BOC 2015 Civil Law Reviewer (Final)

TABLE OF CONTENTS FORMAL REQUISITES .............................. 13 1. CEREMONY ........................................... 13 2. AUTHORITY OF THE SOLEMNIZING OFFICER .................................................... 14 3. LICENSE REQUIRED ............................. 15 4. MARRIAGE CERTIFICATE .................... 16 D. LAW GOVERNING VALIDITY OF MARRIAGES ABROAD ................................... 16 E. COMMON-LAW MARRIAGES .................... 17 F. VOID AND VOIDABLE MARRIAGES .......... 18 F. 1. VOID MARRIAGES ............................. 19 ARTICLE 40 (NO JUDICIAL DECLARATION OF NULLITY).............................................. 19 BOTH SPOUSES ENTERING A SUBSEQUENT MARRIAGE AFTER PRESUMPTIVE DEATH, WHO ACTED IN BAD FAITH ............................................... 20 ARTICLE 53 (NON-RECORDING): ........... 23 F. 2. VOIDABLE OR ANNULLABLE MARRIAGE ............................................... 26 G. THE LAW ON SEPARATION OF THE SPOUSES ........................................................ 31

PERSONS & FAMILY RELATIONS. 1 I. EFFECT AND APPLICATION OF LAWS .....2 A. WHEN LAWS TAKE EFFECT ........................2 B. IGNORANCE OF THE LAW ..........................2 C. RETROACTIVITY OF LAWS ..........................2 D. MANDATORY OR PROHIBITORY LAWS ....2 E. WAIVER OF RIGHTS .................................... 3 F. REPEAL OF LAWS ........................................ 3 G. JUDICIAL DECISIONS .................................. 3 L. BINDING EFFECT ........................................ 4

II. PERSONS AND PERSONALITY ................5 A. CONCEPT OF PERSON AND PERSONALITY ..........................................................................5 B. COMMENCEMENT AND TERMINATION OF PERSONALITY ..................................................5 C. DEATH ..........................................................6 D. JURIDICAL PERSONS.................................. 7 E. RESTRICTIONS ON CIVIL CAPACITY .......... 7 E. 1. PRESUMPTION OF CAPACITY ........... 7 E. 2. RESTRICTIONS ON CAPACITY TO ACT .............................................................. 7 I. MINORITY ............................................... 8 II. INSANITY ............................................... 8 III. DEAF-MUTISM ..................................... 9 IV. PRODIGALITY ....................................... 9 INCOMPETENT INCLUDES PRODIGALS (RULES OF COURT RULE 92, SEC 2) ....... 9 V. CIVIL INTERDICTION ............................. 9 VI. FAMILY RELATIONS............................. 9 VII. ALIENAGE ........................................... 10 VIII. ABSENCE ........................................... 10 F. DOMICILE AND RESIDENCE OF PERSON . 11

V. RIGHTS AND OBLIGATIONS OF SPOUSES.....................................................38 A. LIVE TOGETHER ....................................... 38 B. FAMILY DOMICILE .................................... 38 C. SUPPORT .................................................. 38 D. MANAGEMENT OF FAMILY LIFE ............. 38 E. EFFECT OF NEGLECT OF DUTY ............... 38 F. EXERCISE OF PROFESSION ..................... 38

VI. PROPERTY RELATIONS OF SPOUSES. 39 A. MARRIAGE SETTLEMENTS ...................... 39 B. DONATIONS BY REASON OF MARRIAGE39

VII. FAMILY RELATIONS ............................. 57

III. FAMILY CODE.......................................... 11

THE FAMILY AS AN INSTITUTION .................57 EFFECTS OF FAMILY RELATIONSHIP ON LEGAL DISPUTES ...........................................57 THE FAMILY HOME ........................................57 A. WHAT CONSTITUTES THE FAMILY HOME? ......................................................57 B. WHO MAY CONSTITUTE THE FAMILY HOME? ..................................................... 58 C. WHEN IS IT DEEMED CONSTITUTED?58 D. BENEFICIARIES ................................... 58 E. WHEN TERMINATED ........................... 59 F. WHEN IT MAY BE SOLD ...................... 59 G. RIGHTS OF CREDITORS ..................... 59

