place in cases of devisees and legatees and usufructuaries under the same conditions established for heirs. 3. Accretion is subordinate to substitution, because substitutes are instituted by the testator; hence, express will prevails over presumed will. NOTE: if there is neither accretion nor substitution in testamentary succession, the part left vacant will lapse into testacy 4. The one that the heir gets from accretion can be renounced separate from the inheritance attributed to the heir who will renounced the accrued inheritance. SUMMARY: I. In testamentary succession: 1. Legitime:  In case of predecease of an heir, there is representation if there are children or descendants; if none, the others inherit in their own rights.  In case of incapacity, results are the same as in predecease.  In case of disinheritance, results are the same as in predecease.  In case of repudiation by an heir, the others inherit in their own rights. 2. Disposable free portion:  Accretion takes place when requisites are present, but if such requisites are not present, the others inherit in their own right. II. In intestate succession:  In case of predecease, there is representation if there are children or descendants; if none, the others inherit in their own rights.  In case of incapacity, results are the same as in predecease.  In case of repudiation, there is always accretion. CAPACITY TO SUCCEED The following are capable of succeeding: 1. Natural Persons a. General Rule – must be (1) living when succession opens, and (2) not incapacitated or disqualified by law to succeed.

NOTE: It is enough that the heir, devisee or legatee be already conceived in accordance with Arts 40 and 41, to be considered living. b. If institution subject to a suspensive condition – successor must be living both when decedent dies and when the condition happens c. If institution subject to a suspensive term – must be alive only at the moment of decedent’s death, successor need not be alive when the term arrives. 2. Juridical Persons Organizations or associations which possess juridical personality

WHO ARE INCAPABLE OF SUCCEEDING A. ABSOLUTE INCAPACITY 1. Those not living at the time of death except Arts. 1026, 1027, and 1030 2. Those who cannot be identified – uncertain persons (Art. 845) 3. Those who are not permitted by law to inherit (Art. 1027) B. RELATIVE INCAPACITY 1. Those Prohibited under Art 1027 due to Undue Influence or Interest a. Priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period b. Relatives of such priest or minister of the gospel within the 4th degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong c. Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; EXCEPT if the guardian is his ascendant, descendant, brother, sister, or spouse d. Attesting witness to execution of will, their spouses, parents, children or any one claiming under such witness, spouse, parents or children e. Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness f. Individuals, associations, and corporations not permitted by law to inherit NOTE: Possible only in testamentary succession. Therefore, if the one incapacitated is a compulsory heir, it does not affect the legitime but only the free portion.

2. Those prohibited under Art 739 from giving and receiving donation from each other based on Morality or Public Policy a. Those made between persons who were guilty of adultery or concubinage at the time of the donation; b. Those made between persons found guilty of the same criminal offense, in consideration thereof; c. Those made to a public officer or his wife, descendants and ascendants, by reason of his office. NOTE: Possible only in testamentary succession. Therefore, if the one incapacitated is a compulsory heir, it does not affect the legitime but only the free portion. 3. The following are incapable of succeeding by reason of unworthiness: a. Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or attempted against their virtue; b. Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; c. Any person who has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; d. Any heir of full age who, having knowledge of the violent death of the testator, should fail to report it to an officer of the law within a month, unless the authorities have already taken action; this prohibition shall not apply to cases wherein, according to law, there is no obligation to make an accusation; e. Any person convicted of adultery or concubinage with the spouse of the testator; f. Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; g. Any person who by the same means prevents another from making a will, or from revoking one already made, or who supplants, conceals, or alters the latter's will; h. Any person who falsifies or forges a supposed will of the decedent. (756, 673, 674a) NOTE: The cause of unworthiness shall be without effect if the testator had knowledge thereof at the time he made the will, or if,

having known of them subsequently, he should condone them in writing. This is applicable to both testamentary and legal succession. It is total in the sense that it extends not only to the free portion but also to the legitime. 4. By Operation of Law – The moment the testator uses one of the acts of unworthiness as a cause for disinheritance, he thereby submits it to the rules on disinheritance. Thus, reconciliation renders the disinheritance ineffective. PARDON OF ACTS OF UNWORTHINESS EXPRESS IMPLIED Made by the execution Effected when testator of a document or any makes a will instituting writing in which the the unworthy heir with descendent condones knowledge of the the cause of incapacity cause of incapacity Cannot be revoked Revoked when the testator revokes the will or the institution

TIME TO DETERMINE THE CAPACITY GENERAL RULE: at the moment of the death of the descedent. EXCEPTION: a. Those disqualified under Art. 1032 (2,3,5) wherein it is necessary to wait until final judgment is rendered b. Those disqualified under Art.1032 (4) wherein it is necessary to wait for the expiration for the month allowed for report c. If the institution of the heirs, legacy or devise is conditional, the time of compliance with the condition shall be considered. NOTE: The action for a declaration of incapacity and recovery of the inheritance, devise or legacy shall be 5 years from the time the disqualified person took possession thereof. ADDITIONAL NOTES 1. The capacity to succeed is governed by the law of the nation of the decedent. 2. Persons not incapacitated by law may succeed by will or ab intestato. 3. If the heir excluded from the inheritance by reason of incapacity is a compulsory heir, and if such compulsory heir has children or descendant, the latter shall acquire the incapacitated heir’s right to the legitime (by representation.). 4. A testamentary provision in favor of a disqualified person, even though made under the guise of an onerous contract, or

made through an intermediary, shall be void. (Art. 755) MANNER OF ACCEPTANCE OF INHERITANCE 1. Express a. Public Document b. Private Writing 2. Tacit Acceptance – one resulting from acts by which the intention to accept is necessarily implied or which one would have no right to do except in the capacity of an heir. It can be presumed from certain acts of the heir such as: a. When heir sells, donates, or assigns his right. b. When heir renounces it for the benefit of one or more heirs. c. When renunciation is in favor of all heirs indiscriminately for consideration d. Other acts of tacit acceptance: i. Heir demands partition of the inheritance ii. Heir alienates some objects of the inheritance iii. Under Article 1057, failure to signify acceptance or repudiation within 30 days after an order of distribution by the probate court. CHARACTERISTICS OF REPUDIATION 1. Free and Voluntary Act 2. Irrevocable once made and cannot be impugned, except in cases vitiating consent. 3. Retroactive REQUISITES FOR A VALID REPUDIATION Heir repudiating must be certain of two things before repudiating: a. Death of the person from whom he is to inherit; b. Right to the inheritance. 

Who may accept or repudiate? Any person having the free disposal of his property UNLESS he is incapacitated such as when he is a minor, deaf-mute who cannot read and write, judicially declared insolvent, under civil interdiction, in which cases his guardian or representative shall be the one to accept or repudiate. However, judicial authorization is necessary in case of repudiation.

If the beneficiary happens to be the POOR: a. Acceptance – person designated by the testator to determine the beneficiaries and to distribute the property. In default thereof, the executor.

b. Repudiation – beneficiaries themselves once they are determined If the beneficiary happens to be a CORPORATION, ASSOCIATION, INSTITUTION, OR ENTITY: a. Acceptance – legal representative b. Repudiation – legal representative with judicial authorization If the beneficiary happens to be a MARRIED WOMAN: she may either accept or repudiate the inheritance without her husband’s consent  How is repudiation made? The repudiation of the inheritance shall be made in: a. a public document - acknowledged before a notary public, or b. authentic instrument – equivalent to an indubitable writing or a writing whose authenticity is admitted or proved, or c. by a petition presented to the court having jurisdiction over the testamentary or intestate proceedings. RATIO: The law considers that the act of repudiation is more solemn that the act of acceptance and that repudiation produces more violent and disturbing consequences. 



If the heir repudiates the inheritance to the prejudice of his own creditors, the latter may petition the court to authorize them to accept it in the name of the heir. If an heir is both a testate and legal heir, repudiation of the inheritance as a testate heir, he is understood to have repudiated in both capacities. However, should he repudiate as a legal heir, without knowledge of being a testate heir, he may still accept the inheritance as a legal heir. NOTES: If renounced in favor of other heirs, does it mean acceptance? It depends: a. If specific heir – whether or not renouncing heir receives anything, considered as acceptance on the part of the heir. There are two transfers. b. If gratuitous – i. In favor of all his co heirs indiscriminately - there is repudiation because heir deemed to have not accepted. Hence, accretion takes place. ii. In favor of all co-heirs but in proportion different from those they would receive by accretion: considered as tacit acceptance. iii. If gratuitous in favor of one or some of his co-heirs – deemed

c.

  

conveyance in favor of the co-heirs specified, hence there is acceptance. If onerously: There is no repudiation Transfer considered to be with consideration There are also tax implications because there are two transfers.

EFFECTS OF ACCEPTANCE AND REPUDIATION General Rule: irrevocable Exception: 1. if made through any of the causes that vitiates consent (mistake, violence, intimidation, undue influence and fraud) 2. when an unknown will appears COLLATION: the act by virtue of which, the persons who concur in the inheritance bring back to the common hereditary mass the property which they have received from him, so that a division may be effected according to law and the will of the testator. To collate is to bring back or to return to the hereditary mass, in fact or by fiction, property which came from the estate of the decedent, during his lifetime, but which the law considers as an advance from the inheritance PROPERTIES OR RIGHTS RECEIVED BY COMPULSORY HEIR NOT SUBJECT TO COLLATION 1. Property left by will 2. Property which may have been donated by an ascendant of the compulsory heir 3. Property donated to the spouse of the compulsory heir 4. Expenses for support, education, medical attendance even in extraordinary illness, apprenticeship, ordinary equipment or customary gifts 5. Expenses incurred by parents in giving their children a professional, vocational, or other career 6. Wedding gifts consisting of jewelry, clothing and outfit, given by parents or ascendants, so long as they do not exceed 1/10 of the disposable portion OPERATIONS RELATED TO COLLATION 1. Collation – adding to the mass of the hereditary estate the value of the donation or gratuitous disposition 2. Imputing or Charging – crediting the donation as an advance on the legitime (if the donee is a compulsory heir) or on the free portion (if the donee is a stranger)

3. Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious 4. Restitution – return or payment of the excess to the mass of hereditary estate. PERSONS OBLIGATED TO COLLATE GENERAL RULE: compulsory heirs EXCEPTION: a. When the testator should have so expressly provided; and b. When the compulsory heir should have repudiated his inheritance 

Grandchildren who survive with their uncles, aunts, or first cousins, and inherit by right of representation.

NOTE: Grandchildren may inherit from grandparent in their own right (i.e. heirs next in degree) and not by right of representation if their parent repudiates the inheritance of the grandparent, as no living person can be represented except in cases of disinheritance and incapacity. (In such cases, grandchildren are not obliged to bring to collation what their parent has received gratuitously from their grandparent) WHAT TO COLLATE 1. Any property or right received by gratuitous title during the testator’s lifetime 2. All that they may have received from the decedent during his lifetime 3. All that their parents would have brought to collation if alive. PROPERTIES NOT SUBJECT TO COLLATION 1. Absolutely no collation – expenses for support, education (elementary and secondary only), medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment or customary gifts. 2. Generally not imputable to legitime: a. Expenses incurred by parents in giving their children professional, vocational or other career unless the parents so provide, or unless they impair the legitime b. Wedding gifts by parents and ascendants consisting of jewelry, clothing, and outfit except when they exceed 1/10 of the sum disposable by will. PARTITION AND DISTRIBUTION PARTITION AND DISTRIBUTION : The separation, division and assignment of a thing held in common among those to whom it may belong. It includes every act which is intended to put an end to indivision among co-heirs, and

legatees or devisees, although it should purport to be a sale, exchange, compromise, or any other transaction. It is not subject to any form WHO MAY EFFECT PARTITION i. Decedent himself during his lifetime by an act inter vivos or by will; ii. Heir themselves; iii. Competent court; 3rd person designated by the decedent WHO CAN DEMAND PARTITION 1. Compulsory heir; 2. Voluntary heir 3. Legatee or devisee; 4. Any person who has acquired interest in the estate WHEN PARTITION CANNOT BE DEMANDED (PAPU) 1. When expressly Prohibited by the testator himself for a period not exceeding 20 years; 2. When the co-heirs Agreed that the estate shall not be divided for a period not exceeding 10 years, renewable for another 10 years; 3. When Prohibited by law; 4. When to partition the estate would render it Unserviceable for the use for which it is intended. NOTE:  Partition Inter Vivos – it is one that merely allocates specific items or pieces of property on the basis of the proindiviso shares fixed by law or given under the will to heirs or successors.  Partition is not itself a mode of acquiring ownership, nor a title therefore, this partition, being predicated on succession, necessitates relationship to the decedent (in case of intestacy) or a will duly probated (in case of testacy). A partition inter vivos made in favor or intestate heirs could be operative. Dispositions, however, to non-intestate heirs may suffer an impediment unless based on a valid will, except perhaps when such dispositions are intended to take effect during the life of the testator and the formalities of donations are properly complied with. PROHIBITION TO PARTITION 1. The prohibition to partition for a period not exceeding 20 years can be imposed on the legitime.

2. If the prohibition to partition is for more than 20 years, the excess is void. 3. Even if a prohibition is imposed, the heirs by mutual agreement can still make the partition. LEGAL REDEMPTION IN FAVOR OF CO-HEIRS  The right of legal redemption predicated upon the fact that the sale made by the coheir is effected before the partition of the estate but after the death of the decedent. Requisites: 1. There must be several co-heirs 2. That one of them sells his right to a stranger 3. That the sale is made before the partition 4. That the right of redemption must be exercised by one or more of the co-heirs within 1 month from the time they were notified in writing by the co-heir vendor 5. The vendee is reimbursed for the price of the sale. EFFECTS OF PARTITION  Confers upon each heir the exclusive ownership of the property adjudicated.  After the partition, the co-heirs shall be reciprocally bound to warrant the title to (warranty against eviction) and the quality of (warranty against hidden defects), each property adjudicated.  The obligation of warranty shall cease in the following cases: i. When the testator himself has made the partition unless his intention was otherwise, but the legitime shall always remain unimpaired. ii. When it has been expressly stipulated in the agreement of partition, unless there has been bad faith. iii. When the eviction was due to a cause subsequent to the partition, or has been caused by the fault of the distributee of the property. EFFECTS OF INCLUSION OF INTRUDER IN PARTITION 1. Between a true heir and several mistaken heirs – Partition is VOID 2. Between several true heirs and a mistaken heir – transmission to mistaken heir is VOID 3. Through error or mistake; share of true heir is allotted to mistaken heir – partition shall not be rescinded unless there is bad faith or fraud on the part of the other persons

interested, but the latter shall be proportionately obliged to pay the true heir of his share NOTE: Partition with respect to the mistaken heir is VOID. A VOID WILL MAY BE A VALID PARITION 1. If the will was in fact a partition; and 2. If the beneficiaries in the void will were legal heirs IMPORTANT PERIODS TO REMEMBER PERIODS TO REMEMBER ON PARTITION 1 month or less Testator, if publicly known before making a to be insane, burden of will proof is on the one claiming validity of the will 20 years Maximum period testator can prohibit alienation of dispositions 5 years from To claim property escheated delivery to the to the State State 1 month To report knowledge of violent death of decedent lest he be considered unworthy 5 years from the Action for declaration of time disqualified incapacity & for recovery of person took the inheritance, devise or possession legacy 30 days from Must signify issuance of order acceptance/repudiation of distribution otherwise, deemed accepted 1 month form Right to repurchase written notice of hereditary rights sold to a sale stranger by a co-heir 10 years To enforce warranty of title/quality of property adjudicated to co-heir from the time right of action accrues 5 years from To enforce warranty of partition solvency of debtor of the estate at the time partition is made 4 years form Action for rescission of partition partition on account of lesion

END OF DISCUSSION ========================= =================

III. LEASE ========================= ======== TOPIC UNDER THE SYLLABUS: A. Lease of Things B. Lease of Work or Services C. Lease of Rural and Urban Lands 1. Qualified persons 2. Registration 3. Prohibitions D. Contract for Piece of Work E. Rights and Obligations of Lessor and Lessee ========================= ======== CONTRACT OF LEASE is a contract by which one person binds himself to grant temporarily, the use of a thing or the rendering of some service to another who undertakes to pay some rent, compensation, or price Characteristics Of Lease Of Things: (CLONSPEP-TP) 1. Consensual 2. Lessor need not be the owner 3. Onerous 4. Nominate 5. Subject matter must be within the commerce of man (i.e. not belonging to public domain) 6. Principal contract 7. Purpose is to allow Enjoyment or use of a thing 8. Purpose to which the thing will be devoted should not be immoral 9. Period is Temporary 10. Period may be definite or indefinite NOTE: Persons disqualified to buy under Arts. 1490 and 1491 of the Civil Code are also disqualified to become lessees of the things mentioned therein. (Art. 1646, NCC) Kinds Of Lease 1. Lease of things (whether immovable or movable property)  One of the parties binds himself to give to another the enjoyment or use of a thing  For a price certain and  For a period which may be definite or indefinite NOTE: However, no lease for more than 99 years shall be valid. General Rule: The contract of lease may be made orally Exception: Lease of real property for more than 1 year (must be in writing to comply with Statute of Frauds)

2. Lease of work (contract for a piece of work) One of the parties binds himself to produce a result out of his work or labor For a price certain Duties Of A Contractor Who Furnishes Work And Material 1. Duty to deliver 2. Duty to transfer ownership 3. Duty to warrant eviction and hidden defects Remedies Of Employer In Case Of Defects  Ask contractor to remove the defect or to execute another work  If contractor fails or refuses to remove the defect, employer can ask another person to do it at the contractor’s expense. 3. Lease of service One party binds himself to render to the other some service For a price certain CONTRACT FOR A PIECE OF WORK (Locatio Operis) The object of contract is the result of the work without considering the labor that produced it If the result promised is not accomplished, the lessor is not entitled to compensation

CONTRACT OF LEASE OF SERVICE (Locatio Operarum)

CONTRACT OF LEASE OF THING

The object of contract is the service itself and not the result which it generates

The object of contract is a thing

Even if the result intended is not attained, the services of the lessor must still be paid. In case of breach, no action for specific performance

Lessor has to deliver the thing leased. In case of breach, there can be an action for specific performance

Elements Of A Tenancy Agreement (PACAPS) 1. Parties are the landowner and the tenant or agricultural lessee 2. Subject matter of the relationship is an agricultural land

3. There is consent between the parties to the relationship. 4. Purpose of the relationship is to bring about agricultural production 5. There is personal cultivation on the part of the tenant or agricultural lessee and 6. Harvest is shared between the landowner and the tenant or agricultural lessee. NOTE: Absence of any of the elements will not make the alleged tenant a de facto tenant. RENT is the compensation either in money, provisions, chattels, or labor, received by the lessor from the lessee. REQUISITES: 1. Must not be fictitious or nominal, otherwise the contract is considered essentially gratuitous 2. Must be capable of determination 3. May be in the form of products, fruits, or construction, as long as it has value    



Owner has the right to fix the rent because the contract is consensual and not imposed by law. Increasing the rent is NOT an absolute right of the lessor. If the rent is fixed for the first time, courts cannot interfere, but if it is a renewal, the courts can settle the disagreements. There being no agreement on the reasonable compensation that a lessee must pay for its continuing use and occupation of the premises after the termination of the lease, it was proper for the lower courts to determine the same. MATERCCO v. First Landlink Asia Development Corporation, [G.R. No. 175678 (2007)] In lease of rural lands, lessee has no right to a reduction of the rent on account of the sterility of land leased, or by reason of the loss of fruits due to ordinary fortuitous events, except when the loss more than ½ of the fruits is through extraordinary and unforeseen fortuitous events unless there be stipulation to the contrary.

LEASE DISTINGUISHED FROM USUFRUCT LEASE USUFRUCT Ownership on the Ownership of the thing part of the lessor is on the part of the not necessary to grantor is necessary to constitute a contract constitute a usufruct of lease It is generally a It is always a real right personal right and is a real right only by exception

It is limited to the use specified in the contract Lessor places and maintains the lessee in the peaceful enjoyment of the thing Its term is generally for a definite period It may be created by contract as a general rule Lessee has no duty to make repairs Lessee has no duty to pay taxes Lessee cannot constitute a usufruct of the property leased

It includes all possible uses and enjoyment of the thing Owner allows the usufructuary to use and enjoy the property Its term may be for an indefinite period It may be created by law, contract, last will or prescription Usufructuary has duty to make repairs Usufructuary has a duty to pay taxes Usufructuary may constitute a sublease

LEASE DISTINGUISHED FROM SALE LEASE SALE Only the use or Ownership is transferred enjoyment is transferred Transfer is Transfer is permanent temporary Lessor need not be Seller must be the the owner owner at the time the property is delivered The price of the Usually, the selling price object (distinguished is mentioned from the rent) is usually not mentioned LEASE OF SERVICE DISTINGUISHED FROM AGENCY LEASE OF AGENCY SERVICES It is based on It is based on employment representation – the lessor of – agent represents his services does not principal and enter into represent his juridical acts employer nor does he execute juridical acts Principal contract Preparatory contract General Rule: A lease of real property is a personal right Exceptions: 1. If it is for more than one year and to be enforceable it must be in writing 2. If it is registered with Registry of Property, regardless of its period

Effects If Lease Of Real Property Is Not Registered: 1. The lease is not binding on third persons 2. Such third person is allowed to terminate the lease in case he buys the property from the owner-lessor 3. Actual knowledge of existence and duration of lease is equivalent to registration 4. Stranger knows of the existence of the lease, but was led to believe that the lease would expire soon or before the new lease in favor of him begins, the stranger can still be considered innocent Persons Disqualified To Become Lessees: 1. Husband and wife cannot lease to each other their separate properties (Exception: separation of property) 2. Those disqualified due to fiduciary relationship  Guardian: ward  Agent: principal  Executor and administrators  Public officer: state property  Justices/judges: property under litigation  Others disqualified by law Lease By Filipinos  May lease lands of public domain with an area of 500 hectares and may acquire not more than 12 hectares Lease By Corporations  At least 60% Filipino-owned, may lease lands of public domain for a period of 25 years, renewable for not more than 25 years; the area not to exceed more than 1,000 hectares Rules On Lease Of Things When Lessee Is An Alien 1. 99-year limit applies to aliens as long as it is a lease of personal property 2. Aliens CANNOT lease public lands, and cannot acquire private lands except through succession 3. If lease of real property (private lands), maximum of 25 years renewable for another 25 years (P.D. 713) 4. Under the Investor’s Lease Act of 1995, the 25-year period was extended to 50 years renewable for another 25 years provided the following conditions are met: a. Lessee must make investments b. Lease is approved by DTI c. If terms are violated, DTI can terminate it NOTE: the ILA did not do away with P.D. 713. Under ILA the consent of DTI is required, while in P.D. 713 it is not.

E. Rights and Obligations of Lessor and Lessee Obligations Of The Lessor (Art 1654) (DNM) 1. To DELIVER THE THING which is the object of the contract in such condition as to render it fit for the use intended 2. To make on the same during the lease all the NECESSARY REPAIRS in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary 3. To MAINTAIN THE LESSEE IN THE PEACEFUL AND ADEQUATE ENJOYMENT OF THE LEASE for the entire duration of the contract This is true only if the contract is valid. Where the contract is void, for having an existent contract of lease, the lessor has no right to lease the same property. Bercero v. Capitol Development Corporation,[ G.R. No. 154765 (2007)] Nature Of The Duty Of The Lessor To Maintain Peaceful Possession Of The Premises By The Lessor This is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession. Chua Tee Dee v. Court of Appeals, 429 SCRA 418 Obligations Of The Lessee (Art. 1657) (PUP) 1. PAY THE PRICE of the lease according to the terms stipulated 2. USE THE THING leased as a diligent father of a family devoting it to the use stipulated, and in the absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the custom of the place 3. PAY THE EXPENSES for the deed of lease Rights Of The Lessee 1. Right to be respected in his possession 2. Right to be restored to said possession by the means established by law or by the Rules of Court, should he be disturbed therein Remedies When Lessor Or Lessee Does Not Comply With Their Obligations 1. Rescission and damages or 2. Damages while allowing the contract to remain in force Remedy Of Lessee Is Lessor Refuses To Accept The Rentals To make a proper tender of payment and consignation in order to extinguish the debt

Rules On Changing The Form Of The Lease The lessor can alter the thing leased provided there is no impairment of the use to which the thing is devoted under the terms of the lease Alteration can also be made by the lessee so long as the value of the property is not substantially impaired Rules In Case Of Urgent Repairs The lessee is obliged to tolerate the work, although it may be very annoying to him and although during the same time he may be deprived of a part of the premises, if repairs last for not more than 40 days If repairs last for 40 days or more, lessee can ask for reduction of the rent in proportion to the time – including the 1 st 40 days – and the part of the property of which he is deprived. NOTE: In either case, rescission may be availed of if the main purpose of the lease is to provide a dwelling place and the property becomes uninhabitable. Effects If Lessor Fails To Make Urgent Repairs The lessee may: 1. Order repairs at the lessor’s cost 2. Sue for damages 3. Suspend the payment of the rent 4. Ask for rescission, in case of substantial damage to him EFFECT OF DESTRUCTION OF THE SUBJECT MATTER WITH RESPECT TO THE LEASE IF TOTALLY IF ONLY PARTIALLY DESTROYED DESTROYED Lease is extinguished Lessee can choose between reduction of the rent and rescission Rules Upon Termination Of Lease Governing Useful Improvements Caused By The Lessee If made in good faith and suitable to the use for which the lease is intended, without altering the form or substance of the property: 1. Lessor may appropriate the improvements provided he pays the lessee ½ of its value at that time 2. If lessor does not appropriate, lessee may remove the improvements even if the principal thing may suffer damage, 3. If improvement is ornamental, no right of reimbursement, but lessee may remove them provided no damage is caused to the principal thing

NOTE: Lessee has no right of retention of the premises if the lessor does not pay. His only right is right of removal if lessor does opt not to pay and appropriate. Kinds Of Trespass In Lease: 1. Trespass in fact (perturbacion de mere hecho): Lessor is not liable for the mere fact of a trespass or trespass in fact made by a third person of a leased property. Mere fact or mere act of trespass is when the third person claims no right whatever Physical enjoyment is reduced 2. Trespass in law (perturbacion de derecho): A third person claims legal right to enjoy the premises Lessor will be held liable Duration Of Lease 1. Lease may be for a determinate time or fixed period Lease will be for the said period and it ends on the day fixed without need of a demand 2. Lease may be without a fixed period a. For rural lands (Art. 1682) It shall be for all time necessary for the gathering of fruits which the whole estate may yield in 1 year, or which it may yield once b. For urban lands (Art. 1687) If rent is paid daily, lease is from day to day If rent is paid weekly, lease is from week to week If rent is paid monthly, lease is from month to month If rent is paid yearly, lease is from year to year Rules On Extension Of The Lease Period 1. If a lease contract for a definite term allows lessee to extend the term, there is no necessity for lessee to duly notify lessor of his desire to so extend the term, unless the contrary is stipulated. 2. “may be extended” as stipulation: lessee can extend without lessor’s consent but lessee must notify lessor. 3. “may be extended for 6 years, agreed upon by both parties” as stipulation: this must be interpreted in favor of the lessee. Hence, ordinarily the lessee, at the end of the original period, may either: a. leave the premises b. remain in possession 4. In co-ownership, assent of co-owner is needed; otherwise, it is void or ineffective as against non-consenting co-owners.

5. Where according to the terms of the contract, the lease can be extended only by the written consent of the parties thereto, no right of extension can rise without such written consent. IMPLIED NEW LEASE (Tacita Reconducion) Lease that arises if at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, unless a notice to the contrary had previously been given by either party. Period of the implied new lease is not that of the original contract but the time established in Arts 1682 and 1687 (see Duration of Lease above) Other terms of the original contract are revived except option to purchase in case such was in the original contract NOTE: Terms that are revived are only those which are germane to the enjoyment of possession, but not those with respect to special agreements which are by nature foreign to the right of occupancy or enjoyment inherent in a contract of lease – such as an option to purchase the leased premises. Dizon v. Magsaysay, [G.R. No. 23399 (1974)] Requisites For Implied New Lease: 1. The term of the original contract has EXPIRED 2. The lessor HAS NOT GIVEN THE LESSEE a notice to vacate 3. The lessee CONTINUED ENJOYING THE THING LEASED FOR AT LEAST 15 DAYS with the acquiescence of the lessor When There Is No Implied New Lease: 1. When before or after the expiration of the term, THERE IS A NOTICE TO VACATE given by either party 2. When there is NO DEFINITE FIXED PERIOD IN THE ORIGINAL LEASE CONTRACT as in the case of successive renewals EXTENSION DISTINGUISHED FROM RENEWAL EXTENSION OF RENEWAL OF LEASE LEASE CONTRACT CONTRACT Original contract Original contract ceases subsists to exist Creates additional Creates a new contract term PERPETUAL LEASE A lease contract providing that the lessee can stay in the premises for as long as he wants

-

and for as long as he can pay the rentals and its increases. This is not permissible; it is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee.

SUBLEASE A lessee may sublease the thing leased unless there is an express prohibition to do so Remedy of lessor if lessee violates prohibition: action for rescission of the lease and damages If the prohibition to sublease is not express but only implied, the sublease will still be allowed Duration of sublease cannot be longer than that of the lease to which it is dependent The prohibition against subleasing may not embrace the taking in of boarders. Mallarte v. Court of Appeals, G.R. No. 85108 (1989) In a sublease arrangement, there are two distinct leases: the principal lease and the sublease. SUBLEASE DISTINGUISHED FROM AN ASSIGNMENT OF A LEASE SUBLEASE ASSIGNMENT Lessee remains a Lessee is disassociated party in the contract from the original contract of lease Two leases and two Only one (lessordistinct juridical assignee who becomes relationship (lessorthe lessee) because lessee and sublessor- lessee transmits sublessee) absolutely his rights and his personality disappears Sublessee does not Assignee has a direct have any direct action against the lessor, action against the there being novation lessor Subleasing is allowed Assignment is not unless there is an allowed unless the lessor express prohibition gives his consent NOTE: The sub-lessee is primarily liable to his sub-lessor and only a court can extinguish or modify this primary liability if the sublessor contests the pre-termination of the principal lease by the lessor. Tamio v. Ticson, G.R. No. 154895 (2004)] Circumstances When A Sublessee Is Made Liable To The Lessor: 1. For all acts which affect the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee

2. For any rent due to the lessor from the lessee which the latter failed to pay  Sublessee is subsidiarily liable  Sublessee shall not be responsible beyond amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor

1.

2.

Grounds For Ejectment 1. When the period agreed upon or that which is fixed for the duration of leases (Arts. 1682 and 1687) has expired (see Duration of Lease) 2. Lack of payment of the price stipulated In case lessor refuses to accept rentals, lessee should make tender of payment, and consignation otherwise there is no payment Willingness to pay is not payment 3. Violation of any of the conditions agreed upon in the contract 4. When the lessee devotes thing leased to any use or service not stipulated which causes the deterioration thereof, or if he does not observe the requirement in Art 1657. R.A. 9341 - AN ACT ESTABLISHING REFORMS IN THE REGULATION OF RENT OF CERTAIN RESIDENTIAL UNITS, PROVIDING THE MECHANISMS THEREFOR AND FOR OTHER PURPOSES (APPROVED LAST DEC. 21, 2005) Limitations Imposed Upon The Lessor For The Protection Of The Lessee (SECS. 3, 5 AND 8) 1. The rent of any residential unit covered by this Act shall not be increased by more than 10% annually as long as the unit is occupied by the same lessee. When the residential unit becomes vacant, the lessor may set the initial rent for the next lessee. 2. No lessor may demand more than 1 month advance rent. Neither can he demand more than 2 months deposit which shall be kept in a bank under the lessor’s account name during the entire duration of the lease agreement. Any and all interest that shall accrue therein shall be returned to the lessee at the expiration of the lease contract. 3. No lessor or his successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises have been sold or mortgaged to a third person regardless of whether the lease or mortgage is registered or not. Grounds For Judicial Ejectment (SEC. 7)

3.

4.

5.

Assignment of lease or subleasing of residential units in whole or part, including the acceptance of boarders or bedspacers, without the written consent of the onwer/lessor. Arrears in payment of rent for a total of 3 months; Provided, That in the case of refusal by the lessor to accept payment of the rental agreed upon, the lessee may either deposit by way of consignation, the amount in court, or with the city or municipal treasurer, as the case may be, or in a bank in the name of the lessor and with notice to the latter, within 1 month after the refusal of the latter to accept payment.  The lessee shall thereafter deposit the rental within 10 days of every current month. Failure to deposit the rental or 3 months shall constitute a ground for ejectment.  The lessor, upon authority of the court in case of consignation or upon joint affidavit by him and the lessee to be submitted to the city or municipal treasurer and to the bank where the deposit was made, shall be allowed to withdraw the deposit. Legitimate need of the owner/lessor to repossess his /her property for his/her own use or of any immediate member of his/her family as a residential unit. Need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of condemnation by appropriate authorities concerned in order to make the said premises safe and habitable. Expiration of the period of the lease contract.

IV. PARTNERSHIP ========================= ======== TOPICS UNDER THE SYLLABUS A. CONTRACT OF PARTNERSHIP B. RIGHTS AND OBLIGATIONS OF PARTNERSHIP C. RIGHTS AND OBLIGATIONS OF PARTNERS AMONG THEMSELVES D. OBLIGATIONS OF PARTNERSHIP/PARTNERSHIP TO THIRD PERSONS E. DISSOLUTION F. LIMITED PARTNERSHIP ========================= ======== CHAPTER 1: GENERAL PROVISIONS

A. CONTRACT OF PARTNERSHIP 1. DEFINITION PARTNERSHIP - a contract wherein two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. 2. ELEMENTS ELEMENTS OF A PARTNERSHIP: There shall be a partnership whenever: 1. There is a meeting of the minds; 2. To form a common fund; 3. With intention that profits (and losses) will be divided among the contracting parties. ESSENTIAL FEATURES: 1. There must be a VALID CONTRACT.

2.

The parties must have legal capacity to enter into the contract. 3. There must be a mutual contribution of money, property, or industry to a common fund. 4. There must be a lawful OBJECT. 5. The purpose or primary purpose must be to obtain profits and divide the same among the parties. ADDITIONAL REQUIREMENT FOR JURICICAL PERSONALITY a. It is also required that the articles of partnership must NOT be kept SECRET among the members; otherwise, the association shall have no legal personality and shall be governed by the provisions on CO-OWNERSHIP (Art. 1775).

b.

"kept secret among the members" - secrecy directed not to third persons but to some of the partners c. This does not mean that there could be no contractual relations amongst the parties; there is only no partnership or association with distinct legal personality CHARACTERISTICS: 1. Essentially contractual in nature (Art. 1767, 1784) 2. Separate juridical personality (Art. 1768) 3. Delectus personae 4. Mutual Agency (Art. 1803) 5. Personal liability of partners for partnership debts 3. RULES TO DETERMINE EXISTENCE GENERAL RULE: Persons who are NOT partners as between themselves, CANNOT be partners as to third persons. (Art. 1769(1)) EXCEPTION: Partnership by Estoppel under Art. 1825 Other Rules to Determine whether a partnership exists: (Art. 1769) The following, alone, do not establish partnership 1. Co-ownership or co-possession 2. Sharing of gross returns, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; Receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, UNLESS such were received in payment: 1. Debt by installments or otherwise; 2. Wages or rent; 3. Annuity; 4. Interest on loan; 5. Consideration for sale of goodwill of business/other property by installments A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated in favor of the State, without prejudice to the provisions of the Penal Code governing the confiscation of the instruments and effects of a crime. EFFECTS OF AN UNLAWFUL PARTNERSHIP: 1. Void ab initio - never existed in the eyes of the law. (Art. 1409(1))

2. Profits shall be confiscated in favor of the government. (Art. 1770) 3. Instruments or tools and proceeds of the crime shall also be forfeited in favor of the government. (Art. 1770, Art. 45-RPC) 4. The contributions of the partners shall not be confiscated unless they fall under no. 3. (See Arts. 1411 and 1412) Judicial decree is not necessary to dissolve an unlawful partnership. That there is no legally constituted partnership DOES NOT mean that there are no contractual or legal relations among the parties. EFFECT OF PARTIAL ILLEGALITY: Where a part of the business of a partnership is legal and a part illegal, an account of that which is legal may be had. Where, without the knowledge or participation of the partners, the firm's profits in a lawful business have been increased by wrongful acts, the innocent partners are not precluded as against the guilty partners from recovering their share of the profits. 4. HOW PARTNERSHIP FORMED GENERAL RULE: No special form is required for the validity of a contract. (Art. 1356) BURDEN OF PROOF AND PRESUMPTION 1. Must be proven, not presumed. 2. Persons acting as partners presumed to have entered into contract of partnership. Burden of proof shifted to party denying its existence. 3. Extant Parntership presumed to exist until proven terminated. 4. Use of the term “partner” does not necessarily show existence of partnership. Non-use of the terms “parntership” or “partners” not conclusive as to non-existence or partnership, but entitled to weight. 5. PARTNERSHIP TERM PARTNERSHIP AT WILL — one in which no fixed term is specified and is not formed for a particular undertaking or venture which may be terminated anytime by mutual agreement PARTNERSHIP WITH A FIXED TERM — the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular undertaking

6. UNIVERSAL VS. PARTICULAR; GENERAL VS. LIMITED UNIVERSAL VS. PARTICULAR UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY —comprises the following: 1. Property which belonged to each of the partners at the time of the constitution of the partnership 2. Profits which they may acquire from all property contributed UNIVERSAL PARTNERSHIP OF PROFITS — comprises all that the partners may acquire by their industry or work during the existence of the partnership Note: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership. (Art. 1782) PARTICULAR PARTNERSHIP—has objects: 1. Determinate things 2. Their use or fruits 3. Specific undertaking 4. Exercise of profession or vocation

for

its

GENERAL VS. LIMITED GENERAL PARTNERSHIP—consists of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts. LIMITED PARTNERSHIP—one formed by 2 or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership 7. PARTNERSHIP BY ESTOPPEL PARTNER BY ESTOPPEL—by words or conduct, he does any of the ff.: Directly represents himself to anyone as a partner in an existing partnership or in a nonexisting partnership Indirectly represents himself by consenting to another representing him as a partner in an existing partnership or in a non-existing partnership Elements to establish liability as a partner on ground of estoppel: Defendant represented himself as partner/represented by others as such and not denied/refuted by defendant Plaintiff relied on such representation Statement of defendant not refuted

LIABILITIES IN ESTOPPEL All partners Partnership is liable consented to representation No existing Person who represented partnership & all himself & all those who those represented made representation liable consented; pro-rata/jointly Not all partners of existing partnership consents to representation No existing Person who represented partnership & not himself liable & those who all represented made/consented to consented; representation separately None of partners in liable existing partnership consented 8. PARTNERSHIP VS. JOINT VENTURE Particular partnership distinguished from joint venture: Heirs of Tan Eng Kee v. CA, G.R. No. 126881, October 3, 2000 A particular partnership is distinguished from joint venture, to wit: 1. A joint venture (an American concept similar to our joint account) is a sort of informal partnership, with no firm name and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can be individually liable therefore; and 2. Usually, but not necessarily a joint venture is limited to a single transaction, although the business of pursuing to a successful termination may continue for a number of years; a partnership generally relates to a continuing business of various transactions of a certain kind. It would seem that under Philippine law, a joint venture is a FORM of PARTNERSHIP, specifically a particular partnership which has for its object specific undertaking. The Supreme Court has, however, recognized a distinction between these two business forms and has held that although a corporation cannot enter into a partnership, it may, however, engage in a joint venture with others. Aurbach v. Sanitary Wares, 180 SCRA 130 (1989) 9. PROFESSIONAL PARTNERSHIP General Professional Partnership (Art. 1767, Par. 2): Two or more persons may also

form a partnership profession.

for

the

exercise

of

a

The Architecture Act of 2004 (R.A. 9266) grants that a firm, company, partnership, corporation or association may be registered or licensed as such for the practice of architecture under the following conditions: a. Only Filipino citizens properly registered and licensed as architects under this Act may, among themselves, or together with allied technical professionals, form and obtain registration as a firm, company, partnership, association or corporation for the practice of architecture; b. Registered and licensed architects shall compose at least seventy-five percent (75%) of the owners, shareholders, members incorporators, directors, executive officers, as the case may be; c. Individual members of such firm, partnership association or corporation shall be responsible for their individual and collective acts as an entity and as provided by law; d. Such firm, partnership, association or corporation shall be registered with the Securities and Exchange Commission and Board. 10. MANAGEMENT See Rights and Obligations of Partners Among Themselves B. RIGHTS AND OBLIGATIONS OF PARTNERSHIP General Rule – A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated. Exception – 1. Where immovable property/real rights are contributed (Art. 1771) Public instrument is necessary Inventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is VOID 2. When the contract falls under the coverage of the Statute of Frauds (Art. 1409) 3. Where capital is P3,000 or more, in money or property (Art. 1772) Public instrument is necessary Must be registered with SEC But failure to comply shall not affect the liability of the partnership and the members thereof to third persons A “void” partnership under Article 1773, in relation to Article 1771, may still be considered

a partnership de facto or by estoppel vis-à-vis third persons; and may be considered by the courts as an ordinary contract (though not exactly an “Art. 1767” partnership) from which rights and obligations may legally stem. Torres v. CA, 320 SCRA 428 (1999)

business or from transacting business with the partnership as if he were a stranger (Art. 1866, in relation to Arts. 1789, 1808, and 1854).

SEC Opinion, 1 June 1960: For purposes of convenience in dealing with government offices and financial institutions, registration of partnership having a capital of less than Php 3,000 is recommended.

Unless otherwise stated, all partners are considered agents and whatever any one of them may do alone shall bind the partnership (Arts. 1803(1), 1818)

SEPARATE JURIDICAL PERSONALITY The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of Article 1772, first paragraph (Registration with SEC). As 1. 2. 3.

a JURIDICAL PERSON, a partnership may: Acquire and possess property of all kinds; Incur obligations; and Bring suit, in conformity with the laws and regulations of their organization. (See Art. 46)

DELECTUS PERSONAE - The selection or choice of the person. Implications: (Dean Villanueva) The assignment of a partner of his share does not make assignee a partner (Art. 1804 and 1813) The existence of the partnership is closely tied-up to the particular contractual relationship of the partners (see instances of dissolution of the partnership upon change of contractual relationship.) PARTNERSHIP RELATIONSHIP IS FIDUCIARY IN NATURE 1. Right to choose co-partners – No one can become member of partnership without the consent of all other partners 2. Power to dissolve partnership – Allowed the power, not necessarily the right, to dissolve partnership. Dissolution must be in good faith. Bad faith will not prevent dissolution but may result in liability for damages. Doctrine of Delectus Personae: Partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom to associate himself is the very foundation and essence of that partnership. Ortega v. CA, G.R. No. 109248, July 3, 1995 Delectus personarum; does not apply to a limited partner who merely contributes his interest and is not barred from engaging in competitive

MUTUAL AGENCY (According to Dean Villanueva)

Partners can dispose of partnership property even when in partnership name (Art. 1819) Admission or representation made by any partner concerning partnership affairs is evidence against the partnership (Art. 1820) Notice to any partner of any matter relating to partnership affairs is notice to the partnership (Art. 1821) Wrongful act or omission of any partner acting for partnership affairs makes the partnership liable (Art. 1822) Partnership bound to make good losses for acts or misapplications of partners (Art. 1823) UNLIMITED LIABILITY (According to Dean Villanueva) All partners are liable pro rata with all their properties and after partnership assets have been exhausted, for all partnership debts (Art. 1816) Any stipulation against personal liability of partners for partnership debts is void, except as among them (Art. 1817) Partners are liable solidarily with the partnership for everything chargeable to the partnership when caused by the wrongful act or omission of any partner acting in the ordinary course of business of the partnership or with authority from the other partners and for partner's act or misapplication of properties (Art. 1824) A newly admitted partner into an existing partnership is liable for all the obligations of the partnership arising before his admission but out of partnership property shares (Art. 1826) Partnership creditors are preferred to those of each of the partners as regards the partnership property (Art. 1827)

Upon dissolution of the partnership, the partners shall contribute the amounts necessary to satisfy the partnership liabilities (Art. 1839(4), (7))

PARTNERSHIP DISTINGUISHED FROM COOWNERSHIP AND CORPORATION BASIS Creation

Juridical personali ty

PARTNERS HIP Created by a contract, by mere agreement of the parties Has a juridical personality separate and distinct from that of each partner

Purpose

Realization of profits

Duration/ Term of existence

No limitation

COOWNER SHIP Created by law

None

Common enjoymen t of a thing or right 10 years maximu m

Disposal/ Transfera bility of interest

Partner may not dispose of his individual interest unless agreed upon by all partners

Co-owner may freely do so

Power to

In absence

Co-owner

act with 3rd persons

Effect of d e a t h

of stipulation to contrary, a partner may bind partnership (each partner is agent of partnership ) Death of partner results in dissolution of partnership

CORP Created by law

Has a juridical personality separate and distinct from that of each stockholde r Depends on AOI

50 years maximum, extendible to not more than 50 years in any one instance Stockholde r has a right to transfer shares without prior consent of other stockholde rs Manageme

Dissoluti May be o dissolved n at any time by the will of any or all of the partners # of incorpora tors

Minimum of 2 persons

Commen cement of juridical personali ty

From the moment of execution of contract of partnership

cannot represent the coownershi p

nt is vested with the Board of Directors

Death of co-owner does not necessari ly dissolve coownershi p May be dissolved anytime by the will of any or all of the coowners Minimum of 2 persons

Death of stockholde r does not dissolve corporatio n

None

Can only be dissolved with the consent of the state Minimum of 5 incorporat ors From date of issuance of certificate of incorporati on by the SEC

WHO MAY BE PARTNERS GENERAL RULE: Any person capacitated to contract may enter into a contract of partnership. EXCEPTIONS Persons who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership. (Art. 1782) Persons suffering from civil interdiction. Persons who cannot give consent to a contract: Minors insane persons deaf-mutes who do not know how to write De Leon: There is no prohibition for partnerships to be partners, BUT THIS IS DOUBTFUL AND

IMPRACTICAL on account of Art. 1768 (that a partnership has a juridical personality separate from that of each of the partners) and of the essential attribute called delectus personae.



MAY CORPORATIONS ENTER INTO PARTNERSHIP?