A. EFFECT AND RETROACTIVITY................... 11 B. REPEAL AND AMENDMENT ...................... 11

IV. MARRIAGE AND PERSONAL RELATIONSHIP BETWEEN SPOUSES ....... 12 A. CONCEPT OF MARRIAGE ......................... 12 B. AGREEMENTS PRIOR TO MARRIAGE ...... 12 C. REQUISITES ............................................... 12 KINDS OF REQUISITES AND EFFECTS OF NON-COMPLIANCE.................................. 12 EFFECT OF ABSENCE OF REQUISITES ... 13 ESSENTIAL REQUISITES .......................... 13 1. GENDER ................................................ 13 2. AGE ....................................................... 13 3. CONSENT FREELY GIVEN .................... 13

VIII. PATERNITY AND FILIATION .............. 60 A. LEGITIMATE CHILDREN ........................... 60

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TABLE OF CONTENTS B. PROOF OF FILIATION ............................... 62 C. ILLEGITIMATE CHILDREN .........................63 D. LEGITIMATED CHILDREN ........................ 65

WHO ARE DISADVANTAGED CHILDREN: ................................................................... 77 PERSONS EXERCISING SPECIAL PARENTAL AUTHORITY........................... 77

IX. ADOPTION ............................................ 66

XII. EMANCIPATION.................................... 77 XII. SUMMARY JUDICIAL PROCEEDINGS UNDER FC ................................................... 78

A. WHO CAN ADOPT .................................... 66 B. WHO CAN BE ADOPTED ........................... 67 C. PRE-ADOPTION PROCEDURES .............. 68 D. ADOPTION PROCEDURES ...................... 69 E. WHO MAY NOT ADOPT/ BE ADOPTED ... 69 F. RIGHTS OF AN ADOPTED CHILD ............. 70 G. RESCISSION OF ADOPTION .................... 70 H. RECTIFICATION OF SIMULATED BIRTH . 71 I. RA 8043 – THE LAW ON INTER-COUNTRY ADOPTION ..................................................... 71 I. 1. WHO CAN ADOPT .............................. 72 I. 2. WHO CAN BE ADOPTED ................... 72

A. PROCEDURAL RULES PROVIDED FOR IN THIS TITLE SHALL APPLY TO [ART. 238]: ... 78 B. SEPARATION IN FACT .............................. 78 C. INCIDENTS INVOLVING PARENTAL AUTHORITY ................................................... 79

XIII. CARE AND EDUCATION OF CHILDREN .................................................................... 80 XIV. SURNAMES ......................................... 81 A. SURNAMES OF CHILDREN ....................... 81 B. WIFE AFTER AND DURING MARRIAGE ... 81 C. CONFUSION AND CHANGE OF NAMES ... 81

X. SUPPORT ................................................ 73 A. WHAT IT COMPRISES................................ 73 B. WHO ARE OBLIGED................................... 73 C. SUPPORT DURING MARRIAGE LITIGATION ........................................................................ 75 D. AMOUNT .................................................... 75 E. WHEN DEMANDABLE ............................... 75 F. OPTIONS .................................................... 75 G. ATTACHMENT ........................................... 75

XV. RULES GOVERNING PERSONS WHO ARE ABSENT ...............................................82 A. PROVISIONAL MEASURES IN CASE OF ABSENCE [ARTS. 381-383] ........................... 82 B. DECLARATION OF ABSENCE, [ARTS. 384389] ................................................................ 84 C. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE, [ARTS. 387-389] ............... 84 D. PRESUMPTION OF DEATH, [ARTS. 390392] ................................................................ 85

XI. PARENTAL AUTHORITY AND CUSTODY OF CHILDREN ............................................. 75 PARENTAL AUTHORITY INCLUDES [ART. 209]: .......................................................... 75 CASES WHEN PARENTAL AUTHORITY AND RESPONSIBILITY MAY BE TRANSFERRED OR RENOUNCED .......... 76 RULES AS TO THE EXERCISE OF PARENTAL AUTHORITY .......................... 76 CHARACTERISTICS OF PARENTAL AUTHORITY .............................................. 76 PARENTAL PREFERENCE RULE ............. 76 WHO EXERCISES AUTHORITY IN CASES OF DEATH, ABSENCE, UNSUITABILITY, REMARRIAGE, OR SEPARATION OF PARENTS .................................................. 76 TENDER YEARS PRESUMPTION: ............ 77 PERSONS EXERCISING SUBSTITUTE PARENTAL AUTHORITY IN DEFAULT OF PARENTS OR JUDICIALLY APPOINTED GUARDIAN ............................................... 77 SUBSTITUTE PARENTAL AUTHORITY OVER DISADVANTAGED CHILDREN ...... 77

XVI. FUNERALS .......................................... 85 XVII. ENTRIES IN THE CIVIL REGISTER ..... 86 A. ARTS. 407-413 .................................... 86 B. RA 9048 AS AMENDED BY RA 10172 ...... 87 C. RULE 108, RULES OF COURT .................. 89

PROPERTY ................................ 91 I. CHARACTERISTICS..................................92 II. CLASSIFICATION ....................................92 A. HIDDEN TREASURE ................................. 92 B. BASED ON MOBILITY [IMMOVABLE OR MOVABLE] ..................................................... 92 B. 1. REAL OR IMMOVABLE PROPERTY . 92 B.2. PERSONAL OR MOVABLE ............... 94 TESTS TO DETERMINE MOVABLE CHARACTER ............................................ 95 B. 3. IMPORTANCE AND SIGNIFICANCE OF CLASSIFICATION UNDER THE NCC . 95 C. BASED ON OWNERSHIP/RIGHTS-HOLDER ....................................................................... 96 C.1. PUBLIC DOMINION ........................... 96

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TABLE OF CONTENTS CHARACTERISTICS ................................. 96 CLASSIFICATIONS................................... 96 C.2. PRIVATE OWNERSHIP ......................97 KINDS ........................................................97 DETERMINATION (TWO DIFFERENT VIEWS) ..................................................... 98 CONVERSION .......................................... 98 D. BASED ON CONSUMABILITY .................. 98 [NCC 418] ....................................................... 98 D.1. CONSUMABLE .................................. 98 D.2. NON-CONSUMABLE ....................... 98 E. BASED ON SUSCEPTIBILITY TO SUBSTITUTION ............................................. 98 E.1. FUNGIBLES ....................................... 98 E.2. NON-FUNGIBLES ............................. 99 F. BASED ON THE CONSTITUTION [ARTICLE XII, SEC 3]....................................................... 99 G. OTHER CLASSIFICATIONS....................... 99 G.1. BY THEIR PHYSICAL EXISTENCE..... 99 G.2. BY THEIR AUTONOMY OR DEPENDENCE ......................................... 99 G.3. BY SUSCEPTIBILITY TO DETERIORATION..................................... 99 G.4. BY REASON OF THEIR SUSCEPTIBILITY TO DIVISION................ 99 G.5. BY REASON OF DESIGNATION ...... 99 G.6. EXISTENCE IN POINT OF TIME ....... 99

POLICE POWER ...................................... 102 PROPERTY TAKEN WITH NO COMPENSATION FOR GENERAL WELFARE. ............................................... 102 TAXATION ............................................... 102 EMINENT DOMAIN ................................. 102 D.2. SPECIFIC LIMITATIONS: ................. 102 IMPOSED BY LAW, SIC UTERE TUO, NUISANCE, STATE OF NECESSITY, EASEMENTS, AND THOSE VOLUNTARILY IMPOSED BY THE OWNER: SERVITUDES, MORTGAGES IMPOSED BY CONTRACT. ................................................................. 102 SUMMARY OF ACTIONS ........................ 103

IV. ACCESSION.......................................... 104 A. CLASSIFICATION OF ACCESSION ..........104 A.1. WITH RESPECT TO IMMOVABLES ..104 ACCESSION DISCRETA ..........................104 PRINCIPLES APPLICABLE TO ACCESSION DISCRETA ...............................................105 PRINCIPLES APPLICABLE TO ACCESSION CONTINUA ..............................................105 A.2. WITH RESPECT TO MOVABLE PROPERTY .............................................. 110 TYPES ...................................................... 110 CONJUNCTION / ADJUNCTION............. 110 MIXTURE .................................................. 111 SPECIFICATION ....................................... 111