Philippine Corporate Law (2001) by Dean Villanueva (p. 902) citing various SEC Opinions: Corporations may enter into partnership agreements on the following conditions: Authority to enter into a partnership relation is expressly conferred by the charter or the articles of incorporation (AoI), and the nature of the business venture to be undertaken by the partnership is in line with the business authorized by the charter or AoI. If it is a foreign corporation, it must obtain a license to transact business in the country in accordance with the Corporation Code of the Philippines. NOTE: How tax law treats the matter: Notion of partnership no matter how created or organized: a pool of insurance companies was considered a partnership under applicable tax law. Afisco v. CA, G.R. No. 112675, January 25, 1999 Without prejudice to the formation of a joint venture. J.M. Tuazon v. Bolanos, 95 Phil. 106 (1954); Aurbach v. Sanitary Wares Manufacturing, 180 SCRA 130 (1989) WHAT MAY BE CONTRIBUTED Must be in equal shares unless otherwise stipulated (Art. 1790). Money – failure to contribute promised money makes the promissory-partner liable for the amount promised, and also for interest due and damages arising from the time the former should have complied with his or her undertaking (Art. 1786, ¶ 1) (upon perfection of contract, unless contrary stipulation) If there is fraud or misrepresentation, action for rescission may be filed and the party entitled to rescind, without prejudice to any other right, has the right to:  lien on, or right of retention over, the surplus of partnership property after satisfying partnership liabilities to third persons (for any sum paid by the injured partner for the purchase of an interest in the partnership and for any capital or advances contributed by the latter)

stand in place of creditors of the partnership for any payments made by the injured partner in respect of partnership liabilities, after all liabilities to third persons have been satisfied indemnity by the guilty partner against all partnership debts and liabilities (Art. 1838); relate to Art. 1831: with or without fraud or misrepresentation, injured partner may seek judicial dissolution

Property

– may include intangible or incorporeal, e.g. credit Lim Tong Lim v. Phil. Fishing Gear, 316 SCRA 728 (1999)

Art. 1786, ¶¶ 1 and 2 applies: liable for fruits from the time property should have been delivered without need of demand; also include obligation to preserve the promised property with the diligence of a good father of a family pending delivery. Industry – may concur with any or both of the first two or in the absence of any one or both of them; manual and/or intellectual in consideration of share in the profits; hence, as generally, partners are not entitled to charge each other. Marsh’s Appeal, 69 Pa. St. 30 “Every partner is bound to work to the extent of his ability for the benefit of the whole, without regard to the services of his copartners, and without comparison of value; for services to the firm cannot, from their very nature, be estimated and equalized by compensation of differences.” Beatty v. Wray, 7 Harris 519 BUT: a partner who has agreed to render special service to the partnership, for the performance of which he is qualified, and which is one of the inducements for the other members to enter the partnership, was found liable civilly to account for the value of such service upon a finding that he wrongfully refused to perform such service. BUT THEN AGAIN, specific performance not available due to constitutional prohibition vs. involuntary servitude A limited partner is not allowed to contribute services, only “cash or other property” (Art. 1845); otherwise, he is considered an “industrial and general partner” and thus, not exempted from personal liability.

WHEN IMMOVABLES OR REAL RIGHTS CONTRIBUTED GENERAL RULE: Failure to comply with the requirement of appearance in public instrument and SEC Registration will not affect the liability of the partnership and the members thereof to third persons. (Art. 1772, ¶ 2) EXCEPTION: When IMMOVABLE PROPERTY/ REAL RIGHTS are contributed, *public instrument + inventory* made and signed by the parties and attached to the public instrument (Arts. 1771 and 1773) is required for the benefit of third persons.

EFFECT OF ABSENCE OF REQUIREMENTS UNDER ARTICLES 1771 AND 1773 Condition of Partnership where Real Property is Contributed No public Instrument, No Inventory With Public Instrument, No Inventory

Bautista, E.

VOID

De Leon

VOID

With Public Instrument, With

(Source: Bar Review Notes for Partnership Law by Atty. Villareal) Atty. Villareal: The safer view is De Leon’s due to his simplified view of statute. NOTE: Partnerships void under Art.1773, in relation Art. 1771 may still be considered either de facto or estoppel partnerships vis-à-vis third persons; may even be treated as an ordinary contract from which rights and obligations may validly arise, although not exactly a partnership under the Civil Code. Torres v. CA, 320 SCRA 428 (1999) Failure to prepare an inventory of the immovable property contributed, in spite of article 1773 declaring the partnership void would not render the partnership void when: NO THIRD PARTY INVOLVED (since Art. 1773 was intended for the protection of 3rd parties; Partners have MADE A CLAIM ON THE PARTNERSHIP AGREEMENT.

OTHER CLASSIFICATIONS OF PARTNERSHIP As to legality of existence DE JURE PARTNERSHIP—one which has complied with all the legal requirements for its establishment DE FACTO—one which has failed to comply with all the legal requirements for its establishment As to purpose

VOID

VOID

VALID

No Public Instrument, With Inventory

Inventory

But either party may compel execution of public instrument so it may be registered in the registry of property; nonetheless, partnership agreement may be enforced (cf. Arts. 1356 to 1358) VALID

COMMERCIAL OR TRADING PARTNERSHIP —one formed for the transaction of business PROFESSIONAL OR NON TRADING PARTNERSHIP—one formed for the exercise of a profession KINDS OF PARTNERS

VOID

VALID

CAPITALIST—contributes money or property INDUSTRIAL—contributes only industry personal service GENERAL—liability to 3rd persons extends separate property LIMITED—liability to 3rd persons limited capital contribution MANAGING—manages the affairs/business the partnership LIQUIDATING—takes charge of the winding of partnership affairs upon dissolution

or to to of up

PARTNERS BY ESTOPPEL—not really a partner but liable as a partner for the protection of innocent 3rd persons CONTINUING PARTNER—continues the business of a partnership after dissolution by reason of the admission of a new partner, retirement, death or expulsion of one of the partners SURVIVING PARTNER—after a partnership has been dissolved by death of any partner SUBPARTNER—not a member of the partnership who contracts with a partner with reference to the latter's share in the partnership OSTENSIBLE—takes active part and known to the public as partner in the business SECRET—takes active part in the business but is not known to be a partner by outside parties SILENT—does not take any active part in the business although he may be known to be a partner DORMANT—does not take active part in the business and is not known or held out as a partner C. RIGHTS AND OBLIGATIONS OF PARTNERS AMONG THEMSELVES 1) OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES PROMISED CONTRIBUTION Obligations with respect to contribution of property: 1. to contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute (Art. 1786) To answer for eviction in case the partnership is deprived of the determinate property contributed (Art. 1786) 2. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery (Art. 1786) 3. To preserve said property with the diligence of a good father of a family pending delivery to partnership (Art. 1163) 4. To indemnify partnership for any damage caused to it by the retention of the same or by the delay in its contribution (Arts. 1788, 1170) Effect of failure to contribute property promised: Partners becomes ipso jure a debtor of the partnership even in the absence of any demand (See Art. 1169[1])

Remedy of the other partner is not rescission but specific performance with damages from defaulting partner (Art. 1788) Obligations with respect to contribution of money and money converted to personal use: 1. To contribute on the date fixed the amount he has undertaken to contribute to the partnership 2. To reimburse any amount he may have taken from the partnership coffers and converted to his own use 3. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it to his own use 4. To indemnify the partnership for the damages caused to it by delay in the contribution or conversion of any sum for his personal benefits (See Art. 1788) FIDUCIARY DUTY A partnership is a fiduciary relation—one entered into and to be maintained on the basis of trust and confidence. With that, a partner must observe the utmost good faith, fairness, and integrity in his dealings with the others: He cannot directly or indirectly use partnership assets for his own benefit; He cannot carry on a business of the partnership for his private advantage; He cannot, in conducting the business of the partnership, take any profit clandestinely; He cannot obtain for himself that he should have obtained for the partnership (e.g. business opportunity) He cannot carry on another competition with the partnership;

business

in

He cannot avail himself of knowledge or information which may be properly regarded as the property of the partnership; PROHIBITION AGAINST ENGAGING IN COMPETITIVE BUSINESS INDUSTRIAL PARTNER - cannot engage in business (w/n same line of business with the partnership) unless

CAPITALIST PARTNER - cannot engage in business (with same kind of business with the

partnership expressly permits him to do so. (Art. 1789)

partnership) for his own account, unless there is a stipulation to the contrary. ( Art. 1808)

CONSEQUENCES IF AN INDUSTRIAL PARTNER ENGAGES IN ANY BUSINESS: (Art. 1789) he can be excluded from the partnership; or the capitalist partners can avail of the benefit he obtained from the business, or the capitalist partners have the right to file an action for damages against the industrial partner, in either case. CONSEQUENCES IF THE CAPITALIST PARTNER ENGAGES IN A BUSINESS (which competes with the business of the partnership): 1. he may be required to bring to the common fund the profits he derived from the other business; (Art. 1808) 2. he shall personally bear the losses; (Art. 1808) 3. he may be ousted form the partnership, especially if there was a warning. Obligations with respect to contribution to partnership capital: 1. Partners must contribute equal shares to the capital of the partnership unless there is stipulation to contrary (Art. 1790) 2. Partners (capitalist) must contribute additional capital in case of imminent loss to the business of the partnership and there is no stipulation otherwise; refusal to do so shall create an obligation on his part to sell his interest to the other partners (Art. 1790) Requisites: 1. There is an imminent loss of the business the partnership 2. The majority of the capitalist partners are the opinion that an additional contribution the common fund would save the business 3. The capitalist partner refuses deliberately contribute (not due to financial inability) 4. There is no agreement to the contrary

of of to to

Obligation of managing partners who collects debt from person who also owed the partnership (Art. 1792) 1. Apply sum collected to 2 credits in proportion to their amounts 2. If he received it for the account of partnership, the whole sum shall be applied to partnership credit Requisites:

1. There exist at least 2 debts, one where the collecting partner is creditor and the other, where the partnership is the creditor 2. Both debts are demandable The partner who collects is authorized to manage and actually manages the partnership Obligation of partner who receives share of partnership credit Obliged to bring to the partnership capital what he has received even though he may have given receipt for his share only (Art. 1793) Requisites: 1. A partner has received in whole or in part, his share of the partnership credit 2. The other partners have not collected their shares 3. The partnership debtor has become insolvent

TO MANAGEMENT BEARING THE RISK OF LOSS OF THINGS CONTRIBUTED (Art. 1795) Specific and determinate things which are not fungible where only the use is contributed Specific and determinate things the ownership of which is transferred to the partnership Fungible things (consumable) Things contributed to be sold Things brought and appraised in the inventory Specific and determinate things which are not fungible where only the use is contributed

Risk is borne by partner Risk is borne by partnership Risk is borne by partnership Risk is borne by partnership Risk is borne by partnership Risk is borne by partner

RULES FOR DISTRIBUTION OF PROFITS AND LOSSES PROFITS LOSSES With According to According to agreem agreement agreement ent Without Share of capitalist If sharing of agreeme partner is in profits is nt proportion to his stipulated capital apply to sharing contribution of losses Share of industrial If no profit partner is not sharing fixed - as may be stipulated just and equitable losses shall be under the borne according circumstances to capital contribution Purely industrial partner not liable for losses A stipulation which excludes one or more partners from any share in the profits and losses is void. NOTE: Stipulation exempting a partner from losses should be allowed. If a person can make a gift to another, there is no sound reason why a person cannot also agree to bear all the losses. Of course, as far as THIRD PERSONS are concerned, any such stipulation may be properly declared void. (De Leon, pp. 124-125, citing Espiritu and Sibal) RIGHTS AND OBLIGATIONS WITH RESPECT

Partner is appointed manager in the articles of partnership

Partner is appointed manager after constitution of partnership 2 or more persons entrusted with management of partnership without specification of duties/stipulation that each shall not act w/o the other's consent

Power of managing partner is irrevocable without just/lawful cause; Revocable only when in bad faith Power is revocable any time for any cause

Vote of partners representing controlling interest necessary to revoke power

Each may execute all acts of administratio n

In case of opposition, decision of majority shall prevail; In case of tie, decision of partners owning controlling interest shall prevail Absence or disability of any one cannot be alleged unless there is imminent danger of grave or irreparable injury to partnership If refusal of partner is manifestly prejudicial to interest of partnership, court's intervention may be sought

Stipulated that none of the managing partners shall act w/o the consent of others

Concurrence of all necessary for the validity of acts

Manner of management not agreed upon

All partners are agents of the partnership Unanimous consent required for alteration of immovable property

Other rights and obligations of partners: 1. Right to associate another person with him in his share without consent of other partners (subpartnership) 2. Right to inspect and copy partnership books at any reasonable hour 3. Right to a formal account as to partnership affairs (even during existence of partnership):

4. If he is wrongfully excluded from partnership business or possession of its property by his copartners 5. If right exists under the terms of any agreement As provided by art. 1807 Whenever other circumstances render it just and reasonable Duty to render on demand true and full information affecting partnership to any partner or legal representative of any deceased partner or of any partner under legal disability Duty to account to the partnership as fiduciary 2) PROPERTY RIGHTS OF A PARTNER His rights in specific partnership property His interest in the partnership His right to participate in the management (Art. 1810) Nature of partner's right in specific partnership property—a partner has an equal right to possession which is not assignable and such right is limited to the share of what remains after partnership debts have been paid Nature of partner's right in the partnership —a share in the profits and surplus 3. OBLIGATION OF PARTNERS WITH REGARD TO THIRD PERSONS Every partnership shall operate under a firm name. Persons who include their names in the partnership name even if they are not members shall be liable as a partner All partners shall be liable for contractual obligations of the partnership with their property, after all partnership assets have been exhausted: Pro rata Subsidiary Admission or representation made by any partner concerning partnership affairs within scope of his authority is evidence against the partnership Notice to partner of any matter relating to partnership affairs operates as notice to partnership, except in case of fraud: Knowledge, of partner acting in the particular matter, acquired while a partner Knowledge of the partner acting in the particular matter then present to his mind Knowledge of any other partner who reasonably could and should have communicated it to the acting partner

Partners and the partnership are solidary liable to 3rd persons for the partner's tort or breach of trust Liability of incoming partner is limited to: His share in the partnership property for existing obligations His separate property for subsequent obligations Creditors of partnership preferred in partnership property & may attach partner's share in partnership assets Every partner is an agent of the partnership POWER OF PARTNER AS AGENT OF PARTNERSHIP Acts for carrying on in the usual way the business of the partnership

Act w/c is not apparently for the carrying of business in the usual way Acts of strict dominion or ownership: Assign partnership property in trust for creditors Dispose of goodwill of business Do an act w/c would make it impossible to carry on ordinary business of partnership Confess a judgment Enter into compromise concerning a partnership claim or liability Submit partnership claim or liability to arbitration Renounce claim of partnership Acts in contravention of a restriction on authority

Every partner is an agent and may execute acts with binding effect even if he has no authority Except: when 3rd person has knowledge of lack of authority Does not bind partnership unless authorized by other partners

Partnership not liable to 3rd persons having actual or presumptive knowledge of the

restrictions EFFECTS OF CONVEYANCE OF REAL PROPERTY BELONGING TO PARTNERSHIP Title in partnership name, Conveyance in partnership name

Title in partnership name, Conveyance in partner's name

Title in name of 1/ more partners, Conveyance in name if partner/partners in whose name title stands

Title in name of 1/more/all partners or 3rd person in trust for partnership, Conveyance executed in partnership name if in name of partners Title in name of all partners, Conveyance in name of all partners

Conveyance passes title but partnership can recover if: Conveyance was not in the usual way of business, or Buyer had knowledge of lack of authority Conveyance does not pass title but only equitable interest, unless: Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Conveyance passes title but partnership can recover if: Conveyance was not in the usual way of business, or Buyer had knowledge of lack of authority Conveyance will only pass equitable interest

Conveyance pass title

will

ASSIGNMENT OF INTEREST IN PARTNERSHIP Assignment is subject to three (3) conditions: made in good faith for fair consideration after a fair and complete disclosure of all important information as to its value RIGHTS OF AN ASSIGNEE: Get whatever assignor-partner would have obtained Avail usual remedies in case of fraud in the management

Ask for annulment of contract of assignment if he was induced to join through any of the vices of consent Demand an accounting (only in case of dissolution) 4) RESPONSIBILITY OF PARTNERSHIP TO PARTNERS To refund the amounts disbursed by partner in behalf of the partnership + corresponding interest from the time the expenses are made (loans and advances made by a partner to the partnership aside from capital contribution) To answer for obligations partner may have contracted in good faith in the interest of the partnership business To answer for risks in consequence of its management E. DISSOLUTION AND WINDING UP DISSOLUTION—change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business; partnership is not terminated but continues until the winding up of partnership affairs is completed WINDING UP—process of settling the business or partnership affairs after dissolution TERMINATION—that point when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. CAUSES OF DISSOLUTION: 1) Without violation of the agreement between the partners  By termination of the definite term/ particular undertaking specified in the agreement  By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified  By the express will of all the partners who have not assigned their interest/ charged them for their separate debts, either before or after the termination of any specified term or particular undertaking  By the bona fide expulsion of any partner from the business in accordance with power conferred by the agreement B) In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time

C) By any event which makes it unlawful for business to be carried on/for the members to carry it on for the partnership Loss of specific thing promised by partner before its delivery D) Death of any partner E) Insolvency of a partner/partnership F) Civil interdiction of any partner G) Decree of court under art. 1831 GROUNDS FOR DISSOLUTION BY DECREE OF COURT (Art. 1831)  Partner declared insane in any judicial proceeding or shown to be of unsound mind  Incapacity of partner to perform his part of the partnership contract  Partner guilty of conduct prejudicial to business of partnership  Willful or persistent breach of partnership agreement or conduct which makes it reasonably impracticable to carry on partnership with him  Business can only be carried on at a loss  Other circumstances which render dissolution equitable  Upon application by purchaser of partner's interest: o After termination of specified term/particular undertaking o Anytime if partnership at will when interest was assigned/charging order issued 1) EFFECTS OF DISSOLUTION AUTHORITY OF PARTNERSHIP

PARTNER

TO

BIND

GENERAL RULE: Authority of partners to bind partnership is terminated EXCEPTIONS 1. To wind up partnership affairs 2. Complete transactions not finished Qualifications: With respect to partners— Authority of partners to bind partnership by new contract is immediately terminated when dissolution is not due to ACT, DEATH or INSOLVENCY (ADI) of a partner (art 1833); If due to ADI, partners are liable as if partnership not dissolved, when the ff. concur:

If cause is ACT of partner, acting partner must have knowledge of such dissolution If cause is DEATH or INSOLVENCY, acting partner must have knowledge/ notice With respect to persons not partners (Art. 1834)— Partner continues to bind partnership even after dissolution in ff. cases: Transactions in connection to winding up partnership affairs/completing transactions unfinished Transactions which would bind partnership if not dissolved, when the other party/obligee: Situation 1 Had extended credit to partnership prior to dissolution & Had no knowledge/notice of dissolution, or Situation 2 i. Did not extend credit to partnership Had known partnership prior to dissolution Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on Partner cannot bind the partnership anymore after dissolution: Where dissolution is due to unlawfulness to carry on with business (except: winding up of partnership affairs) Where partner has become insolvent Where partner unauthorized to wind up partnership affairs, except by transaction with one who: Situation 1 i. Had extended credit to partnership prior to dissolution & ii. Had no knowledge/notice of dissolution, or Situation 2 Did not extend credit to partnership prior to dissolution Had known partnership prior to dissolution Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on 2) DISCHARGE OF LIABILITY Dissolution does not discharge existing liability of partner, except by agreement between: Partner and himself person/partnership continuing the business partnership creditors Rights of partner where dissolution not in contravention of agreement: Apply partnership property to discharge liabilities of partnership

Apply surplus, if any to pay in cash the net amount owed to partners Rights of partner where dissolution in contravention of agreement: Partner who did not cause dissolution wrongfully: Apply partnership property to discharge liabilities of partnership Apply surplus, if any to pay in cash the net amount owed to partners Indemnity for damages caused by partner guilty of wrongful dissolution Continue business in same name during agreed term Posses partnership property if business is continued Partner who wrongly caused dissolution: If business not continued by others - apply partnership property to discharge liabilities of partnership & receive in cash his share of surplus less damages caused by his wrongful dissolution If business continued by others - have the value of his interest at time of dissolution ascertained and paid in cash/secured by bond & be released from all existing/future partnership liabilities Rights of injured partner where partnership contract is rescinded on ground of fraud/misrepresentation by 1 party: 1. Right to lien on surplus of partnership property after satisfying partnership liabilities 2. Right to subrogation in place of creditors after payment of partnership liabilities 3. Right of indemnification by guilty partner against all partnership debts & liabilities 3) SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS Assets of the partnership: Partnership property (including goodwill) Contributions of the partners Order of Application of Assets: Partnership creditors Partners as creditors Partners as investors—return of capital contribution Partners as investors—share of profits if any 4) WHEN BUSINESS OF DISSOLVED PARTNERSHIP IS CONTINUED Creditors of old partnership are also creditors of the new partnership which continues the business of the old one w/o liquidation of the partnership affairs Creditors have an equitable lien on the consideration paid to the retiring /deceased partner by the purchaser when

retiring/deceased partner sold his interest w/o final settlement with creditors Rights if retiring/estate of deceased partner: To have the value of his interest ascertained as of the date of dissolution To receive as ordinary creditor the value of his share in the dissolved partnership with interest or profits attributable to use of his right, at his option Persons Authorized to Wind Up Partners designated by the agreement In absence of agreement, all partners who have not wrongfully dissolved the partnership Legal representative of last surviving partner A partner’s share cannot be returned without first dissolving and liquidating the business for the partnership’s outside creditors have preference over the enterprise’s assets. The firm’s property cannot be diminished to their prejudice. Magdusa v. Albaran, 115 Phil. 511 (1962) Due to its separate juridical personality from the individual partners, it is thus the partnership – having been the recipient of the capital contributions – which must refund the equity of retiring partners. Such duty does not pertain to partners who managed the business. The amount to be refunded, supra, consistent with the partnership being a separate and distinct entity, must necessarily be limited to what to the firm’s total resources. It can only pay out what it has for its total assets. But this is subject to the priority enjoyed by outside creditors. “After all the (said) creditors have been paid, whatever is left of the partnership assets becomes available for the payment of partners’ shares. Villareal v. Ramirez, 406 SCRA 145 F. LIMITED PARTNERSHIP Characteristics: 1. Formed by compliance with statutory requirements 2. One or more general partners control the business 3. One or more general partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions

4. May ask for the return of their capital contributions under conditions prescribed by law 5. Partnership debts are paid out of common fund and the individual properties of general partners

Right of remaining gen partners (if given) or continue business in case of death, insanity, retirement, civil interdiction, insolvency Right of limited partner (if given) to demand/receive property/cash in return for contribution Certificate must be filed with the SEC

DIFFERENCES BETWEEN GENERAL AND LIMITED PARTNER/PARTNERSHIP GENERAL Personally liable for partnership obligations When manner of mgt. not agreed upon, all general partners have an equal right in the mgt. of the business Contribute cash, property or industry Proper party to proceedings by/against partnership Interest not assignable w/o consent of other partners Name may appear in firm name Prohibition against engaging in business Retirement, death, insolvency, insanity of general partner dissolves partnership

LIMITED Liability extends only to his capital contributions No participation in management

Contribute cash or property only, not industry Not proper party to proceedings by/against partnership Interest is freely assignable Name must appear in firm name No prohibition against engaging in business Does not have same effect; rights transferred to legal representative

REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP: Certificate of articles of the limited partnership must state the ff. matters: 1. Name of partnership + word "ltd." 2. Character of business 3. Location of principal place of business 4. Name/place of residence of members 5. Term for partnership is to exist 6. Amount of cash/value of property contributed 7. Additional contributions 8. Time agreed upon to return contribution of limited partner 9. Sharing of profits/other compensation Right of limited partner (if given) to substitute an assignee Right to admit additional partners Right of limited partners (if given) to priority for contributions

To validly form a limited partnership, all that is required is SUBSTANTIAL COMPLIANCE IN GOOD FAITH with all the requirements under Art. 1844 (i.e. signing and swearing to a certificate, affixing the word “Limited” to the partnership name, etc.). If no substantial compliance, then the firm becomes a general partnership to third persons (but as amongst the partners, still limited). WHEN GENERAL PARTNER NEEDS CONSENT/RATIFICATION OF ALL LIMITED PARTNERS: 1. Do any act in contravention of the certificate 2. Do any act which would make it impossible to carry on the ordinary business of the partnership 3. Confess judgment against partnership 4. Possess partnership property/assign rights in specific partnership property other than for partnership purposes 5. Admit person as general partner 6. Admit person as limited partner - unless authorized in certificate 7. Continue business with partnership property on death, retirement, civil interdiction, insanity or insolvency of gen partner unless authorized in certificate SPECIFIC RIGHTS OF LIMITED PARTNERS: 1. Right to have partnership books kept at principal place of business 2. Right to inspect/copy books at reasonable hour 3. Right to have on demand true and full info of all things affecting partnership 4. Right to have formal account of partnership affairs whenever circumstances render it just and reasonable 5. Right to ask for dissolution and winding up by decree of court 6. Right to receive share of profits/other compensation by way of income 7. Right to receive return of contributions provided the partnership assets are in excess of all its liabilities REQUISITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER: 1. All liabilities of partnership have been paid/if not yet paid, at least sufficient to cover them 2. Consent of all members has been obtained

3. Certificate is cancelled/amended as to set forth withdrawal /reduction of contribution LIABILITIES OF A LIMITED PARTNER To the partnership For the difference between his contribution as actually made and that stated in the certificate as having been made, and For any unpaid contribution which he agreed in the certificate to make in the future time As a trustee for the partnership For the specific property stated in the certificate as contributed by him but which he had not contributed; For the specific property of the partnership which had been wrongfully returned to him; and Money or other property wrongfully paid or conveyed to him on account of his contribution. DISSOLUTION OF LIMITED PARTNERSHIP (Priority in Distribution of Assets): Those due to creditors, including limited partners Those due to limited partners in respect of their share in profits/compensation Those due to limited partners of return of capital contributed Those due to general partner other than capital & profits Those due to general partner in respect to profits Those due to general partner for return of capital contributed AMENDMENT OF CERTIFICATE OF PARTNERSHIP 1. In case any of the ten enumerated changes and circumstances in Art. 1864, par. 2 are present. 2. It must be signed and sworn to by all the members including the new members if some are added; in case of substitution, the assigning limited partner must also sign. 3. The cancellation or amendment must be recorded in the SEC. Any person who suffers loss by reliance on false statement in certificate may hold liable for damages any party to the certificate who knew the statement to be false at the time the latter signed the certificate or came to know such falsity subsequently but within sufficient time before reliance to enable such party to cancel or amend the certificate or file the proper petition for such purpose (under Art. 1865). (Art. 1847; Walraven v. Ramsay, 55 N.W.d 853). A general partner’s DIIC (death, insolvency, insanity, or civil interdiction) dissolves the

partnership unless the business is continued by the surviving general partners under a right stated in the certificate or with their common (i.e. all) consent (Art. 1860). Still, even if allowed under the certificate or consented to by all, there must be an amendment further to Arts. 1864 and 1865 (cf. Bautista). Otherwise, limited partners will not be able to avail of the protection of the law as regards liability. The partnership will be considered general Lowe v. Arizona Power & Light Co., 427 P. d. 366 A limited partner shall not become liable as a general partner, unless in addition to the exercise of his rights and powers as a limited one, he takes part in the control (and management) of the business (Art. 1848; Holzman v. Escamilla, 195 P. d. 833). Actually, a person may be general and limited at the same time provided this is stated in the certificate. He shall have all the powers, rights, and restrictions of a general partner; but with respect to his capital contribution, his right against the other members of the firm would be that of a limited partner (Art. 1853). A limited partner may also loan money to and transact other business with the firm. BUT, he cannot: (1) receive or hold as collateral any partnership property; or (2) receive from a general partner or from the firm any payment, conveyance, release if at that time assets of the firm are not sufficient to discharge liabilities to outside creditors; Art. 1854: any violation would be fraud on such creditors. The remedy of a general partner who suffers from or faces interference from his limited partners is dissolution. Weil v. Diversified Properties, 319 F. Supp

V. AGENCY ========================= ======== TOPICS UNDER THE SYLLABUS A. DEFINITION OF AGENCY B. POWERS (ARTS. 1877-1878 C. EXPRESS V. IMPLIED AGENCY D. AGENCY BY ESTOPPEL E. GENERAL VS. SPECIAL AGENCY F. AGENCY COUCHED IN GENERAL TERMS G. AGENCY REQUIRING SPECIAL POWER OF ATTORNEY H. AGENCY BY OPERATION OF LAW I. RIGHTS AND OBLIGATIONS OF PRINCIPAL J. MODES OF EXTINGUISHMENT ========================= ======== A. DEFINITION OF AGENCY CONTRACT OF AGENCY is a contract whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Characteristics: Consensual: perfected by mere consent; Nominate: it has its own name; Preparatory: entered into as means to enter into other contracts Principal: does not depend on another contract for its existence and validity; Unilateral/Bilaterial: Unilateral: if contract is gratuitous or it creates obligations for only one party (i.e. the agent) Bilateral: if contract is for compensation or gives rise to reciprocal rights and obligations

its representative character & its derivative authority. Purpose: Extend the personality of the principal through the facility of the agent Capacity of the Parties: Principal He may be a natural or a juridical person He must be capacitated. General RULE: If a person is capacitated to act for himself or his own right, he can act through an agent. The agent is not liable where he was ignorant of the principal’s incapacity Agent Insofar as third persons are concerned, it is enough that the principal is capacitated. Insofar as his obligations to his principal are concerned, the agent must be able to bind himself. As an agent, some mental capacity is necessary, therefore, those who are absolutely incapacitated (ex. Insane persons) cannot be agents. ESSENTIAL ELEMENTS Consent of the parties to establish the relationship; Object of the contract is the execution of a juridical act in relation to third persons; Agent acts as a representative and not for himself; and Agent acts within the scope of his authority. An illegal termination of agency does not justify reinstatement of the agent as such. The agency cannot be compelled by the courts to be reinstated because such relationship can only be given effect with the consent of the principal. Orient Air Services v. CA, G.R. No. 76931, May 29, 1991

Nature: Since it is a contract, there must be a meeting of the minds as to consent, object, and cause.

Acts That Cannot Be Done By Agent: Personal Acts – ex. making of a will Criminal or Illegal Acts

Exception to contractual nature: When the agency is created by operation of law Ex: Agency by Estoppel

Nature of Relationship between Principal and Agent: Fiduciary  based on trust & confidence Agent is estopped from asserting interest adverse to his principal’s Agent must not act as an adverse party Agent must not act for an adverse party Agent must not use or disclose secret information Agent must give notice of material facts

Basis: Representation The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if they were personally done by the principal. Hence, the distinguishing features of agency are

GENERAL RULE: Knowledge of the agent is imputed to the principal even though the agent never communicated it to his principal

EXCEPTIONS: Where the interests of the agent are adverse to those of the principal; Agent Acts in Bad Faith or Where the person claiming the benefit of the rule colludes with the agent to defraud the principal. B. POWERS (ARTS. 1877-1878) Special powers of attorney are necessary in the following cases: (PECWAM-LLBBOCARO) To make such payments as are not usually considered as acts of administration; To effect novations which put an end to obligations already in existence at the time the agency was constituted; To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; To waive any obligation gratuitously; To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; To lease any real property to another person for more than one year; To bind the principal to render some service without compensation; To bind the principal in a contract of partnership; To obligate the principal as a guarantor or surety; To create or convey real rights over immovable property; To accept or repudiate an inheritance; To ratify or recognize obligations contracted before the agency; Any other act of strict dominion. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. Special Power of Attorney - an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The special power of attorney can be included in the general power when it specifies therein the

act or transaction for which the special power is required. Powers Not Included in the Power to Mortgage To sell To execute a second mortgage To mortgage for the agent’s or any 3rd persons’ benefit, UNLESS clearly indicated Powers Not Included in the Power to Compromise - Submission to Arbitration Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Requisites for Principal to be Bound by Act of Agent: The agent must act in behalf of the principal The agent must act within the scope of his authority When a principal NOT BOUND by act of agent: The latter acts without or beyond the scope of his authority in the former’s name Exceptions: Where the acts of the principal have contributed to deceive a 3rd person in good faith; Where the limitations upon the power created by the principal could not have been known by the 3rd person; Where the principal has placed in the hands of the agent instruments signed by him in blank; Where the principal has ratified the acts of the agent The latter acts within the scope of his authority but in his own name, EXCEPT when the transaction involves things belonging to the principal NOTE: The agent is not deemed to have exceeded the limits of his authority should he perform the agency in a manner more advantageous to the principal than that indicated

by him, since he is authorized to do such acts as may be conducive to the accomplishment of the purpose of the agency. The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. Eurotech v. Cuizon, G.R. No. 167552, April 23, 2007 Distinction between Agency & Lease of Work/Service AGENCY LEASE OF WORK/SERVICE Representation Employment

Agent can make the principal personally liable.

Guardian has no power to impose personal liability on the ward.

Distinction between Agency & Lease of Property AGENCY

LEASE OF PROPERTY

Agent is controlled by the principal.

Lessee is not controlled by the lessor.

Agency may involve things other than property.

Lease of property involves property.

Agent can bind the principal.

Lessee cannot bind the lessor.

Distinction between Agency to Sell & Sale AGENCY TO SELL

SALE

Agent exercises discretionary powers

Lessor ordinarily performs only ministerial functions

Agent receives the goods as the principal’s goods

Buyer receives the goods as owner

3 persons are involved: principal, agent and the 3rd person with whom the agent contracts

2 persons are involved: lessor and lessee

Agent delivers the proceeds of the sale

Buyer pays the price

Buyer, as a general rule, cannot return the object sold

Relates to commercial or business transactions

Relates more to the matters of mere manual or mechanical execution

Agent can return the object in case he is unable to sell the same to a third person

Distinction between Agency & Guardianship AGENCY GUARDIANSHIP Agent represents a capacitated person

A guardian represents an incapacitated person.

Agent is appointed by the principal and can be removed by the latter.

Guardian is appointed by the court and stands in loco parentis.

Agent is subject to the directions of the principal.

Guardian is not subject to the directions of the ward but must act for the benefit of the latter

Agent in dealing with Buyer can deal with the the thing received is thing as he pleases, bound to act according being the owner to the instructions of his principal Distinction between Agent & Contractor AGENT

INDEPENDENT CONTRACTOR

Represents his principal

Employed by the employer

Acts under the principal’s control and instruction

Acts according to his own method

Principal is liable for torts committed by the agent within the

Employer not liable for torts committed by the independent contractor.

scope of his authority Distinction between Agency and Partnership AGENCY PARTNERSHIP An agent must submit to the principal’s right to control

A co-partner is not subject to co-partner’s right to control, unless there is an agreement to that effect

The agent assumes no personal liability where he acts within the scope of his authority

The partner binds not only the firm members but himself as well

The agent takes his agreed share of profits not as owner but as an agreed measure of compensation for his services

The profits belong to all the partners as common proprietors in agreed proportions

C. EXPRESS VS. IMPLIED AGENCY Express – agent has been actually authorized by the principal, either orally or in writing Implied – agency is implied from the acts of the principal, from his silence, or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority, or from the acts of the agent which carry out the agency, OTHER CLASSIFICATIONS OF AGENCY As to character Gratuitous – agent receives no compensation for his services Onerous – agent receives compensation for his services As to extent of business of the principal General – agency comprises all the business of the principal Special – agency comprises one or more specific transactions As to authority conferred Couched in general terms – only acts of administration Couched in specific terms – only the performance of a specific act/s As to nature and effects Ostensible or Representative – agent acts in the name and representation of the principal Simple or Commission – agent acts in his

own name but for the account of the principal. Forms of Agency GENERAL RULE: Appointment of an agent may be oral or written; no formal requirements EXCEPTION: When the law requires a specific form (ex. agent’s sale of real property or any interest therein) Agency is presumed to be for compensation, unless there is proof to the contrary. The agent does not have to prove that the agency is for compensation. But the prima facie presumption that the agency is for a compensation may be contradicted by contrary evidence Broker - negotiate contracts relative to property in behalf of others and for a compensation/fee When Broker Entitled to Compensation: Whenever he brings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly However, a broker is never entitled to commission for unsuccessful efforts. The broker should be paid his commission where he is the efficient procuring cause in bringing the sale. Efficient procuring cause: when there is a close proximate and causal connection between the efforts and labor of the agent and the principal’s sale of property. Manotoc Brothers v. CA, 221 SCRA 224 (1993) LAW ON DOUBLE AGENCY Disapproved by law for being against public policy and sound morality EXCEPT where the agent acted with full knowledge and consent of the principals Right of agent to compensation in case of double agency: With knowledge of both principals - recovery can be had from both principals Without the knowledge of both principals the agent can recover from neither With knowledge of one principal - as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals ACCEPTANCE BY AGENT

Forms of Acceptance by Agent: Express - when it is oral or written Implied -when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances Between persons who are present – implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it without any objection Between persons who are absent – acceptance not deemed implied from the silence of the agent. EXCEPTIONS: When the principal transmits his power of attorney to the agent who receives it without any objection When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram

D. AGENCY BY ESTOPPEL There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although not real, authority to represent another. Distinction between Agency by Estoppel & Implied Agency BASIS

Existence of actual agency

Reliance by 3rd persons

What is meant by “present”? Generally, “face to face”, but includes people conversing directly through technology (ex. over the telephone). Power of Attorney - Instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal; primary purpose is to evidence agent’s authority to third parties within whom the agent deals Construction of Power of Attorney: GENERAL RULE: Strictly construed and strictly pursued; held to grant only those specified powers EXCEPTION: when strict construction will destroy the very purpose of the power Ways of Giving Notice of Agency & Its Effect: By special information - the person appointed as agent is considered as such with respect to the person to whom it was given. By public advertisement - the agent is considered as such with regard to any person

How do you revoke an agency? In the same manner as it was constituted. However, constitution by Special Information may be revoked by notice in a daily newspaper, provided it can be proven that 3rd persons in question read the revocation

Nature of Authority

AGENCY BY ESTOPPEL

IMPLIED AGENCY

No agency at all

There is an actual agency

Can be invoked only by a 3rd person who in good faith relied on the conduct of the principal in holding the agent out as being authorized

Such reliance is not needed, since the agent is a real agent

An agent by estoppel has none of the rights of an agent, except where the principal’s conduct are such that the agent reasonably believed that the principal intended him to act as an agent

An agent by implied appointment has all the rights and liabilities of an agent, i.e. has actual authority to act on behalf of the principal

An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. Will an authority embodied in a letter be sufficient? Yes. Jimenez v. Rabot, 38 Phil 387 (1918) Attorney-In-Fact One who is given authority by his principal to do a particular act not of a legal character The term is, in loose language, used to include agents of all kinds, but in its strict sense, it means an agent having a special authority created by a deed.

V. GENERAL VS. SPECIAL AGENCY

BASIS Scope of Authority

Nature of Service Authorized Extent to Which Agent May Bind the Principal

Terminatio n of Authority

Constructi on of Principal’s Instruction s

GENERAL AGENCT

SPECIAL AGENT

All acts connected with the business or employment in which he is engaged

Specific acts in pursuance of particular instructions or with restrictions necessarily implied from the act to be done No continuity of service

Involves continuity of service May bind his principal by an act within the scope of his authority although it may be contrary to the latter’s special instructions Apparent authority does not terminate by the mere revocation of his authority without notice to the third party

Merely advisory in nature

Can not bind his principal in a manner beyond or outside the specific acts which he is authorized to perform Duty imposed upon the third party to inquire makes termination of the relationship as between the principal and agent effective as to such third party unless the agency has been entrusted for the purpose of contracting with such third party Strictly construed as they limit the agent’s authority

E. AGENCY COUCHED IN GENERAL TERMS Agency Couched in General Terms: Covers only MERE ACTS OF ADMINISTRATION even if: The principal should state that he withholds no power The agent may execute such acts as he may consider appropriate The agency should authorize a general and unlimited management

How are contracts of agency construed? Contracts of agency, as well as general powers of attorney, must be interpreted in accordance with the language used by the parties. The real intention of the parties is primarily determined from the language used and gathered from the whole instrument. In case of doubt, resort must be had to the situation, surroundings and relations of the parties. The intention of the parties must be sustained rather than defeated. If the contract is open to 2 constructions, one of which would uphold the intention while the other would overthrow it, the former is to be chosen. F. AGENCY REQUIRING SPECIAL POWER OF ATTORNEY Special powers of attorney are necessary in the following cases: (PECWAM-LLBBOCARO) To make such payments as are not usually considered as acts of administration; To effect novations which put an end to obligations already in existence at the time the agency was constituted; To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; To waive any obligation gratuitously; To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; To lease any real property to another person for more than one year; To bind the principal to render some service without compensation; To bind the principal in a contract of partnership; To obligate the principal as a guarantor or surety; To create or convey real rights over immovable property; To accept or repudiate an inheritance; To ratify or recognize obligations contracted before the agency; Any other act of strict dominion. A special power to sell excludes the power to

mortgage; and a special power to mortgage does not include the power to sell. Special Power of Attorney - an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The special power of attorney can be included in the general power when it specifies therein the act or transaction for which the special power is required. Powers Not Included in the Power to Mortgage To sell To execute a second mortgage To mortgage for the agent’s or any 3rd persons’ benefit, UNLESS clearly indicated Powers Not Included in the Power to Compromise - Submission to Arbitration Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Requisites for Principal to be Bound by Act of Agent: The agent must act in behalf of the principal The agent must act within the scope of his authority When a principal NOT BOUND by act of agent: The latter acts without or beyond the scope of his authority in the former’s name Exceptions: Where the acts of the principal have contributed to deceive a 3rd person in good faith; Where the limitations upon the power created by the principal could not have been known by the 3rd person; Where the principal has placed in the hands of the agent instruments signed by him in blank; Where the principal has ratified the acts

of the agent The latter acts within the scope of his authority but in his own name, EXCEPT when the transaction involves things belonging to the principal NOTE: The agent is not deemed to have exceeded the limits of his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him, since he is authorized to do such acts as may be conducive to the accomplishment of the purpose of the agency. The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. Eurotech v. Cuizon, G.R. No. 167552, April 23, 2007 G. RIGHTS AND OBLIGATIONS OF PRINCIPAL OBLIGATIONS OF THE PRINCIPAL Obligations of the Principal to the Agent: (CARIP) Comply with all the obligations agent contracted in representation of the principal Advance sums necessary for the execution of the agency, when agent so requests; liable for reimbursement regardless of the undertaking’s success whenever agent had advanced & has no fault; includes interest Reimburse the agent for all advances made by him provided the agent is free from fault Indemnify the agent for all the damages which the execution of the agency may have caused the latter without fault or negligence on his part Pay the agent the compensation agreed upon or the reasonable value of the latter’s services Liability of 3rd persons to the Principal In Contract – a 3rd person is liable to the principal upon contracts entered into by his agent, as if the contract has been entered into by the principal. In Tort – the 3rd person’s tort liability to the principal, insofar as the agent is involved in the tort, arises in 3 situations:

Where the 3rd person damages or injures property or interest of the principal in the possession of the agent Where the 3rd person colludes with the agent to injure/defraud the principal Where the 3rd person induces the agent to violate his contract with the principal to betray the trust reposed upon him by the principal. Requisites for solidary liability of principals There are 2 or more principals The principals have all concurred in the appointment of the same agent The agent is appointed for a common transaction or undertaking NOTE: The rule in Art. 1915 applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals and not from the act of constituting the agency. Rule where 2 persons contract separately with agent and principal Two persons may contract separately with the agent and the principal with regard to the same thing. If the two contracts are incompatible with each other, the one of prior date shall be preferred. This is subject, however, to the rules on Double Sales under Article 1544 of the Civil Code (i.e. for movables: first in possession, first in right; for immovables: first to register in good faith, first in right; absent any inscription: first in possession or party who presents oldest title acquires ownership). Agent’s Right of Retention: Specific (only for those goods connected with the agency) and Until the principal effects the reimbursement and pays the indemnity PRINCIPAL’S LIABILITIES FOR EXPENSES GENERAL RULE: Principal is liable for the expenses incurred by the agent EXCEPTIONS: (AFUS) If the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the benefits derived from the contract When the expenses were due to the fault of the agent When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof When it was stipulated that the expenses

would be borne by the agent, or that the latter would be allowed only a certain sum Who can be estopped to deny agency? Estoppel of Agent- one professing to act as agent is estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged Estoppel by the Principal As to agent – one knowing another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other As to sub-agent – for the principal to be estopped from denying his liability to a third person, he must have known or be charged with knowledge of the transaction and the terms of the agreement between the agent and subagent As to third persons – one who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency Estoppel of Third Persons – a third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest Estoppel of the Government - government neither estopped by the mistake/error of its agents; may be estopped through affirmative acts of its officers acting within the scope of their authority Distinction between Ratification and Estoppel RATIFICATION ESTOPPEL Rests on intention

Rests on prejudice

Affects the entire transaction from the beginning

Affects only relevant parts of the transaction

Substance of ratification is confirmation of an authorized act or conduct after it has been done

Substance of estoppel is the principal’s inducement to another to act to his prejudice

Distinction between Apparent Authority &

Authority by Estoppel APPARENT AUTHORITY Though not actually granted, principal knowingly permits/holds out the agent as possessing the necessary powers to act in a certain way

AUTHORITY BY ESTOPPEL Where the principal, by his negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent

OBLIGATIONS OF THE AGENT OBLIGATIONS OF THE AGENT TO THE PRINCIPAL General: (GOC) Act with utmost good faith & loyalty for the furtherance of principal’s interests Obey principal’s instructions Exercise reasonable care Specific: (FADI – CALAMARI) Carry out the agency Answer for damages which through his nonperformance the principal may suffer Finish the business already begun on the death of the principal should delay entail any danger (exception to the rule that death extinguishes agency) Observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed Advance necessary funds if there be a stipulation to do so (except when the principal is insolvent) Act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do Exceptions (to the rule that the agent must not depart from the instructions of principal): (SAI) There’s a sudden emergency If the instructions are ambiguous If the departure is so insubstantial that it does not affect the result and the principal suffers no damage thereby Not to carry out the agency if it would manifestly result in loss or damage to the principal Answer for damages if there being a conflict between his & his principal’s interests, he prefers his own Not to loan to himself if he has been authorized to loan money at interest

Render an account of his transactions and deliver to the principal whatever he may have received by virtue of the agency (If the agent fails to deliver and instead converts or appropriates for his own use the money or property belonging to his principal, he may be charged with ESTAFA.) Be responsible in certain cases for the act of the substitute appointed by him Pay interest on funds he has applied to his own use Distinctions between Authority and the Principal’s Instructions AUTHORITY INSTRUCTIONS Sum total of the Contemplates only a powers committed to private rule of guidance the agent by the to the agent; principal independent and distinct in character Refers to the manner or mode of agent’s action Relates to the subject/business with which the agent is empowered to deal or act Limitations of authority Without significance as are operative as against those with against those who neither knowledge nor have/charged with notice of them knowledge of them Contemplated to be Not expected to be made known to third made known to those persons dealing with with whom the agent the agent deals When agent has a right to disobey the principal’s instructions: When the instruction calls for the performance of illegal acts Where he is privileged to do so to protect his security in the subject matter of the agency When obligation to account not applicable: If the agent acted only as a middleman with the task of merely bringing together the vendor and the vendees. If the agent had informed the principal of the gift/bonus/profit he received from the purchaser and his principal did not object thereto. Where a right of lien exists in favor of the agent. When agent may incur personal liability When the agent expressly binds himself When the agent exceeds his authority When an agent by his act prevents performance on the part of the principal When a person acts as an agent without

authority or without a principal A person who purports to act as agent of an incapacitated principal

The means adopted are reasonable under the circumstances; The emergency really exists;

Appointment of Sub-agent: If the principal has not prohibited the agent from appointing a substitute, he will be liable to 3rd persons for the acts of the sub-agent within the scope of his authority If there is a prohibition but nevertheless the agent appoints a sub-agent, all the subagent’s acts are void as to the principal. If there is authority to appoint and sub-agent is not designated by the principal, the agent will be liable for all the acts of the sub-agent if the sub-agent is notoriously incompetent or insolvent. If there is authority to appoint and sub-agent is designated by the principal, the agent is released from any liability from the acts of the sub-agent. If the appointment of a sub-agent is not authorized but not prohibited, it shall be valid if it is beneficial to the principal. But, should the principal incur damage due to such appointment, the agent shall be primarily responsible for the acts of the sub-agent.

When 3rd persons can repudiate the contract Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agent’s acts.

Responsibility of 2 or More Agents Appointed Simultaneously: GENERAL RULE: Liable jointly EXCEPTION: When solidarity has stipulated, in which case, each becomes solidarily liable for fulfillment of the agency; and for negligence of his fellow agent(s)

been expressly of the agents (1) the non(2) the fault or

EXCEPTION TO THE EXCEPTION: when one of the other agent/s acts beyond the scope of his authority – innocent agent is NOT liable Effect where 3rd person aware of limits of agent’s power: If the agent exceeds his authority, it shall be VOID unless the principal ratifies it. DOCTRINE OF AGENCY BY NECESSITY An agency can never be created by necessity; what is actually created is additional authority in an agent appointed and authorized before the emergency arose. The existence of emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency, provided: (PURE) The agent’s enlarged authority is exercised for the principal’s protection The agent is unable to communicate with principal;

Effect of the principal receiving the benefits of the transaction He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens Conditions for Ratification: The principal must have capacity and power to ratify He must have had knowledge of material facts He must ratify the acts in its entirety The act must be capable of ratification The act must be done in behalf of the principal To be effective, ratification need not be communicated or made known to the agent or the third party. The act or conduct of the principal rather than his communication is the key. But before ratification, the third party is free to revoke the unauthorized contract. Effects of Ratification With respect to agent - relieves the agent from liability to the third party for the unauthorized transaction, and to his principal for acting without authority; may recover compensation With respect to principal - assumes responsibility for the unauthorized act, as if the agent had acted under original authority but not liable for acts outside the authority approved by his ratification With respect to 3rd persons - bound by ratification to the same extent as if the ratified act had been authorized; cannot raise the question of the agent’s authority to do the ratified act Ratification is spelled out when the principal brings legal proceedings to enforce the contract entered into by the unauthorized agent, subject to qualification, however, that the bringing of legal proceedings is not deemed ratification where the principal’s action is undertaken to avert a greater loss rather than to assert a gain. Robinson v. Borse

ACTS OF THE AGENT

In behalf of the principal, within the scope of authority

Without or beyond scope of authority

Within the scope of authority but in the agent’s name

Within the scope of the written power of attorney but agent has actually exceeded his authority according to an understanding between him & the principal With improper motives

NOTE: Agent always liable for fraud but not for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for compensation. Authorize d princi Principal still responsible for the pal Mismanageme acts contracted by the agent with still nt of the respect to 3rd persons; liable business by the Principal, however, may seek Beyond agent recourse from the agent the Principalscope civilly liable so long as of isthecommitted by the Tort committed the tort agent’ by the agent agent while performing his duties s in furtherance of the principal’s author business Agent in good Principalityis liable for damages GR: faith but Principal not EFFECT prejudices 3rd liable parties Excep Binds principal; Agent in bad Only the agent is liable for tion: Agent not personally liable faith and damages principal prejudices 3rd takes persons advantag e of a contract Contract is unenforceable as or against the principal but receives the agent to the third person benefits made under Not binding on the principal; false Principal has no cause of action represent rd against the 3 parties and ation of vice versa his agent 3. For the agent’s own benefit – principal still liable; agent’s motive immaterial

Insofar as 3rd persons are concerned (not required to inquire further than the terms of the written power, agent acted within Commission Agent - one whose business is to scope of his authority; receive and sell goods for a commission and who Principal estopped is entrusted by the principal with the possession Motive is immaterial; as long ofas goods to be sold, and usually selling in his own within the scope of authority, name. valid Distinction between Commission Agent & Broker COMMISSION AGENT BROKER

Engaged in the purchase and sale for a principal of personal property which has to be placed in his possession and disposal

No custody or possession of the thing he disposes; merely a go-between, an intermediary between the seller and the buyer

Has a relation with principal, buyer or seller, and property which is the object of the transaction

Maintains no relation with the thing which he purchases or sells

Distinction between Ordinary Agent & Commission Agent ORDINARY AGENT COMMISSION AGENT Acts for and in behalf May act in his own of his principal name or in that of the principal Need not have Must be in possession possession of the of the thing he principal’s goods disposes Obligations of a Commission Agent: (RMCB) Responsible for the goods received by him, as described in the consignment, UNLESS upon receiving them he should make a written statement of the damage and deterioration suffered by the same If goods are of the same kind and mark but belonging to different owners, make a distinction by counter marks and designate the merchandise respectively belonging to each principal He cannot, without consent of the principal, sell on credit; should he do, principal may demand payment in cash, but the commission agent entitled to any interest/benefit which may result from such sale If an agent receives guarantee commission (a del credere agent), he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. The agent shall be liable for damages if he does not collect the credits of his principal at the time when they become due and demandable, UNLESS he proves, that he exercised due diligence for that purpose. J. MODES OF EXTINGUISHMENT Agency is Extinguished: (EDWARD) By the expiration of the period for which the agency was constituted. By the death, civil interdiction, insanity or

insolvency of the principal or of the agent; By the withdrawal of the agent; By the accomplishment of the object or purpose of the agency; By its revocation; By the dissolution of the firm or corporation which entrusted or accepted the agency (Art. 1919) The list not exclusive; causes particular only to agency; may be extinguished by the modes of extinguishment of obligations in general whenever they are applicable, like loss of the thing and novation Agency is TERMINATED, as a matter of law, upon the outbreak of war. Presumption of Continuance of Agency when once shown to have existed, an agency relation will be presumed to have continued, in the absence of anything to show its termination. Continuance of Agency Parties must be Present, Capacitated and Solvent Modes of extinguishing an agency, generally: (ASO) Agreement Subsequent acts of the parties which may be either: By the act of both parties or by mutual consent By the unilateral act of one of them NOTE: Even if the reason for extinguishing the agency is not true, the agent cannot insist on reinstatement. The agent can only demand damages. What happens if the subject matter of the agency is lost or destroyed? In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agent‘s authority to deal with reference to it EXCEPTIONS: If it is possible to substitute other material for that which was destroyed without substantial detriment to either party If the destroyed subject matter was not in fact essential to the contract A partial loss or destruction Form of renunciation

It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, such as: Where he has conducted himself in a manner incompatible with his duties as agent When he abandons the object of his agency and acts for himself in committing a fraud upon his principals When he files a complaint against the principal and adopts an antagonistic attitude towards him Exceptions

to Extinguishment by Death (CKID) If the agency is coupled with an interest If the act of the agent was executed without the knowledge of the death of the principal and the third person who contracted with the agent acted in good faith To avoid damage If it has been constituted in the common interest of the principal and of the agent, or in the interest of a third person who has accepted the stipulation in his favor Can the heirs continue the agency? GENERAL RULE: agency calls for personal services on the part of the agent; rights & obligations are not transmissible EXCEPTIONS: Agency by operation of law, or a presumed or tacit agency Agency is coupled with an interest in the subject matter of the agency (ex. power of sale in a mortgage). Exceptions to Extinguishment Upon Loss or Destruction of Subject Matter If it is possible to substitute other material for that which was destroyed without substantial detriment to either party or if the destroyed subject matter was not in fact essential to the contract; A partial loss or destruction does not always result in a complete termination of the agency, and under such circumstances, while the agency may be ended in so far as the destroyed property is concerned, it may continue in existence as to other property not affected If the loss brought about by the principal (ex.. principal sells subject matter to another party even if an agent has been constituted in reference to it), principal liable for damages for his wrongful terminating act; if subject matter is lost without principal’s fault, no liability assumed by him Change of Circumstance: GENERAL RULE: when there is a basic change

in the circumstances surrounding the transaction, which was not contemplated by the parties and which would reasonably lead the agent to believe that the principal would not desire him to act, the authority of the agent is terminated EXCEPTIONS: If the original circumstances are restored within a reasonable period of time, the agent's authority may be revived Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably Where the principal and agent are in close daily contact, the agent's authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions Revocation - termination of the agency by the subsequent act of the principal Renunciation/Withdrawal - termination of the agency by the subsequent act of the agent May the agency be extinguished at will? AGENT may do so but subject to the contractual obligations owing to the principal (i.e. fixed period of time for the agency or purpose not yet accomplished); Expressly or impliedly conducted himself in a manner incompatible with his duties; abandons the object of agency and acts for himself in committing a fraud upon his principal; he files a complaint against the principal and adopts an antagonistic attitude towards him with just cause - give due notice without just cause - liable for damages if the principal suffers damages thereby UNLESS the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself The mere fact that the agent violates his instructions does not amount to renunciation, and although he may thus render himself liable to the principal, he does not cease to become an agent. PRINCIPAL may also revoke the agency at will EXCEPTION: agency coupled with interest When a bilateral contract depends upon the agency When the agency is the means of fulfilling an obligation already contracted When a partner is appointed as manager of a partnership in the contract of partnership

and his removal from the management is unjustifiable. Exception to the exception: when the agent acts to defraud the principal Implied Revocation of Agency Principal appoints a new agent for the same business or transaction (only if there is incompatibility); effective as between the principal and the agent only if communicated to the agent; does not prejudice rights of third persons acting in good faith without knowledge of the revocation Principal directly manages the business entrusted to the agent, or deals directly with 3rd persons Effect of Issuance of a Special Power of Attorney: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. Principal’s Liability for Damages despite Revocation If the agency was constituted for a fixed period, the principal shall be liable for damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed Even if there was no time fixed for the continuance of the agency, but the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid the payment of commission about to be earned, the principal can be held liable for damages Necessity of Notice of Revocation As to the agent - express notice always necessary; sufficient notice if the party to be notified actually knows, or has reason to know, a fact indicating that his authority has been terminated/suspended; revocation without notice to the agent will not render invalid an act done in pursuance of the authority As to 3rd persons – express notice necessary As to former customers - actual notice must be given to them because they always assume the continuance of the agency relationship As to other persons - notice by publication is enough Effect of Extinguishment without Notice Act of agent deemed valid insofar as 3rd parties acting in good faith and without knowledge of revocation

VI. CREDIT TRANSACTIONS ============================ =====

TOPIC UNDER THE SYLLABUS: A. Loan 1. Commodatum vs. Mutuum 2. Obligations of bailor and bailee 3. Interest and the suspension of usury law =========================== =========== CREDIT TRANSACTIONS include all transactions involving the purchase or loan of goods, services or money in the present with a promise to pay or deliver in the future (contract of security) 2 Types of Credit Transactions: 1. Secured transactions – those supported by a collateral or an encumbrance of property 2. Unsecured transactions – those supported only by a promise to pay or the personal commitment of another such as a guarantor or surety SECURITY is something given, deposited or serving as a means to ensure the fulfillment or enforcement of an obligation or of protecting some interest in the property 2 Types of Security: 1. Personal – when an individual becomes a surety or a guarantor 2. Real or Property – when an encumbrance is made on property (e.g. mortgage or pledge) BAILMENT - is the delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when a special purpose is accomplished or kept until the bailor reclaims it. Generally, it is contractual, but may also be created by operation of law. PARTIES IN BAILMENT 1. BAILOR – The lender/giver; the party who delivers possession/custody of the thing bailed 2. BAILEE – The recipient; the party who receives the possession/custody of the thing delivered LOAN

CHARACTERISTICS 1. Real Contract – delivery is essential for perfection of the loan (BUT a promise to lend, being consensual, is binding upon the parties) 2. Unilateral Contract - only the borrower has the obligation

1. COMMODATUM VS. MUTUUM KINDS 1. COMMODATUM – bailor delivers to bailee a non-consumable thing so that the latter may use it for a certain time and return the identical thing Kinds of commodatum: a. Ordinary commodatum – bailee uses the thing for a certain period of time b. Precarium – bailor may demand the thing loaned at will; exists in cases where: i. There is no stipulation as to the duration of the contract or use of the thing loaned ii. Use of the thing is merely tolerated by the owner 2. MUTUUM OR SIMPLE LOAN - lender delivers to the borrower money or other consumable thing upon the condition that the latter will pay the same amount of the same kind and quality LOAN 1. Delivery by one party and the receipt by the other party of a given sum of money or other consumable thing upon an agreement, express or implied 2. To repay the same amount of the same kind and quality, w/ or w/o interest

CREDIT Ability of an individual to borrow money or things by virtue of the confidence or trust reposed by a lender that he will pay what he may promise w/in a specified period

COMMODATUM (Articles 1935-1952) CHARACTERISTICS AND CERTAIN RULES TO REMEMBER: 1. Gratuitous: If there is compensation, then it’s not commodatum. It may be a lease. 2. Personal: Death of lender/borrower EXTINGUISHES the contract

3.

4.

5.

6.

7.

a. Borrower can’t lend or lease the thing to third persons i. EXCEPTION: when stipulated that he can ii. EXCEPTION: the members of the borrower’s household may make use of the thing iii. EXCEPTION TO EXCEPTION: when stipulated that members of the househould cannot use or if the nature of the thing forbids such use Subject Matter: a. Generally non-consumables (can be real or personal property) b. If consumable, it must be for exhibition (1936) Ownership a. Lender does not have to be the owner of the thing loaned in commodatum Right of retention: a. Borrower can’t retain the thing loaned just because he has claims against lender b. Borrow can retain if he suffers damages by reason of hidden flaws in the thing lent (1951) Presumption of solidary liability of borrowers a. If there are two or more borrowers, the presumption is that they are solidarily liable Fruits: a stipulation to make use of fruits is valid, but it is never presumed. The enjoyment of the fruits must only be incidental to the use of the thing itself - if enjoyment of fruits is primary reason, it is a usufruct.

d.

LENDS THE SUBJECT MATTER TO A 3RD PERSON - he lends or leases the thing to a third person who is not a member of his household e. INGRATITUDE - being able to save the thing borrowed or his own thing, he chose to save the latter

2. OBLIGATIONS OF BAILOR AND BAILEE OBLIGATIONS OF BAILEE (borrower) 1. To take care of the thing with ordinary diligence 2. To pay for ordinary expenses 3. To be liable for loss due to fortuitous event if stipulated that he is such OBLIGATIONS OF THE BAILOR (lender) (ADREAD-HA) 1. Primary obligation of the bailor: General Rule: To allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for w/c the commodatum was constituted. Exceptions: Bailor may demand the return of the thing or its temporary use when: a. Bailor has an urgent need for the thing (Art. 1946) – the contract is suspended b. Bailee commits an act of ingratitude (Art. 1948) 



When borrower is liable for loss of the thing (ADLIB) a.

BAD FAITH – if the bailee devotes the thing to any purpose different from that for which it has been loaned b. DELAY - he keeps it longer than the period stipulated or after the accomplishment of the use for which the commodatum has been constituted c. HAS BEEN DELIVERED W/ APPRAISAL - the thing loaned has been delivered with appraisal of its value, UNLESS there is a stipulation exempting the bailee from responsibility in case of a fortuitous event



If the bailee should commit an offense against the person, the honor or the property of the bailor, or of the wife or children under his parental authority If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, UNLESS the crime or the act has been committed against the bailee himself, his wife, or children under his authority If the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor

2. May demand the thing at will when the contract is a precarium

PRECARIUM – a kind of commodatum where the bailor may demand the thing at will. It is a contract by which the owner of a thing, at the request of another person, gives the latter the thing for use as long as the owner shall tolerate 3. To refund the extraordinary expenses (Art. 1949) General Rule – Notice should be given by the bailee to the bailor regarding such extraordinary expenses and consent should be obtained Exception – Where the extraordinary expenses are so urgent that the reply to the notification cannot be awaited w/o danger 4. If the extraordinary expenses arise from the actual use of the thing and even though bailee acted w/o fault, the expenses will be borne equally by both the bailor and the bailee (50-50) (Art. 1949, par. 2) REASONS: a. Bailee pays ½ because of the benefit derived from the use of the thing b. Bailor pays the other ½ because he is the owner and the thing will be returned to him Exception – Stipulation to the contrary (e.g. different apportionment or sole burden by bailee or bailor) 5. All other expenses which are not necessary for the use and preservation of the thing must be shouldered by the borrower (bailee) 6. The depreciation caused by the reasonable and natural use of the thing is borne by the bailor (Art. 1943) REASON: parties to the contract know that the thing borrowed cannot be used without deterioration due to ordinary wear and tear. Exceptions: a. When there is a stipulation to the contrary b. When the bailee is guilty of fault or negligence c. If he devotes the thing to any purpose different from that for which has been loaned 7. To pay damages for known hidden flaws (Art. 1951) Requisites: (the following must concur) a. There is a flaw or defect in the thing loaned b. The flaw or defect is hidden

c. c. c. c. The bailor is aware thereof d. Bailor does not advise the bailee of the same e. The bailee suffers damages by reason of the flaw or defect 8.

The bailor has no right of abandonment for expenses and damages (Art. 1952) REASON: expenses and/or damages may exceed the value of the thing loaned SIMPLE LOAN OR MUTUUM (Arts. 1933-1961)

SIMPLE LOAN OR MUTUUM is a contract whereby one of the parties delivers to another money or other fungible thing w/ the understanding that the same amount of the same kind and quality shall be paid. Nature of Mutuum a. Bilateral – borrower’s promise to pay is the consideration for the lender’s obligation to furnish the loan b. No criminal liability upon failure to pay Subject Matter a. Fungible or consumable - depending on the intent of the parties; that the return of the thing is equivalent only and not the identical thing Fungible things – those which are usually dealt with by number, weight, or measure so that any given portion is treated as the equivalent of any other unit or portion. – depends upon the intention of the parties (as opposed to consumable or non- consumable which depends upon its nature) - A fungible from the viewpoint of the parties is easily replaceable b. Money  If the transfer of ownership is on a nonfungible thing, with the obligation of the other to give things of the same kind, quantity and quality, it is a barter FORM OF PAYMENT 1. If the thing loaned is money – stipulated, otherwise that which tender in the Philippines. In extraordinary inflation or deflation,

currency is legal case of payment

shall be in the value of the currency at the time of the creation of the obligation. 2. If other than money – another thing of the same kind, quality and quantity. If impossible to do so, payment must be its value at the time of perfection of the loan.

3. INTEREST AND THE SUSPENSION OF USURY LAW INTEREST General Rule – Interest must be expressly stipulated in writing, and it must be lawful (Art. 1956) 1. When an obligation, regardless of its source, is breached, the contravenor can be held liable for damages. 2. If obligation consists in the payment of a sum of money (loan, forbearance of money, judgment money) a. Interest due is what has been stipulated by the parties b. The interest shall earn legal interest from the time of judicial demand c. If there’s no stipulation, the rate is 12% from default (judicial or extrajudicial demand) 2. If obligation is not a loan or forbearance of money a. Interest on the amount of damages awarded may be imposed at the discretion of the court at 6% b. No interest shall be adjudged on unliquidated claims or damages, except when or until the amount can be established with reasonable certainty c. Where the amount is established with reasonable certainty, the interest shall begin from the time the claim is made judicially or extrajudicially d. But when such certainty cannot be so reasonably established the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made e. The actual base (principal) for the computation of the legal interest shall, in any case, be on the amount finally adjudged. 3. When judgment of court awarding a sum of money becomes final and executory, 12% interest from such until its payment Eastern Assurance and Surety Corporation v. CA [322 SCRA 73, Jan. 18, 2000]

Exceptions: 1. Indemnity for damages – the debtor in delay is liable to pay legal interest (6%/12%) as indemnity for damages even in the absence of a stipulation for the payment of interest. Interest as indemnity for damages is payable only in case of default or non-performance of contract. 

Basis for computation for indemnity: a. Central Bank Circular 416 – 12% p.a. in cases of:  Loans  Forbearance of money, goods or credits  Judgments involving such loans or forbearance, in the absence of the express agreement as to such rate of interest  During the interim period from the date judgment until actual payment b. Art. 2209 of the Civil Code – 6% p.a. in cases of:  Other sources (e.g. sale)  Damages arising from injury to persons  Loss of property which does not involve a loan

2. Interest accruing from unpaid interest interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this point. Determination of interest payable in kind: Its value shall be appraised at the current price of the products or goods at the time and place of payment. (Art. 1958) NOTE: In case of an unstipulated interest paid by mistake, the debtor may recover as in the case of solutio indebiti or undue payment. If such was voluntarily paid, there can be no recovery as in the case of natural obligations. COMPOUNDING INTEREST (Art. 1959) May be availed of only when there is a written stipulation in the contract for the payment of interest. General Rule – Accrued interest (interest due and unpaid) shall not earn interest

Exceptions:  When judicially demanded(e.g. when case is filed to collect)  When there is an express stipulation made by the parties: that the interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest USURY USURY – is the contracting for or receiving something in excess of the amount allowed by law for the loan or forbearance of money, goods or chattels. ELEMENTS OF USURY: (LUIT) 1. Loan or forbearance 2. Understanding between the parties that he loan shall be paid. 3. Unlawful intent to take more than the legal rate. 4. Taking or agreeing to take for the use of the loan of something in excess of what is allowed by law. NOTE: Usury now is legally inexistent. In Art. 1306 of NCC, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. This may be invoked to annul the excessive stipulated interest.  However, Usury law has NOT been repealed 

Since the mortgage contract derives its vitality from the validity of the principal obligation, the invalid stipulation on interest rate is similarly insufficient to render void the ancillary mortgage contract. Sps. Carpo v. Chua, [G.R. No. 150773 & 153599, September 20, 2005]

BARTER – A contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the part of the latter to give things of the same kind, quantity and quality, shall be considered a barter.

======================== ============== TOPIC UNDER THE SYLLABUS: B. Deposit 1. Voluntary Deposit

2. Necessary Deposit 3. Judicial Deposit ======================== ============== DEPOSIT (Arts. 1962-2009) DEPOSIT is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. Safekeeping must be the principal purpose of the contract. Characteristics 1. Real - because it is perfected only by the delivery of the subject matter  BUT an agreement to constitute a deposit is binding and enforceable, since it is merely consensual 2. Unilateral - if gratuitous 3. Bilateral - if with compensation Creation of deposit (Art. 1964) 1. By virtue of a court order or 2. By law 3. Not by the will of the parties 4. Depositary must not be the owner of the property deposited (Art. 1962) Kinds of Deposit 1. Judicial - when an attachment or seizure of property in litigation is ordered 2. Extrajudicial (Art. 1967) a. Voluntary - delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited b. Necessary - made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns or by travelers with common carriers. There is lack of free choice in the depositor. BASIS Creati on

JUDICIAL Will of the court

Purpos e

Security ensure the a party property recover in favorable judgment

or to right of to the or to case of

EXTRAJUDICIAL Will of the contracting parties Custody and safekeeping

Subjec t Matter Cause

Generally immovables

Movables only

Always onerous

Return of thing In whose behalf it is held

Upon order of the court / end of litigation Person who has a right

May be compensated but generally gratuitious Upon demand of depositor Depositor or / 3rd person designated

Deposit is generally gratuitous: (Art. 1965) General Rule – A deposit is generally gratuitous. Exceptions: (SBSJ) a. When there is a contrary stipulation b. Where depositary is engaged in the business of storing goods c. Where property is saved without knowledge of the owner d. Judicial deposit Subject Matter of Deposit (Art. 1966) General Rule: Only movable or personal property may be the object of deposit (whether voluntary or necessary) Exception: In judicial deposit, it may cover both movable and immovable property Depositor need not be the owner of the thing General Rule: The depositor must be the owner of the thing deposited Exceptions: It may belong to another person than the depositor a. When two or more persons claiming to be entitled to a thing may deposit the same with a third person. In such case, the third person assumes the obligation to deliver to the one to whom it belongs. b. Interpleader – the action to compel the depositors to settle their conflicting claims. Here one of the depositors is not the owner. Form of contract of deposit General Rule: A contract of deposit may be entered into (but not perfected) orally or in writing (Art. 1969) Exception: Delivery of the thing deposited is needed for perfection.

DEPOSITARY CAPACITATED / DEPOSITOR INCAPACITATED Depositary is subject to ALL the obligations of a depositary

DEPOSITARY INCAPACITATED / DEPOSITOR CAPACITATED Depositary does not incur the obligations of a depositary

Depositary must return the property either to:

Depositary, however, is liable to: a) Return the thing deposited while still in his possession; AND b) Pay the depositor the amount by w/c he may have benefited himself w/ the thing or its price subject to the right of any 3rd person who acquires the thing in good faith

a) The legal representative of the incapacitated, OR b) The depositor himself if he should acquire capacity

BASIS

Demandabi lity

Benefit

Preference of credit

IRREGUL AR DEPOSIT Demandable at will of the irregular depositor for whose benefit the deposit has been constituted Benefit accrues to the depositor Depositor has preference over other creditors with respect to thing deposited

MUTUUM Lender is bound by the provisions of the contract and cannot seek restitution until the time of payment as provided in the contract has arisen Necessity of the borrower Enjoy no preference in the distribution of the debtor’s property

OBLIGATIONS OF THE DEPOSITARY (SRT-CCC-ULC-RITT-RPPT-TL-HR) 1. Two primary obligations (Art. 1972) a. Safekeeping of the object Degree of Care – same diligence as he would exercise over his property  REASONS:

i.

Essential requisite of judicial relation which involves the depositor’s confidence in his good faith and trustworthiness ii. The presumption that the depositor took into account the diligence which the depositary is accustomed with respect to his own property b. Return of the thing when required – Even though a specified term or time for such may have been stipulated in the contract The depositary cannot excuse himself from liability, in the event of loss, by claiming that he exercised the same amount of care toward the thing deposited as he would towards his own if such care is less than that required by the circumstances 2. Obligation not to Transfer deposit (Art. 1973) General Rule: The depositary is not allowed to deposit the thing with a third person REASON: A deposit is founded on trust and confidence and it can be supposed that the depositor, in choosing the depositary, has taken into consideration the latter’s qualification Exception: The depositary is authorized by express stipulation LIABILITIES: Depositary is liable for loss of the thing deposited when: a. He transfers the deposit with a third person without authority although there is no negligence on his part and the third person; b. He deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence; or c. The thing is lost through the negligence of his employees whether the latter are manifestly careless or not. 

Exemption from liability: The thing is lost without the negligence of the third person with whom he was allowed to deposit the thing if such third person is not “manifestly careless or unfit.” (i.e., minor)

3. Obligation not to Change the way of deposit (Art. 1974)

General Rule: Depositary may not change the way of the deposit Exception: If there are circumstances indicating that the depositor would consent to the change. This is a situation wherein the depositary would reasonably presume that the depositor would agree to the change if he knows of the facts of the situation. Requisites: a. The depositary must notify the depositor of such change; and b. Must wait for the reply of the depositor to such change.  These requisites may not be dispensed with unless delay would cause danger. 4. Obligation to Collect on the choses in action deposited (Art. 1975)  If the thing deposited should earn interest, the depositary is under the obligation to: a. Collect the interest as it becomes due b. Take such steps as may be necessary to preserve its value and the right corresponding to it  The depositary is bound to collect the capital, as well as the interest, when due Contract of rent of safety deposit boxes (Art. 1975) - A contract for the rent of safety deposit boxes is not an ordinary contract of lease of things, but a special kind of deposit; hence, it is not to be strictly governed by the provisions on deposit. - The prevailing rule in the US is that the relation between a bank renting out safety deposit boxes and its customer with respect to the contents of the box is that of bailor and bailee. 5. Obligation not to Commingle things if so stipulated (Art. 1976) General Rule: The depositary is permitted to commingle grain or other articles of the same kind and quality Effects: a. The various depositors of the mingled goods shall own the entire mass in common b. Each depositor shall be entitled to such portion of the entire mass as the amount deposited by him bears the whole

Exception: When there is a stipulation to the contrary

Relation between bank and depositor (Art. 1980)

6. Obligation not to make Use of the things deposited (Art. 1977) General Rule: Deposit is for safekeeping of the subject matter and not for its use Exceptions: a. Expressly authorized by the depositor b. Such use is necessary for its preservation but limited for the purpose only  Effect of unauthorized use: Liability for damages  Effects of authorized use: (Art. 1978)



a. If the thing consumable:

deposited

is

non-

General Rule: The contract loses the character of a deposit and acquires that of a commodatum, despite the fact that the parties may have denominated it as a deposit Exception: Safekeeping is still the principal purpose of the contract b. If the thing deposited is money or other consumable thing: General Rule: Converts the contract into a simple loan or mutuum Exception: Safekeeping is still the principal purpose of the contract, but it becomes an irregular deposit. Bank deposits are in the nature of irregular deposits but they are really loans governed by the law on loans. 7. Liability for Loss event (Art. 1979)

through

fortuitous

Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan a. Contract of loan – deposits in banks are really loans because the bank can use the same for its ordinary transactions b. Relation of creditor and debtor – the relation between a depositor and a bank is that of a creditor and a debtor.

8. Obligation when the thing deposited is Closed and Sealed (Art. 1981)  The depositary has the obligation to: a. Return the thing deposited when delivered closed and sealed in the same condition b. Pay for damages should the seal or lock be broken through his fault, which is presumed unless proven otherwise c. Keep the secret of the deposit when the seal or lock is broken, with or without his fault When depositary justified in opening closed and sealed subject matter (Art. 1982): a. The depositary is presumed authorized to do so if the key has been delivered to him b. When the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle (Necessity)

General Rule: Depositary is not liable for loss through fortuitous event without his fault Exceptions: (SUDA) a. If it is so stipulated b. If he uses the thing without the depositor’s permission c. If he delays in its return d. If he allows others to use it, even though he himself may have been authorized to use the same

9. Obligation to Return products, accessories and accessions (Art. 1983)

NOTE: Liability for loss without fortuitous event: Depositary presumed at fault since he is in possession (Art. 1265)

12. Where Third person appears to be the owner (Art. 1984)

10. Obligation to pay Interest on sums converted for personal use (Art. 1983) 11. The depositary who receives the thing in deposit cannot require that the depositor Prove his ownership over the thing (Art. 1984)



The depositary may be relieved from liability when: a. He advised the true owner of the thing of the deposit b. If the owner, in spite of such information, does not claim it within the period of one month (30 days)

13. Obligation of the depositary when there are Two or more depositors (Art. 1985) a. Divisible thing and joint depositors – each one of the depositors can demand only his share proportionate thereto b. Indivisible thing or solidary depositors – rules on active solidarity General Rule: Each one of the depositors may do whatever may be useful to the others (Art. 1212) Exception: Anything w/c may be prejudicial to the other depositors General Rule: The depositary may return the thing to any one of the solidary depositors Exception: When a demand, judicial or extrajudicial, for its return has been made by one of them in which case delivery should be made to him c.

Return to one of the depositors stipulated • If by stipulation, the thing should be returned to one of the depositors, the depositary is bound to return it only to the person designated, although he has not made any demand for its return

14. Obligation to Return to the person to whom return must be made (Art. 1986) a. The depositary is obliged to return the thing deposited, when required, to:  The depositor;  To his heirs or successors; or  To the person who may have been designated in the contract. b. If the depositor was incapacitated at the time of making the deposit, the property must be returned to:  His guardian or administrator  To the person who made the deposit

 c.

To the depositor himself should he acquire capacity Even if the depositor had capacity at the time of making the deposit, but he subsequently loses his capacity during the deposit, the thing must be returned to his legal representative

15. Obligation to return at the Place of return (Art. 1987) – same as the general rule of law regarding the place of payment (Art. 1251) GENERAL RULE: At the place agreed upon by the parties, transportation expenses shall be borne by the depositor EXCEPTION: In the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made 16. Obligation to return upon the Time of return (Art. 1988) General Rule: The thing deposited must be returned to the depositor upon demand, even though a specified period or time for such return may have been fixed Exceptions: a. When the thing is judicially attached while in the depositary’s possession b. When notified of the opposition of a third person to the return or the removal of the thing deposited 17. Right of the depositary to return the Thing deposited (Art. 1989) NOTE: In this case, it is the depositary who is returning the deposit WITH OR WITHOUT THE DEMAND of the depositor. General Rule: The depositary may return the thing deposited, notwithstanding that a period has been fixed for the deposit, if: a. The deposit is gratuitous b. The reason is justifiable  Remedy if depositor refuses to receive the thing: The depositary may deposit the thing at the disposal of the judicial authority Exception: When the deposit is for a valuable consideration, the depositary has no right to return the thing before the expiration of the time designated even if he should suffer inconvenience as a consequence

18.

Depositary’s liability in case of Loss by force majeure or government order (Art. 1990) 

Depositary is not liable in cases of loss by force majeure or by government order. However, he has the duty to deliver to the depositor money or another thing he receives in place of the thing.

19. Liability in case of alienation by the depositary’s Heir (Art. 1991) 



When alienation is done in GOOD FAITH: a. Return the value of the thing deposited b. Assign the right to collect from the buyer  The heir does not need to pay the actual price of the thing deposited When alienation is done in BAD FAITH: a. Liable for damages b. Pay the actual price of the thing deposited

20. Depositary may Retain the thing in pledge until the full payment of what may be due him by reason of the deposit (Art. 1994) 

The thing retained serves as security for the payment of what may be due to the depositary by reason of the deposit (see Arts. 1965, 1992 & 1993) NOTE: The debt must be prior to the deposit

IRREGULAR DEPOSIT May be demanded at will by the irregular depositor for whose benefit the deposit has been constituted Only benefit is that which accrues to the depositor Depositor has preference over other creditors

MUTUUM Lender is bound by the provision of the contract and cannot seek restitution until the time for payment, as provided in the contract, has arisen If with interest, benefit if both parties No preference

Obligations of the Depositor: (PLD) 1. Obligation to pay expenses of preservation (Art. 1992) - Applies only when the deposit is gratuitous

2. Obligation to pay losses incurred due to character of thing deposited (Art. 1993) General Rule: The depositary must be reimbursed for loss suffered by him because of the character of the thing deposited. Exceptions: a. Depositor was not aware of the danger b. Depositor was not expected to know the dangerous character of the thing c. Depositor notified the depositary of such dangerous character d. Depositary was aware of the danger without advice from the depositor 3. Effect of death of depositor or depositary (Art. 1995) a. Deposit gratuitous – death of either of the depositor or depositary extinguishes the deposit (personal in nature). By the word “extinguished,” the law really means that the depositary is not obliged to continue with the contract of deposit. b. Deposit for compensation – not extinguished by the death of either party Extinguishment of Deposit a. Upon the loss or deterioration of the thing deposited; b. Upon the death of the depositary, ONLY in gratuitous deposits; c. Other provisions in the Civil Code (novation, merger, etc.) NECESSARY DEPOSIT A deposit is necessary when: (LCCT) 1. It is made in compliance with a legal obligation 2. It takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events  There must be a causal relation between the calamity and the constitution of the deposit 3. Made by passengers with common carriers  As to baggages the passengers or their agents carry 4. Made by travelers in hotels or inns (Art. 1998)



Before keepers of hotels or inns may be held responsible as depositaries with regard to the effects of their guests, the following must concur: Elements: a. They have been previously informed about the effects brought by the guests; and b. The latter have taken the precautions prescribed regarding their safekeeping.

The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest (Art. 2003) Effect: Any stipulation between the hotelkeeper and the guest whereby the responsibility of the former (as set forth in Art. 1998-2001) is suppressed or diminished shall be VOID. 

Extent of liability: a. Liability in hotel rooms which come under the term “baggage” or articles such as clothing as are ordinarily used by travelers b. Include those lost or damages in hotel annexes such as vehicles in the hotel’s garage. 

When hotel-keeper liable: (Art. 2000 – 2002) NOTE: In the following cases, the hotelkeeper is liable REGARDLESS of the amount of care exercised: a. The loss or injury to personal property is caused by his servants or employees as well as by strangers (Art. 2000) b. The loss is caused by the act of a thief or robber done without the use of arms and irresistible force (Art. 2001) Reason: Hotel-keeper is apparently negligent



When hotel-keeper not liable: a. The loss or injury is caused by force majeure, like flood, fire, theft or robbery by a stranger (not the hotelkeeper’s servant or employee) with the use of firearms or irresistible force EXCEPTION: Unless the hotel-keeper is guilty of fault or negligence in failing to provide against the loss or injury from his cause b. The loss is due to the acts of the guests, his family, servants, visitors c. The loss arises from the character of the things brought into the hotel



Exemption or diminution of liability:

Hotel-keeper’s right to retain The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of: a. Lodging b. Supplies usually furnished to hotel guests Reason: It is given to hotel-keepers to compensate them for the liabilities imposed upon them by law. The right of retention recognized in this article is in the nature of a pledge created by operation of law.



In compliance with a legal obligation (governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit e.g. Arts. 538, 586 and 2104)



Made on the occasion of any calamity (governed by the rules on voluntary deposit and Art. 2168) SEQUESTRATION OR JUDICIAL DEPOSIT

When judicial deposit takes place: When an attachment or seizure of property in litigation is ordered by a court. (Art. 2005) Nature: Auxiliary to a case pending in court Purpose: To maintain the status quo during the pendency of the litigation or to insure the right of the parties to the property in case of a favorable judgment Depositary of sequestered property: person appointed by the court. (Art. 2007) Obligations: a. To take care of the property with the diligence of a good father of the family. (Art. 2008)

b.

He may not be relieved of his responsibility until the litigation is ended or the court so orders. (Art. 2007) Applicable law: The law on judicial deposit is remedial or procedural in nature. Hence, the Rules of Court are applicable. (Art. 2009) BASIS Cause origin

or

Purpose

Subject Matter

Remunerati on

In whose behalf it is held

JUDICIAL DEPOSIT By will of the courts Security; Secure the right of a party to recover in case of favorable judgment. Either movable or immovable property but generally, immovable Always remunerated (onerous) In behalf of the person who, by the judgment, has a right

EXTRAJUDIC IAL DEPOSIT By will of the parties. Hence, there is a contract Custody; Safekeeping of the thing

CHARACTERISTICS OF THE CONTRACT 1. Accessory – dependent for its existence upon the principal obligation guaranteed by it hence if principal contract is void, then guaranty is also void 2. Subsidiary and Conditional – takes effect only when the principal debtor fails in his obligation subject to limitation 3. Unilateral – a. It gives rise only to a duty on the part of the guarantor in relation to the creditor and not vice versa b. It may be entered into even without the intervention of the principal debtor. 4. Distinct Person – a person cannot be the personal guarantor of himself

Only movable property

Generally gratuitous, but may be compensated In behalf of the depositor or third person designated

======================== ============== TOPIC UNDER THE SYLLABUS: C. Guaranty and Suretyship 1. Nature and extent of guaranty 2. Effects of guaranty 3. Extinguishment of guaranty 4. Legal and judicial bonds ======================== ============== GUARANTY AND SURETYSHIP (Arts. 2047-2084) GUARANTY – By guaranty, a person called the guarantor, binds himself to the creditor, to fulfill the obligation of the principal debtor in case the latter should fail to do so. It is a contract between the guarantor and the creditor.

Cause of contract of guaranty 1. Presence of cause which supports principal obligation: Cause of the contract is the same cause which supports the obligation as to the principal debtor. The consideration which supports the obligation as to the principal debtor is a sufficient consideration to support the obligation of a guarantor or surety. 2. Absence of direct consideration or benefit to guarantor: Guaranty or surety agreement is regarded valid despite the absence of any direct consideration received by the guarantor or surety, such consideration need not pass directly to the guarantor or surety; a consideration moving to the principal will suffice. MARRIED WOMAN AS GUARANTOR (Art. 2049) General Rule: Married woman binds only her separate property Exceptions: 1. With her husband’s consent, binds the community or conjugal partnership property 2. Without husband’s consent, in cases provided by law, such as when the guaranty has redounded to the benefit of the family GUARANTY UNDERTAKEN WITHOUT KNOWLEDGE OF DEBTOR (Art. 2050)

a. To Rights of third persons who pay: 1. Payment without the knowledge or against the will of the debtor: a. Guarantor can recover only insofar as the payment has been beneficial to the debtor (Art. 1236) b. Guarantor cannot compel the creditor to subrogate him in his rights (Art. 1237) 2. Payment with knowledge or consent of the debtor: Subrogated to all the rights which the creditor had against the debtor (Art. 2067)

secure the payment of a loan at maturity –guarantee of the punctual payment of a loan at maturity and all other obligations of indebtedness b. To secure payment if any debt to be subsequently incurred –construed as continuing when it is evident from the terms that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved.

Double or sub-guaranty (Art. 2051(2)) One constituted to guarantee the obligation of a guarantor. It should not be confounded with guaranty wherein several guarantors concur.

Guaranty of conditional obligations: A guaranty may secure all kinds of obligations, be they pure or subject to a suspensive or resolutory condition. 1. Principal obligation subject to a suspensive condition – the guarantor is liable only after the fulfillment of the condition. 2. Principal obligation subject to a resolutory condition – the happening of the condition extinguishes both the principal obligation and the guaranty

GUARANTY OF VOIDABLE, UNENFORCEABLE, AND NATURAL OBLIGATIONS (Art. 2052(2)) A guaranty may secure the performance of a: 1. Voidable contract – such contract is binding, unless it is annulled by a proper court action 2. Unenforceable contract – because such contract is not void 3. Natural obligation – the creditor may proceed against the guarantor although he has no right of action against the principal debtor for the reason that the latter’s obligation is not civilly enforceable.  When the debtor himself offers a guaranty for his natural obligation, he impliedly recognizes his liability, thereby transforming the obligation from a natural into a civil one. GUARANTY OF FUTURE DEBTS (Art. 2053) Continuing Guaranty or Suretyship: 1. Not limited to a single transaction but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked. 2. It is prospective in its operation and is generally intended to provide security with respect to future transactions. 3. Future debts, even if the amount is not yet known, may be guaranteed but there can be no claim against the guarantor until the amount of the debt is ascertained or fixed and demandable. Examples:

GUARANTOR’S LIABILITY CANNOT EXCEED PRINCIPAL OBLIGATION (Art. 2054) General Rule: Guaranty is a subsidiary and accessory contract – guarantor cannot bind himself for more than the principal debtor  If he does, his liability shall be reduced to the limits of that of the debtor.  But the guarantor may bind himself for less than that of the principal. Exceptions: 1. Interest, judicial costs, and attorney’s fees as part of damages may be recovered – creditors may recover from the surety as part of their damages the abovementioned fees even without stipulation and even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. REASON: Surety is made to pay, not by reason of the contract, but by reason of his failure to pay when demanded and for having compelled the creditor to resort to the courts to obtain payment. Interest runs from: (demand) a. Filing of the complaint judicial demand); or

(upon

b.

The time demand was made upon the surety until the principal obligation is fully paid (upon extra-judicial demand)

2. Penalty may be provided –surety may be held liable for the penalty provided for in a bond for violation of the condition therein. Principal’s liability may exceed guarantor’s obligations The amount specified in a surety bond as the surety’s obligation does not limit the extent of the damages that may be recovered from the principal, the latter’s liability being governed by the obligations he assumed under his contract. GUARANTY NOT PRESUMED (Art. 2055) Guaranty requires the expression of consent on the part of the guarantor to be bound. It cannot be presumed because of the existence of a contract or principal obligation. Guaranty Covered by the Statute of Frauds  Guaranty must not only be expressed but must so be reduced into writing. 



Hence, it shall be unenforceable by action, unless the same or some note or memorandum thereof be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents. It need not appear in a public document.