III. OWNERSHIP.......................................... 99

V. QUIETING OF TITLE ............................... 112

A. DEFINITION AND CONCEPT .................... 99 B. TYPES OF OWNERSHIP ..........................100 C. RIGHT IN GENERAL .................................100 C.1. RIGHTS INCLUDED IN OWNERSHIP [NCC 428] ................................................100 C.2. BUNDLE OF RIGHTS .......................100 C.3. PROTECTING PROPERTY ...............100 C.3.1 BASIC DISTINCTIONS ....................100 REAL RIGHTS V. PERSONAL RIGHTS ...100 REAL ACTION V. PERSONAL ACTION (ROC, RULE 4 SEC 1-2) ...........................100 ACTION IN REM V. ACTION IN PERSONAM V. ACTION QUASI IN REM .......................101 C.3.2. REMEDIES .....................................101 DOCTRINE OF SELF-HELP [NCC 429-430] ..................................................................101 ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF PROPERTY .................101 D. LIMITATIONS ON OWNERSHIP .............. 102 D.1. GENERAL LIMITATIONS: ................ 102 TAXATION, EMINENT DOMAIN, POLICE POWER ................................................... 102

OR INTEREST IN AND REMOVAL OR PREVENTION OF CLOUD OVER TITLE TO OR INTEREST IN REAL PROPERTY.................... 112 A. IN GENERAL.............................................. 112 B. PURPOSE .................................................. 112 C. NATURE: QUASI IN REM .......................... 112 D. JUSTIFICATIONS TO BRING AN ACTION TO QUIET TITLE .................................................. 112 E. THE ACTION TO QUIET TITLE DOES NOT APPLY: ........................................................... 112 F. REQUIREMENTS ....................................... 112 F.1. REQUISITES OF AN ACTION TO QUIET TITLE ........................................................ 112 F.2. REQUISITES OF AN ACTION TO PREVENT A CLOUD: ................................ 113 G. QUIETING OF TITLE V. REMOVAL OF CLOUD ........................................................... 113 H. PRESCRIPTION / NON-PRESCRIPTION OF ACTION .......................................................... 113 PRESCRIPTION OF ACTION.................... 113

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TABLE OF CONTENTS VI. CO-OWNERSHIP ................................... 114

VII. POSSESSION ....................................... 119

A. REQUISITES .............................................. 114 B. WHAT GOVERNS CO-OWNERSHIP ......... 114 C. CHARACTERISTICS OF CO-OWNERSHIP114 D. SOURCES OF CO-OWNERSHIP ............... 115 D.1. LAW ................................................... 115 D.2. CONTRACT....................................... 115 D.3. INTESTATE SUCCESSION ............... 115 D.4. TESTAMENTARY DISPOSITION OR DONATION INTER VIVOS........................ 116 D.5. BY FORTUITOUS EVENT OR BY CHANCE ................................................... 116 D.6. BY OCCUPANCY .............................. 116 D.7. BY ASSOCIATIONS AND SOCIETIES WITH SECRET ARTICLES ........................ 116 E. RIGHTS OF CO-OWNERS ......................... 116 E.1. RIGHT TO SHARE IN THE BENEFITS AS WELL AS THE CHARGES [NCC 485] . 116 E.2. RIGHT TO USE THE THING OWNED IN COMMON [NCC 486] .............................. 116 RIGHT TO BRING AN ORDER IN EJECTMENT [NCC 487] ........................... 116 RIGHT TO COMPEL OTHER CO-OWNERS TO CONTRIBUTE TO THE EXPENSES OF PRESERVATION AND TO THE TAXES [NCC 488] .......................................................... 116 RIGHT TO REPAIR [NCC 489] ................. 116 RIGHT TO OPPOSE ALTERATIONS ........ 117 [NCC 491].................................................. 117 RIGHT TO FULL OWNERSHIP OF HIS PART AND OF THE FRUITS AND BENEFITS PERTAINING THERETO......... 117 [NCC 493] ................................................. 117 RIGHT TO PARTITION [NCC 494] ........... 117 RIGHT TO REDEMPTION [NCC 1619] ...... 117 F. RULES........................................................ 117 F.1. ON RENUNCIATION OF SHARE (DIFFERENT FROM RENUNCIATION OF CO-OWNERSHIP) .................................... 117 F.2. REPAIRS FOR PRESERVATION ....... 117 F.3. EMBELLISHMENTS OR IMPROVEMENTS ..................................... 117 G. TERMINATION OR .................................... 118 EXTINGUISHMENT ....................................... 118 G.1. TOTAL DESTRUCTION OF THING OR LOSS OF THE PROPERTY CO-OWNED .. 118 G.2. MERGER OF ALL INTERESTS IN ONE PERSON ................................................... 118 G.3. ACQUISITIVE PRESCRIPTION ......... 118 G.4. PARTITION OR DIVISION ................ 118