Guaranty Strictly Construed Strictly construed against the creditor in favor of the guarantor and is not be extended beyond its terms or specified limits. Doubt in the terms and conditions of the guaranty or suretyship agreement should be resolved in favor of the guarantor or surety. 1. Liability for obligation stipulated – guarantor is not liable to obligations assumed previous to the execution of the guaranty unless an intent to be so liable is clearly indicated 2. Liability of surety limited to a fixed period – the surety must only be bound in the manner and to the extent, and under the circumstances which are set forth or which may be inferred from the contract of guaranty or suretyship, and no further. 3. Liability of surety to expire on maturity of principal obligation – such stipulation is unfair and unreasonable for it practically

nullifies the nature of the undertaking it had assumed. Remedy of surety: Foreclose the counterbond put up by the principal debtor (if there is any) GUARANTY DISTINGUISHED FROM SURETYSHIP GUARANTY SURETYSHIP Liability depends upon Assumes liability as a an independent regular party to the agreement to pay the undertaking obligation if the primary debtor fails to do so Engagement is a Charged as an original collateral undertaking promisor Secondarily liable – Primarily liable – he contracts to pay if, undertakes directly for by the use of due the payment without diligence, the debt reference to the cannot be paid solvency of the principal, and is so responsible at once the latter makes default, without any demand by the creditor upon the principal whatsoever or any notice of default Only binds himself to Undertakes to pay if the pay if the principal principal does not pay, cannot or is unable to without regard to his pay ability to do so Insurer of the Insurer of the debt solvency of the debtor Does not contract Pay the creditor without that the principal qualification if the will pay, but simply principal debtor does not that he is able to do pay. Hence, the so responsibility or obligation assumed by the surety is greater or more onerous than that of a guarantor QUALIFICATIONS OF GUARANTOR (Arts. 2056-2057) (SIC) 1. He possesses integrity 2. He has the capacity to bind himself 3. He has sufficient property to answer for the obligation which he guarantees Exception: The creditor waives the requirements Effect of Subsequent Loss of Required Qualifications: The qualifications need only be

present at the time of the perfection of the contract. The subsequent loss of the qualifications would not extinguish the liability of the guarantor, nor will it extinguish the contract of guaranty. Remedy of creditor: Demand another guarantor with the proper qualifications Exception: Creditor may waive it if he chooses and hold the guarantor to his bargain.

NOTE: Art. 2058 is not applicable to a contract of suretyship.

Article 2057: 1. Requires conviction in the first instance of a crime involving dishonesty to have the right to demand another. 2. Judicial declaration of insolvency is not necessary in order for the creditor to have a right to demand another guarantor.

Exception: The creditor may, prior thereto, secure a judgment against the guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him, until after the properties of the principal debtor shall have been exhausted, to satisfy the latter’s obligation.

Estate of Hemady v. Luzon Surety; The supervening incapacity of a guarantor DOES NOT terminate the guaranty for it merely gives the creditor the OPTION to demand another guarantor. He is not bound to substitute the guarantor.

EXCEPTIONS TO THE EXCUSSION (Art. 2059)

Selection of Guarantor: 1. Specified person stipulated as guarantor: Substitution of guarantor may not be demanded REASON: The selection of the guarantor is: a. A term of the agreement; b. As a party, the creditor is, therefore, bound thereby. 2. Guarantor selected by the principal debtor: Debtor answers for the integrity, capacity, and solvency of the guarantor. 3. Guarantor personally designated by the creditor: Responsibility of the selection should fall upon the creditor because he considered the guarantor to have the qualifications for the purpose. RIGHT OF GUARANTOR TO BENEFIT OF EXCUSSION OR EXHAUSTION (Art. 2058) 1. Guarantor only secondarily liable – guarantor binds himself only in case the principal debtor should fail to do so. If the principal debtor fulfills the obligation guaranteed, the guarantor is discharged from any responsibility. 2. All legal remedies against the debtor to be first exhausted – to warrant recourse against the guarantor for payment, it may not be sufficient that the debtor appears insolvent. Such insolvency may be simulated.

Right of Creditor to Secure Judgment against Guarantor prior to Exhaustion General Rule: An ordinary personal guarantor (NOT a pledgor or mortgagor), may demand exhaustion of all the property of the debtor before he can be compelled to pay.

BENEFIT

OF

The guarantor is not entitled to the benefit of excussion: 1. As provided in Art. 2059: (I-SAW-U) a. If the guarantor has expressly waived it – Waiver  Waiver is valid but it must be made in express terms. b. If he has bound himself solidarily with the debtor – liability assumed that of a surety  Guarantor becomes primarily liable as a solidary co-debtor. In effect, he renounces in the contract itself the benefit of exhaustion. c. In case of insolvency of the debtor – guarantor guarantees the solvency of the debtor  If the debtor becomes insolvent, the liability of the guarantor as the debtor cannot fulfill his obligation d. When he (debtor) has absconded, or cannot be sued within the Philippines – the creditor is not required to go after a debtor who is hiding or cannot be sued in our courts Exception: Debtor has left a manager or representative e. If it may be presumed that a judicial action including execution on the property of the principal debtor would not result in the satisfaction of the obligation – if such is

the case, the guarantor can no longer require the creditor to resort to all such remedies against the debtor as the same would be but a useless formality. It is not necessary that the debtor be judicially declared insolvent. 2. If he does not comply with Art. 2060: In order that the guarantor may make use of the benefit of excussion, he must:

(not in litigation or encumbered) of the debtor within the Philippines. DUTY OF THE CREDITOR TO RESORT TO ALL LEGAL REMEDIES (Art. 2061) After the guarantor has fulfilled the conditions required for making use of the benefit of exhaustion, it becomes the duty of the creditor to: Exhaust all the property of the debtor pointed out by the guarantor

a. Set it up against the creditor upon the latter’s demand for payment from him; b. Point out to the creditor: i. Available property of the debtor – the guarantor should facilitate the realization of the excussion since he is the most interested in its benefit. ii. Within the Philippine territory – excussion of property located abroad would be a lengthy and extremely difficult proceeding and would not conform with the purpose of the guaranty to provide the creditor with the means of obtaining the fulfillment of the obligation. iii. Sufficient to cover the amount of the debt.

If he fails to do so, he shall suffer the loss but only to the extent of the value of the said property, for the insolvency of the debtor.

3. If he is a judicial bondsman and subsurety (Art. 2084) –because he is solidarily liable 4. Where a pledge or mortgage has been given by him as a special security 5. If he fails to interpose it as a defense before judgment is rendered against him

PROCEDURE WHEN CREDITOR SUES (Art. 2062)

DUTY OF CREDITOR TO MAKE PRIOR DEMAND FOR PAYMENT FROM GUARANTOR (Art. 2060) 1. When demand to be made – only after judgment on the debt for obviously the exhaustion of the principal’s property cannot even begin to take place before judgment has been obtained. 2. Actual demand to be made – joining the guarantor in the suit against the principal debtor is not the demand intended by law. There must be an actual demand and not judicial demand. DUTY OF THE GUARANTOR TO SET UP BENEFIT OF EXCUSSION (Art. 2060) As soon as he is required to pay, guarantor must also point out to the creditor available property

Resort to all legal remedies includes accion pauliana, among others. Joinder of Guarantor and Principal as Parties Defendant General Rule: The guarantor, not being a joint contractor with his principal, cannot be sued with his principal. Exception: Where it would serve merely to delay the ultimate accounting of the guarantor or if no different result would be attained if the plaintiff were forced to institute separate actions against the principal and the guarantors.

1. Sent against the principal – The guarantor cannot be sued with his principal, much less alone, except in the cases mentioned in Art. 2059 where the guarantor is not entitled to the benefit of excussion.  As a rule, the creditor may hold the guarantor only after judgment has been obtained against the principal debtor and the latter is unable to pay. 2. Notice to guarantor of the action – guarantor must be notified so that he may appear, if he so desires, and set up defenses he may want to offer a. Guaranty appears – voluntary appearance does not constitute a renunciation of his right to excussion. b. Guaranty does not appear – i. He cannot set up the defenses which, by appearing are allowed to him by law; and

ii. It may no longer be possible for him to question the validity of the judgment rendered against the debtor 3. Hearing before execution can be issued against the guarantor – a guarantor is entitled to be heard before an execution can be issued against him where he is not a party in the case involving his principal. EFFECTS OF COMPROMISE (Art. 2063) Compromise – a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. 1. Compromise between creditor and principal debtor benefits the guarantor but does not prejudice him. 2. Compromise between guarantor and the creditor benefits but does not prejudice the principal debtor. REASON: A compromise binds only the parties thereto and not third persons. Thus, it cannot prejudice the guarantor or debtor who was not party to the compromise. But if it benefits a third person, then the compromise may bind that third person. SUB-GUARANTOR’S RIGHT TO EXCUSSION (Art. 2064) Sub-guarantor enjoys the benefit of excussion with respect to: 1. Principal debtor; and 2. Guarantor REASON: He stands with respect to the guarantor on the same footing as the latter does with respect to the principal debtor. BENEFIT OF DIVISION AMONG SEVERAL GUARANTORS (Art. 2065) 1. In whose favor applicable - should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. 2. Cannot be availed of if there are: a. Two or more debtors of one debt, even if they be bound solidarily, each with different guarantors; or b. Two or more guarantors of the same debtor but for different debts c. If any of the circumstances enumerated in Art. 2059 should take place, as would the benefit of exhaustion of the debtor’s property.

3. Extent of liability of several guarantors – joint obligation: the obligation to answer for the debt is divided among all of them. The guarantors are not liable to the creditor beyond the shares which they are respectively bound to pay. Exception: Solidarity has been expressly stipulated Benefit of Guarantors:

Excussion

among

Several

In order that the guarantor may be entitled to the benefit of division, it is not required that he point out the property of his co-guarantors. REASON: Obligation of the guarantor with respect to his co-guarantors is not subsidiary but direct and does not depend as to its origin on the solvency or insolvency of the latter. RIGHT TO INDEMNITY OR REIMBURSEMENT (Art. 2066) (DELT) 1. Total amount of the debt - The guarantor has no right to demand reimbursement until he has actually paid the debt, unless by the terms of the contract, he is given the right before making payment. 2. Legal interest - It is immaterial that the debt did not earn interest for the creditor, because the guarantor’s right to legal interest is granted by law by virtue of the payment he has made, and is independent of the creditor’s right to claim interest which was necessarily regulated by the stipulations between him and the debtor. 3. Expenses incurred by the guarantor The expenses referred to are only those that the guarantor has to satisfy in accordance with law as a consequence of the guaranty. These expenses are limited to those incurred by the guarantor after having notified the debtor that payment has been demanded of him by the creditor. Exception: The guarantor cannot demand for reimbursement for litigation expenses, when such expenses are due to its failure to fulfill its obligation to pay upon demand. (Tuason vs. Machuca, GR No. L-22177, December 2, 1924) 4. Damages, if they are due. Exceptions to Reimbursement

Right

to

Indemnity

or

1.

Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor 2. Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it (Art. 1238) 3. Waiver GUARANTOR’S (Art. 2067)

RIGHT

TO

SUBROGATION

SUBROGATION transfers to the person subrogated, the credit with all the rights thereto appertaining either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in conventional subrogation. 1. Accrual, basis, and nature of right – right of subrogation is necessary to enable the guarantor to enforce the indemnity given in Art. 2066 a. Arises by operation of law upon payment by the guarantor b. It is not a contractual right c. The guarantor is subrogated, by virtue of the payment, to the right of the creditor, not those of the debtor. 2. When right not available – since subrogation is the means of effectuating the right of the guarantor to be reimbursed, it cannot therefore be invoked in those cases where the guarantor has no right to be reimbursed. EFFECT OF PAYMENT BY GUARANTOR WITHOUT NOTICE TO DEBTOR (Art. 2068) When the guarantor pays the creditor, but debtor has already paid the latter, then debtor can set up against the guarantor defense of previous extinguishments of obligation by payment.

the the the the

Hence, guarantor must notify the debtor before making payment. REASON: The guarantor cannot be allowed, through his own fault or negligence to prejudice or impair the rights or interests of the debtor.

NOTE: In case of an unenforceable contract, if the debtor consents to the guarantor paying, the guarantor can seek reimbursement from the debtor. If the debtor did not consent to the guarantor paying, the guarantor cannot seek reimbursement from the guarantor. EFFECT OF PAYMENT BY GUARANTOR BEFORE MATURITY (Art. 2069) Debtor’s obligation with a period – demandable only when the day fixed comes. 1. The guarantor who pays before maturity is not entitled to reimbursement since there is no necessity for accelerating payment. 2. A contract of guaranty being subsidiary in character, the guarantor is not liable for the debt before it becomes due. Exception: The debtor will be liable if the payment was made: a. With his consent; or b. Subsequently ratified (express or implied) by him EFFECT OF REPEAT PAYMENT BY THE DEBTOR (Art. 2070) General Rule: Before the guarantor pays the creditor, he must first notify the debtor.  If he fails to give notice and the debtor repeats payment: Guarantor’s Remedy: collect from the creditor  No cause of action against the debtor for the return of the amount paid by him.  In a gratuitous guaranty – if guarantor was prevented to notify because of a fortuitous event, and creditor becomes insolvent, debtor shall reimburse guarantor. Exception: The guarantor may still claim reimbursement from the debtor in spite of lack of notice if the following conditions are present: a. The creditor becomes insolvent b. That guarantor was prevented by a fortuitous event to advise the debtor of the payment c. The guaranty is gratuitous RIGHT OF GUARANTOR TO PROCEED AGAINST DEBTOR BEFORE PAYMENT (Art. 2071) General Rule: Guarantor has no cause of action against the debtor until after the former has paid the obligation. Exceptions: Art. 2071 enumerates instances when the guarantor may proceed against the debtor even before the payment. (PAID-SIT)

1. When he is sued for the payment; 2. In case of insolvency of the principal debtor; 3. When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; 4. When the debt has become demandable, by reason of the expiration of the period for payment; 5. After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years; 6. If there are reasonable grounds to fear that the principal debtor intends to abscond; 7. If the principal debtor is in imminent danger of becoming insolvent. Purpose: To enable the guarantor to take measures for the protection of his interest in view of the probability that he would be called upon to pay the debt. Remedy to which the Guarantor Entitled The guarantor cannot demand reimbursement for indemnity when he has not paid the obligation. REMEDIES AVAILABLE: 1. To obtain release from the guaranty; or 2. To demand security that shall protect him from: a. Any proceedings by the creditor; and b. Against the insolvency of the debtor. Guarantor’s remedies are alternative. He has the right to choose the action to bring. Suit by Guarantor against Creditor before Payment The guarantor’s or surety’s action for release can only be exercised against the principal debtor and not against the creditor. REASON: The creditor cannot be compelled to release the guarantor before payment of his credit. Release of the guarantor imports an extinction of his obligation to the creditor, connoting remission or a novation by subrogation which requires the creditor’s assent. ARTS. 2066 and 2071 Distinguished ART. 2066 ART. 2071 (RIGHT OF (RIGHT OF GUARANTOR TO GUARANTOR TO REIMBURSEMENT PROCEED AGAINST AFTER PAYMENT) DEBTOR EVEN BEFORE PAYMENT)

Provides for the enforcement of the rights of the guarantor against the debtor after he has paid the debt – gives a right of action after payment Substantive right Gives a right of action, which, without the provisions of the other might be worthless

Provides for the protection before he has paid but after he has become liable – gives a protective remedy before payment

Preliminary remedy Remedy given seeks to obtain from the guarantor “release from the guaranty or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor.” Recovery of Surety against Indemnitor even before Payment 1. Indemnity agreement for the benefit of surety –not for the benefit of the creditor 2. Indemnity agreement may be against actual loss as well as liability – such agreement is enforceable and not violative of any public policy a. Indemnity against loss – indemnitor will not be liable until the person to be indemnified makes payment or sustains loss b. Indemnity against liability – indemnitor’s liability arises as soon as the liability of the person to be indemnified has arisen without regard to whether or not he has suffered actual loss c. Such agreement valid - A stipulation in an indemnity agreement providing that the indemnitor shall pay the surety as soon as the latter becomes liable to make payment to the creditor under the terms of the bond, regardless of whether the surety has made payment actually or not, is valid and enforceable, and in accordance therewith, the surety may demand from the indemnitor even before the creditor has paid. Where the principal debtors are simultaneously the same persons who executed the indemnity agreement, the position occupied by them is that of a principal debtor and indemnitor at the same, and their liability being joint and several.

GUARANTOR OF A THIRD PERSON AT REQUEST OF ANOTHER (Art. 2072) The guarantor who guarantees the debt of an absentee at the request of another has a right to claim reimbursement, after satisfying the debt from: 1. The person who requested him to be a guarantor; 2. The debtor

DEFENSES AVAILABLE TO CO-GUARANTORS (Art. 2074)

RIGHTS OF THE GUARANTOR AGAINST THE DEBTOR (BRIB) 1. Indemnification 2. Benefit of Subrogation 3. Benefit of Compromise 4. Right to obtain or demand a security under Art. 2071

LIABILITY OF SUB-GUARANTOR IN CASE OF INSOLVENCY OF GUARANTOR (Art. 2075)

BETWEEN CO-GUARANTORS RIGHT TO CONTRIBUTION OF GUARANTOR WHO PAYS (Art. 2073) Presumption of joint liability of several guarantors when there are: 1. Two or more guarantors 2. Same debtor 3. Same debt Effect: Each is bound proportionate share.

to

pay

only

his

When Art. 2073 Applicable: 1. When one guarantor has paid the debt to the creditor; 2. Payment by such guarantor must have been made: a. By virtue of a judicial demand (benefit of division must have ceased); or b. Because the principal debtor is insolvent; 3. Guarantor who paid is seeking reimbursement from each of his coguarantors the share which is proportionately owing him. Effect of Insolvency of Any Guarantor: Follows the rule on solidary obligations: The share of the insolvent guarantor shall be borne by the others including the paying guarantor in the same joint proportion. Accrual and Basis of Right: The right of reimbursement is acquired ipso jure without need of any prior cession from the creditor by the guarantor.

General Rule: All defenses which the debtor would have interposed against the creditor (i.e. fraud, prescription, remission, illegality, etc.). Exception: Those which cannot be transmitted for being purely personal to the debtor.

Sub-guarantor is liable to the co-guarantors in the same manner as the guarantor whom he guaranteed in case of the insolvency of the guarantor for whom he bound himself as subguarantor. CAUSES OF EXTINGUISHMENT GUARANTY (Art. 2076) (PL3CN-ARFP)

OF

General Rule: Guaranty being accessory, it is extinguished when principal obligation is extinguished, the causes of which are: 1. Payment or performance; 2. Loss of the thing due; 3. Condonation or remission of the debt; 4. Confusion or merger of the rights of the creditor and debtor; 5. Compensation; and 6. Novation 7. Other causes: a. Annulment; b. Rescission; c. Fulfillment of a resolutory condition; d. Prescription Exception: The guaranty itself may be directly extinguished although the principal obligation still remains such as in the case of the release of the guarantor made by the creditor. Material Alteration of Principal Contract – any agreement between the creditor and the principal debtor which essentially varies the terms of the principal contract without the consent of the surety, will release the surety from liability. Such material alteration would constitute a novation or change of the principal contract, which is consequently extinguished. Upon such extinguishments, the accessory contract to guaranty is also terminated and the guarantor cannot be held liable on the new contract to which he has not given his consent.

When Alteration Material – where such change will have the effect of making the obligation more onerous. 1. Imposes a new obligation or added burden on the party promising; or 2. Takes away some obligation already imposed, changing the legal effect of the original contract and not merely the form thereof. RELEASE BY CONVEYANCE OF PROPERTY (Art. 2077) General Rule: Payment is made in money. Exception: Any substitute paid in lieu of money which is accepted by the creditor extinguishes the obligation and in consequence, the guaranty. 

If the creditor accepts property in payment of a debt from the debtor, the guarantor is relieved from responsibility. This is also true even in case the creditor is subsequently evicted from the property.

In case of eviction: Eviction revives principal obligation but not the guaranty.

the

REASON: The creditor’s action against the debtor is for eviction and this is different from what the guarantor guaranteed. RELEASE OF GUARANTOR CONSENT OF OTHERS (Art. 2078)

WITHOUT

a. a. a. a. Prejudicial or not or b. For a long or short period of time Consent of the guarantor is a must! Extension must be based on some new agreement between the creditor and the principal debtor by virtue of which the creditor deprives him of his claim. 1. Where obligation payable in installments: where a guarantor is liable for different payments: General Rule: An extension of time to one or more will not affect the liability of the surety for the others. Exception: When the unpaid balance has become automatically due by virtue of an acceleration clause for failure to pay an installment. Effect of exception: The act of the creditor extending the payment of said installment, without the guarantor’s consent, discharges the guarantor. REASON: The extension constitutes an extension of the payment of the whole amount of the indebtedness

EFFECT: The release benefits all to the extent of the share of the guarantor released.

2. Where consent to an extension is waived in advance by the guarantor: Such waiver is not contrary to law, nor to public policy

REASON: A release made by the creditor in favor of one of the guarantors without the consent of the others may prejudice the others should a guarantor become insolvent.

Effect: Amounts to the surety’s consent to all the extensions granted.

RELEASE BY EXTENSION OF TERM GRANTED BY CREDITOR TO DEBTOR (Art. 2079) Release Without Consent of Guarantor: Creditor grants an extension of time to the debtor without the consent of the guarantor. EFFECT: Guarantor undertaking.

is

discharged

from

his

REASON: To avoid prejudice to the guarantor The debtor may become insolvent during the extension, thus depriving the guarantor of his right to reimbursement. It doesn’t matter if the extension is:

NOTE: The mere failure or neglect on the part of the creditor to enforce payment or to bring an action upon a credit, as soon as the same or any part of it matures, does not constitute an extension of the term of the obligation, and therefore, the liability of the guarantor is not extinguished. In order to constitute an extension discharging a surety, it should appear that the extension was: (DEW) 1. For a Definite period 2. Pursuant to an Enforceable agreement between the principal and the creditor 3. Made Without the consent of the surety or with a reservation of rights with respect to him.



The contract must be one which precludes the creditor from, or at least hinders him in, enforcing the principal contract within the period during which he could otherwise have enforced it, and precludes the surety from paying the debt.



The law does not even grant the surety the right to sue the creditor for delay, as protection against the risks of possible insolvency of the debtor; but in view of the efficacy of the action on the contract against the surety, beginning with the date the obligation becomes due, his vigilance must be exercised rather against the principal debtor.

RELEASE WHEN GUARANTOR CANNOT BE SUBROGATED (Art. 2080) 



If there can be no subrogation because of the fault of the creditor, the guarantors are thereby released, even if the guarantors are solidary. If the creditor has acquired a lien upon the property of a principal, the creditor at once becomes charged with the duty of retaining such security, or maintaining such lien in the interest of the surety, and any release or impairment of this security as a primary resource of payment of a debt, will discharge the surety to the extent of the value of the property or lien released for there immediately arises a trust relation between the parties, and the creditor as trustee is bound to account to the surety for the value of the security in his hands.

REASON: The act of one cannot prejudice another. It also avoids collusion between the creditor and the debtor or a third person. DEFENSES AVAILABLE TO GUARANTOR AGAINST CREDITOR (Art. 2081) General Rule: All defenses, which pertain to the principal debtor and are inherent in the debt. Exception: Those which are purely personal to the debtor.

obligation and another person (surety) is also under a direct and primary obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, the second, rather than the first should perform.  If a person binds himself solidarily with the principal debtor, the contract is called suretyship and the guarantor is called a surety. NATURE OF SURETY’S UNDERTAKING 1. Liability is contractual and accessory but direct: 2. Liability is limited by terms of contract 3. Liability arises only if principal debtor is held liable a. In the absence of collusion, the surety is bound by a judgment against the principal event though he was not a party to the proceedings; b. The creditor may sue, separately or together, the principal debtor and the surety; c. A demand or notice of default is not required to fix the surety’s liability EXCEPTION: Where required by the provisions of the contract of suretyship d. A surety bond is void where there is no principal debtor because such an undertaking presupposes that the obligation is to be enforceable against someone else besides the surety, and the latter can always claim that it was never his intention to be the sole person obligated thereby. NOTE: Surety is not entitled to exhaustion 4. Undertaking is to creditor, not to debtor: The surety’s undertaking is that the principal shall fulfill his obligation and that the surety shall be relieved of liability when the obligation secured is performed. EXCEPTION: Unless otherwise expressly provided. NOTE: Surety is not entitled principal’s default

to notice

of

SURETYSHIP

5. Prior demand by the creditor upon principal not required: Surety is not exonerated by neglect of creditor to sue principal

SURETYSHIP is a relation which exists where one person (principal) has undertaken an

Strictissimi Juris Rule Applicable Only to Accommodation Surety

NOTE: Art 2081 does not cover a surety.

REASON: An accommodation surety acts without motive of pecuniary gain and hence, --should be protected against unjust pecuniary impoverishment by imposing on the principal, duties akin to those of a fiduciary. This rule will apply only after it has been definitely ascertained that the contract is one of suretyship or guaranty. Strictissimi Juris Rule Not Applicable to Compensated Sureties REASONS: 1. Compensated corporate sureties are business association organized for the purpose of assuming classified risks in large numbers, for profit and on an impersonal basis. 2. They are secured from all possible loss by adequate counter-bonds or indemnity agreements. 3. Such corporations are in fact insurers and in determining their rights and liabilities, the rules peculiar to suretyship do not apply.

Effect of negligence of creditor: Mere negligence on the part of the creditor in collecting from the debtor will not relieve the surety from liability.

======================== ============== TOPIC UNDER THE SYLLABUS: D. Pledge 1. Definition 2. Kinds 3. Essential requirements 4. Obligation of pledge 5. Rights of pledgor 6. Perfection (Arts. 2093, 2096) 7. Foreclosure (Arts. 2112, 2115) 8. Pledge by operation of law (Art. 2121-2122) 9. Distinguished from chattel mortgage (Arts. 2140, 1484) ======================== ==============

LEGAL AND JUDICIAL BONDS

PROVISIONS COMMON TO PLEDGE AND MORTGAGE (Arts. 2085-2123)

MEANING AND FORM OF BOND (Art. 2082) Bond – an undertaking that is sufficiently secured, and not cash or currency Bondsman – a surety offered in virtue of a provision of law or a judicial order. Qualifications of personal bondsman: (SIC) 1. He possesses integrity; 2. He has the capacity to bind himself; 3. He has sufficient property to answer for the obligation which he guarantees. PLEDGE OR MORTGAGE IN LIEU OF BOND (Art. 2083) Guaranty or suretyship is a personal security. Pledge or mortgage is a property or real security. If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage sufficient to cover the obligation shall be admitted in lieu thereof. BONDSMAN NOT ENTITLED TO EXCUSSION (Art. 2084) A judicial bondsman and the sub-surety are not entitled to the benefit of excussion. REASON: They are not mere guarantors, but sureties whose liability is primary and solidary.

1. 2. 3.

4. 5. 6.

Essential Requisites to Contracts of Pledge and Mortgage: (FARCAS) Constituted to secure the fulfillment of a principal obligation Pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged The persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose Cannot exist without a valid obligation Debtor retains the ownership of the thing given as a security When the principal obligation becomes due, the thing in which the pledge or mortgage consists may be alienated for the payment to the creditor.

Important Points 1. Future property cannot be pledged or mortgaged 2. Pledge/mortgage executed by one who is not the owner of the property pledged or mortgaged is without legal existence and registration cannot validate it. 3. Mortgage of a conjugal property by one of the spouses is valid only as to ½ of the entire property

4. In

5. 6. 7. 8. 9.

case of property covered by Torrens title, a mortgagee has the right to rely upon what appears in the certificate of title and does not have to inquire further. Pledgor or mortgagor has free disposal of property Thing pledged or mortgaged may be alienated. Creditor not required to sue to enforce his credit Pledgor or mortgagor may be third person The liability of an accommodation pledgor or mortgagor extends only to the property pledged or mortgaged.

PLEDGE Constituted on movables Property is delivered to the pledgee, or by common consent to a 3rd person Not valid against 3rd persons unless a description of the thing pledged and the date of the pledge appear in a public instrument

MORTGAGE Constituted on immovables Delivery not necessary

Not valid against 3rd persons if not registered

Right of Creditor where Debtor fails to Comply with his Obligation 1. Creditor is merely entitled to move for the sale of the thing pledged or mortgaged with the formalities required by law in order to collect 2. Creditor cannot appropriate to himself the thing nor can he dispose of the same as owner. Prohibition against pactum commissorium  Stipulation is null and void - stipulation where thing pledged or mortgaged shall automatically become the property of the creditor in the event of nonpayment of the debt within the term fixed 



Requisites of pactum commissorium: a. There should be a pledge or mortgage b. There should be a stipulation for an automatic appropriation by the creditor of the property in the event of nonpayment Effect on Security Contract Nullity of the stipulation does not affect validity and efficacy of the principal contract

Important Points 1. Debtor -owner bears the risk of loss of the property 2. Pledge or mortgage is indivisible Exceptions to the rule of indivisibility: a. Where each one of several things guarantees determinate portion of credit b. Where only portion of loan was released Example: X borrowed 80k from the bank and he mortgaged his 100 ha. property. Lender was only able to release 40k due to CB restrictions. The Court held that the bank can only foreclose on 50% of the mortgaged land (50 ha.) Central Bank v. CA, [139 SCRA 46] c. Where there was failure of consideration 3. The rule that real property, consisting of several lots should be sold separately, applies to sales in execution, and not to foreclosure of mortgages 4. The mere embodiment of a real estate mortgage and a chattel mortgage in one document does not have the effect of fusing both securities into an indivisible whole 5. Contract of pledge or mortgage may secure all kinds of obligation, be they pure or subject to a suspensive or resolutory condition 6. A promise to constitute pledge or mortgage gives rise only to a personal right binding upon the parties and creates no real right in the property. What exists is only a right of action to compel the fulfillment of the promise, but there is no pledge or mortgage yet. 7. Under RPC, estafa is committed by a person who, pretending to be the owner of any real property, shall convey, sell, encumber or mortgage the same knowing that the real property is encumbered shall dispose of the same as unencumbered. It is essential that fraud or deceit be practiced upon the vendee at the time of the sale. PLEDGE (Arts. 2093-2123) PLEDGE is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.

6.

Kinds of Pledge: 1. Voluntary or conventional - created by agreement of the parties 2. Legal - created by operation of law

Contract of pledge gives the creditor the right to retain the thing in his possession or in that of a third person to whom it has been delivered, until the debt is paid

Characteristics of Pledge: 1. Real - perfected by delivery 2. Accessory - has no independent existence of its own 3. Unilateral - creates obligation solely on the part of the creditor to return the thing subject upon the fulfillment of the principal obligation 4. Subsidiary - obligation incurred does not arise until the fulfillment of the principal obligation

7. Creditor : a. Shall take care of the thing pledged with the diligence of a good father of a family

Cause or Consideration in Pledge 1. Principal obligation – in so far as the pledgor is concerned 2. Compensation stipulated for the pledge or mere liberality of the pledgor- if pledgor is not the debtor PROVISIONS APPLICABLE ONLY TO PLEDGE 1. Transfer of possession to the creditor or to third person by common agreement is essential in pledge a. ACTUAL DELIVERY is important b. CONSTRUCTIVE delivery or symbolic delivery of the key to the warehouse is sufficient to show that the depositary appointed by common consent of the parties was legally placed in possession.

b. Has the right to the reimbursement of the expenses made for its preservation and is liable for its loss or deterioration by reason of fraud, negligence, delay or violation of the terms of the contract, and not due to fortuitous event c.

May bring the actions which pertain to the owner of the thing in order to recover it from, or defend it against a 3rd person

d. Cannot use the thing without the authority of the owner, and if he should do so, or misuse the thing, the owner may ask that it be judicially or extrajudicially deposited e. May use the thing if it is necessary for the preservation of the thing (e.g. car has to be driven once in a while) f.

May either claim another thing in pledge or demand immediate payment of the principal obligation if he is deceived on the substance or quality of the thing

2. All movables within commerce of men may be pledged as long as susceptible of possession

8. Pledgee: a. Take care of the thing with diligence of a good father of a family.

3. Incorporeal right may be pledged. The instruments pledged shall be delivered to the creditor and if negotiable, must be indorsed.

b. Cannot deposit the thing pledged with a third person, unless there is a stipulation authorizing him to do so

4. Pledge shall take effect against 3rd persons only if the ff appears in a public instrument: a. Description of the thing pledged b. Date of the pledge

c.

5. Thing pledged may be alienated by the pledgor or owner only if with the consent of the pledgee. Ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, but the latter shall continue in possession

Is responsible for the acts of his agents or employees with respect to the thing pledged

d. Has no right to use the thing or to appropriate the fruits without the authority of the owner e. May cause public sale of the thing pledged if, without fault on his part, there is danger of destruction, impairment or diminution in value of the thing. The proceeds of the auction shall be a security for the principal obligation.

9.

1.

Pledgor: a. Has the responsibility for flaws of the thing pledged. b. Cannot ask for the return of the thing against the will of the creditor, unless and until he has paid the debt and its interest, with expenses in a proper case c.

Is allowed to substitute the thing which is in danger of destruction or impairment without any fault on the part of the pledgee, with another thing of the same kind and quality

d. May require that the thing be deposited with a 3rd person if through the negligence or willful act of the pledgee the thing is in danger of being lost or impaired EXTINGUISHMENT OF PLEDGE (R2P23A) 1. If the thing pledged is returned by the pledgee to the pledgor or owner, pledge is extinguished. 2. A statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to extinguish it. For this purpose, neither the acceptance by the pledgor or owner, nor the return of the thing pledged is necessary, the pledgee becoming a depositary. 3. If subsequent to the perfection of the pledge, the thing is in the possession of the pledgor or owner, there is prima facie presumption that the thing has been returned by the pledgee. 4. If the thing is in the possession of 3rd person who has received it from the pledgor or owner after the constitution of the pledge, there is prima facie presumption that the thing has been returned by the pledgee 5. Payment of the debt 6. Sale of the thing pledged at public auction Formalities required in sale by a creditor if credit not paid in due time: 1. The debt is due and unpaid 2. The sale must be at a public auction 3. There must be notice to the pledgor and owner, stating the amount due, and 4. The sale must be made with the intervention of a notary public EFFECT OF THE SALE OF THE THING PLEDGED

Extinguishes the principal obligation whether the price of the sale is more or less than the amount due 2. If the price is more than amount due, the debtor is not entitled to the excess unless the contrary is provided 3. If the price of the sale is less, neither is the creditor entitled to recover the deficiency. Contrary stipulation is void. Legal Pledges 1. Necessary expenses shall be refunded to every possessor, but only possessor in good faith may retain the thing until he has been reimbursed Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired and by reason thereof. (Art. 546) 2. He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. (Art. 1731) 3. The agent may retain the things which are the objects of agency until the principal effects the reimbursement and pays the indemnity. (Art. 1914) 4. The laborer’s wages shall be a lien on the goods manufactured or the work done. (Art. 1707) Special Laws apply to pawnshops and establishments which are engaged in making loans secured by pledges. Provisions of the Civil Code shall apply subsidiarily.

======================== ============== TOPIC UNDER THE SYLLABUS: E. Real Mortgage 1. Definition and characteristics 2. Essential requisites 3. Foreclosure ======================== ============== MORTGAGE

REAL MORTGAGE (Arts. 2124-2131) is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated. OBJECTS OF REAL MORTGAGE: 1. Immovables 2. Alienable real rights in accordance with the laws, imposed upon immovables. General Rule: Future property cannot be object of mortgage Exception: (AFTER-ACQUIRED PROPERTIES) A stipulation subjecting to the mortgage lien, improvements which the mortgagor may subsequently acquire, install, or use in connection with the real property already mortgaged belonging to the mortgagor is valid People’s Bank and Trust Co. v. Dahican Lumber Co., [20 SCRA 84 (1967)] Example: X owns a factory. In that factory, he installed a machine and subsequently mortgaged it. The parties may validly stipulate that if the original machine is replaced, the replacement shall be subject to the mortgage. The reason for this is that after-acquired properties are understood to be replacements, as the original machine may be subject to wear and tear. Important Points 1. As a general rule, the mortgagor retains possession of the property. He may deliver said property to the mortgagee without altering the nature of the contract of mortgage. 2. It is not an essential requisite that the principal of the mortgage credit bears interest, or that the interest as compensation for the use of the principal and the enjoyment of its fruits be in the form of a certain percent thereof. Kinds of Mortgage: 1. Voluntary 2. Legal 3. Equitable – one which, although it lacks the proper formalities of a mortgage shows the intention of the parties to make the property as a security for a debt (governed by Arts. 1365, 1450, 1454, 1602, 1603, 1604 and 1607)

ESSENTIAL REQUISITES OF MORTGAGE: (FADVAP) 1. Constituted to secure the fulfillment of a principal obligation 2. Mortgagor be the absolute owner of the thing pledged or mortgaged 3. Mortgagor has free disposal of the property, and in the absence thereof, that he be legally authorized for the purpose 4. Cannot exist without a valid obligation 5. When the principal obligation becomes due, the thing in which the mortgage consists may be alienated for the payment to the creditor. 6. Appears in a public document duly recorded in the Registry of Property to be validly constituted  If the instrument is not recorded, the mortgage is nevertheless binding between the parties. LEGAL MORTGAGE: the persons in whose favor the law establishes a mortgage have no other right than to demand the execution and the recording of the document in which the mortgage is formalized.

1. 2. 3. 4. 5.

INCIDENTS OF REGISTRATION OF MORTGAGE Mortgagee entitled to registration of mortgage as a matter of right Proceedings for registration do not determine validity of mortgage or its effect Registration is without prejudice to better right of third parties Mortgage deed once duly registered forms part of the records for the registration of the property mortgaged Mortgage by surviving spouse of his/her undivided share of conjugal property can be registered

Effect of Invalidity of Mortgage on principal obligation 1. Principal obligation remains valid 2. Mortgage deed remains as evidence of a personal obligation Effect of Mortgage 1. Creates right in rem or real rights. A lien inseparable from the property mortgaged, enforceable against the whole world as long as it is registered. If not registered the third party must know of the mortgage. 2. Creates merely an encumbrance. The law considers void any stipulation forbidding the owner from alienating the immovable mortgaged (Art. 2130).

 

The mortgagor’s default does not operate to vest in the mortgagee the ownership of the encumbered property. His failure to redeem the property does not automatically vest ownership of the property to the mortgagee.

EXTENT OF MORTGAGE (AIGRiPE) A real estate mortgage constituted on immovable property is not limited to the property itself but also extends to its: 1. Accessions 2. Improvements 3. Growing fruits 4. Rents or income 5. Proceeds of insurance should the property be destroyed 6.Expropriation value of the property should it be expropriated.

obtain the consent of the debtor. Alienation of the mortgage credit is valid even if it is not registered. Registration is necessary only to affect third persons. Laws 1. 2. 3. 4.

Foreclosure of Mortgage is the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given. 

To exclude them, it is necessary that there be an express stipulation to that effect. But if the mortgaged estate passes into the hands of a third person, the mortgage does not extend to any machinery, object, chattel or construction which he may have brought or placed there and which such third person may remove whenever it is convenient for him to do so. MORTGAGE TO SECURE FUTURE ADVANCEMENTS (BLANKET OR DRAGNET CLAUSE) Blanket/Dragnet Clause - one which is specifically phrased to subsume all debts of past or future origin. General Rule: There must be a stipulation for the inclusion of future advancements. Mortgage with a dragnet clause enable the parties to provide continuous dealings, the nature or extent of which may not be known or anticipated at the time, and they avoid the expense and inconvenience of executing a new security on each new transaction. A mortgage given to secure future advancements is a continuing security and is not discharged by the repayment of the amount named in the mortgage, until the full amount of the advancements is paid. ALIENATION OR ASSIGNMENT OF MORTGAGE CREDIT The mortgage credit is a real right which may be alienated by the mortgagee without need to

Governing Mortgage New Civil Code P.D. 1952 Revised Administrative Code R.A. 4882, as regards aliens becoming mortgages





A foreclosure sale retroacts to the date of registration of the mortgage and that a person who takes a mortgage in good faith and for valuable consideration, the record showing clear title to the mortgagor, will be protected against equitable claims on the title in favor of third persons of which he had no actual or constructive notice St. Dominic Corporation v. IAC, 151 SCRA 577 (1987) Mere inadequacy of the price obtained at the sheriff’s sale will not be sufficient to set aside the sale unless “the price is so inadequate as to shock the conscience of the court” taking into consideration the peculiar circumstances attendant thereto. Sulit v. CA, 268 SCRA 441 (1997) The action to recover a deficiency after foreclosure prescribes after 10 years from the time the right of action accrues (Arts. 1142 & 1144)

JUDICIAL FORECLOSURE (governed by Rule 68 of Rules of Court): (J-PACE-PC) 1. Judicial action for the purpose in the proper court which has jurisdiction over the area wherein the real property involved or a portion thereof is situated 2. Court order to mortgagor to pay mortgage debt with interest and other charges within a period of not less than 90 days nor more than 120 days from the entry of judgment 3. Sale to the highest bidder at public auction, should the mortgagor fail to pay at the time directed. Confirmation of sale, which operates to divest the rights of all parties in the action and to vest their rights to the purchase, subject to the right

of

redemption allowed by law 4. Execution of judgment 5. Application of proceeds of sale to: a. Costs of the sale; b. Amount due the mortgagee; c. Claims of junior encumbrancers or persons holding subsequent mortgages in the order of their priority; and d. The balance, if any shall be paid to the mortgagor 6. Sheriff’s certificate is executed, acknowledged and recorded to complete the foreclosure Nature of Judicial Foreclosure Proceedings 1. Quasi in rem action 2. Foreclosure is only the result or incident of the failure to pay debt 3. Survives death of mortgagor EXTRAJUDICIAL FORECLOSURE (governed by Act No. 3135, as amended) 1. Express authority to sell is given to the mortgagee 2. Authority is not extinguished by death of mortgagor or mortgagee 3. Public sale should be made after proper notice (posting and publication) 4. Surplus proceeds of foreclosure sale belong to the mortgagor or his assigns 5. Debtor has the right to redeem the property sold within 1 year from and after the date of sale 6. Remedy of party aggrieved by foreclosure is a petition to set aside sale and cancellation of writ of possession 7. Republication is necessary for the validity of a postponed foreclosure sale (parties have no right to waive the publication requirement) Procedure for Extrajudicial Foreclosure of Real Estate Mortgage (Act No. 3135 ) & Chattel Mortgage (Act No. 1508, A.M. N0. 99-10-05-0; January 15, 2000) (ARC-DIN-REA) 1. Filing of application before the Executive Judge through the Clerk of Court 2. Clerk of Court will examine whether the requirements of the law have been complied with, that is, whether the notice of sale has

been posted for not less than 20 days in at least 3 public places of the municipality or city where the property is situated, and if the same is worth more than P400.00, that such notice has been published once a week for at least 3 consecutive weeks in a newspaper of general circulation in the city or municipality 3. The certificate of sale must be approved by the Executive Judge 4. In extrajudicial foreclosure of real mortgages in different locations covering one indebtedness, only one filing fee corresponding to such debt shall be collected 5. The Clerk of Court shall issue certificate of payment indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the description of the real estates and their respective locations 6. The notice of sale shall be published in a newspaper of general circulation 7. The application shall be raffled among all sheriffs 8. After the redemption period has expired, the Clerk of Court shall archive the records 9. No auction sale shall be held unless there are at least 2 participating bidders, otherwise the sale shall be postponed to another date. If on the new date there shall not be at least 2 bidders, the sale shall then proceed. The names of the bidders shall be reported by the Sheriff or the Notary Public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale Right of mortgagee to recover deficiency 1. Mortgagee is entitled to recover deficiency 2. If the deficiency is embodied in a judgment, it is referred to as deficiency judgment 3. Action for recovery of deficiency may be filed even during redemption period 4. Action to recover prescribes after 10 years from the time the right of action accrues Nature of power of foreclosure by extrajudicial sale 1. Conferred for mortgagee’s protection 2. An ancillary stipulation supported by the same cause or consideration for the mortgage

3. A prerogative of the mortgagee Stipulation of Upset Price or “tipo” A stipulation of minimum price at which the property shall be sold to become operative in the event of a foreclosure sale at public auction is NULL and VOID Effect of inadequacy of price in foreclosure sale 1. Where there is right to redeem General Rule: Inadequacy of price is immaterial because the judgment debtor may redeem the property Exception: The price is so inadequate as to shock the conscience of the court taking into consideration the peculiar circumstances 2. Property may be sold for less than its fair market value upon the theory that the lesser the price the easier for the owner to redeem 3. The value of the mortgaged property has no bearing on the bid price at the public auction, provided that the public auction was regularly and honestly conducted Waiver of security by creditor 1. Mortgagee may waive right to foreclose his mortgage and maintain a personal action for recovery of the indebtedness 2. Remedies are alternative, not cumulative. 3. Options in case the debtor dies: a. To waive mortgage and claim entire debt from the mortgagor’s estate as an ordinary claim b. To judicially foreclose mortgage and prove any deficiency c. To rely on the mortgage exclusively without filing a claim for deficiency NOTE: Foreclosure retroacts to the date of registration of mortgage REDEMPTION is a transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created. KINDS OF REDEMPTION 1. Equity of redemption: right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before confirmation of the sale.

a.

Applies to judicial foreclosure of real mortgage and chattel mortgage foreclosure b. A second mortgagee acquires only the equity of redemption vested in the mortgagor, and his rights are strictly subordinate to the superior lien of the first mortgagee. NOTE: Redemption of the banking institutions is allowed within 1 year from confirmation of sale 2. Right of redemption: right of the mortgagor to redeem the property within a certain period after it was sold for the satisfaction of the debt a. Applies only to extrajudicial foreclosure of real mortgage NOTE: The right of redemption, as long as within the period prescribed, may be exercised irrespective of whether or not the mortgagee has subsequently conveyed the property to some other party Sta. Ignacia Rural Bank, Inc. v. CA, 230 SCRA 513 (1994) A sale by the mortgagor to a third party of the mortgaged property during the period of redemption transfers only the right to redeem the property and the right to possess, use, and enjoy the same during the period. The judgment debtor remains in possession of the property foreclosed and sold during the period of redemption, but he cannot make a conveyance of the ownership of the property, since it belongs to the purchaser at the foreclosure sale Dizon v. Gaborro, 83 SCRA 688 (1978) PERIOD OF REDEMPTION Extra-judicial (Act No. 3135) a. Natural person – 1 year from registration of the certificate of sale with Registry of Deeds b. Juridical person – same rule as natural person c. Juridical person (mortgagee is bank) – 3 months after foreclosure or before registration of certificate of foreclosure whichever is earlier (Sec. 117 of General Banking Law) Judicial – before confirmation of the sale by the court Periods of redemption Mortgage:

Judicial Foreclosure BANKS

NONBANK

Extrajudicial Foreclosure BANKS

NONBANKS

S

Individual debtors/mortga gors

1 year from registrati on of sale

Juridical persons as debtors/mortga gors

1 year from registrati on of sale

X

X

1 year from registrati on of sale

1 year from registrati on of sale

Until registrati on of certificat e of sale or 3 months from sale whichev er is earlier

1 year from registrati on of sale

NOTE: Allowing redemption after the lapse of the statutory period when the buyer at the foreclosure sale does not object but even consents to the redemption, will uphold the policy of the law which is to aid rather than defeat the right of redemption Ramirez v. CA, 219 SCRA 598 (1993) AMOUNT OF THE REDEMPTION PRICE: 1. Mortgagee is not a bank (Act No. 3135 in relation to Sec. 28, Rule 39 of Rules of Court) a. Purchase price of the property b. 1% interest per month on the purchase price c. Taxes paid and amount of purchaser’s prior lien, if any, with the same rate of interest computed from the date of registration of sale, up to the time of redemption 2. Mortgagee is a bank (GBL 2000) a. Amount due under the mortgage deed b. Interest c. Cost and expenses NOTE: Redemption price in this case is reduced by the income received from the property Junior Mortgagees 1. After the foreclosure sale, there remains in the second mortgagee a mere right of redemption. His remedy is limited to the right to redeem by paying off the debt secured by the first mortgage. 2. He is entitled to the payment of his credit the excess of the proceeds of the auction sale. 3. In case the credit of the first mortgagee has absorbed the entire proceeds of the sale, the second mortgage is extinguished, since the

mortgage cannot be enforced beyond the total value of the mortgaged property. Mortgagee in Possession – one who has lawfully acquired actual or constructive possession of the premises mortgaged to him, standing upon his rights as mortgagee and not claiming under another title, for the purpose of enforcing his security upon such property or making its income help to pay his debt RIGHTS AND OBLIGATIONS OF MORTGAGEE IN POSSESSION 1. Similar to an antichresis creditor – entitled to retain such possession until the indebtedness is satisfied and the property redeemed. 2. Without right to reimbursement for useful expenses RIGHT OF PURCHASER TO WRIT OF POSSESSION Writ of Possession – order whereby the sheriff is commanded to place in possession of real or personal property the person entitled thereto such as when a property is extrajudicially foreclosed. The issuance of the writ of possession in an extrajudicial foreclosure is merely a ministerial function. The purchaser at the foreclosure sale is entitled as of right to a writ of possession. Before lapse of redemption period – file an ex parte application and file a bond After lapse of redemption period – file an ex parte application and no need for a bond

======================== ============== TOPIC UNDER THE SYLLABUS: F. Antichresis 1. Definition and Characteristics 2. Obligations of Antichretic Creditor ======================== ============== ANTICHRESIS (Arts. 2132-2139) ANTICHRESIS is a contract whereby the creditor acquires the right to receive the fruits of an immovable of the debtor, with the obligation to apply them to the payment of the interest, if

owing, and thereafter to the principal of the credit.

pledge. Tavera v. El Hogar Filipino, Inc. [68 Phil 712]

CHARACTERISTICS 1. Accessory contract – it secures the performance of a principal obligation Formal contract – it must be in a specified form to be valid (Art. 2134)

A stipulation authorizing the antichretic creditor to appropriate the property upon the nonpayment of the debt within the agreed period is void (Art. 2088)

SPECIAL REQUISITES: 1. Only the fruits of an immovable property 2. Delivery of the immovable is necessary for the creditor to receive the fruits and not that the contract shall be binding 3. Amount of principal and interest must be specified in writing (otherwise, void) 4. Express agreement that debtor will give possession of the property to creditor and that the latter will apply the fruits to the interest, if any, then to the principal of his credit NOTE: The obligation to pay interest is not essential in a contract of antichresis, there being nothing in the Code to show that antichresis is only applicable to securing the payment of interest-bearing loans. On the contrary, antichresis is susceptible of guaranteeing all kinds of obligations, pure or conditional OBLIGATIONS OF ANTICHRETIC CREDITOR: (FAT-P) 1. To pay taxes and charges on the estate, including necessary expenses NOTE: Creditor may avoid said obligation by: a. Compelling debtor to reacquire enjoyment of the property b. By stipulation to the contrary 2. To apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the principal 3. To render an account of the fruits to the debtor 4. To bear the expenses necessary for its preservation and repair REMEDIES OF CREDITOR IN CASE OF NONPAYMENT OF DEBT 1. Action for specific performance 2. Petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court NOTE: The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and

======================== ============== TOPIC UNDER THE SYLLABUS: G. Chattel Mortgage 1. Definition and characteristics 2. Registration ======================== ============== CHATTEL MORTGAGE CHATTEL MORTGAGE (Arts. 2140-2141) is a contract by virtue of which a personal property is recorded in the Chattel Mortgage Register as security for the performance of an obligation. NOTE: If the movable, instead of being recorded is delivered to the creditor, it is a pledge and not a chattel mortgage. CHATTEL MORTGAGE Involves movable property Delivery of the personal property is NOT necessary Registration is necessary for validity Procedure: Sec 14 of Act no 1508, as amended If the property is foreclosed, the excess over the amount due goes to the debtor Creditor is entitled to recover deficiency from the debtor EXCEPT if it is a security for the purchase of personal property in installments

PLEDGE Involves movable property Delivery of the personal property is necessary Registration is NOT necessary for validity Procedure: Art 2112 of Civil Code If the property is sold, the debtor is not entitled to the to the excess UNLESS it is otherwise agreed or in case of legal pledge Creditor is not entitled to recover deficiency notwithstanding any stipulation to the contrary

Laws Governing Chattel Mortgage 1. Chattel Mortgage Law, Act No. 1508, as amended 2. Civil Code 3. Revised Administrative Code

4.

1. Be

Revised Penal Code 5. Ship Mortgage Decree of 1978 (P.D. 1521) governs mortgage of vessels of domestic ownership Affidavit of Good Faith - An oath in a contract of chattel mortgage wherein the parties "severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the same is a just and valid obligation and one not entered into for the purpose of fraud.”  Not essential to the validity of the mortgage but only transforms a valid one into a preferred one  Absence vitiates a mortgage only as against third persons without notice NOTE: A chattel mortgage can only cover obligations existing at the time the mortgage is constituted. A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage Jaca v. Davao Lumber Co., 113 SCRA 107 (1982) EFFECT OF REGISTRATION 1. Creates real rights – binding notice and symbolical possession 2. Adds nothing to mortgage NOTE: Registration of assignment of mortgage is not required 

RIGHT OF REDEMPTION When the condition of a chattel mortgage is broken, the ff may redeem: a. Mortgagor; b. Person holding a subsequent mortgage; c. Subsequent attaching creditor.

Redemption can be done within 30 days from the time the condition is broken. 



An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it The redemption is made by paying or delivering o the mortgagee the amount due on such mortgage and the costs and expenses incurred by such breach of condition before the sale

Right of Mortgagee to Possession

fore default, mortgagee is not entitled to the possession of the property (otherwise, it will become a pledge) 2. When default occurs and the creditor desires to foreclose, he has the right to take the property. 3. If the debtor refuses to surrender the property, the creditor’s remedy is to institute an action to effect judicial foreclosure or to secure possession preliminary to sale.  The creditor cannot take the property by force nor can the sheriff seize the property. FORECLOSURE OF CHATTEL MORTGAGE 1. Public sale 2. Private sale – there is nothing illegal, immoral or against public order in an agreement for the private sale of the personal properties covered by chattel mortgage Period to Foreclose 1. After 30 days from the time the condition was broken 2. The 30-day period is the minimum period after violation of the mortgage condition for the creditor to cause the sale at public auction with at least 10 days notice to the mortgagor and posting of public notice of time, place, and purpose of such sale, and is a period of grace for the mortgagor, to discharge the obligation. 3. After the sale at public auction, the right of redemption is no longer available to the mortgagor. Civil Action to Recover Credit 1. Independent action not required 2. Mortgage lien deemed abandoned by obtaining a personal judgment (civil action to recover amount of loan) Right of Mortgagee to Recover Deficiency 1. Where mortgage foreclosed: creditor may maintain action for deficiency although Chattel Mortgage Law is silent on this point. Reason is chattel mortgage is only given as a security and not as payment of the debt. 2. Where mortgage constituted as security for purchase of personal property payable in installments: no deficiency judgment can be asked and any contrary agreement shall be void 3. Where mortgaged property subsequently attached and sold: mortgagee is entitle to deficiency judgment in an action for specific performance

Application of Proceeds of Sale 1. Costs and expenses of keeping and sale 2. Payment of the obligation 3. Claims of persons holding subsequent mortgages in their order 4. Balance, if any, shall be paid to the mortgagor, or person holding under him

========================= ============= TOPIC UNDER THE SYLLABUS: H. Concurrence and Preference of Credits 1. Solutio Indebiti 2. Negotiorum Gestio ========================= ============= Solutio Indebiti and Negotiorium Gestio Solutio Indebiti (Art 2154) 





The principle of solution indebiti provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasicontract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same The principle ofsolutio indebiti applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause (Siga-An v. Villanueva, GR 173227 January 2009)

Negotiorium Gestio (Art 2144) 

One who voluntarily takes charge of the agency/management of the business or property of another (without any power



from the latter), is obliged to continue such agency or management until: o The termination of the affair or its incidents or o He has required the person concerned to substitute him (if the owner is in a position to do so) However, this juridical relation does not arise in the following: o When the property or business is NOT neglected or abandoned o If the manager has been impliedly authorized by the owner

========================= ============= TOPIC UNDER THE SYLLABUS: I. Concurrence and Preference of Credits 1. Meaning of Concurrence and Preference 2. Preferred Credits on Specific Movables 3. Exempt Property 4. Classification of Credits ========================= ============= CONCURRENCE AND PREFERENCE OF CREDITS (Arts. 2236-2251) CONCURRENCE OF CREDIT implies possession by two or more creditors of equal rights or privileges over the same property or all of the property of a debtor. PREFERENCE OF CREDIT is the right held by a creditor to be preferred in the payment of his claim above others out of the debtor’s assets.  Preference creates no interest or lien on the property, but merely a preference to the application of the proceeds.  The right of preference can be made effective only by being asserted and maintained. Otherwise, it is lost. General Provisions: 1. The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subjects to exemptions provided by law - Exempt property: a. Present property 1. Family home (Arts 152, 153 and 155, NCC)

2.

Right to receive support as well as money or property obtained by such support shall not be levied upon on attachment or execution (Art 205, NCC) 3. Sec 13, Rule 39, Rules of Court (Ordinary tools, lettered gravestones, necessary clothing, etc.) 4. Sec 118, the Public Land Act,( CA No. 141, as amended) b. Future property  A debtor who obtains a discharge from his debts on account of insolvency, is not liable for the unsatisfied claims of his creditors with said property (Secs. 68 and 69, Insolvency Law, Act No. 1956) c. Property in custodia legis and of public domain 2. Insolvency shall be governed by the Insolvency Law (Act No. 1956, as amended) 3. Exemption of conjugal property or absolute community or property provided that: a. Partnership or community subsists b. Obligations of the insolvent spouse have not redounded to the benefit of the family 4. If there is co-ownership, and one of the co-owners is the insolvent debtor, his undivided share or interest in the property shall be possessed by the assignee in insolvency proceedings because it is part of his assets 5. Property held by the insolvent debtor as a trustee of an express or implied trust, shall be excluded from the insolvency proceedings CLASSIFICATION OF CREDITS 1. Special preferred credits (Arts 2241 and 2242 of NCC) a. Considered as mortgages or pledges of real or personal property or liens within the purview of legal provisions governing insolvency b. Taxes due to the State shall first be satisfied

2. Ordinary preferred credits (Art 2244) preferred in the order given by law 3. Common credits (Art 2245) - credits of any other kind or class, or by any other right or title not comprised in Arts 22412244 shall enjoy no preference Order of Preference of Credit 1. Credits which enjoy preference with respect to specific movables, exclude all others to the extent of the value of the personal property to which the preference refers. 2. If there are 2 or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof 3. Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent of the value of the immovable or real right to which the preference refers. 4.

If there are 2 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 taxes and assessment of the taxes and assessments upon the immovable property or real right.

5.

The excess, if any, after the payment of the credits which enjoy 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 other credits.

6.

Those credits which do not enjoy any preference with respect to specific property, and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules:  

Order established by Art. 2244 Common credits referred to in Art. 2245 shall be paid pro rata regardless of dates.

NOTE: Preference of mortgage credits is determined by the priority of registration, following the maxim “prior tempore potior jure” (He who is first in time is preferred in right.)

1.

========================= ============= TOPIC UNDER THE SYLLABUS: J. Insolvency Law 1. Definition of insolvency 2. Suspension of payments 3. Voluntary insolvency 4. Involuntary insolvency ========================= ============= INSOLVENCY LAW – FRIA FRIA DEFINITION OF “INSOLVENCY” Financial condition of a debtor that is generally unable to pay its or his liabilities as they gall due in the ordinary course of business or has liabilities that are greater than its or his assets For FRIA to be applicable, there must be insolvency proceedings in the courts designated by the Supreme Court to hear and resolve cases brought under this act PURPOSES OF FRIA 1. To effect equitable distribution of the insolvent’s property among its or his creditors 2. To benefit the debtor in discharging him from his liabilities and enabling him to start afresh with the property set apart to him as exempt 3. To ensure or maintain certainty and predictability of commercial affairs FRIA DEFINTION OF “DEBTOR”  Sole proprietorship (juridical debtor)  Partnership (juridical debtor)  Corporation (juridical debtor)  Individual debtor who has become insolvent (natural debtor) NATURE OF PROCEEDINGS Insolvency proceedings in FRIA are proceedings in rem HOW JURISDICTION IS ACQUIRED Jurisdiction is acquired upon publication of notice of the commencement of proceedings in any newspaper of general circulation MODES OF REHABILITATION  Court-supervised rehabilitation  Pre-negotiated rehabilitation  Out of court or informal restructuring agreements or rehabilitation plans

COURT-SUPERVISED REHABILITATION  Owner, partnership or corporation may initiate proceedings for rehabilitation, which the proper court oversees and deliver a final judgment regarding the rehabilitation plan  REHABILITATION o Restoration of the debtor to a condition of successful operation and solvency o The debtor is economically feasible and its creditors can recover by way of present value of payments projected in the plan  REHABILITATION PLAN o Plan by which the financial wellbeing and viability of the insolvent debtor can be restored using various means  REHABILITATION RECEIVER o Persons or persons, natural or juridical, appointed as such by the court entrusted with powers and duties set forth in the FRIA  KINDS  Voluntary proceedings o Filing a petition for rehabilitation with the court done by the insolvent debtor  Involuntary proceedings o Filed by a creditor or group of creditors o Claim or aggregate claim is at least P1M or at least 25% of capital stock or partner’s contribution, whichever is higher  TYPES OF PROCEEDINGS Initiation proceedings o

Attachments in the petition for rehabilitation: Voluntary Proceedings 1. Identification of debtor, principal activities and addresses 2. State fact of and cause of debtor’s insolvency or inability to pay debt 3. Specific relief sought pursuant to the Act 4. Grounds which petition is based 5. Other information required by the act, depending on the kind of relief requested 6. List of debtors, liabilities and creditors with addresses, amounts of claims and collaterals

o

7. Inventory of assets, includes receivables and claims against 3rd parties 8. Rehabilitation plan 9. Names of at least 3 nominees for rehabilitation receiver position 10. Other documents required by the Act or rules promulgated by the SC Attachments in the petition for rehabilitation: Involuntary Proceedings 1. Identification of debtor, principal activities and addresses 2. Circumstances sufficient for a petition to initiate rehabilitation proceedings 3. Specific relief sought 4. Rehabilitation plan 5. Names of at least 3 nominees for rehabilitation receiver position 6. Other information required depending on relief requested 7. Other documents required by the act or rules promulgated by the SC

GROUNDS TO INITIATE INVOLUNTARY PROCEEDINGS  No genuine issue of fact on law on the claim/s of the petitioner/s (creditors) and demandable payments due have not been made for at least 60 days or debtor failed in meeting obligations  A third-person creditor other than petitioner/s has initiated foreclosure against debtor, preventing debtor to pay debts due or will render him insolvent  Action on the Petition and Commencement of Proceedings  If court finds the petition for rehabilitation to be sufficient in form and substance, it shall within 5 working days from filing, issue a Commencement Order.  If in the same period the court finds the petition deficient, court may give petitioner time to amend or supplement petition, or to submit documents necessary to fix said petition. 5 working days provided for issuing the order will be reckoned from date of filing the amended petition or submission of additional documents  Commencement order: Identifies the debtor

Summarizes the grounds for initiating the proceedings States the relief States the legal effects of the CO Declares that the debtor is under rehab Directs publication in newspaper of general circulation in the Philippines Appoints a rehabilitation receiver Summarizes the requirements and deadlines for creditors to establish their claims against the debtor (5) days before the initial hearing Sets the case for initial hearing Suspension/Stay Order (effects)  Suspend all actions or proceedings for enforcement of claims against the debtor  Suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor  Prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business  Prohibit the debtor from making any payment of its outstanding liabilities as of the commencement date  Note: Stay order applies to government financial institutions (Sec 20) Exceptions to the Stay and Suspension Order  Cases already pending appeal in the SC as of the commencement date. Provided that any final judgment on the appeal be referred to the court for appropriate action o Cases pending in specialized court or quasi-judicial agency, on the court’s discretion o Enforcement of claims against sureties and other persons solidarily liable with debtor and 3rd party accommodation mortgagors even issuers of letters of credit UNLESS the property subject of the 3rd party/accommodation mortgage is necessary for the rehabilitation of the debtor as determined by the court (in other -





 

words, secured creditors can enforce their claims/foreclose if the security they’re holding is not necessary for rehabilitation) o To any form of action of customers of a security market participant to recover or claim securities entrusted to the latter in the ordinary course of the latter’s business o To the actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to a securities pledge or margin agreement o To the clearing and settlement of financial transactions through the facilities of a clearing agency o To any criminal action against the debtor/owner o Effectivity and Duration of Commencement Order o Unless lifted by the court, CO shall be effective for the duration of the rehabilitation proceedings. o Minimum requirements must be met:  Rehabilitation plan complies with minimum contents prescribed by the act  Sufficient monitoring by rehabilitation receiver  Debtor has met with creditors in attempts for consensus proposed by rehabilitation plan  Rehabilitation receiver submits a report, a preliminary evaluation of how realistic the goals of rehabilitation plan are and how reasonable and realistic success is based on  Sufficient assets to rehabilitate debtor  Sufficient cash flow to maintain operations of debtor  Petition is not a filing intended to defraud creditors and delay claims  Debtors, partners, stockholders, directors and officers acting in good faith and due diligence  Debtor likely to be able to pursue viable rehabilitation plan Attachments on petition for rehabilitation are not materially false If petitioner is the debtor, he has met with creditors representing ¾ of total

 o o o  o

o

obligation made in good faith. If petitioner is a creditor, he has met with the debtor, made a good faith effort to reach consensus Effect of Failure to File Notice of Claim Instead of filing a notice of claim, the creditor files a subsequent belated claim Such claim shall not be entitled to participate in rehabilitation proceedings Creditor is still entitled to receive distributions arising from rehabilitation Rehabilitation Receiver Within 40 days from initial hearing, the rehabilitation receiver shall submit a report to court stating preliminary findings and recommendations on whether:  Debtor is insolvent, causes of insolvency including any unlawful acts done by oweners which may have contributed to the insolvency  If the rehab plan is indeed feasible and reasonable in relation to goals and underlying assumptions  Substantial likelihood exists or not  Petition should be dismissed or not  Debtor should be liquidated and/or dissolved or not  Giving due course to or dimissal of petition or conversion of proceedings Within 10 days from receipt of rehabilitation receiver report mentioned in section2 24, court may  Give due course to petition upon finding  Debtor is insolvent  Substantial likelihood for success exists  Debtor shall comply with provisions of the Rehab Plan and take action to carry out the plan  Payments made to creditors according to the Rehab Plan  Contracts with creditors interpreted as continuing to the extent that they do not conflict with the Rehab Plan  Compromises on amounts or rescheduling of timing of payments by debtor shall be binding to creditor regardless whether plan ins a success or not



Claims after approval of plan not treated by the plan are not subject to suspension order o Period for confirmation of rehabilitation plan  Court has a maximum period of 1 year from date of filing of petition to confirm rehabilitation plan. If no plan is confirmed within said period proceedings may upon a motion or motu proprio be converted to one for liquidation of the debtor o Accounting discharge of Rehabilitation Receiver  Upon confirmation of rehabilitation plan, rehabilitation receiver shall provide a final report and accounting to the court. Unless the plan requires or describes the role of the rehabilitation receiver after approval of the plan, curt shall discharge rehabilitation receiver of duties. o Termination Proceedings  Upon motion of any stakeholder or rehabilitation receiver, the rehabilitation plan may be terminated by order of court.  Failure of rehabilitation:  Dismissal of petition by court  Debtor fails to submit a rehabilitation plan  Under rehabilitation plan submitted by debtor, there is no substantial likelihood for rehabilitation  Though amended and approved, debtor fails to implement the rehabilitation plan, failure to realize objectives  Commission of fraud in securing the approval for the plan  Analogous circumstances as may be defined by rules of procedure  Court action upon break of or failure of rehabilitation plan (upon motion of an affected party)  Issue an order directing breach be cured within specified period, failing which, proceeding may be converted to liquidation  Issue and order converting proceedings to liquidation



    



Allow debtor to submit amendments to plan subject to approval under same requirements for approval under provisions Issue any other order to remedy breach consistent with present regulation Enforce applicable provision of rehabilitation plan through writ of execution Effects of termination The discharge of the rehabilitation receiver subject to his submission of a final accounting The lifting of the Stay Order and any other court order holding in abeyance any action for the enforcement of a claim against the debtor PROVIDED, that if the termination is due to failure of rehabilitation or dismissal of petition for reasons other than technical grounds, proceedings will automatically be converted to LIQUIDATION

2. PRE-NEGOTIATED REHABILITATION Parties to file a petition for negotiated rehabilitation plan  Insolvent debtor by itself; or  Jointly with any of its creditors

a

pre-

Requisites for a petition for a prenegotiated rehabilitation plan  Petition must be filed by o An insolvent debtor by itself or jointly with any of its creditors o With the court  The pre-negotiated rehabilitation plan must be endorsed or approved by creditors holding at least 2/3 of the total liabilities of the debtor, including secured claims of the debtor and unsecured creditors holding more than 50% of the total unsecured claims of the debtor Documents that must accompany the petition as a minimum  Schedule of debtor’s debts and liabilities  Inventory of debtor’s assets  The pre-negotiated Rehabilitation Plan, including the names of at least 3 qualified nominees for rehabilitation receiver



Summary of disputed claims against debtor, and report on provisioning of refunds to account for appropriate payments

Procedure for pre-negotiated rehabilitation  Filing of the petition  Issuance of Court Order  Publication of the order in a newspaper of general circulation in the Philippines once a week for at least two consecutive weeks  Objection to the petition or rehabilitation plan if any  Hearing on the objections if necessary  Approval of the plan Cause for which objection may be made to petition or plan  The allegation in the petition or the Rehabilitation Plan or the attachments thereto are materially false or misleading  The majority of any class of creditors do not in fact support the Rehabilitation Plan  The Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim is not categorically declared as contested claim; or  The support of the creditors, or any of them was induced by fraud  Note: if objection is meritorious, the debtor is directed to cure the defect within a reasonable period  Note: if the debtors/creditors supporting the plan acted in bad faith or the objection is non-curable, the Court may order conversion of proceedings into liquidation  Note: if the objection is not meritorious or the objection is cured, the rehabilitation plan is deemed approved Effect of Approval of Plan Same effect as confirmation of Plan under Court=Supervised Rehabilitation 3. OUT-OF-COURT OR INFORMAL RESTRUCTING AGREEMENTS OR REHABILITATION PLANS Informal restructuring/workout agreement or rehabilitation plan defined Done outside or without the intervention of court provided it meets the minimum requirements set for the in the Act

Requisites for an Out-of-court or informal restructuring/workout agreement or rehabilitation plan  The debtor must agree to the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan  It must be approved by creditors representing at least 67% of the SECURED obligations of the debtor  It must be approved by creditors representing at least 75% of the UNSECURED obligations of the debtor  It must be approved by creditors holding at least 85% of the TOTAL LIABILITIES, SECURED and UNSECURED, of the debtor Standstill Period It is a period that may be agreed upon by the parties pending negotiation/finalization of the out-of-court agreement or Rehab Plan (similar to a stay order) Requirements for the standstill period to be enforceable against 3rd parties  



Agreement is approved by creditors representing 50% of the total liabilities of the debtor Notice is published o Must invite creditors to participate in the negotiation o All creditors must be given due notice Period does not exceed 120 days

Effect of Standstill Period Any court action shall not stay the plan’s implementation UNLESS the relevant party is able to secure a TRO or injunctive relieve from the Court of Appeals to stay the implementation of proceedings The effect of the approval of the plan is the same to that of confirmation of Plan under Court Supervised Rehabilitation Notice of Out-of-Court rehabilitation plan is required Published once a week for at least 3 consecutive weeks in a newspaper of general circulation in the Philippines. It shall take effect after 15 days from the date of the last publication of the notice thereof Amendments or modification to the plan

Amendments or modification must be made in accordance with the terms of the agreement and with due notice on all creditors LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS

I.

Voluntary Liquidation: a. An insolvent debtor may apply for liquidation by filing a verified petition for liquidation with the court i. Contents: 1. Schedule of debtor’s liabilities with a list of creditors 2. An inventory of all its assets 3. Names of at least 3 nominees to the position of liquidator b. Procedure: i. Filing of Petition (Sec 90) ii. If court finds petition sufficient in form and substance, it shall issue the Liquidation Order (Sec 104) iii. Publication of the petition or motion in a newspaper of general circulation once a week for 2 consecutive weeks [Sec 112 (d)] iv. Hearing for election and appointment of liquidator [Sec 112 (j)] v. Direct payments of any claims and conveyance of any property due the debtor to the liquidator [Sec 112 (e)] vi. Liquidation of the debtor’s assets and payment of his debts by the Liquidator (Sec 119) vii. Discharge of Liquidator (Sec 122) viii. Appeal if proper

II.

Involuntary Liquidation: a. A verified petition may be filed in court by 3 or more creditors with the aggregate claims of at least 1M or at least 25% of the subscribed capital stock or partner’s contributions of the debtor, whichever is higher. i. Contents: 1. Must show that there’s no genuine issue of fact or law on the claim/s of the petitioner/s, and that the due and

demandable payments thereon have not been made for at least 180 days or the debtor has failed generally to meet its liabilities as they fall due 2. Must show that no substantial likelihood that the debtor may be rehabilitated b. Procedure: i. Filing of the petition of 3 or more creditors (Sec 91) ii. Issuance of order: 1. Directing publication of petition or motion in a newspaper of general circulation once a week for 2 consecutive weeks 2. Directing the debtor and all creditors to file their comment on the petition iii. Filing of comments iv. Consideration of comments filed by the court v. Issuance of the liquidation order vi. Publication of the petition or motion in a newspaper of general circulation once a week for 2 consecutive weeks [Sec 112 (d)] vii. Hearing for election and appointment of the liquidator [Sec 112 (j)] viii. Direct payments of any claims and conveyance of any property due the debtor to the liquidator [Sec 112 (e)] ix. Liquidation of the debtor’s assets and payment his debts by the Liquidator (Sec 119) x. Discharge of Liquidator (Sec 122) xi. Appeal if proper Note: Under both voluntary and involuntary liquidation, the debtor or the 3 or more creditors may initiate liquidation proceedings by filing a motion in court at any time during the pendency of the court-supervised or pre-negotiated rehabilitation proceedings.

Ching vs. Landbank of the Philippines [201 SCRA 190 (1991)]: SC held that the SEC has jurisdiction only with regard to petitions of juridical debtors to be declared in the state of suspension of payments. PD. 902-A cannot be stretched to include petitions for insolvency. Petitions for declaration of insolvency of private corporations are within the original and exclusive jurisdiction of regular courts. SEC may entertain such petitions only as an incident of and in continuation of its already acquired jurisdiction over petitions to be declared in the state of suspension payments. INSOLVENCY OF INDIVIDUAL DEBTORS

I.

Suspension of Payments: postponement, by court order, of the payment of debts of one who possesses sufficient property to cover all his debts but foresees the impossibility of meeting them when they respectively fall due (Sec 94) a. Purpose: to suspend or delay the payment of debts; debtor’s inability to meet his obligations when they respectively fall due, despite the fact that he has sufficient assets to cover his liabilities (De Leon) b. A debtor may file a verified petition for suspension of payments if: i. Individual debtor possesses sufficient property to cover all his debts ii. But he foresees the impossibility of meeting them when they respectively fall due iii. Contents: 1. He has to state his residence 6 months before filing of his petition (and file in the court where he resided 6 months prior to the filing) 2. Schedule of debts/liabilities 3. Inventory of assets 4. Proposed agreement with creditors c.

Procedure: i. Filing of petition by debtor (Sec 94)

ii. Issuance by the court of an order calling a meeting of creditor (Sec 95) iii. Publication of said order and service of summons iv. Meeting of the creditors for the consideration of the debtor’s proposition (Sec 97) v. Approval of the creditors of the debtor’s proposition vi. Objections, if any, to the decision which must be made within 10 days from the date of the last creditors’ meeting (Sec 100) vii. Issuance of order by the court directing that the agreement be carried out in case the decision is declared valid or when no objection to said decision has been presented (Sec 101) d. Effect of filing a petition for suspension of payments: i. No disposition in any manner of his property may be made by the individual debtor, except those used in the ordinary operation of commerce or of industry in which he is engaged [Sec 95 (e)]. ii. No payments may be made by the individual debtor outside of the necessary and legitimate expenses of his business or industry [Sec 95 (f)]. iii. Suspension Order: Upon motion by the debtor, the court may issue an order suspending any pending execution against the individual debtor provided that properties held as security by secured creditors shall not be subject of such suspension order (Sec 96, par. 1). iv. No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of filing of petition as long as proceedings remain pending, except: 1. Those creditors with claims for personal

labor, maintenance, expenses of last illness and funeral of wife or children of the debtor, incurred 60 days before petition is filed. 2. Secured debtors. e. Creditor’s meeting (Only creditor included in the schedules filed by the debtor shall be cited to appear and take part in the meeting) i. To form a majority (Rule of Double Majority): 1. 2/3 of the creditors voting unite on the same proposition, and 2. That the claims represented by said majority vote amount to at least 3/5 of the total liabilities of the debtor [Sec 97 (d)] ii. If the majority agrees, the court will approve on the agreement of the creditors/debtors as regards the payment iii. But petition is deemed rejected when: 1. the number of creditors representing at least 3/5 of the liabilities of the individual debtor do not attend, or 2. if the double majority rule are not in favor of the proposed agreement (Sec 99) iv. Effect of disapproval of petition: Court shall declare the proceedings terminated and the creditors shall be at liberty to exercise the rights which may correspond to them (Sec 100, par. 2) v. Causes for which objection may be made to the decision of the meeting: 1. Defects in the call for the meeting, in the holding thereof and in the deliberations, which prejudice the right of the creditors;

2. Fraudulent connivance between one or more creditors and the individual debtor ot vote in favor of the proposed agreement; 3. Fraudulent connivance of claims for the purpose of obtaining a majority. vi. Effect of failure or individual debtor to perform agreement: If the debtor fails, wholly or in part, to perform the agreement decided upon the meeting of the creditors, all rights which the creditors had against the debtor before the agreement shall revest in them (Sec 102). Distinctions between Suspension of Payments and Insolvency:

Purpose

Property

Amount of Indebtedness

SUSPENSION OF PAYMENTS Suspend or delay the payment of debts Debtor has sufficient property Amount of indebtedness is not affected

INSOVENCY Discharge the debtor from the payment of debts Debtor does not have sufficient property Creditors receive less than their credits, and in case there are preferences, some creditors may not receive any amount at all

LIQUIDATION OF INDIVIDUAL INSOLVENT DEBTORS

I.

Voluntary Liquidation a. A verified petition may be filed by an insolvent debtor (owing debts exceeding the amount of P500,000) in the court of the province or city in

which he has resided 6 months prior to filing the petition. i. Contents: 1. Schedule of debts and liabilities 2. Inventory of Assets 3. Proposed Agreement with creditors b. Procedure: i. Filing of the petition by the debtor praying for the declaration of insolvency (Sec 103) ii. If the court finds the petition sufficient in form and substance, it shall issue the Liquidation Order (Sec 104) iii. Publication of the petition or motion in a newspaper of general circulation once a week for 2 consecutive weeks [Sec 112 (d)] iv. Hearing for election and appointment of the liquidator [Sec 112 (j)] v. Direct payments of any claims and conveyance of any property due the debtor to the liquidator [Sec 112 (e)] vi. Liquidation of the debtor’s assets and payment of his debts by the Liquidator (Sec 119) vii. Discharge of Liquidator (Sec 122) viii. Appeal if proper c.

Effect of filing of petition: The filing of the petition shall be an act of insolvency (Sec 103). Once the petition is filed, it ipso facto takes away and deprives the debtor of the right to do or commit any act of preference as to creditors, pending the final adjudication.

d. Effects of errors in description or omission of property in inventory: i. The erroneous or ambiguous description of the insolvent’s property in inventory does not affect the title of purchasers in the insolvency proceedings. Legal title of the property of the insolvent passes to the liquidator and is administered

in the insolvency proceedings regardless of errors in the inventory. ii. If the insolvent omits property from his inventory, it is the duty of the liquidator to recover any property or its value, fraudulently conveyed by the debtor [Sec 119 (f)]. iii. Even property exempt from execution must be included in order to preclude possible fraudulent omission under the pretext that such property is exempt. e. If the debt exceeds the secured property: i. To the extent of the unsecured portion, the creditor can join the proceedings. ii. If the creditor wants to participate as an ordinary creditor, he has to let go of the mortgage. II.

Involuntary Liquidation a. Purpose: It is not a mere personal action against the insolvent for the collection of debts, but its purpose is to impound all of his non-exempt property, to distribute it equitably among his creditors, and release him from further liability. b. Any creditor or group of creditors, with a claim of or with claims aggregating at least P500,000, may file a verified petition in the court of the province or city in which the individual debtor resides. i. Petitioning creditor must post a bond. ii. Petition must allege at least one act of insolvency. 1. Any debtor who commits an act of insolvency may adjudged insolvent. The date of adjudication of insolvency retroacts to the date of the filing of the petition for insolvency.

c. Acts of Insolvency: i. That such person is about to depart or has departed from the Republic of the Philippines, with intent to defraud his creditors; ii. That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent; iii. That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of defrauding his creditors; iv. That he conceals, or is removing, any of his property to avoid its being attached or taken on legal process; v. That he has suffered his property to remain under attachment or legal process for three (3) days for the purpose of hindering or delaying the liquidation or of defrauding his creditors; vi. That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or delaying the liquidation or of defrauding any creditors or claimant; vii. That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or delaying the liquidation or of defrauding his creditors; viii. That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors; ix. That he has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to hinder or delay the liquidation or defraud his creditors; x. That he has, in contemplation of insolvency, made any

payment, gift, grant, sale, conveyance or transfer of his estate, property, rights or credits; xi. That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of thirty (30) days; xii. That for a period of thirty (30) days, he has failed, after demand, to pay any moneys deposited with him or received by him in a fiduciary; and xiii. That an execution having been issued against him on final judgment for money, he shall have been found to be without sufficient property subject to execution to satisfy the judgment. d. Procedure: i. Filing of the petition by any creditor or group of creditors and posting of required bond (Sec 105) ii. Issuance of Order to Show Cause (Sec 106): court will order the individual debtor to defend himself and state why he is not an insolvent. 1. Nothing in the order shall impair the rights of a secured creditor to enforce his lien in accordance with its terms (secured creditor may foreclose notwithstanding an order forbidding the debtor to alienate/encumber any of his property) 2. If the debtor cannot be found, the creditors may ask the court to issue an order directing the sheriff to take possession of the debtor’s property in order for it to be sold at a public sale (sale under execution) iii. Service of order to show cause iv. Filing of answer or motion to dismiss by individual debtor v. Hearing of the case (Sec 107)

vi. Issuance of the Liquidation Order vii. Publication of the petition or motion in a newspaper of general circulation once a week for 2 consecutive weeks [Sec 112 (d)] viii. Hearing for election and appointment of liquidator [Sec 112 (j)] ix. Direct payments of any claims and conveyance of any property due the debtor to the liquidator [Sec 112 (e)] x. Liquidation of the debtor’s assets and payment of his debts by the Liquidator (Sec 119) xi. Discharge of Liquidator (Sec 122) xii. Appeal if proper e. The petitioners shall pay the debtor all costs, expenses, damages due to the proceedings if the case is dismissed, withdrawn by them or if the debtor is not insolvent. f.

Absent Individual debtor: i. Resides outside the Philippines; ii. Departed from the Philippines; iii. Cannot be found with due diligence; or iv. Hides to avoid service of the order to show cause (Sec 108)

g. Liquidation Process if the individual debtor is absent: i. Creditors must file the petition ii. Petitioning creditors must: 1. Submit the required affidavits for the Order of publication 2. Present the bonds equivalent to twice the amount of their claims against the debtor iii. Court shall issue and Order directing the sheriff to take a sufficient amount of the debtor’s property not exempt from execution to satisfy the claim; iv. The sheriff shall then: 1. Take said property

2. Prepare a complete inventory of the property within 3 days from said taking and may be extended for good cause; 3. Give such to the court as soon as completed; 4. Prepare a schedule of the names and residences of the creditors and the amounts due to them. Distinction between Voluntary and Involuntary Liquidation: VOLUNTARY

INVOLUNTARY

Number of creditors

One

Filed by:

Insolvent debtor

Acts of insolvency

Must not be guilty

Amounts of indebtedness Bond Order of Adjudication

Must exceed P500,000 Not Required May be granted ex parte Province or city in which debtor has resided for 6 months prior to petition Upon filing of the voluntary petition

Any creditor or group of creditors 3 or more creditors with qualifications set by laws Must have committed one or more Not less than P500,000 Required Granted only after hearing

Length of residence (for RTC)

When does the court order the adjudication?

Immaterial

Only until after hearing the case

PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF INDIVIDUAL AND JURIDICAL DEBTORS What is a liquidation order? The liquidation order shall: a) declare the debtor insolvent b) Order the liquidation of the debtor, or in case of a juridical debtor, declare it as dissolved c) Order the sheriff to take the property of the debtor

d) Order the publication of the petition in a newspaper of general circulation e) Direct payments of any claims and conveyance of any property due to the debtor to the liquidator f) Prohibit the transfer of property and payment by the debtor g) Direct all creditors to file their claims with the liquidator within the period set by the rules h) Authorize the payment of admin expenses ad they become due Effects of the Liquidation Order a) The juridical debtor is dissolved and its juridical existence terminated b) Legal title of all the assets of the debtor shall be vested in the liquidator/court c) All contracts of the debtor shall be deemed terminated unless the liquidator, w/in 90 days from the date of his assumption of office, declares otherwise and the contracting party agree d) No separate action for the collection of an unsecured claim shall be allowed (direct claims to liquidator) e) No foreclosure proceeding shall be allowed for 180 days Rights of Secured Creditors: The Liquidation Order shall NOT affect the right of a secured creditor to enforce his lien. He may: a) Waive his right under the security, prove his claim in the liquidation proceedings and share in the distribution of assets b) Maintain his rights under the security a. If he chooses to maintain: i. If the value of the property used as security is LESS than the claim it secures, the liquidator may convey the property to the secured creditor and the creditor will be admitted in the liquidation proceedings as a creditor for the balance (basically, he can recover deficiency) ii. If it is MORE, the liquidator may convey the property to the creditor and waive the debtor’s right of redemption upon receiving the excess from the creditor b. The liquidator may sell the property and satisfy the secured

c.

creditor’s entire claim from the proceeds The secured creditor may foreclose/enforce his lien

Functions of Liquidator The liquidator shall be deemed an officer of the court with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and responsibilities of the liquidator shall include, but not limited to: a. to sue and recover all the assets, debts and claims, belonging or due to the debtor; b. to take possession of all the property of the debtor except property exempt by law from execution; c. to sell, with the approval of the court, any property of the debtor which has come into his possession or control; d. to redeem all mortgages and pledges, and so satisfy any judgment which may be an encumbrance on any property sold by him; e. to settle all accounts between the debtor and his creditors, subject to the approval of the court; f. to recover any property or its value, fraudulently conveyed by the debtor; g. to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the functions and which shall have powers as the court deems just, reasonable and necessary NOTE: In sum, the liquidator shall have the right and duty to take all reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings therefrom, to pay creditors and stockholders, and to terminate the debtor's legal existence. When can a secured creditor be allowed to vote for a liquidator? a) he waives his security or lien; or b) has the value of the property subject of his security or lien fixed by agreement with the liquidator, and is admitted for the balance of his claim.

NOTE: The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest number of votes cast in terms of amount of claims and who is qualified shall be appointed as the liquidator. When can the court appoint the liquidator? a) on the date set for the election of the liquidator, the creditors do not attend; b) the creditors who attend, fail or refuse to elect a liquidator; c) after being elected, the liquidator fails to qualify; or d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court may instead set another hearing of the election of the liquidator. What are the qualifications of the Liquidator? a) A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his nomination; b) Of good moral character and with acknowledged integrity, impartiality and independence; c) Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a rehabilitation receiver; and d) Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly or impliedly, by a party who may be prejudiced thereby. Preliminary Registry of Secured and Unsecured Creditors: The liquidator shall prepare a preliminary registry of claims within twenty (20) days from his assumption into office. Unsecured Creditors defined They are Secured Creditors who have: a) Waived their security or lien; or b) Who has fixed the value of the property subject of their security or lien by agreement with the liquidator and is admitted as a creditor for the balance, shall be considered as unsecured creditors. The liquidator shall make the registry available for public inspection and provide publication

notice (on where and when they may inspect it) to: a) Creditors, b) Individual debtors owner/s of the sole proprietorship-debtor, c) Partners of the partnership debtor; and d) Shareholders or members of the corporation-debtor. Right of Set-off Debtor and Creditor are MUTUALLY Debtor and Creditor of each other: One Debt shall be SET OFF against the other, The Balance, if any shall be allowed in the liquidation proceedings. Opposition or Challenge to Claims A Challenge to Claim or Claims may be submitted to the court by serving a certified copy on the liquidator and the creditor holding the challenged claim; within thirty (30) days from the expiration of the period for filing of applications for recognition of claims, creditors, individual debtors, owner/s of the sole proprietorshipdebtor. Who may submit a Challenge to Claim or Claims: a) Partners of the partnership-debtor; b) Shareholders or members of the corporation-debtor; and c) Other interested parties Transactions that may be rescinded or nullified The Following Transactions may be Rescinded or Nullified: a) Any transaction occurring prior to the issuance of the Liquidation Order; or b) A transaction entered into by the debtor or involving its assets; in case of the conversion of the rehabilitation proceedings prior to the commencement date. Grounds for rescission or nullification: a) It was executed with intent to defraud a creditor or creditors; or b) It constitutes undue preference of creditors. The Liquidation Plan. The Liquidator shall submit a Liquidation Plan to the court within three (3) months from his assumption into office, The Liquidation Plan shall, as a minimum enumerate:

a) All the assets of the debtor; and b) A schedule of liquidation of the assets and payment of the claims. NOTE: Duty of the Court to exempt and set apart for the use and benefit of the said

insolvent such real and personal property as is by law exempt from execution.