A. CONCEPT OF POSSESSION .....................119 B. ESSENTIAL REQUISITES OF POSSESSION .......................................................................119 C. DEGREES OF POSSESSION .................... 120 D. CASES OF POSSESSION ......................... 120 D.1. POSSESSION FOR ONESELF, OR POSSESSION EXERCISED IN ONE’S OWN NAME AND POSSESSION IN THE NAME OF ANOTHER [NCC 524] ........................ 120 D.2. POSSESSION IN THE CONCEPT OF AN OWNER, AND POSSESSION IN THE CONCEPT OF A HOLDER WITH THE OWNERSHIP BELONGING TO ANOTHER [NCC 525]................................................ 120 D.3. POSSESSION IN GOOD FAITH AND POSSESSION IN BAD FAITH [NCC 526] . 121 E. ACQUISITION OF POSSESSION .............. 122 E.1. WAYS OF ACQUIRING POSSESSION [NCC 531] ................................................. 122 E.2. BY WHOM MAY POSSESSION BE ACQUIRED [NCC 532]............................. 122 F. WHAT DO NOT AFFECT POSSESSION [NCC 537] ............................................................... 123 F.1. ACTS MERELY TOLERATED ............ 123 F.2. ACTS EXECUTED CLANDESTINELY AND WITHOUT THE KNOWLEDGE OF THE POSSESSOR [NCC 1108] .............................. 124 F.3. ACTS OF VIOLENCE AS LONG AS THE POSSESSOR OBJECTS THERETO (I.E. FILES A CASE) .............................................. 124 [NCC 536]...................................................... 124 RULES TO SOLVE CONFLICTS OF POSSESSION [NCC 538] .............................. 124 G. EFFECTS OF POSSESSION ..................... 124 G.1. RIGHTS OF A POSSESSOR IN GOOD FAITH ...................................................... 124 G.2. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH ........................................... 124 G.3. RIGHTS OF A POSSESSOR IN BAD FAITH ...................................................... 124 G.4. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH ........................................... 125 G.5. RIGHT TO BE PROTECTED IN HIS POSSESSION [NCC 539] ........................ 125 ACTIONS TO RECOVER POSSESSION .. 125 RULES ..................................................... 125 G.6. ENTITLEMENT TO FRUITS – POSSESSOR IN GOOD/BAD FAITH [NCC 544, 549] ................................................ 126

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TABLE OF CONTENTS RIGHT OF THE POSSESSOR IN GOOD FAITH ...................................................... 126 D. REIMBURSEMENT FOR EXPENSES – POSSESSOR IN GOOD/BAD FAITH ............ 127 [NCC 546-552].............................................. 127 D.1. NECESSARY EXPENSES ................. 127 D.2. USEFUL EXPENSES ........................ 127 D.3. EXPENSES FOR LUXURY ............... 127 E. LOSS OR UNLAWFUL DEPRIVATION OF A MOVABLE PROPERTY ................................. 129 E.1. POSSESSION OF MOVABLE ACQUIRED IN GOOD FAITH (IN CONCEPT OF OWNER) IS EQUIVALENT TO TITLE [NCC 559] ................................................ 129 E.2. PERIOD TO RECOVER [NCC 1140, 1132, 1133] ......................................................... 129 E.3. FINDER OF LOST MOVABLE [NCC 719720] ......................................................... 129 E.4. DISTINGUISHED FROM VOIDABLE TITLE [NCC 1506] .................................... 129 F. EFFECTS OF POSSESSION IN THE CONCEPT OF AN OWNER ........................... 130 PRESUMPTION IN FAVOR OF THE POSSESSOR—FOR ACQUISITIVE PRESCRIPTION ............................................ 130 G. LOSS/TERMINATION OF POSSESSION [NCC 555] ...................................................... 131 G.1. ABANDONMENT .............................. 131 G.2. ASSIGNMENT, EITHER GRATUITOUS OR ONEROUS.......................................... 131 G.3. POSSESSION BY ANOTHER; IF POSSESION HAS LASTED LONGER THAN ONE YEAR; REAL RIGHT OF POSSESSION NOT LOST AFTER 10 YEARS – SUBJECT TO NCC 537.............................................. 131 H. RULES FOR LOSS OF MOVABLES ......... 132 I. KINDS OF ANIMALS .................................. 132