LIQUIDATION REHABILITATION COURT SUPERVISED

Voluntary Proceeding s How Made

Purpose

- verified petition

Establish insolvency and the viability of rehabilitatio n in court

Involuntar y Proceeding s - verified petition

Establish insolvency and the viability of rehabilitatio n in court

PRENEGOTIATED

-verified petition

the approval of the Rehabilitation plan in court

INFORMAL RESTRUCTU RING AGREEMENT

Done without court intervention provided that it meets the minimum requirement of FRIA

To negotiate terms of the rehabilitation plan without court intervention

INSOLVENT JURIDICAL DEBTORS

Voluntary

Involunta ry

1) verified petition for liquidation in court 2) verified motion to convert pending rehabilitation proceeding into a liquidation proceeding

1) verified petition for liquidation in court 2) verified motion to convert pending rehabilitati on proceedin g into a liquidation proceedin g

To establish the insolvency of debtor for purposes of liquidation

To establish the insolvency of debtor for purposes of liquidation

INDIVIDUAL INSOLVENT DEBTORS

Voluntary Liquidati on Verified petition court of the city/provin ce where debtor has resided 6 months prior to filing *filing of such petition=a ct of insolvency to apply for discharge of debts and liabilities

Involunta ry Liquidati on Verified petition in the court of the province or city in which the individual debtor resides

to impound all of debtor’s nonexempt property, to distribute it equitably among his creditors and to release

Suspensi on of Payments Verified petition before city/provin ce where debtor has resided 6 months prior to filing

to be declared in a state of suspension of payment

him from further liability Parties

Filed by Insolvent Debtor -sole proprietorshi p: owner partnership: partners corporation: majority vote of BoD or trustees + 2/3 vote of SH representing outstanding capital stock or 2/3 vote of members

Filed by Creditor or group of creditors with aggregate claim of at least 1M or at least 24% of subscribed capital stock or partner’s contribution s, whichever is higher

Filed by Insolvent debtor by itself or jointly with other creditors

Rehabilitation Plan must be approved by: 1) debtor 2) creditors representing at least 67% of the SECURED obligations of the debtor 3) creditors representing at least 75% of the UNSECURED obligations of the debtor 4) creditors holding at least 85% of the TOTAL LIABILITIES, SECURED and UNSECURED, of the debtor

Filed by the Insolvent debtor

3 or more creditors with the aggregate claims of at least 1M or at least 25% of the subscribed capital stock or partner’s contributio ns of the debtor, whichever is higher

Individual debtor

Creditor or group of creditors with a claim or aggregate claim of at least 500K

Individual debtor

Grounds

Debtor’s insolvency or inability to pay its obligations as they become due

1) no genuine issue of fact or law on the claim/s of the petitioner/s and that the due and demandable payments have not been made for at least

Pre-negotiated Rehabilitation plan which must approved by creditors holding at least 2/3 of total liabilities including: a) secured creditors holding more than 50% of the total

Consent of the parties involved to the informal re-structuring agreement

Rehabilitation is no longer possible

1) no genuine issue of fact or law on the claim/s of the petitioner/ s, and that the due and demandab le payments

Debtor doesn’t have sufficient properties to cover his liabilities and the debts which he owes exceeds 500k

Acts of Insolvency which tends to delay the liquidation or to defraud any creditors like: 1)debtor has departed

Debtor has sufficient property to cover all his debts BUT foresees the impossibili ty of meeting debts when they become

from the

60 days or that the debtor has generally failed to meet its liabilities as they fall due

Minimu m require ments of the petition

1) schedule of debtor’s liabilities with list of creditors 2)an inventory of all its assets 3)Rehabilitat ion Plan 4) names of at least 3 nominees to the position of receiver

2)creditor, other than the petitioner/s has initiated foreclosure proceedings against the debtor that will prevent the debtor from paying its debts as they become due or will render it insolvent 1) circumstanc es sufficient to support petition 2)specific relief sought 3)Rehabilitat ion Plan 4) names of at least 3 nominees to the position of receiver

secured claims of the debtor and b) unsecured creditors holding more than 50% of the total unsecured claims of the debtor

thereon have not been made for at least 180 days or the debtor has failed generally to meet its liabilities as they fall due

Philippines , with intent to defraud his creditors; 2) he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation

2) no substantia l likelihood that the debtor may be rehabilitat ed

1) schedule of debtor’s liabilities with list of creditors 2)an inventory of all its assets 3) prenegotiated Rehabilitation plan and names of at least 3 nominees to the position of receiver

N/A

1) schedule of debtor’s liabilities with list of creditors 2)an inventory of all its assets 3) names of at least 3 nominees to the position of liquidator

none

due

1)schedul e of debts and liabilities 2) inventory of assets

Posting of bond in the amount determine d by the court

1)schedule of debts and liabilities 2)inventor y of assets 3)propose d agreement with creditors

Court Action (if sufficien t in form and substanc e)

Publicati on

COMMENCEMENT ORDER -shall appoint a rehabilitation receiver -summarize requirements and deadlines for creditors to establish their claim -include a STAY or SUSPENSION ORDER

none

4) summary of disputed claims against debtor and report on the provisioning of funds Court order -shall appoint a rehabilitation receiver, if provided in the plan - service of petition to each creditor who is not a petitioner holding at least 10% of total liabilities of debtor -

Once a week for 2 consecutive weeks in a newspaper of general circulation; with first publication made within 7 days from issuance of Order

Insolvent debtor or creditor may seek court assistance for the execution or implementatio n of the agreed Rehabilitation Plan

Liquidation Order

Notice of Rehabilitation plan: published once a week for 3 consecutive weeks in a newspaper of general circulation

Petition or motion: Once a week for 2 consecutive weeks in a newspaper of general circulation

Court Order: 1)publicati on 2)directing debtors and creditors to file comment

Liquidatio n order

1) show cause order 2) liquidation order

none

none

Liquidatio n order

Petition or motion: Once a week for 2 consecutiv e weeks in a newspape r of general circulation

Court Order: 1) calling of creditor’s meeting 2)publicati on of said order and service of such order to all creditors 3)suspend any pending execution against debtor upon motion Order: Once a week for 2 consecutiv e weeks in a newspaper of general circulation; with first publication made within 7 days from

issuance of Order Hearing

Effect

1) for the determination of the creditors 2) determine any objections to the appointment of receiver 3) direct creditors to comment on the Rehabilitation Plan 4) direct the rehabilitation receiver to evaluate the financial condition of the debtor and submit report within 40 days -there shall be a waiver of taxes and fees due to the National Government and to LGUs from the issuance of the commencement order until approval of the Rehabilitation plan or the dismissal of petition, whichever is earlier CONFIRMATION OF REHABILITATION PLAN 1) Rehabilitation plan and its provisions shall be binding upon the debtor and all creditors whether or not such persons have participated in the proceeding 2) debtor shall comply with the provisions 3)payments shall be made to creditors in accordance with the plan 4)contracts bet. Debtor and creditors shall be interpreted as continuing to apply to the extent that they don’t conflict with the

For the determination of the objections to the Rehabilitation plan

N/A

For the election and appointment of liquidator

Approval of the Rehabilitation plan shall have the legal effect as Confirmation of Plan

CRAM DOWN EFFECT: the Rehabilitation Plan shall have the same legal effect as Confirmation of a Plan

LIQUIDATION ORDER: 1)The juridical debtor is dissolved and its juridical existence terminated 2)Legal title of all the assets of the debtor shall be vested in the liquidator/court 3)All contracts of the debtor shall be deemed terminated unless the liquidator, w/in 90 days from the date of his assumption of office, declares otherwise and the contracting party agree 4)No separate action for the collection of an unsecured claim shall be allowed (direct claims to liquidator) 5) No foreclosure proceeding shall be allowed for 180 days

*court has 120 days from date of filing to approve the Plan. Failing to do so, the Rehab Plan shall be deemed approved.

For the election and appointme nt of liquidator

For the election and appointme nt of liquidator

For the election and appointme nt of liquidator

SUSPENSI ON ORDER: No creditor shall sue or institute proceedin gs to collect his claim from the debtor from the time of filing of the petition and for so long as the proceedin gs remain pending Except: a)those creditors having claims for personal

plan 5) any compromises/reschedule of timing of payments by debtor shall be binding on the creditor regardless whether the plan is successfully implemented 6) claims arising after the approval of the plan that are otherwise not treated by the Plan are NOT subject to Suspension Order

labor, maintenan ce, expense of last illness of debtor 60 days prior filing b) secured creditors

COMMODATUM Object

Purpose

Obligation

Status of Ownership Ability to demand return

Nonconsumable Except: consumable if used for exhibition purposes only Temporary use of the thing Take care of the thing with due diligence Return the thing upon expiration of period or purpose Retained by bailor Anytime, if no period or purpose has been agreed upon or if by mere tolerance only (precarium)

MUTUUM

DEPOSIT

Fungible/ consumable (i.e. money)

Movable/person al property

Nonconsumable

Consumption

Safekeeping

Use or consumption

Return a thing of the same kind and quality

Passes to bailee Only after the expiration of the period

Take care of the thing Do not use the thing deposited unless authorized or is required for its preservation Retained by the depositor Anytime

Compensatio n

Exchange (sale) Exchange a thing of the same kind, quality and quantity

Gratuitous or onerous

Gratuitous or onerous

WAREHOUSE RECEIPTS ACT Goods (chattels, merchandise)

Store for profit

Take care of the goods Do not commingle with other goods Issue a receipt for the goods

Passes to the other party (mutual exchange) Cannot demand return because contract is already extinguished Rescission only if grounds exist

If there is an urgent necessity Acts of ingratitude by the bailee Essentially gratuitous

BARTER

onerous

Retained by the depositor Anytime up to: a. Surrender of warehouse receipt b. Offer to pay warehouse man’s lien c. Sign the acknowledg ement

Onerous

Object

Requisit es

Immovables Real Rights over immovables (leasehold rights)

Movables

Movables Incorporeal rights Except: can CM evidenced by buildings by negotiable agreement and no instruments, bills innocent third party of lading, shares of prejudiced stock, bonds, warehouse receipts 1. Constituted to secure fulfillment of principal obligation 2. Mortgagor/Pledgor absolute owner 3. Mortgagor/Pledgor has free disposal/legal authority *RM, CM and Pledge is VALID as between the parties even if registration requirements are not complied with BUT is not binding to 3rd persons

To bind 3rd persons

Must be registered in the RD

Must be registered in the CM Registry

Delivery ?

Generally not required

*If vehicle, must also be registered in the LTO Generally not required

Effect of default

Must be in a public instrument with a description of thing pledged and the date

Immovables

1. Must be in writing 2. Express agreement between debtorcreditor that the fruits will be applied to payment of interest if any, and then to the principal Must be registered in the RD

Delivery essential to constitute pledge

Delivery essential only so that the antichretic creditor can enjoy the fruits Ownership does not pass to the creditor upon default. Principle of pactum comissorium applies Except: In pledge, after two sales and the thing remains unsold, the pledgee can appropriate (in this case, he has to waive his claim)

Foreclos ure Deficien cy

Extrajudicial/Judicial Creditor can sue for deficiency in either EJ/J

Sale through a notary public No express right granted by law, BUT allowed by jurisprudence Except: No deficiency in sale on movables in installment (Recto Law)

Extrajudicial Private sale No deficiency

Extrajudicial/Judicial Creditor can sue for deficiency in either EJ/J

VIII. LAND TITLES AND DEEDS ========================= ======== TOPIC UNDER THE SYLLABUS: A. Torrens System 1. Concept and background 2. Certificate of title B. Regalian Doctrine 1. Concept 2. Effects 3. Concept of native title, time immemorial possession C. Citizen Requirements D. Non-Registrable Properties E. Original Registration 1. Registration process and requirements 2. Who may apply a. Under P.D. 1529 b. Under C.A. 141 3. Remedies 4. Cadastral registration F. Subsequent Registration 1. Voluntary Dealings 2. Involuntary Dealings G. Dealings With Unregistered Land ========================= ======== 1.

CONCEPT AND BACKGROUND

LAND TITLE is evidence of the owner’s right or extent of interest, by which he can maintain control and as a rule assert right to exclusive possession and enjoyment of property DEED is an instrument in writing by which any real estate or interest therein is created, alienated, mortgaged, or assigned, or by which title to any real estate may be affected in law or equity LAND REGISTRATION is a judicial or administrative proceeding whereby a person’s claim over a particular land is determined and confirmed or recognized so that such land and the ownership thereof may be recorded in a public registry TORRENS SYSTEM is a system for registration of land under which, upon the landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title

PURPOSES: (QUIP-CC) 1. To quiet title to the land and to stop forever any question as to the legality of said title 2. To relieve the land of unknown claims 3. To guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized 4. To give every registered owner complete peace of mind 5. To issue a certificate of title to the owner which shall be the best evidence of his ownership of the land 6. To avoid conflicts of title in and to real estate and to facilitate transactions. Lagarda v. Saleeby [31 Phil 590, 1915] The registration of property is to: (1) avoid possible conflicts of title, and (2) facilitate transactions relative to real property by giving the public the right to rely upon the face of the Torrens certificate of title and to dispense with the need of inquiring further, EXCEPT when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry. Capitol Subdivision v. Province of Negros, [7 SCRA 60 ,1963) NATURE OF TORRENS SYSTEM  

Judicial in character and not merely administrative Proceeding is in rem (binding upon the whole world)

In a registration proceeding, the judgment of the court confirming the title, and ordering its registration in one’s name constitutes, when final, res judicata against the whole world. Ronald Ting v. Heirs of Lirio, [G.R. No. 168913, March 14, 2007] TORRENS TITLE is a certificate of ownership issued under the Torrens System, through the Register of Deeds, naming and declaring the owner of the real property described therein, free from all liens and encumbrances except such as may be expressly noted there or otherwise reserved by law. (See Section 44, PD 1529) General Rule – A title once registered cannot be impugned, altered, changed, modified, enlarged, or diminished Exception – Direct proceeding permitted by law, usually for the protection of innocent third persons

2. CERTIFICATE OF TITLE

PROBATIVE VALUE OF THE TORRENS TITLE Torrens Title may be received in evidence in all Philippine courts , and shall be conclusive as to all matters contained therein, principally as to the identity of the land owner except so far as provided in the Land Registration Act. 

3. Accretion

As opposed to an unregistered deed of sale, the certificate of title certainly deserves more probative value. Indeed, a Torrens Certificate is evidence of indefeasible title of property in favor of the person in whose name appears therein—such holder is entitled to the possession of the property until his title is nullified. Pascual v. Coronel, [527 SCRA 474, 2007]

Accretion to registered lands needs new registration

TYPES OF TORRENS CERTIFICATES OF TITLE 1. ORIGINAL CERTIFICATE OF TITLE - the first title issued in the name of the registered owner by the Register of Deeds (ROD) covering a parcel of land which had been registered by virtue of a judicial or administrative proceeding. 2. TRANSFER CERTIFICATE OF TITLE - the title issued by the ROD in favor of the transferee to whom the ownership of the already registered land had been transferred by virtue of a sale or other modes of conveyance. MODES OF ACQUIRING TITLE 1. Public Grant A conveyance of public land by government to a private individual 2. Acquisitive Requisites: ONCE Prescription Open, Continuous, Exclusive, and Notorious possession If in good faith & with just title: 10 yrs. uninterrupted possession is required If in bad faith & without just title: 30 yrs. continuous possession is required Only available if the land possessed is public, alienable and disposable A property registered under the Torrens System is not subject to prescription Prescription is unavailing not

only against the registered owner, but also against his hereditary successors Requisites: G-C-A 1. The deposit of soil or sediment be gradual and imperceptible, 2. It is the result of the current of the waters (river/sea), and 3. The land where accretion takes place is adjacent to the banks of rivers or the sea coast

There must be No human intervention,



4. Reclamation

5. Voluntary Transfer

6. Involuntary Alienation

7. Descent or Devise 8. Emancipation Patent/Grant (Certificate of Land Ownership Award)

The current causing the alluvial deposit must be from a river. If it is from the sea, the deposit will pertain to the state. (Government of the Phils. v. Cabangis 53 Phil. 112 (1929)) Filling of submerged land by deliberate act and reclaiming title thereto  Must be initially owned by the government  May be subsequently transferred to private owners 1. Private grant 2. Voluntary execution of deed of conveyance  Contractual relationship between the parties  Consensual  No consent from the owner of land  Forcible acquisition by the State Hereditary succession to the estate of deceased owner To ameliorate the sad plight of tenant-farmers (to answer their problems) Such grant is not transferable except by hereditary succession

LAWS IMPLEMENTING LAND REGISTRATION 1. Property Registration Decree (P.D. 1529, as

amended) 2. Cadastral Act (Act 2259, as amended) 3. Public Land Act (Commonwealth Act 141, as amended) 4. Emancipation Decree (P.D. 27, as amended) 5. Comprehensive Agrarian Reform Law of 1988 (R.A. 6657, as amended) ADMINISTRATION OF THE TORRENS SYSTEM 1. Land Registration Authority (LRA) Agency charged with the efficient execution of the laws relative to the registration of lands, under the executive supervision of the DOJ Composition: a. Administrator b. 2 Deputy Administrators (as assistants) The Functions of the LRA are: (SAC) 2. Extend speedy and effective assistance to the Dept. of Agrarian Reform, the Land Bank, and other agencies in the implementation of the land reform program of the government 2. Extend assistance to courts in ordinary and cadastral land registration proceedings 3. Be the central repository of records relative to original registration of lands titled under the Torrens system, including the subdivision and consolidation plans of titled lands 2. Register Of Deeds (ROD) It is the public repository of records and instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is situated Composition: a. Register of Deeds b. Deputy (as assistant) The functions of the ROD: (PIDI) 1. Immediately register an instrument presented for registration dealing with real or personal property which complies with the requisites for registration 2. Shall see to it that said instrument bears the proper documentary and science stamps and that the same are properly cancelled 3. If the instrument is not registerable, he shall deny the registration thereof and inform the presentor of such denial in writing, stating the ground or reason therefore, and advising him of his right to appeal by consulta in accordance with Sec. 117 of PD 1529

4. Pr epare and keep an index system which contains the names of all registered owners and lands registered The function of the ROD with reference to registration of deeds, encumbrances, instruments, and the like is ministerial in nature, provided the applicant complies with all the requisites. Baranda v. Gustilo, [165 SCRA 757, 1988] It is enough that in the ROD’s opinion an instrument is registrable for him to register it. The act being an administrative act does not contemplate notice to and hearing of interested parties. Ledesma v. Villasenor, [13 SCRA 494, 1965] The determination of whether a document is valid or not is a function that belongs to a court of competent jurisdiction, and not to the ROD. Almirol v. ROD of Agusan, [G.R. No. L-22486, March 20, 1968] Instances when the ROD may validly deny registration of a voluntary instrument: 1. Where there are more than 1 copy of the owner’s duplicate certificate of title and not all such copies are presented to the ROD 2. Where the voluntary instrument bears on its face an infirmity 3. Where the validity of the instrument sought to be registered is in issue in a pending court suit, notice of which must be given to parties 4. Registration may be suspended Balbin v. ROD, [28 SCRA 12,1969] The ROD may also refuse to register a private document since Section 112 of PD 152 provided that deeds of conveyances affecting lands should be verified and acknowledged before a notary public or other public officer authorized by law to take acknowledgement. Gallardo v. IAC, [155 SCRA 248, 1987] NOTE: When the ROD is in doubt as to the proper action to take on an instrument or deed presented to him for registration, he should submit the question to the Administrator of the LRA en consulta (Section 117, PD 1529).

B. REGALIAN DOCTRINE 1. CONCEPT Under the Regalian doctrine which is embodied in Section 2, Article XII of the 1987 Constitution, all lands of the public domain belong to the State, which is the source of any asserted right to

ownership of land. ll lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests, or timber, wildlife, flora and fauna, and natural resources belong to the state. With the exception of agricultural lands, all other natural resources shall not be alienated

2. EFFECTS All lands not appearing to be clearly within private ownership are presumed to belong to the State. Unless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public domain. To overcome this presumption, incontrovertible evidence must be established that the land subject of the application is alienable or disposable. To prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a positive act of the government such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute. The applicant may also secure a certification from the Government that the lands applied for are alienable and disposable.

3. CONCEPT OF NATIVE TIME IMMEMORIAL

D. NON-REGISTRABLE PROPERTIES NON-REGISTRABLE PROPERTIES Article 420 1. Those intended for public NCC use, such as roads, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character 2. Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. Arts. 5 & 6, Water Code (PD 1067 )

TITLE,

NATIVE TITLE - refers to pre-conquest rights to lands and domains which, as far back as memory reaches, have been held under a claim of private ownership by ICCs/IPs, havenever been public lands and are thus indisputably presumed to have been held that way sincebefore the Spanish Conques

C. CITIZEN REQUIREMENTS 1. INDIVIDUALS AND CORPORATIONS

1. Rivers and their natural beds; 2. Continuous or intermittent waters of springs and brooks running in their natural beds and the beds themselves; 3. Natural lakes and lagoons; 4. All other categories of surface waters such as water flowing over lands, water from rainfall whether natural or artificial, and water from agriculture runoff, seepage and drainage; 5. Atmospheric water; 6. Subterranean or ground water; 7. Seawater; Found in private lands: 8. Continuous or intermittent waters rising on such lands; 9. Lakes and lagoons naturally occuring on such lands; 10. Rain water and falling on such lands; 11. Subterranean or ground waters; and 12. Waters in swamps and marshes Forest or timberland, public forest, forest reserves lands, mineral lands

Only Filipino citizens may acquire not more than 12 hectares by purchase, homestead or grant, or lease not more than 500 hectares.

Regalian Doctrine under the 1935, 1973, and 1987 Constitution

Private corporations may lease not more than 1,000 hectares for 25 years renewable for another 25 years

It is not the court which determines the classification of lands of the public domain into agricultural, forest or mineral but the Executive Branch of the government, through the Office of

Alienable lands of the public domain:

the President. Bureau of Forestry v. CA, [153 SCRA 351, 1987] The State has an imprescriptible right to cause the reversion of a piece of property belonging to the public domain if title has been acquired through fraudulent means. Republic v. Heirs of Alejaga, [393 SCRA 361, 2002]

indicium of possession in the concept of an owner. Such an act strengthens one’s bona fide claim of acquisition of ownership. Republic v. Sta. AnaBurgos, [523 SCRA 309, 2007] b. Always filed with the RTC of the place where land is situated c. Indorsed to the MTC if there is no controversy over the land or if its value is less than 100,000 d. In cases of delegated jurisdiction to the MTC, appeal is directed to the CA e. If land is situated between boundaries of 2 provinces, application must be filed:  When boundaries are not defined: with the RTC of the place where it is declared for taxation purposes;  When boundaries are defined: a separate plan for each portion must be made by a surveyor and a separate application for each lot must be filed with the appropriate RTC

A land classified as a military reservation zone, until reclassified or released from the said classification remains inalienable public land. Republic v. Southside, [G.R. No. 156951, Sept. 22, 2006]

E. ORIGINAL REGISTRATION Types Of Registration: 1. Original Registration 2. Subsequent Registration ORIGINAL REGISTRATION UNDER P.D. 1529 is a proceeding brought before the RTC (as a land registration court) to determine title or ownership of land on the basis of an application for registration or answer by a claimant in a cadastral registration.

1. REGISTRATION REQUIREMENTS

PROCESS

AND

Kinds Of Judicial Registration: 1. Judicial/Voluntary/Ordinary – by filing with the proper court; application by the private individual himself 2. Administrative/Involuntary/Cadastral – compulsory registration initiated by the government Procedure In Ordinary Land Registration (SurF-D-TraPS-AHJ-DECT) 1. SURvey of land by the Bureau of Lands or a duly licensed private surveyor - Survey plan must be duly approved by the Director of Lands. 2. Filing of application for registration by the applicant a. With all muniments of titles and copies thereof with survey plan approved by Bureau of Lands MUNIMENTS OF TITLE are instruments or written evidence which applicant hold or possess to enable him to substantiate and prove title to his estate. Tax declarations or realty tax payment of property are not conclusive evidence of ownership. At most, they serve as a good

3. Setting of the Date of initial hearing of application by the RTC - Within 5 days, set hearing 45-90 days from date of order 4. Transmittal of the application and the date of the initial hearing, with all the documents or other evidence attached thereto, by the Clerk of Court to the LRA 5. Publication of notice of the filing of the application and the date and place of the hearing in the Official Gazette. The notices required are mandatory. a. Publication of notice of initial hearing i. Once in the Official Gazette (this confers jurisdiction upon the court) ii. Once in a newspaper of general circulation Purpose of publication:

1.

To confer jurisdiction over the land applied for upon the court 2. To charge the whole world with knowledge of the application of the land involved, and invite them to take part in the case and assert and prove their rights over the subject land b. Mailing  Within 7 days after publication of said notice in the OG, mailing of notice to: i. Persons named in the notice ii. Sec. of Public Highways, Provincial Governor, and Mayor, if the applicant requests to have the line of a public way or road determined iii. Sec. of Agrarian Reform, Solicitor

iv.

General, Director of Lands, Director of Fisheries, and Director of Mines, if the land borders on a river, navigable stream, or shore, or on an arm of the sea where a river or harbor lies Other persons as the court may deem proper

c. Posting Posting in conspicuous place on subject land and on bulletin board of municipal building at least 14 days before initial hearing 6. Service of notice by the sheriff upon contiguous owners, occupants and those known to have interests in the property 7. Filing of answer to the application by any person whether named in the notice or not 8. Hearing by the court 9. Promulgation of judgment by the Court 10. Issuance of the decree declaring the decision final and instructing the LRA to issue a decree of confirmation and registration Decree– issued by LRA after finality of judgment; contains technical description of land. i. Decrees dismissing application ii. Decrees of confirmation and registration *0. Subject only to appeal 11. Entry of the decree of registration in the LRA 1 year after the date of entry, it becomes incontrovertible and amendments will not be allowed except clerical errors. It is deemed conclusive as to the whole world. - Puts an end to litigation - Purpose of Torrens system is protected 12. Sending a copy of the decree of registration to the corresponding ROD 13. Transcription of the decree of registration in the registration book and issuance of the owner’s duplicate original certificate of title to the applicant by the ROD upon payment of the prescribed fees NOTE: Noncompliance with the requisites will make the Certificate of Title (CT) issued invalid and cancellable by the courts.

2 .WHO MAY APPLY a. UNDER PD 1529 (OPAL)

1. Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945 or earlier 2. Those who acquired ownership of private land by prescription under the provisions of existing laws 3. Those who acquired ownership of private lands or abandoned river beds by right of accession or accretion under the existing laws 4. Those who have acquired ownership of land in any manner provided for by law NOTE: All these persons must be natural-born Filipino citizens. By way of exception juridical persons may apply for registration of leased agricultural and disposable lands not exceeding 1,000 hectares in area for a period of 25 years and renewable for not more than 25 years (Sec. 3, Article XII, 1987 Constitution), and except when the land has been previously acquired by prescription by a natural person and subsequently transferred to a juridical entity. In this case, a corporation may apply for judicial confirmation of title. Dir. of Lands v. IAC and ACME, [146 SCRA 159 (1986] Limitation To Ownership Of Land By Corporation: 1. Private Lands a. At least 60% Filipino (Sec. 7, Article XII, 1987 Constitution) b. Restricted as to extent reasonably necessary to enable it to carry out purpose for which it was created c. If engaged in agriculture, it is restricted to 1,024 hectares 2. Patrimonial Property of the State (Sec. 3, Article XII, 1987 Constitution) a. May only Lease (CANNOT own land of the public domain) for 25 years renewable b. Limited to 1,000 hectares c. Apply to both Filipinos & foreign corporations Determinative of this issue is the character of the parcels of land – whether they were still public or already private – when the registration proceedings were commenced. If they are already private lands, the constitutional prohibition against acquisitions by a private corporation would not apply. Natividad v. CA, [202 SCRA 439, 1991] FORM OF THE APPLICATION

(Sec. 15, PD 1529): (WSS) 1. Written 2. Signed by the applicant or person duly authorized in his behalf - If there is more than 1 applicant, the application shall be signed and sworn to by and in behalf of each. 2. Sworn to before an officer authorized to administer oath for the province or city where the application was actually signed CONTENTS OF APPLICATION (Sec. 15, P.D. 1529): (MADFARCE) 1. Manner of acquisition of land 2. Assessed value of the land and the buildings and other improvements based on the last assessment for taxation purposes 3. Description of the land applied for together with the buildings and improvements; the plan approved by Director of Lands and the technical descriptions must be attached 4. The court may require Facts to be stated in the application in addition to those prescribed by the Decree not inconsistent therewith and may require the filing of additional papers 5. Full names and addresses of All occupants of the land and those of the Adjoining owners, if known; and if not known, the applicant shall state the extent of the search made to find them 6. If the application describes the land as bounded by a public or private way or Road, it shall state whether or not the applicant claims any portion of the land within the limits of the way or road, and whether the applicant desires to have the line of way or road determined (Sec. 20, PD 1529) 7. Citizenship and Civil status of the applicant  if married, name of spouse, and  if the marriage has been legally dissolved, when and how the marriage relation was terminated 8. Mortgage or Encumbrance affecting the land or names of other persons who may have an interest therein, legal or equitable 9. If the applicant is a non-resident of the Philippines, he shall file an instrument appointing an agent residing in the Phils. and shall agree that service of any legal process shall be of the same legal effect as if made upon the applicant within the Philippines (Sec. 16, PD 1529) Where To File Application General Rule – RTC of the province or city where the land is situated

File together with application all original muniments of titles or copies thereof and a survey plan of the land as approved by the Bureau of Lands P.D. 1529 has eliminated the distinction between the general jurisdiction vested in the RTC and the limited jurisdiction conferred upon it by the former law when acting merely as land registration court. Aimed at avoiding multiplicity of suits, the change has simplified registration proceedings by conferring upon the RTCs the authority to act not only on original applications but also those filed after original registration, with power to hear and determine all questions arising upon such applications or petitions. Averia v. Caguioa, [146 SCRA 459, 1986] If there are several parcels of land situated in different provinces/cities but belong to one owner, he must file in RTC of each province/city where the different parcels of land are located for registration purposes Exception – Delegated jurisdiction of the MTC to hear and determine cadastral or land registration cases covering lots where: − there is no controversy or opposition, or − contested lots, the value of which does not exceed 100,000 AMENDMENTS IN ORDINARY REGISTRATION PROCEEDINGS 1. Striking out one or The court may strike more of the parcels of out at any time land applied for or by a severance of the application 2. Substantial change in New technical boundaries, increase in description and new area, inclusion of publication and notice additional land are necessary 3. Joinder, substitution, File motion with court or discontinuance of any of the parties 4. Decrease in area File motion with court; no need for new publication or notice If the amendment consists in the inclusion in the application for registration an area or parcel of land not previously included in the original application, as published, a new publication of the amended application must be made. The purpose of the new publication is to give notice to all persons concerned regarding the amended application. Without a new publication, the registration court cannot acquire jurisdiction over the area or parcel of land that is added to the area covered by the

original application, and the decision of the registration court would be a nullity insofar as the decision concerns the newly included land. But if the amendment consists in the exclusion of a portion of the area covered by the original application and the original plan as previously published, a new publication is not necessary. In the latter case, the jurisdiction of the court is not affected by the failure of a new application. Benin v. Tuason, [57 SCRA 531, 1974] Requisites of Opposition: an opposition may be filed by any person claiming an interest 1. Set forth objections to the application 2. State interest claimed by oppositor 3. Apply for the remedy desired 4. Signed and sworn to by him or by some other duly authorized person 5. Filed on or before the date of initial hearing 6. If only a portion of the land applied for is contested and such portion is not properly delimited, court may require submission of a division plan approved by the Director of Lands GENERAL DEFAULT Those persons who did not appear and answer within the time prescribed

SPECIAL DEFAULT When a party appears at initial hearing without having filed an answer and asks court for time to file answer but failed to do so within period allowed

b. UNDER C.A. 141 Judicial Confirmation of Imperfect or Incomplete Title under the Public Land Act  In rem, judicial proceedings  The decree of registration issued is conclusive and final  Governed by court procedure and law of evidence When To File Extended up to December 31, 2020, as provided in Sec. 2 of RA 9176 Limitation To Area Applied For Maximum of 12 hectares (Sec. 3, RA 6940) What Applicant Must Prove  The land is alienable and disposable land of the public domain, and  His possession was for the length of time and in the manner and concept required by law

NOTE: Form, Contents, Notice, Mailing, Posting Requirements are the same as those required in original registration under PD 1529. A judicial declaration that a parcel of land is public, does not preclude even the same applicant from subsequently seeking a judicial confirmation of his title to the same land, provided he thereafter complies with the provisions of Sec. 48 of C.A. 141, as amended and as long as said public land remains alienable and disposable. Director of Lands v. CA, [106 SCRA 426, 1981] Proof of Private Ownership (STOP) 1. Spanish title (inadmissible and ineffective proof of ownership in land registration proceedings filed after Aug. 16, 1976) 2. Tax declarations and tax payments (not conclusive evidence of ownership, must be coupled with proof of actual possession for the period required by law) 3. Other kinds of proof (ex. testimonial evidence to prove accretion, deeds of sale) 4. Presidential issuances and legislative acts (constitutive of a fee simple title or absolute title in favor of the grantee, a law ceding full ownership to a government institution) The holder of a Spanish title may still lose his ownership of the real property to the occupant who actually possesses the same for the required prescriptive period. Taking the law as a whole, it has clearly set a deadline for the filing of applications for registration of ALL Spanish titles under the Torrens system (i.e., 6 months from its effectivity or on 14 August 1976), after which, the Spanish titles may no longer be presented to prove ownership. Spanish titles can no longer be countenanced as indubitable evidence of land ownership. Santiago v. SBMA, [G.R. No. 156888, November 20, 2006] JUDGMENT is a decision of court constituting its opinion after taking into consideration the evidence submitted. It becomes final upon the lapse of 15 days counted from the receipt of notice of the judgment. However, notwithstanding the lapse of the 15-day period from receipt of judgment by the parties, the court continues to retain control over the case until the expiration of 1 year after the entry of decree of registration by the LRA. Republic v. Assosacion Benevola de Cebu [178 SCRA 692, 1989] In special proceedings the purpose of execution of judgment is to establish a status, condition or fact; in land registration proceedings, the ownership by

a person of a parcel of land is sought to be established. After the ownership has been proved and confirmed by judicial declaration, no further proceeding to enforce said ownership is necessary, except when the adverse or losing party had been in possession of the land and the winning party desires to oust him therefrom. Ronald Ting v. Liro, [G.R. No. 168913, March 14, 2007] Post-Judgment Incidents 1. Writ of Possession: order to sheriff to deliver the land to the successful party litigant; no prescription against: (1) the loser and (2) anyone unlawfully and adversely occupying When writ may not issue: When a party entered into property after issuance of final decree, is not an oppositor in registration proceeding, and is in possession of land for at least 10 years 2. Writ of Demolition: the complement of writ of possession; to demolish improvements introduced by oppositor or his successor in interest Means to Recover Possession 1. Forcible entry 2. Unlawful detainer 3. Accion publiciana 4. Accion reivindicatoria Decree of Registration  The decree issued by the LRA pursuant to the order of the court.  Binds the land, quiets title thereto, subject only to such exceptions or liens as may be provided by law  Conclusive upon all persons including the government Contents of The Decree (DMD-DO) 1. Date, hour and minute of its entry 2. Whether the owner is married or unmarried, and if married, the name of the spouse; provided that if the land is conjugal property, the decree shall be issued in the name of both spouses 3. If the owner is under disability, the nature of such disability, and if a minor, his age 4. Description of the land and shall set forth the estate of the owner, and also show their relative easements, liens, attachments, and other encumbrances 5. Other matters to be determined in pursuance of the law

Process of Issuing The OCT 1. Within 15 days from finality of order of judgment directing registration of title – court orders the LRA to issue decree of registration and certificate of title 2. Clerk of court will send order of court and copies of judgment 3. Writ of Demolition may be issued. The court has authority to order, as a consequence of the writ of possession issued by it, the demolition of improvements introduced by the defeated oppositor or his successor-ininterest 4. Administrator will issue a decree of registration and original and duplicate of OCT that is signed by the Administrator, enter and file decree of registration in LRA 5. Send to ROD the original and duplicate of title and certificate for entry in his registration book 6. Enter in record book, dated, signed, numbered and sealed to take effect upon date of entry 7. ROD to send notice to registered owner ready for delivery after payment of fees 8. ROD shall send duplicate and note on each certificate of title to whom it is issued 9. Original copy to be filed in ROD 10. Bound in consecutive order Attributes and Limitations on Certificates of Title and Registered Lands 1. Free from liens and encumbrances General Rule – Claims and liens of whatever character existing against the land prior to the issuance of the certificate of title are cut off by such certificate and the certificate so issued binds the whole world, including the government. Exceptions: (CNT-PD) i. Those noted on the certificate ii. Liens, claims, or rights arising or existing under the laws and the Constitution, which are not by law required to appear on record in the Register of Deeds in order to be valid iii. Unpaid real estate taxes levied and assessed within 2 years immediately preceding the acquisition of any right over the land by an innocent purchaser for value iv. Any public highway, or private way established or recognized by law, or any government irrigation, canal or lateral thereof, if the certificate of title does not state the boundaries of such highway or irrigation canal or lateral thereof have been determined v. Any disposition of the property or limitation on the issue thereof pursuant to PD 27 or

of any other law or regulations on agrarian reform 2.

Incontrovertible and indefeasible General Rule – Upon expiration of 1 year from and after the entry of the decree of registration in the LRA, the decree and the corresponding certificate of title becomes incontrovertible and indefeasible. Exceptions: (PNF) a. If previous valid title of the same land exists b. When land covered is not capable of registration c. When acquisition of certificate is attended by fraud

title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with the law.” Torrens title cannot be collaterally attacked. The question on the validity of a Torrens title, whether fraudulently issued or not, can be raised only in an action expressly instituted for that purpose. The action for the declaration of nullity of deed of sale commenced by the petitioners in the RTC is not the direct proceeding required by law to attack a Torrens certificate of title. Tapuroc v. Loquellano de Mende, 512 SCRA 97 (2007 4.

The rule on the incontrovertible nature of a certificate of title applies when what is involved is the validity of the OCT, not when it concerns that of the TCT. Arguelles v. Timbancaya, [72 SCRA 193, 1976] 2.

Registered land not subject to prescription a. Even adverse, notorious and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. JM Tuason and Co. Inc. v. CA, [93 SCRA 146, 1979] b. The fact that the title to the land was lost does not mean that the land ceased to be registered land before the reconstitution of its title. It cannot perforce be acquired by prescription. Ruiz v. CA, [79 SCRA 525 , 1977] c. Laches may be invoked to bar reconveyance of land to the registered owner only if there are intervening rights of third persons which may be affected or prejudiced if such land is returned to the registered owner. De Lucas v. Gamponia, [100 Phil 277 , 1956]

With respect to a claim of acquisitive prescription, it is baseless when the land involved is a registered land since no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Feliciano v. Zaldivar, [G.R. No. 162593, Sept. 26, 2006] 3.

Certificate of collateral attack

title

not

subject

to

Sec. 48 of P.D. 1529 provides that “a certificate

Torrens Certificate presumed valid and devoid of flaws General Rule – Torrens Certificate of Title is presumed to have been regularly issued, valid, and without defects. The buyer has the right to rely upon the face of the Torrens title and dispense with the trouble of inquiring further. Exception – When he has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make inquiry.

While, it is a familiar doctrine that a forged or fraudulent document may become the root of a valid title, if title to the property has been transferred from the forger to an innocent purchaser in good faith, the same does not apply in case of banking institutions or those engaged in real estate for they are expected expected to exercise more care and prudence than private individuals in their dealing with registered lands. In the absence of inquiry, the respondent Bank cannot and should not be regarded as a mortgagee/purchaser in good faith. Erasusta v. CA, [G.R. No. 149231, July 17, 2006] 5.

General incidents of registered land

Registered land or the owners thereof are not relieved from the following: a. From any rights incident to the relation of husband and wife, landlord and tenant b. From liability to attachment or levy on execution c. From liability to any lien of any description established by law on the land and buildings thereon, or in the interest of the owner in such land or buildings d. From any right or liability that may arise due to change of the law on descent e. From the rights of partition between coowners f. From the right of the government to take the land by eminent domain

g. From liability to be recovered by an assignee in insolvency or trustee in bankruptcy under the laws relative to preferences h. From any other rights or liabilities created by law and applicable to unregistered land 6.

Where certificate of title is obtained by a trustee a. Trustee who obtains a Torrens title in his name, over property held in trust by him for another cannot repudiate the trust relying on the registrations, such being one of the limitations upon the finality of title b. Trustee could not perforce legally convey ownership of the registered property in her will for she is not the absolute owner thereof

adjudicate lands already covered by a Certificate of Title, it is nonetheless true that this rule only applies where there exists no serious controversy as to the certificate’s authenticity vis-à-vis the land covered therein. Republic v. Vera, 120 SCRA 210 (1983) BASIS Nature Applicant

PD 1529 Voluntary Landowner

Lands covered

usually involves private land

3. CADASTRAL REGISTRATION CADASTRAL REGISTRATION is a proceeding in rem initiated by the filing of a petition for registration by the government, not by the persons claiming ownership of the land subject thereof, and the latter are, on the pain of losing their claim thereto, in effect, compelled to go to court to make known their claim or interest therein and to substantiate such claim or interest Procedure: (NN-CP-PAHD-DI) 1. Notice of cadastral survey published once in OG and posted in conspicuous place with a copy furnished to the mayor and barangay captain 2. Notice of date of survey by the Bureau of Land Management and posting in bulletin board of the municipal building of the municipality or barrio, and he shall mark the boundaries of the lands by monuments set-up in proper places thereon 3. Cadastral survey 4. Filing of petition 5. Publication (twice in successive issues of OG), mailing, posting 6. Filing of answer 7. Hearing of the case 8. Decision 9. Issuance of the decree and certificate of title NOTE: The cadastral court is not limited to a mere adjudication of ownership in favor of one or more claimants. If there are no successful claimants, the property is declared public land. Additionally, while the court has no jurisdiction to

Parties

Purpose

Person who requests the survey Effect of judgment

it may also refer to public agricultural lands if the object of the action is confirmation of an imperfect title Applicant and opponent

Petitioner comes to court to confirm his title and seeks the registration of the land in his name Landowner • no adverse claim • if the applicant fails to prove his title, his application may be dismissed without prejudice (no res judicata)

CADASTRAL Compulsory Director of Lands all classes of lands are included

Government, Landowners must come to court as claimants of their own lands Government asks the court to settle and adjudicate the title of the land Government • if none of the applicants can prove that he is entitled to the land, the same shall be declared public (res judicata)

PATENTS Classification of Land of Public Domain: The classification is the exclusive prerogative of executive and not of the judiciary Anyone who applies for confirmation of imperfect

title has the burden of proof to overcome the presumption that the land sought to be registered forms part of public domain (Regalian doctrine) Under the Constitution: 1. Agricultural – the subject to alienation 2. Forest or timber 3. Mineral lands 4. National park

only

classification

Under the Public Land Act: 1. Alienable/disposable: a. Agricultural b. Residential, commercial, industrial c. Educational, charitable d. Town sites and for public and quasipublic uses 2. Timber lands: inalienable 3. Mineral lands: inalienable  If patent or title is issued, it is void ab initio for lack of jurisdiction General Rule – It is not subject to acquisitive prescription even if in possession for long time, it will not ripen into ownership Exception – Mineral lands and forest lands acquired before inauguration of Commonwealth in November 15, 1935 because there are vested rights which are protected FISHPONDS Before: It was included in the definition of agriculture, therefore the conversion of agricultural land to fishponds did not change character of land Now: It has a restricted meaning; Fishponds are of a distinct category and cannot be alienated but may be leased from government When Government Grant Deemed Acquired by Operation of Law: 1. Deed of conveyance issued by government patent/grant 2. Registration with the ROD: mandatory, it is the operative act to convey and transfer title 3. Actual physical possession, open and continuous  Land ceased to be part of public domain & now ownership vests to the grantee  Any further grant by Government on same land is null and void  Upon registration, title is indefeasible

Title Issued Pursuant to Registration of Patent: 1. Indefeasible when registered, and deemed incorporated with Torrens system 1 year after the issuance of patent 2. GR: May not be opened 1 year after entry by LRA (otherwise, confusion and uncertainty on the government system of the distribution of public lands may arise and this must be avoided) Exception: if it is annullable on ground of fraud, then it may be reopened even after 1 year because registration does not shield bad faith  The court, in the exercise of its equity jurisdiction, may direct reconveyance even without ordering cancellation of title Homestead Restrictions: 1. Land cannot be alienated within 5 years after approval of application for patent 2. It cannot be liable for satisfaction of debt within 5 years after approval of patent application 3. Subject to repurchase of heirs within 5 years after alienation when allowed already 4. No private corporation, partnership, association may lease land unless it is solely for commercial, industrial, educational, religious or charitable purpose, or right of way (subject to consent of grantee and approval of Secretary of Environment & Natural Resources) Exceptions: 1. Action for partition because it is not a conveyance 2. Alienations or encumbrances made in favor of the government Erring Homesteader not Barred by Pari Delicto - Pari delicto rule does not apply in void contracts - Violation of prohibition results in void contract - Action to recover does not prescribe KIND S

Home stead Paten t

TO WHOM GRANTE D To any Filipino citizen over the age of 18 years or head of a family

OTHER REQUIREMENTS

• Grantee does not own more than 12 hectares of land in the Philippines or has not had the benefit of any gratuitous allotment of more than 12 hectares • must have resided continuously for at least 1 year in the municipality where the

Free Paten t

Sales Paten t

To any natural born citizen of the Philippine s (filing ended Dec. 31, 2000)

Citizens of the Philippine s of lawful age or head of the family may purchase public agricultur al land of not more than 12 hectares

To any citizen of legal age for residential purposes

Speci al Paten t

To NonChristian Filipinos under the Public Land Act

land is situated • must have cultivated at least 1/5 of the land applied for • Grantee does not own more than 12 hectares of land • has continuously occupied and cultivated, either by himself or his predecessors-ininterest, tracts of disposable agricultural public land for at least 30 years prior to March 28,1990 • has paid real property taxes on the property while the same has not been occupied by any person • grant will be limited to 12 hectares only • to have at least 1/5 of the land broken and cultivated within 5 years from the date of the award (public auction) • shall have established actual occupancy, cultivation, and improvement of at least 1/5 of the land until the date of such final payment • for agricultural lands suitable for residential, commercial or industrial purposes, patent is issued only after: 1.) full payment of purchase price, and 2.) completion of the construction of permanent improvements appropriate for purpose for which the land is purchased (must be completed within 18 months from date of award) • does not own a home lot in the municipality in which he resides • in good faith, established his residence on a parcel of land of public domain not needed for public service • not more than 1000 sq. m. • occupant must have constructed his house on the land and actually resided therein • no public auction required • not subject to any restriction against encumbrance or alienation • Secretary of the DILG shall certify that the majority of the non-Christian inhabitants of any given reservation have advanced sufficiently in civilization

Procedure for Registration of Public Lands: (IFEFI) 1. Official issues an instrument of conveyance 2. File the instrument with ROD 3. Instrument is to be entered in books and owner’s duplicate to be issued  Instrument is only a contract between Government and private person and does not take effect as conveyance if unregistered, it is registration which is operative act of conveying land; evidence of authority for ROD to register 4. Fees to be paid by grantee 5. After issuance of certificate of title, land is deemed registered land within the purview of the Torrens system RESTRICTION ON ALIENATION/ ENCUMBRANCE OF LANDS TITLED PURSUANT TO PATENTS: 1. Lands under free patent or homestead patent is prohibited from being alienated/encumbered, except if in favor of the government, within 5 years from and after the issuance of the patent or grant. When lands are conveyed within that period, the owner-vendor, his widow or heirs, may repurchase the same within five years from conveyance, such right cannot be waived. Republic v. Heirs of Felipe Alejaga, Sr., 393 SCRA 361 (2002) 2. Transfer or conveyance of any homestead after 5 years but before 25 years after the issuance of the title without the approval of the DENR Secretary 3. Lands acquired under emancipation patents issued to landless tenants and farmers must not be alienated or encumbered within 10 years from issuance of the title 4. Conveyances and encumbrances made by persons belonging to the “nonChristian tribes” may be made only when the person making the conveyance or encumbrance is able to read and understand the language in which the instrument or deed is written. If illiterate, must be approved by the then Commissioner of Mindanao and Sulu NATURE OF TITLE TO PUBLIC LANDS CONVEYED: 1. Indefeasible And Conclusive The certificate of title becomes indefeasible and incontrovertible upon the expiration of one year from the date of the issuance of the order for the issuance of the patent. As such, the land cannot be the subject of a cadastral proceeding nor decreed to another person

In absence of registration, title to public land is not perfected and therefore not indefeasible In case of 2 titles obtained on same date, the one procured through a decree of registration is superior than patent issued by director of lands 2 titles procured by one person: one from homestead patent, and one from judicial decree and sold to 2 different persons, the one who bought it for value and in good faith and who registered first shall have preference A free patent obtained through fraud or misrepresentation is void. Furthermore, the one-year prescriptive period provided in the Public Land Act does not bar the State from asking for the reversion of property acquired through such means. Once a patent is registered and the corresponding certificate of title issued, the land covered by them ceases to be part of the public domain and becomes private property. indefeasibility of a title does not attach to titles secured by fraud and misrepresentation. Wellsettled is the doctrine that the registration of a patent under the Torrens System does not by itself vest title; it merely confirms the registrant’s already existing one. Verily, registration under the Torrens System is not a mode of acquiring ownership. Therefore, under Section 101 of Commonwealth Act No. 141, the State -- even after the lapse of one year -- may still bring an action for the reversion to the public domain of land that has been fraudulently granted to private individuals. Further, this indefeasibility cannot be a bar to an investigation by the State as to how the title has been acquired, if the purpose of the investigation is to determine whether fraud has in fact been committed in securing the title. Republic v. Heirs of Alejaga, [393 SCRA 361, 2002]