AS TO THE FRUITS ................................. 134 AS TO THE OBJECT ................................ 134 C.5. BY THE TERMS OF THE USUFRUCT ................................................................. 134 D. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY ......................................... 134 D.1. RIGHTS AS TO THE THING AND ITS FRUITS .................................................... 134 RIGHT TO ENJOY THE PROPERTY ........ 134 HIDDEN TREASURE ............................... 135 RIGHT TO FRUITS PENDING AT THE BEGINNING OF USUFRUCT ................... 135 RIGHT TO CIVIL FRUITS ......................... 135 RIGHT TO ENJOY ANY INCREASE THROUGH ACCESSIONS AND SERVITUDES, INCLUDING PRODUCTS OF HUNTING AND FISHING. ....................... 135 RIGHT TO LEASE THE THING ................ 135 RULES AS TO LEASE .............................. 136 RIGHT TO IMPROVE THE THING, BUT IMPROVEMENT INURES TO THE BENEFIT OF THE NAKED OWNER ........................ 137 D.2. RIGHTS AS TO THE LEGAL RIGHT OF USUFRUCT ITSELF ................................. 137 RIGHT TO MORTGAGE RIGHT OF USUFRUCT ............................................. 137 RIGHT TO ALIENATE THE USUFRUCT EXCEPT IN PURELY PERSONAL USUFRUCTS OR WHEN TITLE CONSTITUTING IT PROHIBITS THE SAME ................................................................. 137 D.3. OBLIGATIONS AT THE BEGINNING OF THE USUFRUCT OR BEFORE EXERCISING THE USUFRUCT................ 137 TO MAKE AN INVENTORY ..................... 137 TO GIVE A BOND FOR THE FAITHFUL PERFORMANCE OF DUTIES AS USUFRUCTUARY.................................... 138 D.4. DURING THE USUFRUCT ............... 138 TO TAKE CARE OF THE THING LIKE A GOOD FATHER OF A FAMILY ................ 139 TO UNDERTAKE ORDINARY REPAIRS . 139 TO NOTIFY OWNER OF NEED TO UNDERTAKE EXTRAORDINARY REPAIRS ................................................................. 139 TO PAY FOR ANNUAL CHARGES AND TAXES ON THE FRUITS ..........................140 TO NOTIFY OWNER OF ANY ACT DETRIMENTAL TO OWNERSHIP ...........140 (NCC 601) .................................................140

VIII. USUFRUCT ......................................... 132 A. OBJECTS OF USUFRUCT ........................ 132 B. CHARACTERISTICS ................................. 132 B.1. NATURAL CHARACTERISTICS ....... 132 C. CLASSIFICATION ..................................... 133 C.1. BY ORIGIN ........................................ 133 C.2. BY PERSON ENJOYING THE RIGHT OF USUFRUCT ............................................. 133 C.3. BY OBJECT OF USUFRUCT ............. 133 RIGHTS.................................................... 133 THINGS ................................................... 133 C.4. BY THE EXTENT OF THE USUFRUCT ................................................................. 134