4. REMEDIES REMEDIES AVAILABLE TO AGGRIEVED PARTY IN REGISTRATION PROCEEDINGS Motion to Lift/Set Aside order of default (Rule 9 § 3) By defaulted oppositor Before judgment Fraud, accident, mistake, excusable negligence (FAME) and with valid defense, under oath Motion for New Trial (Rule 37) By aggrieved party Within 15 days from receipt of judgment Grounds (FAMINE): a. FAME

b. b. Newly discovered evidence: Discovered after trial not discovered earlier even with exercise of diligence will probably alter judgment c. Award of excessive damages, or insufficiency of evidence to justify decision, or that the decision is against the law Appeal by aggrieved party Within 15 days from notice of judgment To the CA by ordinary appeal; thence to SC by petition for review Relief from Judgment (Rule 38 § 2) By aggrieved party Within 60 days from knowledge of, and 6 months from, judgment no new trial upon finality of judgment Requisites: a. FAME, with affidavit of merit; in case of extrinsic fraud, state that deprived of hearing or prevented from appealing b. After judgment c. Person deprived of right is party to case (applicant or oppositor) Petition for Review of Registration Decree (§ 32 PD1529) By aggrieved party, including person deprived of opportunity to be heard To be filed in same registration case Within 1 year after entry of decree of registration it will not prosper if transferred to innocent purchaser for value Grounds: a. actual or extrinsic fraud, committed outside trial, preventing petitioner from presenting his side b. fatal infirmity in the decision for want of due process c. lack of jurisdiction of the court Requisites: a. Petitioner has a real and dominical right b. He has been deprived of such right c. Through actual or extrinsic fraud d. The petition is filed within 1 year from the issuance of the decree e. The property has not been passed on to an innocent purchaser for value (IPV) Action for Reconveyance (§96 PD 1529/ §102 Act 496) By aggrieved party, whose land was registered wrongly to another person

Before issuance of decree, or within/after 1 year from entry Available so long as property not yet passed to IPV action in personam if based on fraud, it must be instituted within 4 years from the discovery of the fraud if based on implied trust: it must be filed within 10 years from issuance of OCT, if action brought by registered owner or his children, co-heir, or plaintiff in possession: imprescriptible if based on expressed trust: imprescriptible if based on void contract: imprescriptible Action for Damages By aggrieved party After 1 year from decree and no reconveyance possible due to IPV Within 4 years from discovery of fraud (actual or constructive) Against person responsible for fraud Requisites: a. Person is wrongfully deprived of his land by registration in name of another b. No negligence on his part c. Barred/ precluded from bringing an action (after 1 year from decree) d. Action for compensation has not prescribed Action for Compensation from the Assurance Fund By person deprived of his land by reason of operation of Torrens System, provided: no negligence on his part and barred from recovering land Against person responsible for fraud, and ROD and National Treasurer Compensation: fair market value of land at time of loss. Amount to be recovered not limited to 500,000 which is maintained as standing fund. If fund is not sufficient, National Treasurer is authorized to make up for deficiency from other funds available to Treasury even if not appropriated. Execution first against person responsible for fraud; if insolvent, against national treasury. Thereafter, the Government shall be subrogated to the rights of plaintiff to go against other parties or securities Any court of competent jurisdiction: RTC in city where property lies or resident of plaintiff Requisites: a. The aggrieved party sustained loss or

damage, or is deprived land or any estate or interest therein b. Such loss, damage or deprivation was occasioned by the bringing of the land under the operation of the Torrens system or arose after the original registration of the land c. The loss, damage or deprivation was due to: fraud, or any error, omission, mistake, or misdescription in any certificate of title or in any entry or memorandum in the registration book. (Loss or damage should not be due to breach of trust or mistake in resurvey resulting in expansion of area in certificate of title.) d. The aggrieved party was not negligent. e. He is barred under the provisions of PD 1529 or under the provisions of any law from recovering such land; f. The action has not prescribed: must be instituted within 6 years from the issuance of the certificate of title (If plaintiff is minor, insane or imprisoned, he has additional 2 years after disability is removed to file the action.) Cancellation Suits By aggrieved party or the government In case of double title: earlier title prevails, unless procured by fraud or is jurisdictionally flawed. The later title is void even if IPV derives title therefrom In case of non-registered land: to be filed by the Sol-Gen for cancellation of title or reversion to State) Voiding or cancellation of OCT does not affect derivative TCTs if their holders not given opportunity to be heard and defend their title Annulment of Judgment May only be availed of when the ordinary remedies of new trial, petition for relief, or other appropriate remedies are no longer available through no fault of the petitioner. Linzag v. CA, [291 SCRA 304 , 1998] Reversion Suit The objective is the cancellation of the title and the consequential reversion of the land to the State Grounds: a. Violation of Sections 118, 120, 121 and 122 of the Public Land Act (ex. alienation or sale of homestead executed within the 5 year prohibitory period) b. When the land patented and titled is not capable of registration c. Failure of the grantee to comply with conditions imposed by law to entitle him to a patent or grant d. When area is an expanded area e. When the land is acquired in violation of the Constitution (e.g. land acquired by an

alien) Indefeasibility of title, prescription, laches, and estoppel do not bar reversion suits Quieting of Title (Article 476 of the new civil code) By registered owner or person with an equitable right or interest in the property. Mamadsul v. Moson, [190 SCRA 82, 1990] An ordinary civil case brought to remove clouds on the title to real property or any interest therein, by reason of any contract, record, claim, encumbrance, or proceeding that is void, voidable or unenforceable, and may be prejudicial to said title Quasi-in rem If plaintiff is in possession, imprescriptible; if not in possession, must be brought within 10 years from loss of possession Criminal Action (§ 116 Act 496) The State may criminally prosecute for perjury the party who obtains registration through fraud, such as by stating false assertions in the sworn answer required of applicants in cadastral proceedings. People v. Cainglet, 16 SCRA 749 (1966) MORE ON THE ASSURANCE FUND Upon entry of certificate in name of owner or TCT, ¼ of 1% based on assessed value of land shall be paid to the ROD as a contribution to the assurance fund. In case there is no assessment yet, a sworn declaration of 2 disinterested persons on the value of the land, subject to court approval, is required. This shall be in the custody of the National Treasurer. It shall be invested until the principal plus interest aggregates to 500,000. The excess shall be paid to the Assurance Fund and be included in the annual report of Treasurer to Secretary of Budget. PETITIONS AND MOTIONS AFTER ORIGINAL REGISTRATION: 1. Lost Duplicate Certificate a. Person in interest makes a sworn statement regarding the loss or destruction of the owner’s duplicate certificate of title to be filed with ROD. If statement is false, he can be charged with the complex crime of estafa through falsification of public document b. File a petition for replacement of lost or destroyed owner’s duplicate of OCT/ TCT in court for the issuance of new title c. After notice and hearing, the

court is to order issuance of new title with a memorandum that it is issued in place of lost certificate (duplicate) 2. Adverse claim in registered land Different from lis pendens: Lis pendens has no expiration period but adverse claim is only for 30 days. Lis pendens is a notice that property is in litigation while adverse claim signifies that somebody is claiming better right Recent Ruling: adverse claim can only be removed upon court order, therefore, it is considered to be the more permanent and stable one as compared to lis pendens 3. Petition Seeking Surrender of Duplicate Title When a person in possession of the owner’s duplicate certificate fails to surrender the same to the ROD, a party in interest may file a petition in the RTC to compel the surrender of such duplicate title. Grounds: registration pursuant to voluntary and involuntary conveyances and issuance of a new certificate and for purposes of amendment or alteration After hearing, the court may order issuance of a new certificate and annul the old certificate The new certificate shall contain an annotation regarding the annulment of the old certificate 4. Amendment and Alteration of Certificate of Title A certificate of title entered in a registration book cannot be altered, amended except in direct proceeding in court (summary proceeding). A court order is necessary to alter entries of such registration books. A petition for such purpose may be filed by the (a) registered owner, or (b) other person having an interest in the registered property, or (c) in proper cases, the ROD with the approval of the LRA Administrator Grounds (CRIMENN): 1. New interest that does not appear on the instrument have been created 2. Interest have been terminated or ceased 3. Omission or error was made in entering certificate 4. Name of person on certificate has been changed 5. Registered owner has married or

registered as married and the marriage has terminated 6. Corporation, which owned registered land, has dissolved and has not conveyed the property within 3 years after its dissolution 7. When there is reasonable ground for the amendment or alteration. What corrections are permitted in title (which does not include lands included in original; technical description as long as original decree of registration will not be reopened and rights or interest of persons not impaired; old survey was incorrect; substitution of name of registered owner) a. Alterations which do not impair rights and b. Alterations which impair rights: with consent of all parties c. Alterations to correct obvious mistakes 5. Reconstitution of Original Certificate of Title The restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition, under the custody of ROD

Sources: 1. a. b. c. d.

e.

f.

2.

a. b.

Purpose: to have the same reproduced, after proper proceedings, in the same form they were when the loss or destruction occurred. Heirs of Pedro Pinote v. Dulay, [187 SCRA 12, 1990] The applicant should prove : 1. The loss or the destruction of the title sought to be reconstituted and 2. At the time the said title was lost or destroyed, he was the registered owner thereof a. When reconstituted, the new title has the same validity as old one b. Kinds of Reconstitution: a. Judicial b. Administrative JUDICIAL RECONSTITUTION Process: 1. File a petition with the RTC (In rem proceeding) 2. The court shall cause a NOTICE to be PUBLISHED, POSTED and MAILED. Noncompliance voids the proceeding as such requirements are jurisdictional 3. When the court grants the petition, it shall issue a corresponding order to ROD.

c.

FOR OCT (in this order): Owner’s duplicate of the certificate of title Co-owner’s, mortgagee’s or lessee’s duplicate of said certificate Certified copy of such certificate, previously issued by the ROD Authenticated copy of the decree of registration or patent, as the case may be, which was the basis of the certificate of title, Deed of mortgage, lease, or encumbrance containing description of property covered by the certificate of title and on file with the ROD, or an authenticated copy thereof indicating that its original had been registered Any other document which, in the judgment of the court, is sufficient and proper basis for reconstitution. FOR TCT Same as sources (a), (b), and (c) for reconstitution of OCT Deed of transfer or other document containing description of property covered by TCT and on file with the ROD, or an authenticated copy thereof indicating its original had been registered and pursuant to which the lost or destroyed certificate of title was issued Same as sources (e) and (f) for reconstitution of OCT

ADMINISTRATIVE RECONSTITUTION May be availed of only in case of: 1. Substantial loss or destruction of the original land titles due to fire, flood, or other force majeure as determined by the Administrator of the LRA 2. The number of certificates of title lost or damaged should be at least 10% of the total number in the possession of the Office of the ROD 3. These lost or damaged titles should not be less than 500, and 4. Petitioner must have the duplicate copy of the certificate of title (RA 6732) Sources: 1. Owner’s duplicate of the certificate of title 2. Co-owner’s, mortgagee’s, or lessee’s duplicate of said certificate

Contents a. That the owner’s duplicate of the certificate of title had been lost or destroyed b. That no co-owner’s, mortgagor’s, or lessee’s duplicate had been issued c. The location, area and boundaries of the property d. The nature and description of the buildings or improvements, if any, which do not belong to the owner of the land, and the names and addresses of the owners of such buildings or improvements e. The names and addresses of the (a) occupants or persons in possession of the property, (b) of the owners of the adjoining properties and (c) of all persons who may have any interest in the property f. A detailed description of the encumbrance, if any, affecting the property g. A statement that no deeds or other instruments affecting the property have been presented for registration, or, if there be any, the registration thereof has not been accomplished, as yet NOTE: The law provides for retroactive application thereof to cases 15 years immediately preceding 1989 When the duplicate title of the landowner is lost, the proper petition is not reconstitution of title, but one filed with the court for issuance of new title in lieu of the lost copy PUBLICATION, MAILING AND POSTING IN PETITIONS FOR RECONSTITUTION OF TITLE: Notice shall be PUBLISHED twice in successive issues of the Official Gazette, Must be POSTED on the main entrance of the provincial building and of the municipal building of the municipality or city where the land is situated, and Must be SENT BY REGISTERED MAIL or otherwise, at the expense of the petitioner, to every person named in said notice (actual occupants and adjacent owners). PUBLICATION, POSTING AND SENDING BY MAIL should be done at least 30 days prior to date of

hearing. These notice requirements are mandatory and jurisdictional. Non-compliance voids the proceeding. The publication of the petition ,the service of the notice of hearing to the adjoining owners and actual occupants of the land, as well as posting of the notices are mandatory and jurisdictional requisites… If an order of reconstitution is issued without any previous publication, such order of reconstitution is null and void. Even the publication of the notice of hearing in a newspaper of general circulation like the Manila Daily Bulletin, is not a substantial compliance with the law because Section 13 specifies publication in the OG and does not provide for any alternative medium or manner of publication. MWSS v. Sison, [124 SCRA 394, 1983] Notice must be actually sent or delivered to parties affected by the petition for reconstitution. The order of reconstitution issued without compliance with the said requirement never becomes final - it was null and void. Manila Railroad v. Moya, [215 Phil 593, 1984] Service of notice of the petition for reconstitution filed under RA 26 to the occupants of the property, owners of the adjoining properties, and all persons who may have any interest in the property is NOT REQUIRED if the petition is based on the owner’s duplicate certificate of title or on that of the coowner’s, mortgagee’s, or lessee’s. Sections 9 and 10 requires that 30 days before the hearing (1) a notice be published in 2 successive issues of the OG at the expense of the petitioner, and (2) such notice be posted at the main entrances of the provincial building and of the municipal hall where the property is located. The notice shall state the following: (1) the number of the certificate of title, (2) the name of the registered owner, (3) the names of the interested parties appearing in the reconstituted certificate of title, (4) the location of the property, and (5) the date on which all persons having an interest in the property must appear and file such claims as they may have. Puzon v. Sta. Lucia, [353 SCRA 699, 2001] The failure to meet any of the necessary publication, notice of hearing and mailing requirements did not vest jurisdiction of the case to the court. Thus, the judgment rendered by the RTC regarding the reconstitution of title is void. Republic v. Sanchez [G.R. No. 146081, July 17, 2006] When the owner’s duplicate certificate of title has not been lost, but is in fact in the possession of another person, then the reconstituted certificate

is void, because the court that rendered the decision had no jurisdiction. Consequently, the issuance of TCT No. T-17993 is also void, as it emanated from the void in Zaldivar’s name. The indefeasibility of a Torrens title does not apply where fraud attended the issuance of the title, such as when it was based on void documents. Feliciano v. Zaldivar, [G.R. No. 162593, September 26, 2006] 6. Registration of Transaction evidenced by lost document ROD is forbidden to effect registration of lost or destroyed documents Steps by interested parties: 1. Procure an authenticated copy of lost or destroyed instrument 2. Secure an order from court OFFENSES IN LAND REGISTRATION: 1. Larceny 2. Perjury: false statement under oath 3. Fraudulent procurement of certificate 4. Forgery a. Forging of seal in ROD, name, signature or handwriting of any officer of court of ROD b. Fraudulent stamping or assistance in stamping c. Forging of handwriting, signature of persons authorized to sign d. Use of any document which an impression of the seal of the ROD is forged 5. Fraudulent sale: sale of mortgaged property under the misrepresentation that it is not encumbered; deceitful disposition of property as free from encumbrance

F. SUBSEQUENT REGISTRATION SUBSEQUENT REGISTRATION Where incidental matters after original registration may be brought before the land registration court by way of motion or petition filed by the registered owner or a party in interest. Rules as to the necessity and effects of registration in general 1. Except a will that purports to convey or affect a registered land, the mere execution of the deeds of sale, mortgage, or lease or other voluntary documents serve only 2 purposes: a. as a contract between the parties thereto, and b. as evidence of authority to the ROD

to register such documents 2. It is only the act of registering the instrument in the ROD of the province or city where the land lies which is the operative act that conveys ownership or affects the land insofar as third persons are concerned. 3. The act of registration creates a constructive notice to the whole world of such voluntary or involuntary instrument or court writ or process. VOLUNTARY DEALINGS Refer to deeds, instruments, or documents which are results of the free and voluntary acts of the parties thereto

• Sale • Real property mortgage • Lease • Pacto de retro sale • Extra-judicial settlement • Free patent/homestead • Powers of attorney • Trusts An innocent purchaser for value of registered land becomes the registered owner the moment he presents and files a duly notarized and valid deed of sale and the same is entered in the day book and at the same time he surrenders or presents the owner’s duplicate certificate of title covering the land sold and pays the registration fees Need to present title to record the deed in

INVOLUNTARY DEALINGS Refer to such writ or order or process issued by a court of record affecting registered land which by law should be registered to be effective, and also to such instruments which are not the willful acts of the registered owner and which may have been executed even without his knowledge or against his consent • Attachment • Injunction • Mandamus • Sale on execution of judgment or sales for taxes • Adverse claims • Notice of lis pendens

Entry thereof in the day book of the ROD is sufficient notice to all persons even if the owner’s duplicate certificate of title is not presented to the ROD

No presentation required; annotation in

registry & to make memorandum on title

entry book is sufficient

1. VOLUNTARY DEALINGS Operative Act: registration by owner, if deed is not registered, is binding only between parties General Rule – MIRROR DOCTRINE: Where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may defeat his right thereto. Fule v. Legare,[ 7 SCRA 351, 1963] Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore Even if a decree in a registration proceeding is infected with nullity, still, an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is protected. Cruz v. CA & Suzara, [281 SCRA 491, 1997] Although generally a forged or fraudulent deed is a nullity and conveys no title, however, there are instances where such a fraudulent document may become the root of a valid title. One such instance is where the certificate of title was already transferred from the name of the true owner to the forger, and while it remained that way, the land was subsequently sold to an innocent purchaser. Fule v. Legare, [7 SCRA 351, 1963] Exceptions – (BOB-MILK) 1. Where the purchaser or mortgagee is a bank/financing institution, the general rule that a purchaser or mortgagee of the land is not required to look further than what appears on the face of the title does not apply. Dela Merced v. GSIS, [365 SCRA 1, 2001] 2. The ruling in Fule v. Legare cannot be applied where the owner still holds a valid and existing certificate of title covering the same property because the law protects the lawful holder of a registered title over the transfer of a vendor bereft of any transmissible right. Tomas v. Tomas, [98 SCRA 280, 1980] 3. Purchaser in bad faith. Egeo v. CA, [174 SCRA 484, 1989] 4. Where a person buys land not from the

registered owner but from one whose rights to the land has been merely annotated on the certificate of title. Quiniano v. CA, [39 SCRA 221, 1971] 5. Sufficiently strong indications to impel closer inquiry into the location, boundaries, and condition of the lot. Francisco v. CA, [153 SCRA 330, 1987] Person’s legal interest cannot raise this exception Principle of caveat emptor simply requires the purchaser of real property to be aware of the alleged title of the vendor such that one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. While a buyer of registered land need not go beyond its certificate of title, the buyer is obliged to investigate or inspect the property sold to him when there are circumstances that would put him on guard, such as the presence of occupants other than the registered owner. This does not apply in this case. D’Oro Land v. Claunan,[ 516 SCRA 681, 2007] 6. Purchases land with a certificate of title containing a notice of lis pendens 7. Purchaser had full knowledge of flaws and defects of the title. Bernales v. IAC, [166 SCRA 519, 1988] Process of Registration: (Generally) 1. File the instrument creating or transferring the interest and the certificate of title with ROD, including: a. Owner’s duplicate b. Payment of fees and documentary stamp tax c. Evidence of full payment of real estate tax d. Document of transfer: 1 additional copy for city/provincial assessor 2. ROD shall make a memorandum on the certificate of title, signed by him 3. Issuance of the TCT Registration of Real Property Mortgage 1. Execution of deed in a form sufficient in law (public instrument) 2. Registration with ROD where the land lies a. Present deed of mortgage together with b. Owner’s Duplicate and affidavit of good faith c. Payment of fees d. ROD shall enter upon original certificate of title and upon duplicate a memorandum (date, time of filing, signature, file number assigned to deed) e. ROD to note on the deed the date and time

of filing, and reference to volume and page of the registration book in which it was registered 3. No duplicate need be issued Registration of Chattel Mortgage 1. Execution of document 2. Present the document together with affidavit of good faith 3. Payment of fees 4. ROD enters in Day Book in strict order of their presentation chattel mortgages and other instruments relating thereto (primary process) 5. ROD thereafter enters in a more detailed form the essential contents of the instrument in the Chattel Mortgage Register (complementary process) Effects of Registration 1. Creates a lien that attaches to the property in favor of the mortgagee 2. Constructive notice of his interest in the property to the whole world Effects of Failure to Register *1. Valid between parties but void against 3rd persons *2. If instead of registration, it is delivered, it shall be a pledge and not a chattel mortgage (if no chattel mortgage deed executed) *3. Actual knowledge is same effect as registration An Affidavit of Good Faith states that: 1. Mortgage is made to secure obligation specified 2. That it is a valid and just obligation 3. That it is not entered into for purposes of fraud Effect of Absence of Affidavit of Good Faith *4. Vitiates mortgage as against creditors and subsequent encumbrancers *5. Mortgage is not valid as between parties *6. No need to be in public document Registration of Lease It is the lessee, not the lessor, who is required to initiate the registration. 1.

File with ROD the instrument creating lease together with owner’s duplicate of certificate of title 2. ROD to register by way of memorandum upon certificate of title 3. No new certificate shall be issued

NOTE: When there is prohibition in mortgaged property as regards subsequent conveyances, etc., leasehold cannot be registered in the title thereof Effects of Registration 1. Creates a real right but without prejudice to rights of 3rd persons 2. If it is not registered, it is valid as between parties but not to 3rd persons without notice May Aliens Register Lease? Yes 1. May be granted temporary rights for residential purposes 2. Limit: 25 years, renewable for another 25 years Who Else May Register? Builder in Good Faith Registration of Trust 1. Implied Trust: present a sworn statement claiming interest by reason of an implied trust with description of land, the name of the registered owner and a reference to the number of the certificate of title shall be registered in ROD 2. Express Trust: instrument creating the trust does not prohibit registration Registration of Appointed Trustee by Court *7. Certified copy of decree shall be presented to ROD and surrender duplicate certificate *8. Cancel duplicate & new certificate shall be entered by ROD

2. INVOLUNTARY DEALINGS Transactions affecting land in which cooperation of registered owner is not needed, or even against his will 1. Attachment A writ issued at the institution or during progress of an action commanding the sheriff to attach the property, rights, credits, or effects of the defendant to satisfy demands of the plaintiff Kinds: b. c. d.

Preliminary Garnishment Levy on execution

Registration of Attachment/Other Liens 1. Copy of writ in order to preserve any lien, right, or attachment upon registered land may be filed with ROD where land lies, containing number of certificate of title of land to be affected or description of land 2. ROD to index attachment in names of both plaintiff and defendant or name of person for whom property is held or in whose name stands in the records

3. If

duplicate of certificate of title is not presented: a. ROD shall, within 36 hours, send notice to registered owner by mail stating that there has been registration and request him to produce duplicate so that memorandum may be made b. If the owner neglects or refuses to comply, the ROD shall report the matter to the court c. The court, after notice, shall enter an order to owner to surrender certificate at the time and place named therein 4. Although notice of attachment is not noted in duplicate, notation in book of entry of ROD produces the effect of registration already.

Effects of Registration of Attachment (REEA) 1. Creates real right 2. Has priority over execution sale 3. But between 2 attachments, one that is registered earlier is preferred 4. If it is not registered, actual knowledge is the same as registration 2. Execution Sale To enforce a lien of any description on registered land, any execution or affidavit to enforce such lien shall be filed with ROD where land lies Register in registration book & memorandum upon proper certificate of title as adverse claim or as an encumbrance To determine preferential rights between 2 liens: priority of registration of attachment 3. Tax Sale Sale of land for collection of delinquent taxes and penalties due the government a. In personam (all persons interested shall be notified so that they may be given an opportunity to be heard) b. Notice to be given to delinquent tax payer at his last known address c. Publication of notice must also be made in English, Spanish, and local dialect, posted in a public and conspicuous place in the place where the property is situated and at the main entrance of the provincial building d. Sale cannot affect rights of other lien holders unless given the right to defend their rights: due process must be strictly observed e. Tax lien is superior to an

attachment f.

There is no need to register a tax lien because it is automatically registered once the tax accrues g. But the sale of registered land to foreclose a tax lien needs to be registered Procedure of Registration of Tax Sale 1. Officer’s return shall be submitted to the ROD together with the owner’s duplicate title 2. Register in the registration book 3. Memorandum shall be entered in the certificate as an adverse claim or encumbrance 4. After the period of redemption has expired and no redemption was made (2 years from registration of auction sale), title must be cancelled and a new title will be issued 5. Before the cancellation, notice shall be sent to registered owner, with the directive that he surrender title and show cause why it should not be cancelled 4. Adverse Claim A notice to third persons that someone is claiming an interest on the property or has a better right than the registered owner thereof. The disputed land is subject to the outcome of the dispute. Sajonas v. CA, [258 SCRA 79, 1996] Claim is adverse when: 1. A claimant’s right or interest in the registered land is adverse to the registered owner; 2. Such right arose subsequent to date of original registration 3. No other provision is made in the Decree for the registration of such right or claim (Sec. 70, PD 1529) A mere money claim cannot be registered as an adverse claim. Sanchez v. CA, [69 SCRA 327, 1976] Actual knowledge is equivalent to registration of adverse claim. No 2nd adverse claim based on the same ground may be registered by the same claimant. Formal Requisites of an Adverse Claim for Purposes of Registration (WNR) a. Adverse claimant must state the following in writing: 1. His alleged right or interest 2. How and under whom such alleged right or interest is acquired 3. The description of the land in which the right or interest is claimed 4. The certificate of title number b. Such statement must be signed

c.

and sworn to before a notary public Claimant shall state his residence or place to which all notices may be served upon him

NOTE: Noncompliance with said formal requisites renders such adverse claim non-registrable and ineffective. PERIOD OF EFFECTIVITY; WHEN CANCELLED The adverse claim shall be effective for a period of 30 days from the date of registration and it may be cancelled: a. After the lapse of 30 days, upon the filing by the party-in-interest of a verified petition for such purpose b. Before the lapse of said 30 days, upon the filing by the claimant of a sworn petition withdrawing his adverse claim c. Before the lapse of the 30-day period, when a party-in-interest files a petition in the proper RTC for the cancellation of the adverse claim and, after notice and hearing, the court finds that the claim is invalid. If the court also finds the claim to be frivolous, it may fine the claimant the amount of not less than 1,000 pesos nor more than 5,000 pesos, in its discretion For this purpose, the interested party must file with the proper court a petition for cancellation of adverse claim, and a hearing must also first be conducted. The Register of Deeds cannot on its own automatically cancel the adverse claim. Diaz-Duarte v. Ong, [298 SCRA 388, 1998] An adverse claim may exist concurrently with a subsequent annotation of a notice of lis pendens. Ty Sin Tei v. Dy Piao, [103 Phil 858, 1958] When an adverse claim exists concurrently with a notice of lis pendens, the notice of adverse claim may be validly cancelled after the registration of such notice, since the notice of lis pendens also serves the purpose of the adverse claim. Villaflor v. Juezan, [184 SCRA 315, 1990] NOTICE OF LIS PENDENS It merely creates a contingency and not a lien The purpose of the notice of lis pendens is to constructively advise, or warn all people who deal with the property that they so deal with it at their own risk, and whatever rights they may acquire in the property in any voluntary transaction are subject to the results of the action, and may well be inferior and subordinate to those which may be finally determined and

laid down therein. Heirs of Marasigan v. IAC, [152 SCRA 253, 1987] When Notice of Lis Pendeds is Proper: (RQCPO) 1. To recover possession of real estate 2. To quiet title thereto 3. To remove clouds upon the title thereof 4. For partition, and 5. Any other proceeding of any kind in court directly affecting the title to the land or the use of occupation thereof or the building thereon. Effect of Registration: 1. Impossibility of alienating the property in dispute during the pendency of the suit 2. It may still be alienated but the purchaser is subject to the final outcome of pending suit 3. ROD is duty-bound to carry over notice of lis pendens on all new titles to be issued Cancellation of Lis Pendens: (M-NUVD)  Before final judgment, the court may order the cancellation: 1. After showing that notice is only for purpose of molesting an adverse party 2. When it is shown that it is not necessary to protect the right of the party who caused the registration thereof 3. When the consequences of the trial are unnecessarily delaying the determination of the case to the prejudice of the other party 4. ROD may also cancel by verified petition of party who caused such registration 5. Deemed cancelled when certificate issued by clerk of court stating manner of disposal of proceeding is registered When Lis Pendedns has no Application: (P2LAR) 1. Preliminary attachment 2. Proceedings for the probate of wills 3. Levies on execution 4. Proceedings for administration of estate of deceased persons and 5. Proceedings in which the only object is the recovery of a money judgment Other Parties Required to Register: 1. Assignee in Involuntary Proceeding for Insolvency It is the duty of the officer serving the notice to file a copy of such notice to ROD where the property of the debtor is located Assignee elected or appointed by court shall be entitled to entry of a new certificate of registered land upon presentment of copy of assignment with

the bankrupt’s duplicate certificate of title New certificate shall not state that it is entered into by him as assignee or trustee in insolvency proceedings Judgment/Order Vacating Insolvency Proceedings a. order shall also be registered b. Surrender title issued in name of assignee & debtor shall be entitled to entry of new certificate 2. Government in Eminent Domain a. Copy of judgment filed in ROD which states description of property, certificate number, interest expropriated, nature of public use b. Memorandum shall be made or new certificate of title shall be issued c. The government does not seek registration of the land in its own name d. The objective of the proceeding is the adjudication of title to the lands involved in the proceeding

G. DEALINGS WITH UNREGISTERED LAND SYSTEM OF REGISTRATION FOR UNREGISTERED LANDS a. System of registration for unregistered land under the Torrens System (Act 3344) b. Before, it only covered voluntary dealings. Now, it includes involuntary dealings c. Effect: if prospective, it binds 3rd persons after registration but yields to better rights of 3rd person prior to registration (limited effect to 3rd parties) d. Reason: no strict investigation involved e. Subsequent dealings are also valid if recorded f. ROD keeps day book and a register, and an index system is also kept g. Procedure: 1. Presentment of instrument dealing in unregistered land 2. If found in order, register 3. If found defective, then registration is refused writing his reason for refusal

FILING of APPLICATION Survey plan approved by Bureau of Lands Muniments of title

SETTING OF DATE of Initial Hearing by court order Set 45-90 days from order

Transmittal of documents and evidence to LRA

ANNEX A: ORDINARY LAND REGISTRATION PROCEEDINGS

NOTICE of Initial Hearing Publication - 1x in OG 1x in newspaper Mailing - to named parties w/in (7) days from OG Posting - (14) days at least before initial hearing

INITIAL HEARING JUDGMENT

Appeal

TRIAL same order as ordinary civil proceedings

Order of Default vs. all who did not oppose

(15) days

FINALITY OF JUDGMENT Decree of finality Instruction to LRA to issue decree of registration

Entry of DECREE OF REGISTRATION in LRA Copy sent to Registrar of Deeds

OCT Transcription of the decree and issuance of the OCT

Filing of OPPOSITION By any party claiming interest On/ before hearing OR time allowed by court

CADASTRAL SURVEY

President orders Dir. Of Lands to cause cadastral survey

NOTICE of Survey to

persons appearing to claim interest Publication – 1x in OG Mailing Posting

Geodetic Engineer/ employees of Bureau of Lands inform occupants/ persons claiming

STATE FILES PETITION

Instituted by Dir. of Lands (represented by Sol-Gen) Containing: technical description survey plan

interest Persons claiming interest cooperate w/ Engineer re: boundaries

HEARING

JUDGMENT

ANSWER to Petition

Same as ordinary land reg. proceedings

Any claimant files answer (partakes of an action to recover) on/ before hearing OR time allowed by court

NOTICE of Initial Hearing to parties appearing to have interest and adjoining owners Publication – 2x in OG (successive issues) Mailing Posting

DECREE

MOTION TO DISMISS If land covered prior OCT pursuant to land patent if barred by res judicata

Appeal Court may issue writ of possession or order demolition

ANNEX B: CADASTRAL REGISTRATION PROCEEDINGS

O. TORTS



================================= TOPICS UNDER THE SYLLABUS I. Principles A. Abuse of right; elements B. Unjust enrichment C. Liability without fault D. Acts contrary to law E. Acts contrary to morals II. Classification of Torts A. According to manner of commission: intentional, negligent and strict liability B. According to scope: general or specific ================================= I. PRINCIPLES Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (1902a) ELEMENTS OF QUASI DELICT/TORTS: 1. Act or omission 2. Damage or injury is caused to another 3. Fault or negligence is present 4. There is no pre-existing contractual relations between the parties 5. Causal connection between damage done and act/omission NEGLIGENCE The omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of the persons, time and place. (Art. 1173, NCC) KINDS OF NEGLIGENCE 1. Quasi delict (Art. 2176 NCC) 2. Criminal negligence (Art. 356 RPC) 3. Contractual negligence (NCC provisions on contracts particularly Arts. 1170 to 1174) ABUSE OF RIGHTS (ART 19) 1. There is a legal right or duty 2. The right or duty is exercised in bad faith 3. For the sole intent of prejudicing or injuring another  Common element under Articles 19 and 21: the act must be intentional

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

An action can only prosper when damage, material or otherwise, was suffered by the plaintiff. An action based on Articles 19-21 will be dismissed if the plaintiff merely seeks “recognition” A defendant may likewise be guilty of tort under Articles 19-21 even if he acted in good faith. Here, liability to pay moral damages may not be imposed on the defendant who acted in good faith.

GENERAL SANCTION (ART. 20)  For all other provisions of law which do not especially provide their own sanction  In the exercise of his legal right or duty  Willfully or negligently causes damage to another  Article 20 does not distinguish, the act may be done either willfully or negligently CONTRA BONUS MORES (ART 21) 1. There is an act which is legal 2. But which is contrary to morals, good custom, public order or public policy 3. And it is done with intent to injure Damages are recoverable even if no positive law has been violated UNJUST ENRICHMENT ELEMENTS: a. That a person is benefited without a valid basis or justification, and b. That such benefit is derived at another’s expense or damage. CONCEPT OF VICARIOUS LIABILITY A person who himself is not guilty of negligence is made liable for the conduct of another

II.

CLASSIFICATION OF TORTS

COMISSION OF TORTS 1. INTENTIONAL (DELICT): Every person criminally liable for a felony is also civilly liable. NOTE: QUASI DELICT includes acts done through FAULT. 2. NEGLIGENT (QIUASI DELICT): Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties.

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3. STRICT LIABILITY: Persons Expressly Made Liable By Law Even without Fault ACCORDING TO SCOPE GENERAL TORTS: Covered by Art. 2176 on Quasi-Delict SPECIFIC TORTS: These are those found in specific provisions of law, including the Chapter on Human Relations, Common Carriers, etc.

================================= TOPICS UNDER THE SYLLABUS III. The Tortfeasor A. The direct tortfeasor (1) Natural persons (2) Juridical persons B. Persons made responsible for others (1) In General (a) Quasi-delicts under Article 2180, how interpreted – Family Code, Arts. 218-219, 221 (b) Indirect liability for intentional acts (c) Presumption of negligence on persons indirectly responsible (d) Nature of liability; joint or solidary? (2) In Particular (a) Parents (b) Guardian (c) Owners and managers of establishments and enterprises (d) Employers (e) State (f) Teachers and heads of establishments of arts and trades C. Joint tortfeasors (Art. 2194, Civil Code)

================================= III. TORTFEASOR TORTFEASOR - Whoever by act or omission causes damage to another, there being no fault or negligence is obliged to pay for the damage done (art 2176). CORPORATE TORTFEASOR A corporation is civilly liable in the same manner as natural persons for torts, because "generally

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speaking, the rules governing the liability of a principal or master for a tort committed by an agent or servant are the same whether the principal or master be a natural person or a corporation, and whether the servant or agent be a natural or artificial person. All of the authorities agree that a principal or master is liable for every tort which he expressly directs or authorizes, and this is just as true of a corporation as of a natural person, A corporation is liable, therefore, whenever a tortious act is committed by an officer or agent under express direction or authority from the stockholders or members acting as a body, or, generally, from the directors as the governing body. PERSONS VICARIOUSLY LIABLE – the obligation imposed in 2176 is demandable not only for one’s own act or omission but also for those persons for whom one is responsible (art 2180). VICARIOUS LIABILITY – A person who himself is not guilty of negligence is made liable for the conduct of another NOTE: Vicarious liability is not governed by the doctrine of respondeat superior. Employers or parents are made liable not only because of the negligent or wrongful act of the person for whom they are responsible but also because of their own negligence (i.e. liability is imposed on the employer because he failed to exercise due diligence in the selection and supervision of his employees) Whenever an employee’s negligence causes damage or injury to another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees. To avoid liability for a quasi-delict committed by its employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee EXCEPTION: The doctrine of respondeat superior is applicable in: a. Liability of employers under Article 103 of the RPC b. Liability of a partnership for the tort committed by a partner WHO ARE LIABLE:

THE

PERSONS

VICARIOUSLY

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1. PARENTS The father, and in case of his death or incapacity, the mother are responsible for damage caused by minor children who live in their company. Father and Mother shall jointly exercise parental authority over common children. In case of disagreement, father's decision shall prevail (Art. 211). NOTE: Persons liable for the act of minors other than parents: a. Those exercising substitute parental authority b. Surviving grandparents c. Oldest sibling, over 21 years old unless unfit or unqualified d. Child’s actual custodian, over 21 years old unless unfit or disqualified 2. GUARDIANS Guardians are liable for damages caused by the minor or incapacitated persons who are under their authority and who live in their company. 3. OWNERS & MANAGERS OF ESTABLISHMENT/ ENTERPRISE - Owners & managers of establishment or enterprise are responsible for damages caused by their employees who are: o in the service of the branches in which the latter are employed OR o in occasion of their function 4. EMPLOYERS Employers shall be liable for damages caused by their: o employees and o household helpers who are acting w/in the scope of their assigned task even though the former are not engaged in any business or industry (unlike in RPC – subsidiary liability of employer attaches in case of insolvency of employer for as long as the employer is engaged in business/industry) DEFENSES AVAILABLE TO EMPLOYERS: o exercise of due diligence ins election and supervision of employees o act/omission was made outside working hours and in violation of company rules 5. STATE - The state is responsible when it acts through a special agent, but not when the same is caused by

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an official to whom task done properly pertains in which case Art 2176 is applicable 6. SCHOOL ADMINISTRATOR, TEACHER - Teachers or heads of establishments of arts & trades shall be liable for damages caused by their pupils, students & apprentices as long as they remain in their custody even if they are beyond the age of majority NOTE: Art. 2180 applies to all including academic institution per weight of jurisprudence based on obiter of Justice JBL Reyes in the Exconde case. Exconde v. Capuno, [G.R. No. L-10134, June 29, 1957] TEACHER’S LIABILITY: The basis of the teacher’s liability is the principle of loco parentis (stand in place of parents). So long as the students remain in the protective and supervisory capacity of teachers, the latter shall be deemed to have custody over the students. It’s not necessary for the students to board and live with the teachers so that there can be custody over them. SCHOOL’S LIABILITY: GENERAL RULE: The School itself is NOT liable as party defendants EXCEPTIONS: Art. 218 of Family Code – schools are expressly made liable  School is liable as an employer, as in the case where the tortfeasor is a teacher, an employee of the school. St. Francis High vs. CA, [194 SCRA 341]  School has a contract with the student, and thus, if the tortfeasor is a stranger, the school is liable for the breach of the contract. PSBA cs. CA, [205 SCRA 729]

FAMILY CODE PROVISIONS: a. Family Code, Art 218 - The school, its administration & teachers or the individual, entity or institution engaged in child care shall have special parental authority & responsibility over the minor child under their supervision, instruction or custody (authority & responsibility shall apply to all authorized activities whether inside or outside the premises or the school, entity or institution). b. Family Code, Art 219 - Those given the authority & responsibility shall be solidarily

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& principally liable for damages caused by act/omission of the unemancipated minor; parents, judicial guardian or person exercising substitute parental authority over said minor shall be subsidiarily liable. JOINT TORTFEASORS Joint tortfeasors are all the persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit. The responsibility of two or more persons who are liable for quasi-delict is solidary SPECIAL RULES 1. CHILDREN The action of the child will not necessarily be judged according to the standard of an adult. But if the minor is mature enough to understand and appreciate the nature and consequences of his actions, he will be considered negligent if he fails to exercise due care and precaution in the commission of such acts. NOTE: Applying the provisions of the RPC, Judge Sangco takes the view that a child who is 9 or below is conclusively presumed to be incapable of negligence. On the other hand, if the child is above 9 years but below 15, there is a disputable presumption of absence or negligence.  Absence of negligence does not necessarily mean absence of liability. A child under 9 years can still be subsidiarily liable with his property (Art. 100 RPC) 

Absence of negligence of the child may not excuse the parents from their vicarious liability under Art. 2180 NCC or Art. 221 FC.

2. PHYSICAL DISABILITY GENERAL RULE: a weak or accident prone person must come up to the standard of a reasonable man, otherwise, he will be considered as negligent EXCEPTION: If the defect amounts to a real disability, the standard of conduct is that of a reasonable person under like disability. 3. EXPERTS AND PROFESSIONALS They should exhibit the case and skill of one who is ordinarily skilled in the particular field that he is in; the rule regarding experts is applicable not only to professionals who have undergone formal education. (Fernando v. CA)

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4. NATURE OF ACTIVITY There are activities which by nature impose duties to exercise a higher degree of diligence (ex. Banks, Common Carriers) 5. INTOXICATION GENERAL RULE: Mere intoxication is not negligence nor establishes want of ordinary care. But it may be considered to prove negligence. EXCEPTION: Under Art. 2185 of the NCC it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation 6. INSANITY An insane person is exempt from liability. However, by express provision of law, there may be civil liability even when the perpetrator is held to be exempt from criminal liability. The insanity of a person does not excuse him or his guardian from liability based on quasi delict (Art. 2180 and 2182 NCC)

================================= TOPICS UNDER THE SYLLABUS V. Proximate Cause A. Concept (1) Definition (2) Test (3) Distinguished from immediate cause (4) Distinguished from intervening cause (5) Distinguished from remote and concurrent B. Cause in fact (1) Substantial factor test (2) Concurrent causes C. Legal cause (1) Natural and probable consequences (2) Foreseeability D. Efficient intervening cause E. Cause vs. Condition F. Last clear chance ================================= V. PROXIMATE CAUSE A. CONCEPT OF PROXIMATE CAUSE PROXIMATE CAUSE is defined as that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause,

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produces the injury, and without which the result would not have occurred. More comprehensively, proximate cause is that cause acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom.

NECESSARY LINK

Vda. de Bataclan v. Medina, [G.R. No. L10126, October 22, 1957] It may be that ordinarily, when a passenger bus overturns, and pins down a passenger, merely causing him physical injuries, if through some event, unexpected and extraordinary, the overturned bus is set on fire, say, by lightning, or if some highwaymen after looting the vehicle sets it on fire, and the passenger is burned to death, one might still contend that the proximate cause of his death was the fire and not the overturning of the vehicle. But in the present case and under the circumstances obtaining in the same, we do not hesitate to hold that the proximate cause of the death of Bataclan was the overturning of the bus, this for the reason that when the vehicle turned not only on its side but completely on its back, the leaking of the gasoline from the tank was not unnatural or unexpected; that the coming of the men with aBrinas lightedv.torch wasofinthe response to the call People Philippines, G.R.for Lhelp, made not only25, by 1983. the passengers, but 30309, November most probably, cause by the driver and is the The proximate of the injury not conductor and cause that because it necessarilythemselves, the immediate of, or the was very dark (about 2:30 theinjury. morning), cause nearest in time to, in the It is the only rescuers had to carry light with them; when the causes area independent of and each coming as the they did from area with where other that nearest is toaberural charged the lanterns flashlights available, disaster. and So long as therewere is a not natural, direct they to use a torch, the most handy and and had continuous sequence between the available; was more negligent and act what the injury (sic) natural that itthan can that said rescuers should approach reasonably be said that innocently but for the act the the overturned to extendsuch the negligent aid and injury could notvehicle have occurred, effect rescue requested them. and In act is the proximate cause of from the injury, other words, the coming therefore of the men whoever is responsible is with liablethe for torch was to be expected and was natural damages resulting therefrom. One who sequence the overturning of the bus, the negligentlyof creates a dangerous condition trapping of someliability of its passengers’ bus, the cannot escape for the natural and trapping some of its thereof, passengers and the probable of consequences although the call help or an act of God for which act for of aoutside third person, he is not responsible intervenes to precipitate the loss. NOTE: If plaintiff's negligence is only contributory, he is considered partly responsible only. Plaintiff may still recover from defendant but the award may be reduced by the courts in proportion to his own negligence IMMEDIATE CAUSE The cause nearest in time to, the injury. INTERVENING CAUSE

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Phoenix Construction v. IAC, [G.R. L65295, March 10, 1987] If the intervening cause is one which in ordinary human experience is reasonably to be anticipated or one which the defendant has reason to anticipate under the particular circumstances, the defendant may be negligence among other reasons, because of failure to guard against it; or the defendant may be negligent only for that reason. Thus one who sets a fire may be required to foresee that an ordinary, usual and customary wind arising later wig spread it beyond the defendant's own property, and therefore to take precautions to prevent that event. The person who leaves the combustible or explosive material exposed in a public place may foresee the risk of fire from some independent source. ... In all of these cases there is an intervening cause combining with the defendant's conduct to produce the result and in each case the defendant's negligence consists in failure to protect the plaintiff against that very risk. REMOTE CAUSE Manila Electric Co. v. Remoquillo, [G.R. No. L-8828, May 18, 1956] A prior and remote cause cannot be made the be of an action if such remote cause did nothing more than furnish the condition or give rise to the occasion by which the injury was made possible, if there intervened between such prior or remote cause and the injury a distinct, successive, unrelated, and efficient cause of the injury, even though such injury would not have happened but for such condition or occasion. If no danger existed in the condition except because of the independent cause, such condition was not the proximate cause. And if an independent negligent act or defective condition sets into operation the instances, which result in injury because of the prior defective condition, such subsequent act or condition is the proximate cause. CONCURRENT CAUSE Where several causes producing an injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons although under the circumstances of the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not the same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the

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negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury.

B. CAUSE IN FACT ‘BUT FOR’ TEST The (but for) test requires a plaintiff to establish that the act complained of probably caused the subsequent disability. NELSON V. FIBREBOARD CORPORATION, [912 F.2d 469] The test applied to determine whether negligent conduct was the efficient, or proximate cause of the injury or loss suffered by the claimant is whether such conduct is a cause without which the injury would not have taken place (which test is frequently referred to as the "sine qua non rule"), or is the efficient cause which set in motion the chain of circumstances leading to the injury. {Sangco, Philippine Law on Torts and Damages, 1994) SUBSTANTIAL FACTOR It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being liable. Philippine Rabbit Bus Lines v. IAC, [G.R. 66102, August 30, 1990] CONCURRENT CAUSES If one suffers damage as the proximate result of the negligence of two others, and the damage would not have occurred but for the negligence of each of such parties, both are liable to the person so injured. MENNE v. CELOTEX CORPORATION, [861 F.2d 1453]

C. LEGAL CAUSE TEST OF FORSEEABILITY Where the particular harm was reasonably foreseeable at the time of the defendant’s misconduct, his act or omission is the legal cause thereof. Foreseeability is the fundamental test of the law of negligence. To be negligent, the defendant must have acted or failed to act in such a way that an ordinary reasonable man would have realized that certain interests of certain persons were unreasonably subjected to a general but definite class of risk which made the actor’s conduct negligent, it is obviously the consequence for the actor must be held legally responsible. Otherwise, the legal duty is entirely defeated. Accordingly, the generalization may

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be formulated that all particular consequences, that is, consequences which occur in a manner which was reasonably foreseeable by the defendant at the time of his misconduct are legally caused by his breach of duty. TEST OF NATURAL AND PROBABLE CAUSES A natural consequence of an act is the consequence which ordinarily follows it. A probable consequence is one that is more likely to follow than fail to follow its supposed cause but it is need one be one which necessarily follow such cause. (Sangco, Philippine Law on Torts and Damages, 1994) HINDSIGHT TEST A party guilty of negligence or omission is responsible for all the consequences which a prudent and experienced party, fully acquainted with all the circumstances which in fact exist, whether they could have been ascertained by reasonable diligence, or not, would have thought at the time of the negligent act as reasonably possible to follow, if they had been suggested to his mind. ORBIT TEST If the foreseeable risk to plaintiff created a duty which the defendant breached, liability is imposed for any resulting injury within the orbit or scope of such injury, it is not the unusual nature of the act resulting in injury that is the test of foreseeability, but whether the result of the act is within the ambit of the hazards covered by the duty imposed upon defendant.

D. EFFICIENT INTERVENING CAUSE

An independent intervening cause as one which is so distinct as to sever the connection of cause and effect between the negligent act and the injury BARTELS v. CITY of WILLISTON, [629 F.2d 509] If an independent cause intervenes, which is of itself sufficient to produce the result, it is regarded as proximate cause, and the originator of the first cause is relieved from liability MICHAEL v. U.S., [338 F.2d 219]

E. CAUSE/CONDITION

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Phoenix Construction v. IAC, G.R. L-65295, [March 10, 1987] Many courts have sought to distinguish between the active "cause" of the harm and the existing "conditions" upon which that cause operated. If the defendant has created only a passive static condition, which made the damage possible, the defendant is said not to be liable. But so far as the fact of causation is concerned, in the sense of necessary antecedents which have played an important part in producing the result it is quite impossible to distinguish between active forces and passive situations, particularly since, as is invariably the case, the latter are the result of other active forces which have gone before. The defendant who spills gasoline about the premises creates a "condition," but the act may be culpable because of the danger of fire. When a spark ignites the gasoline, the condition has done quite as much to bring about the fire as the spark; and since that is the very risk, which the defendant has created, the defendant will not escape responsibility. Even the lapse of a considerable time during which the "condition" remains static will not necessarily affect liability; one who digs a trench in the highway may still be liable to another who fans into it a month afterward. "Cause" and "condition" still find occasional mention in the decisions; but the distinction is now almost entirely discredited. So far as it has any validity at all, it must refer to the type of case where the forces set in operation by the defendant have come to rest in a position of apparent safety, and some new force intervenes. But even in such cases, it is not the distinction between "cause" and "condition" which is important but the nature of the risk and the character of the intervening cause.

E. LAST CLEAR CHANCE Canlas v. Court of Appeals, [G.R. 112160, February 28, 2000] In essence, the doctrine of last clear chance is to the effect that where both parties are negligent but the negligent act of one is appreciably later in point of time than that of the other, or where it is impossible to determine whose fault or negligence brought about the occurrence of the incident, the one who had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with the consequences arising therefrom.

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Stated differently, the rule is that the antecedent negligence of a person does not preclude recovery of damages caused by the supervening negligence of the latter, who had the last fair chance to prevent the impending harm by the exercise of due diligence.

================================= TOPICS UNDER THE SYLLABUS VI. Legal Injury A. Concept B. Elements of right C. Violation of right or legal injury D. Classes of injury (1) Injury to persons (2) Injury to property (3) Injury to relations ================================= VI. LEGAL INJURY DAMAGE – the detriment, injury or loss which is occasioned by reason of fault of another in the property or person DAMAGES – the pecuniary compensation, recompense or satisfaction for an injury sustained, or as otherwise expressed, the pecuniary consequences which the law imposes for the breach of some duty or the violation of some rights DAMNUM ABSQUE INJURIA or Damage without Injury – a person may have suffered physical hurt or injury, but for as long as no legal injury or wrong has been done, there is no liability INJURY DAMAGE DAMAGES Legal Loss, hurt or The invasion of a harm which recompense legal right results from or the injury compensatio n awarded for the damage suffered

================================= TOPICS UNDER THE SYLLABUS VII. Intentional Torts A. General (1) Concept (2) Classes (a) Interference with persons and property

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(b) Interference with relations B. Interference with rights to persons and property (1) Intentional physical harms (a) General (b) Violation of persons security, physical injuries (Art. 33, Civil Code) (c) False imprisonment (illegal detention) (d) Trespass to land (e) Interference with personal property (2) Intentional non-physical harms (a) General (b) Violation of personal dignity (c) Infliction of emotional distress (d) Violation of privacy (e) Disturbance of peace of mind (f) Malicious prosecution (g) Defamation (h) Fraud or misrepresentation (formerly deceit) (i) Seduction (j) Unjust dismissal C. Interference with relations (1) General (a) Concept (b) Kinds (2) Family relations (a) Alienation of affection (b) Loss of consortium (c) Criminal conversation (adultery) (3) Social relations (a) Meddling with or disturbing family relations (b) Intriguing to cause another to be alienated from his friends (4) Economic relations (a) Interference with contractual relations (b) Unfair competition (5) Political relations (a) Violation of right to suffrage (NCC, Art. 32) (b) Violation of other political rights (freedom of speech, press, assembly and petition, etc.) (6) Defenses

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(a) Absence of element (b) Privilege (c) Prescription (d) Waiver (e) Force majeure ================================= VI. INTERNATIONAL TORTS 1. BREACH OF A PROMISE TO MARRY GENERAL RULE: Breach of a promise to marry by itself is not actionable. EXCEPTION: In cases where there is another act independent of the breach of a promise to marry which gives rise to liability a. Cases where there was financial damage b. Social humiliation caused to one of the parties c. Where there was moral seduction d. If the breach was done in a manner that is clearly contrary to good morals 

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Moral seduction connotes the idea of deceit, enticement, superior power or abuse of confidence on the part of the seducer to which the woman has yielded for which the seducer can be held liable for damages. Gashem Shookat Baksh v. CA, [G.R. No. 97336, February 19, 1993] Sexual intercourse is not by itself a basis for recovery but damages could be awarded if the sexual intercourse is not a product of voluntariness or mutual desire. Constantino v. Mendez, [G.R. NO. 57227, May 14, 1992]

2. SEDUCTION WITHOUT BREACH OF PROMISE TO MARRY  Seduction by itself, is also an act contrary to morals, good customs and public policy  The defendant is liable if he employed deceit, enticement, superior power or abuse of confidence in successfully having sexual intercourse with another even if he satisfied his lust without promising to marry the offended party  It may not even matter that the plaintiff and the defendant are of the same gender 3. SEXUAL ASSAULT  Defendant is liable for all forms of sexual assault

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4. DESERTION BY A SPOUSE  A spouse has the legal obligation to live with his/her spouse. If a spouse does not perform his/her duty to the other, he may be liable for damages for such omission because the same is contrary to law, morals, good customs and public policy. 5.

TRESPASSES AND DEPRIVATION OF PROPERTY 2 KINDS: A. TRESPASS TO AND/OR DEPRIVATION OF REAL PROPERTY  Liability for damages under the RPC and Art. 451 of the Civil Code requires intent or bad faith  A builder in good faith who acted negligently may be held liable under Art. 2176 NCC  Art. 448 of the Civil Code in relation to Art. 456 does not permit action for damages where the builder, planter or sower acted in good faith. The landowner is limited to the options given to him under article 448 B. TRESPASS TO AND/OR DEPRIVATION OF PRIVATE PROPERTY  In tort, trespass extends to all cases where a person is deprived of his personal property even in the absence of criminal liability  Examples: theft, robbery  It may cover cases where the defendant was deprived of personal property for the purpose of obtaining possession of real property. The defendant who was landlord, was held liable because he deprived the plaintiffs, his tenants of water in order to force them to vacate the lot they were cultivating. Magbanua v. IAC, [137 SCRA 352]  The right to disconnect and deprive the customer, who unreasonably fails to pay his bills of electricity should be exercised in accordance with the law and rules. Example: If a company disconnects the electricity service without prior notice as required by the rules, the company commits a tort under Art. 21 NCC, Manila Electric Co. v. CA, [G.R. No. 132539, July 11, 2001]

6. ABORTION AND WRONGFUL DEATH

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

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Damages may be recovered by both spouses if: a.The abortion was cause through the physician’s negligence or b. Done intentionally without their consent NOTE: A doctor who performs an illegal abortion is criminally liable under Art. 259 RPC Husband of a woman who voluntarily procured her abortion may recover damages from the physician who cause the same on account of distress and mental anguish attendant to the loss of the unborn child and the disappointment of his parental expectation. [Geluz v. CA, 2 SCRA 80]

7. ILLEGAL DISMISSAL  The right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised and its effects.  If the dismissal was done anti-socially and oppressively, the employer should be deemed to have violated Art. 1701 of the NCC (which prohibits acts of oppression by either capital or labor against the other) and Art. 21  An employer may be held liable for damages if the manner of dismissing is contrary to morals good customs and public policy. 8. MALICIOUS PROSECUTION  An action for damages brought by one against another whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously and without probable cause, after termination of such prosecution, suit or proceeding in favor of the defendant therein.  The action which is terminated should be one begun in malice, without probable cause to believe that the charges can be sustained  STATUTORY BASIS: Art. 19-21, 2, 32, 33, 35, 2217, 2219(8) NCC ELEMENTS: a. The fact of the prosecution and the further fact that the defendant was himself the prosecutor; and that the action was finally terminated with an acquittal

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b. That in bringing the action, the prosecutor acted without probable cause c. The prosecutor was actuated or impelled by legal malice NOTE: Presence of probable cause signifies absence of malice.  Absence of malice signifies good faith on the part of the defendant. Good faith may even be based on mistake of law. Acquittal presupposes that criminal information is filed in court and final judgment rendering dismissing the case. Nevertheless, prior acquittal may include dismissal by the prosecutor after preliminary investigation. Globe Mackay and Radio Corp v. CA, [G.R. No. 81262, August 25, 1989] 9. PUBLIC HUMILIATION  Such acts also constitute an offense under Art. 359, RPC (Slander by Deed)  A person can be held liable for damages for slapping another in public. Patricio v. Hon. Oscar Leviste, [G.R. No. L51832, April 26, 1989]  A defendant may likewise be guilty of a tort even if he acted in good faith if the action has caused humiliation to another. Grand Union Supermarket v. Espino, [G.R. No. L-48250, December 28, 1979] 10. UNJUST ENRICHMENT ELEMENTS: a. That a person is benefited without a valid basis or justification, and b. That such benefit is derived at another’s expense or damage. 11. OSTENTATIOUS DISPLAY OF WEALTH  Thoughtless extravagance for pleasure or display during a period of public want or emergency 12. VIOLATION OF RIGHT OF PRIVACY AND FAMILY RELATIONS  The following acts though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: a. Prying into the privacy of another's residence b. Meddling with or disturbing the private life or family relations of another c. Intriguing to cause another to be alienated from his friends d. Vexing or humiliating another on account of his religious beliefs,

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lowly station in life. Place of birth, physical defect, or other personal condition 13. DERELICTION OF OFFICIAL DUTY OF PUBLIC OFFICERS  May be brought by any person suffering from material or moral loss because a public servant refuses or neglects, without just cause to perform his official duty (art 27). REQUISITES: a. Defendant is a public officer charged with the performance of a duty in favor of the plaintiff b. 3perform such duty (ministerial) c. Plaintiff sustained material or moral loss as consequence of such non-performance d. The amount of such damages, if material 14. ECONOMIC RELATIONS A. UNFAIR COMPETITION Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit. Machination or other unjust, oppressive or highhanded method (Art 28) B. INTERFERENCE One becomes liable in an action for damages for a nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules. 7 ELEMENTS OF TORT INTERFERENCE : (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of contract; and (3) interference of the third person is without legal justification or excuse. So Ping Bun v. CA, [G.R. 120554, September 21, 1999] 15. MALICIOUS PROSECUTION ELEMENTS

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a. That the defendant was himself the prosecutor/ he instigated its commencement b. That it finally terminates in his acquittal c. That in bringing it the prosecutor acted without probable cause, and d. That he was actuated by legal malice, that is, by improper and sinister motive 16. VIOLATION OF RIGHTS AND LIBERTIES OF ANOTHER PERSON  Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the rights and liberties (under Article 32 of the NCC) of another person shall be liable to the latter for damages. 17. NUISANCE ELEMENTS a. Any act, omission, establishment, condition of property, or anything else b. Which:  Injures or endangers the health or safety to others, or  Annoys or offends the senses, or  Shocks, defies, or disregards decency or morality, or  Obstructs or interferes with the free passage of any public highway or streets, or any body of water, or  Hinders or impairs use of property KINDS  Nuisance Per Se - denounced as nuisance by common law or by statute  Nuisance Per Accidens - those which are in their nature not nuisances, but may become so by reason of their locality, surroundings, or the manner in which they may be conducted, managed, etc.  Public - affects a community or neighborhood or any considerable number of persons  Private - one that is not included in the foregoing definition; affect an individual or a limited number of individuals only REMEDIES AGAINST PUBLIC NUISANCES  Prosecution under the RPC or any local ordinance  Civil action  Abatement, without judicial proceeding

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REMEDIES AGAINST PRIVATE NUISANCES 1. Civil Action 2. Abatement, without judicial proceedings WHO MAY AVAIL OF REMEDIES  Public officers  Private persons - if nuisance is specially injurious to himself; the ff. must be made: a. Demand be first made upon owner or possessor of the property to abate nuisance b. That such demand has been rejected c. That the abatement be approved by the district health officer and executed with the assistance of local police d. That the value of destruction does not exceed P3,000 DOCTRINE OF ATTRACTIVE NUISANCE – Cases within the general rule that one is liable for the injury resulting to another from failure to exercise the degree of care commensurate with the circumstances the attractiveness of the premises or of the dangerous instrumentality to children of tender years is to be considered as an implied invitation, which takes the children who accepted it out of the category of a trespasser and puts them in the category of invitees, towards whom the owner of the premises or instrumentality owes the duty of ordinary..

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================================= TOPICS UNDER THE SYLLABUS VII. Negligence A. Concept B. Good father of a family or reasonably prudent man C. Standard of care (1) Civil Code, Art. 1173 (2) Emergency Rule D. Unreasonable risk of harm E. Evidence F. Presumption of negligence (1) Legal provisions (2) Res ipsa loquitur G. Defenses (1) Complete (a) Absence of element (b) Accident or fortuitous event (c) Damnum absque injuria (d) Authority of law (e) Assumption of risk (f) Last clear chance (g) Prescription (Civil Code, Arts. 1144, 1146, and 1150) (h) Waiver (i) Double recovery (Civil Code, Art. 2177) ================================= VII. NEGLIGENCE ELEMENTS OF QUASI DELICT/TORTS: 1. Act or omission 2. Damage or injury is caused to another 3. Fault or negligence is present 4. There is no pre-existing contractual relations between the parties 5. Causal connection between damage done and act/omission

3. Contractual negligence (NCC provisions on contracts particularly Arts. 1170 to 1174)

NOTE:  Failure of the court to make any pronouncement, favorable or unfavorable, as to the civil liability of the accused amounts to a reservation of the right to have the civil liability litigated and determined in a separate action. The rules nowhere provide that if the court fails to determine the civil liability it becomes no longer enforceable. Jarantilla v. CA, [171 SCRA 42]  A quasi-delict is a separate legal institution under the Civil Code and is entirely apart and independent from a delict or crime – a distinction exists between the civil liability arising from a crime and the responsibility for quasi-delicts or culpa extracontractual. Castillo v. CA, [176 SCRA 591] TESTS OF NEGLIGENCE  Did the defendant in doing the alleged negligent act use the reasonable care and caution which an ordinary prudent person would have used in the same situation?  If not, then he is guilty of negligence  Could a prudent man, in the case under consideration, foresee harm as a result of the course pursued?  If so, it as the duty of the actor to take precautions to guard against harm

NEGLIGENCE - The omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of the persons, time and place KINDS OF NEGLIGENCE 1. Quasi delict (Art. 2176 NCC) 2. Criminal negligence (Art. 356 RPC)

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DISTINGUISHED FROM OTHER SOURCES OF OBLIGATION:

Vinculum Juris Proof Needed Defense available Pre-existing contract Burden of proof

CONTRACT Contract Preponderance of evidence Exercise of extraordinary diligence (in contract of carriage), Force Majeure There is a pre-existing contract Contractual party. Prove the ff.: 1. existence of a contract 2. breach

CONTRACT Vinculum Juris

Contract

Proof Needed

Preponderance of evidence Exercise of extraordinary diligence (in contract of carriage), Force Majeure There is a pre-existing contract Contractual party. Prove the ff.: 1. existence of a contract 2. breach Solidary

Defense available

Pre-existing contract Burden of proof

Liability of Employer Reservation Requirement

Effect of judgment of acquittal in a criminal case involving same act/omission

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Civil aspect of the quasi-delict is impliedly instituted with criminal action, but under 2000 Crimpro Rules it is independent and separate Not a bar to recover civil damages EXCEPT when judgment pronounces that the negligence from which damage arise is

QUASI DELICT Negligent act/ omission (culpa, imprudence) Preponderance of evidence Exercise of diligence of a good father of a family in the selection and supervision of employees No pre-existing contract Victim. Prove the ff.: 1.damage 2. negligence 3.causal connection between negligence and damage done

DELICT Act / omission committed by means of dolo (deliberate, malicious, in bad faith) Proof beyond reasonable doubt

No pre-existing contract Prosecution. Accused is presumed innocent until the contrary is proved.

Subsidiary Civil aspect is Impliedly instituted with criminal action

Not a bar to recover civil damages

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non-existent

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CIRCUMSTANCES TO CONSIDER 1. Time 2. Place 3. Personal circumstances of the Actors GOOD FATHER OF A FAMILY (pater familias)  The only standard of conduct used in the Philippines (Art. 1173 NCC)

Morales, [G.R. 169467, February 25, 2010] EVIDENCE 1. NEGLIGENCE - plaintiff must prove negligence of defendant Exceptions: a. In cases where negligence is presumed or imputed by law this is only rebuttable/presumption juris tantum b. Principle of res ipsa loquitur (the thing speaks for itself) - grounded on the difficulty in proving thru competent evidence, public policy considerations



A reasonable man is deemed to have knowledge of the facts that a man should be expected to know based on ordinary human experience.

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The law presumes or requires a man to possess ordinary capacity to avoid harming his neighbors unless a clear and manifest incapacity is shown and the law does not hold him liable for unintentional injury unless, possessing such capacity, he might and ought to have foreseen the danger. Corliss v. Manila Railroad

2. DAMAGE / INJURY

The law fixes no arbitrary age at which a minor can be said to have the necessary capacity to understand and appreciate the nature and consequences of his acts. Taylor v. Meralco, [16 Phil 8]

NOTE: If plaintiff's negligence is only contributory, he is considered partly responsible only. Plaintiff may still recover from defendant but the award may be reduced by the courts in proportion to his own negligence

EMERGENCY RULE Under this rule, one who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the danger in which he finds himself is brought about by his own negligence DELSAN Transport v. C&A Construction, [G.R. 156034, October 1, 2003]

Proximate Cause - the adequate and efficient cause which in the natural order of events and under the particular circumstances surrounding the case, would naturally produce the event

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UNREASONABLE RISK OF HARM Indeed, a higher degree of care is required of someone who has in his possession or under his control an instrumentality extremely dangerous in character, such as dangerous weapons or substances. Such person in possession or control of dangerous instrumentalities has the duty to take exceptional precautions to prevent any injury being done thereby. Unlike the ordinary affairs of life or business which involve little or no risk, a business dealing with dangerous weapons requires the exercise of a higher degree of care. Pacis v.

3. CAUSAL CONNECTION BETWEEN NEGLIGENCE AND DAMAGE – Defendant’s negligence must be the proximate cause of the injury sustained by the plaintiff to enable plaintiff to recover. Thus, if plaintiff’s own conduct is the cause of the injury there can be no recovery.

A person claiming damages for the negligence of another has the burden of proving the existence of such fault or negligence causative thereof. The facts constitutive of negligence must be affirmatively established by competent evidence. Whosoever relies on negligence for his cause of action has the burden in the first instance of proving the existence of the same if contested, otherwise his action must fail. PLDT v. CA, G.R. L-57079, [September 29, 1989] PRESUMPTION OF NEGLIGENCE 1. DRIVER PRESUMED NEGLIGENT BY LAW IF: a. He had been found guilty or reckless driving or violating traffic regulations at least twice within the next preceding two months. b. at the time of the mishap, he was violating any traffic regulation.

2. COMMON CARRIERS Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In case of loss of the goods, the common carrier is presumed to have been at fault or to have acted negligently. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently 3. DEFENDANT IN POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES, SUCH AS FIREARMS AND POISON There is prima facie presumption of negligence on the part of defendant if death or injury results from such possession EXCEPTION: The possession or use thereof is indispensable in his occupation or business 4. RES IPSA LOQUITOR (The thing speaks for itself) - Grounded on the difficulty in proving thru competent evidence, public policy considerations. Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. Layugan v. IAC, [G.R. 73998, November 14, 1998]

G. DEFENSES TO QUASI DELICT 1. CONTRIBUTORY NEGLIGENCE - the plaintiff was also negligent together with the defendant; to constitute a defense, proximate cause of injury/damage must be the negligence of defendant 2. CONCURRENT NEGLIGENCE – if both parties are equally negligent the courts will leave them as they are; there can be no recovery 3. DOCTRINE OF LAST CLEAR CHANCE even though a person’s own acts may have placed him in a position of peril and an injury results, the injured is entitled to recover if the

defendant thru the exercise of reasonable care and prudence might have avoided injurious consequences to the plaintiff. This defense is available only in an action by the driver or owner of one vehicle against the driver or owner of the other vehicle involved. REQUISITES: a. Plaintiff was in a position of danger by his own negligence b. Defendant knew of such position of the plaintiff c. Defendant had the last clear chance to avoid the accident by exercise of ordinary care but failed to exercise such last clear chance and d. Accident occurred as proximate cause of such failure  Who may invoke: Plaintiff NOTE: o o o

The doctrine is inapplicable to Joint tortfeasors Defendants concurrently negligent As against 3rd persons

4. EMERGENCY RULE - "one who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the emergency in which he finds himself is brought about by his own negligence."  An individual will nevertheless be subject to liability if the emergency was brought about by his own negligence. Valenzuela v. CA, [253 SCRA 303] NOTE: Applicable only to situations that are sudden and unexpected such as to deprive actor of all opportunity for deliberation (absence of foreseeability); the action shall still be judged by the standard of the ordinary prudent man FACTORS TO CONSIDER: a. Gravity of the Harm to be avoided b. Alternative courses of action - If the alternative presented to the actor is too costly, the harm that may result may still

be considered unforeseeable to a reasonable man c. Social Value and Utility of the Action The act which subjects an innocent person to an unnecessary risk is a negligent act if the risk outweighs the advantage accruing to the actor and even to the innocent person himself. d. Person exposed to the risk - A higher degree of diligence is required if the person involved is a child. 5. DOCTRINE OF ASSUMPTION OF RISK – Volenti non fit injuria / That to which a person assents is not deemed in law an injury. REQUISITES: a. Intentional exposure to a known danger b. One who voluntarily assumed the risk of an injury from a known danger cannot recover in an action for negligence or an injury is incurred c. Plaintiff’s acceptance of risk (by law/contract/nature of obligation) has erased defendant’s duty so that his negligence is not a legal wrong d. Applies to all known danger 6. DUE DILIGENCE - diligence required by law/contract/ depends on circumstances of persons, places, things 7. FORTUITOUS EVENT - no person shall be responsible for those events which cannot be foreseen, or which though foreseen were inevitable REQUISITES: a. The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will; b. It must be impossible to foresee the event which constitutes caso fortuito or if it can be foreseen it must be impossible to avoid c. The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner d. The obligor must be free from any participation in the aggravation of the injury resulting to the creditor.

GENERAL RULE: Fortuitous Event is a complete defense and a person is not liable if the cause of the damage is a fortuitous event. EXCEPTION: It is merely a partial defense and the courts may mitigate the damages if the loss would have resulted in any event [Art. 2215(4) NCC] NOTE: A person may still be liable for a fortuitous event if such person made an ASSUMPTION OF RISK. 8. DAMNUM ABSQUE INJURIA – a principle that involves damage without injury, therefore no liability is incurred; there is no legal injury 9. LAW – specific provision of law EXAMPLES  The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property (Art. 429 NCC)  Article 11 of the Revised Penal Code (Act 3815): i. Self-Defense ii. Defense of Property iii. Obedience to Lawful Order iv. Lawful Exercise of a right or duty 10. EXERCISE OF THE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF EMPLOYEES 11. PRESCRIPTION a. Injury to right of plaintiff/quasi delict - 4 years b. Defamation - 1 year c. When no specific provision, must be counted from the day they may be brought

12. PROSCRIPTION AGAINST DOUBLE RECOVERY - Responsibility for fault or negligence under quasi-delict is entirely separate and distinct from civil action arising from the RPC but plaintiff cannot recover damages twice for same act or omission of the defendant 13. WAIVER/ CONSENT 14. ACT OR OMISSION IS NOT THE PROXIMATE CAUSE OF THE DAMAGE 15. OTHER GROUNDS – Motion To Dismiss: a. Lack of jurisdiction over person of defendant b. Lack of jurisdiction over subject matter c. Venue improperly laid d. Plaintiff has no legal capacity to sue e. There is another action pending between same parties for same cause f. Cause of action is barred by prior judgment /statute of limitations g. Pleading asserting claim states no cause of action h. Claim set forth in pleading has been paid, waived, abandoned, extinguished i. Claim is unenforceable under the provision of statute of fraud j. Condition precedent for filing claim has not been complied with

=============================== TOPICS UNDER THE SYLLABUS IX. Special Liability in Particular Activities A. General (1) Concept B. Products Liability (1) Manufacturers or processors a. Elements b. Consumer Act [RA 7394, Sec. 92-107, (Ch. 1)] C. Nuisance (Civil Code, Arts. 694707) (1) Nuisance per se and nuisance per accidence (2) Public nuisance and private nuisance (3) Attractive nuisance D. Violation of constitutional rights

(1) Violation of civil liberties E. Violation of rights committed by public officers F. Provinces, cities and municipalities G. Owner of motor vehicle H. Proprietor of building or structure or thing I. Head of family X. Strict Liability a. Animals (1) Possessor and user of an animal b. Nuisance (supra) (1) Classes: Per se or per accidents; Public or Private (2) Easement against nuisance c. Products Liability (supra) (1) Consumer Act =============================== IX. SPECIAL LIABILITY STRICT LIABILITY: PERSONS EXPRESSLY MADE LIABLE BY LAW EVEN WITHOUT FAULT 1. POSSESSOR OF AN ANIMAL GENERAL RULE: The possessor of an animal or whoever may make use of the same is responsible for the damage which it may cause EXCEPTIONS: a. Force majeure b. Fault of the injured/damaged person 2. OWNER OF MOTOR VEHICLE  In motor vehicle mishap, the owner is solidarily liable with the driver if: a. he was in the vehicle, and b. could have, through due diligence, prevented the misfortune  A Driver is Presumed Negligent by law If: c. He had been found guilty or reckless driving or violating traffic regulations at least twice within the next preceding two months. d. at the time of the mishap, he was violating any traffic regulation. NOTE: Every owner of a motor vehicle shall file with the proper government office a bond executed by a government-controlled corporation or office, to answer for damages to third persons. 3. MANUFACTURERS & PROCESSORS OF FOODSTUFFS, DRINKS, TOILET ARTICLES & SIMILAR GOODS

 They are liable for death and injuries caused by any harmful substances used although no contractual relation exists between them and the consumers CONSUMER ACT R.A. 7394 NOTE ON STIPULATIONS: The stipulation in a contract of a clause preventing, exonerating or reducing the obligation to indemnify for damages effected, as provided for in this and in the preceding Articles, is hereby prohibited, if there is more than one person responsible for the cause of the damage, they shall be jointly liable for the redress established in the pertinent provisions of this Act. However, if the damage is caused by a component or part incorporated in the product or service, its manufacturer, builder or importer and the person who incorporated the component or part are jointly liable. SUMMARY OF LIABILITIES: 1. Any Filipino or foreign manufacturer, producer, and any importer, shall be liable for redress, independently of fault, design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well as for the insufficient or inadequate information on the use and hazards thereof. NOTE: The manufacturer, builder, producer or importer shall not be held liable when it evidences: a) that it did not place the product on the market; b) that although it did place the product on the market such product has no defect; c) that the consumer or a third party is solely at fault. NOTE: This liability applies to tradesman/seller when the persons named above cannot be, or are not identified, or when the tradesman did not preserve the goods adequately. 2. The service supplier is liable for redress, independently of fault, for damages caused to consumers by defects relating to the rendering of the services, as well as for insufficient or inadequate information on the fruition and hazards thereof. 3. The suppliers of durable or nondurable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they

are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts. 4. Suppliers are jointly liable for imperfections in the quantity of the product when, in due regard for variations inherent thereto, their net content is less than that indicated on the container, packaging, labeling or advertisement. 5. The service supplier is liable for any quality imperfections that render the services improper for consumption or decrease their value, and for those resulting from inconsistency with the information contained in the offer or advertisement. 6. When services are provided for the repair of any product, the supplier shall be considered implicitly bound to use adequate, new, original replacement parts, or those that maintain the manufacturer's technical specifications unless, otherwise authorized, as regards to the latter by the consumer. NOTE: The supplier's ignorance of the quality imperfections due to inadequacy of the products and services does not exempt him from any liability. 4. PROVINCES, CITIES & MUNICIPALITIES  Shall be liable for damages for the death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision 5. PROPRIETOR OF BUILDING OR STRUCTURE  Responsible for the damages resulting from any of the ff.:

1.

Total or partial collapse of building or structure if due to lack of necessary repairs

2.

Explosion of machinery which has not been taken cared of with due diligence, and the inflammation of explosive substances which have not been kept in a safe and adequate place

3.

By excessive smoke, which may be harmful to persons or property

4.

By falling of trees situated at or near highways or lanes, if not caused by force majeure

5.

By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place

6. ENGINEER, ARCHITECT OR CONTRACTOR  If damage of building or structure is caused by defect in construction which happens within 15 years from construction; action must be brought within 10 years from collapse 7. HEAD OF FAMILY THAT LIVES IN A BUILDING OR PART THEREOF  Liable for damages caused by things thrown or falling from the same 8.

NUISANCES ELEMENTS a. Any act, omission, establishment, condition of property, or anything else b. Which:  Injures or endangers the health or safety to others, or  Annoys or offends the senses, or  Shocks, defies, or disregards decency or morality, or  Obstructs or interferes with the free passage of any public highway or streets, or any body of water, or  Hinders or impairs use of property KINDS  Nuisance Per Se - denounced as nuisance by common law or by statute  Nuisance Per Accidens - those which are in their nature not nuisances, but may become so by reason of their locality, surroundings, or the manner in which they may be conducted, managed, etc.  Public affects a community or neighborhood or any considerable number of persons  Private - one that is not included in the foregoing definition; affect an individual or a limited number of individuals only REMEDIES AGAINST PUBLIC NUISANCES

 Prosecution under the RPC or any local ordinance  Civil action  Abatement, without judicial proceeding REMEDIES AGAINST PRIVATE NUISANCES  Civil Action  Abatement, without judicial proceedings WHO MAY AVAIL OF REMEDIES  Public officers  Private persons - if nuisance is specially injurious to himself; the ff. must be made: a. Demand be first made upon owner or possessor of the property to abate nuisance b. That such demand has been rejected c. That the abatement be approved by the district health officer and executed with the assistance of local police d. That the value of destruction does not exceed P3,000 DOCTRINE OF ATTRACTIVE NUISANCE – Cases within the general rule that one is liable for the injury resulting to another from failure to exercise the degree of care commensurate with the circumstances the attractiveness of the premises or of the dangerous instrumentality to children of tender years is to be considered as an implied invitation, which takes the children who accepted it out of the category of a trespasser and puts them in the category of invitees, towards whom the owner of the premises or instrumentality owes the duty of ordinary. 9. PUBLIC OFFICERS Art. 32 Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) Freedom of religion; (2) Freedom of speech; (3) Freedom to write for the press or to maintain a periodical publication; (4) Freedom from arbitrary or illegal detention; (5) Freedom of suffrage; (6) The right against deprivation of property without due process of law;

(7) The right to a just compensation when private property is taken for public use; (8) The right to the equal protection of the laws; (9) The right to be secure in one's person, house, papers, and effects against unreasonable searches and seizures; (10) The liberty of abode and of changing the same; (11) The privacy of communication and correspondence; (12) The right to become a member of associations or societies for purposes not contrary to law; (13) The right to take part in a peaceable assembly to petition the Government for redress of grievances; (14) The right to be a free from involuntary servitude in any form; (15) The right of the accused against excessive bail; (16) The right of the accused to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witness in his behalf; (17) Freedom from being compelled to be a witness against one's self, or from being forced to confess guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness; (18) Freedom from excessive fines, or cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; and (19) Freedom of access to the courts. Art. 34 When a member of a city or municipal police force refuses or fails to render aid or protection to any person in case of danger to life or property, such peace officer shall be primarily liable for damages, and the city or municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be independent of any criminal proceedings, and a preponderance of evidence shall suffice to support such action.

=============================== TOPICS UNDER THE SYLLABUS DAMAGES-BOOK II

I. General Considerations A. Classification (1) Under Art. 2197 of the Civil Code (2) According to purpose (3) According to manner of determination (4) Special and ordinary II. Actual and Compensatory Damages A. Concept B. Requisites (1) Alleged and proved with certainty (2) Not speculative C. Component Elements (1) Value of loss; unrealized profit (2) Attorney’s fees and expenses of litigation (3) Interest D. Extent or scope of actual damages (1) In contracts and quasi-contracts (2) In crimes and quasi-delicts =============================== X. DAMAGES A. GENERALLY DAMAGES MAY BE: (MENTAL) 1. Actual or compensatory; 2. Moral; 3. Nominal; 4. Temperate or moderate; 5. Liquidated; or 6. Exemplary or corrective. NOTE:  A complaint for damages is a personal action 



Proof of pecuniary loss is necessary to successfully recover actual damages from the defendant. No proof of pecuniary loss is necessary in case of moral, nominal, temperate, liquidated or exemplary damages. The assessment of damages, except liquidated ones, is left to the discretion of the court according to the circumstances of each case. B. ACTUAL  Adequate compensation for the value of loss suffered or profits which obligee failed to obtain EXCEPTIONS: 1. Law 2. Stipulation

KINDS OF ACTUAL OR COMPENSATORY DAMAGES a. General Damage natural, necessary and logical consequences of a particular wrongful act which result in injury; need not be specifically pleaded because the law itself implies or presumes that they resulted from the wrongful act b. Special Damages - damages which are the natural, but not the necessary and inevitable result of the wrongful act. (i.e., attorney’s fees)

VALUE OF LOSS SUFFERED  Destruction of things, fines or penalties, medical & hospital bills, attorney's fees, interests, cost of litigation

REQUIREMENTS: i. Need to be pleaded ii. Pray for the relief that claim for loss be granted iii. Prove the loss

Formula: American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality [2/3 x 80 – (age at the time of death)] x monthly earnings x 12 = GROSS EARNINGS GE - Approximate Expenses (50% of GE) = Net Earnings

WHEN LOSS NEED NOT BE PROVED: a. Liquidated damages previously agreed upon; liquidated damages take the place of actual damages except when additional damages incurred b. If damages other than actual are sought c. Loss is presumed (ex: loss if a child or spouse) d. Forfeiture of bonds in favor of the government for the purpose of promoting public interest or policy (ex: bond for temporary stay of alien) CONTRACTS AND QUASI-CONTRACTS a. Damages in case of Good Faith i. Natural and probable consequences of breach of obligations ii. Parties have foreseen or could have reasonably foreseen at the time the obligation was created b. Damages in case of Bad Faith i. It is sufficient that damages may be reasonably attributed to the nonperformance of the obligation. CRIMES AND QUASI-CRIMES a. Defendant is liable for all damages that are natural and probable consequences of the act complained of; b. Not necessary that damages have been foreseen or could have been reasonably foreseen.

LOSS OF EARNING CAPACITY:  Variables to consider are: a. life expectancy b. net income/earnings – total of the earnings less expenses necessary for the creation of such earnings and less living or other incidental expenses

LOSS OF PROFITS (Lucrum Cessans)  May be determined by considering the average profit for the preceding years multiplied by the number of years during which the business was affected by the wrongful act or breach ATTORNEY’S FEES  They are actual damages. It is due to the plaintiff and not to counsel  Plaintiff must allege the basis of his claim for attorney’s fees in the complaint; the basis should by one of the cases under Art. 2208 WHEN ARE ATTORNEY’S FEES RECOVERABLE:  In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: a. When exemplary damages are awarded; b. When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; c. In criminal cases of malicious prosecution against the plaintiff; d. In case of a clearly unfounded civil action or proceeding against the plaintiff; e. Where the defendant acted in gross and evident bad faith in refusing to

satisfy the plaintiff's plainly valid, just and demandable claim; f. In actions for legal support; g. In actions for the recovery of wages of household helpers, laborers and skilled workers; h. In actions for indemnity under workmen's compensation and employer's liability laws; i. In a separate civil action to recover civil liability arising from a crime; j. When at least double judicial costs are awarded; WHEN IS ACTUAL DAMAGES MITIGATED: a. Contributory negligence b. In contracts. Quasi-contracts and quasidelict i. Plaintiff has contravened the terms of contract ii. Plaintiff derived some benefit as result of contract iii. In case where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel iv. That the loss would have resulted in any event v. That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury

=============================== TOPICS UNDER THE SYLLABUS III. Moral Damages A. Concept (Arts. 2217-2218) B. When recoverable (Arts. 22192220) (1) In seduction, abduction, rape and other lascivious acts (2) In acts referred to in Arts. 21, 26, 27, 28, 29, 32, 34 & 35, Civil Code (3) In cases of malicious prosecution IV. Nominal Damages A. Concept B. When awarded V. Temperate or Moderate Damages A. Concept B. When awarded VI. Liquidated Damages A. Concept (Civil Code, Art. 2226) B. Rules governing in case of breach

of contract VII. Exemplary or Corrective Damages A. Concept (Civil Code, Art. 2229) B. When recovered (1) In criminal offenses (Civil Code, Art. 2230) (2) In quasi-delicts (Civil Code, Art. 2231) (3) In contracts and quasi-contracts (Civil Code, Art. 2232) C. Requisites (1) Arts. 2233, 2234 =============================== C. MORAL MORAL DAMAGES Include: (PBMF-MWSS) a. Physical suffering b. Besmirched reputation c. Mental anguish d. Fright e. Moral shock f. Wounded feelings g. Social humiliation h. Serious anxiety i. Sentimental value of real or personal property may be considered in adjudicating moral damages j. The social and economic/financial standing of the offender and the offended party should be taken into consideration in the computation of moral damages k. Moral damages is awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of defendant's culpable action and not intended to enrich a complainant at the expense of defendant IN WHAT CASES MAY MORAL DAMAGES BE RECOVERED (Enumeration Not Exclusive): a. Criminal offense resulting in physical injuries b. Quasi-delicts causing physical injuries c. Seduction, abduction, rape or other acts of lasciviousness d. Adultery and concubinage e. Illegal or arbitrary detention or arrest f. Illegal search g. Libel, slander or other form of defamation h. Malicious prosecution

i.

Acts mentioned in art 309 of the RPC relating to disrespect of the dead and interference with funeral j. Acts and actions referred to in arts 21, 26, 27, 28, 29, 30, 32, 34 and 35 k. The parents of the female seduced, abducted, raped, or abused l. Spouse, descendants, ascendants and brother and sisters for acts mentioned in art 309 m. Art 2220 - in cases of willful injury to property or breaches of contract where defendant acted fraudulently or in bad faith GENERAL RULE: The plaintiff must allege and prove the factual basis for moral damages and its causal relation to the defendant’s act EXCEPTION: Moral damages may be awarded to the victim in criminal proceedings without the need for pleading proof of the basis hereof. D. NOMINAL DAMAGES  Adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him ELEMENTS: a. Plaintiff has a right b. Right of plaintiff is violated c. Purpose is not to identify but vindicate or recognize right violated NOTE:  The Law presumes damage although actual or compensatory damages are not proven  They are damages in the name only and are allowed simply in recognition of a technical injury based on a violation of a legal right  Nominal damages cannot coexist with actual or compensatory damages E. TEMPERATE OR MODERATE DAMAGES  More than nominal but less than compensatory where some pecuniary loss has been suffered but its amount can't be proved with certainty due to the nature of the case  In cases where the resulting injury might be continuing and possible future complications directly arising from the injury, while certain to

occur are difficult to predict, temperate damages can and should be awarded on top of actual or compensatory damages; in such cases there is no incompatibility between actual and temperate damages. REQUISITES: a. Some pecuniary loss b. Loss is incapable of pecuniary estimation c. Must be reasonable F. LIQUIDATED DAMAGES  Those agreed upon by the parties to a contract, to be paid in case of breach thereof WHEN LIQUIDATED DAMAGES MAY EQUITABLY REDUCED: a. Iniquitous or unconscionable b. Partial or irregular performance

BE

G. EXEMPLARY

EXEMPLARY OR CORRECTIVE DAMAGE  Imposed by way example or correction for the public good, in addition to the moral, temperate, liquidated to compensatory damages NOTE: Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. WHEN IMPOSABLE: Criminal offenses – exemplary damages as a part of the civil liability may be imposed when the crime was committed with one or more aggravating circumstances. Such damages are separate from fines and shall be paid to the offended party. Quasi-delicts – exemplary damages may be granted if the defendant acted with gross negligence. Contracts and quasi-contracts – the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. WHAT MUST BE PROVED: a. While the amount of exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court

may consider the question of whether or not exemplary damages should be awarded. b. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages.

=============================== TOPICS UNDER THE SYLLABUS XIII. Damages in Case of Death A. In crimes and quasi-delicts causing death (1) In death caused by breach of conduct by a common crime IX. Graduation of Damages A. Duty of injured party (1) Art. 2203 B. Rules (1) In crimes (2) In quasi-delict (Civil Code, Art. 2214) (3) In contracts, quasi-contracts and quasi-delicts (Civil Code, Art. 2215) (4) Liquidated damages (Civil Code, Art. 2227) (5) Compromise X. Miscellaneous Rules A. Damages that cannot co-exists (1) Nominal with other damages (Art. 2223) (2) Actual and Liquidated (Art. 2226) B. Damages that must co-exist (1) Exemplary with moral, temperate, liquidated or compensatory C. Damages that must stand alone (1) Nominal Damages (Art. 2223) =============================== H. DAMAGES IN CASE OF DEATH BY CRIMES AND QUASI-DELICT

1.

Medical & Hospital Bills

2. Damages for death

i. Minimum amount: P50,000 ii. Loss of earning capacity unless deceased had permanent physical disability not caused by defendant so that deceased had no earning capacity at time of death iii. Support, if deceased was obliged to give support (for period not more than 5 years) iv. Moral damages IN CASES OF COMMON CARRIER Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. (See Preceding heading) I .GRADUATION DUTY OF INJURED PARTY. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. RULES 1. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. 2. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. 3. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the following instances: (1) That the plaintiff himself has contravened the terms of the contract; (2) That the plaintiff has derived some benefit as a result of the contract; (3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel; (4) That the loss would have resulted in any event; (5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury.

4. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. 5. There may be a compromise upon the civil liability arising from an offense; but such compromise shall not extinguish the public action for the imposition of the legal penalty. J. MISCELLANEOUS RULES Damages that cannot co-exists 1. Actual and Liquidated damages 2. Nominal with Actual, Moral or Temperate damages Damages that must co-exist 1. Exemplary with moral, temperate, liquidated or compensatory damages a. One must prove that he is entitled to moral, temperate or compensatory damages before the court may consider if the award for exemplary damages. b. No proof of loss is necessary in order that liquidated damages may be recovered. However, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were if not for the stipulation for liquidated damages