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TABLE OF CONTENTS TO SHOULDER THE COSTS OF LITIGATION REGARDING THE USUFRUCT (NCC 602) ................................................ 140 TO ANSWER FOR FAULT OR NEGLIGENCE OF THE ALIENEE, LESSEE OR AGENT OF THE USUFRUCTUARY (NCC 590) ......................................................... 140 D.5. AT THE TIME OF THE TERMINATION OF THE USUFRUCT ................................ 140 E. SPECIAL CASES OF USUFRUCT ............. 140 E.1. USUFRUCT OVER A PENSION OR A PERIODICAL INCOME [NCC 570]........... 140 E.2. USUFRUCT OF PROPERTY OWNED IN COMMON [NCC 582] .............................. 140 E.4. USUFRUCT CONSTITUTED ON A FLOCK OR HERD OF LIVESTOCK .......... 140 [NCC 591] ................................................. 140 E.5. USUFRUCT OVER FRUIT BEARING TREES AND SPROUT AND WOODLANDS [NCC 575-576].......................................... 141 E.6. USUFRUCT ON A RIGHT OF ACTION [NCC 578] ................................................. 141 E.7. USUFRUCT ON MORTGAGED PROPERTY [NCC 600]............................. 141 E.8. USUFRUCT OVER AN ENTIRE PATRIMONY [NCC 598] .......................... 141 E.9. USUFRUCT OVER DETERIORABLE PROPERTY ............................................... 141 E.10. USUFRUCT OVER CONSUMABLE PROPERTY [NCC 574] ............................ 142 F. RIGHTS OF THE OWNER ......................... 142 G. EXTINGUISHMENT / TERMINATION [NCC 603] ............................................................... 142 G.1. DEATH OF USUFRUCTUARY .......... 142 G.2. EXPIRATION OF PERIOD OR FULFILLMENT OF RESOLUTORY CONDITION IMPOSED ON USUFRUCT BY PERSON CONSTITUTING USUFRUCT .. 142 G.3. MERGER OF RIGHTS OF USUFRUCT AND NAKED OWNERSHIP IN ONE PERSON .................................................. 143 G.4. RENUNCIATION OF USUFRUCT.... 143 G.5. EXTINCTION OR LOSS OF PROPERTY [NCC 608] ............................................... 143 G.6. TERMINATION OF THE RIGHT OF PERSON CONSTITUTING THE USUFRUCT ................................................................. 144 G.7. PRESCRIPTION ............................... 144 H. CONDITIONS NOT AFFECTING USUFRUCT ...................................................................... 144

H.1. EXPRORPIATION OF THING IN USUFRUCT [NCC 609] ........................... 144 H.2. BAD USE OF THING IN USUFRUCT [NCC 610]................................................. 144

IX. EASEMENT........................................... 144 A. CHARACTERISTICS ................................. 144 A.1. ESSENTIAL FEATURES: .................. 144 B. CLASSIFICATION ..................................... 146 B.1. AS TO RECIPIENT OF BENEFITS ..... 146 B.2. AS TO CAUSE OR ORIGIN .............. 146 B.3. AS TO ITS EXERCISE [NCC 615] ...... 146 B.4. AS INDICATION OF ITS EXISTENCE ................................................................. 146 B.5. BY THE OBJECT OR OBLIGATION IMPOSED [NCC 616] ............................... 146 C. GENERAL RULES ..................................... 146 D. RELEVANCE OF CLASSIFICATIONS ....... 147 D.1. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY PRESCRIPTION 147 D.2. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY TITLE ................ 147 D.3. DETERMINES HOW TO COMPUTE THE PRESCRIPTIVE PERIOD [NCC 621] 147 D.4. DETERMINES HOW EASEMENT IS LOST BY PRESCRIPTION [NCC 631 (2)] . 147 E. CREATION ................................................ 147 E.1. BY TITLE ........................................... 147 E.2. BY LAW (LEGAL EASEMENTS) ....... 148 E.3. BY WILL OF THE OWNERS (VOLUNTARY EASEMENTS) .................. 148 E.4. BY PRESCRIPTION .......................... 148 G. LEGAL EASEMENTS ................................ 148 G.1. LAW GOVERNING LEGAL EASEMENTS ........................................... 148 F. VOLUNTARY EASEMENTS ...................... 148 H. RIGHTS AND OBLIGATIONS OF OWNERS OF DOMINANT AND SERVIENT ESTATES.. 148 H.1. RIGHTS OF DOMINANT ESTATE OWNER ................................................... 148 H.2. OBLIGATIONS OF DOMINANT ESTATE OWNER ..................................... 149 H.3. RIGHTS OF THE SERVIENT ESTATE OWNER ................................................... 149 H.4. OBLIGATIONS OF SERVIENT ESTATE OWNER ...................................................150 I. KINDS OF LEGAL EASEMENTS ................150 I.1. NATURAL DRAINAGE .......................150 I.2. RIPARIAN BANKS.............................150 I.3. DRAINAGE OF BUILDINGS ..............150 I.4. DAM ..................................................150

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TABLE OF CONTENTS I.5. DRAWING WATER............................. 151 I.6. AQUEDUCT ........................................ 151 I.7. SLUICE GATE ..................................... 151 I.8. RIGHT OF WAY .................................. 151 I.9. PARTY WALL .................................... 153 I.10. EASEMENT OF LIGHT AND VIEW .. 155 I.11. INTERMEDIATE DISTANCES ........... 156 [NCC 677] ................................................ 156 BRANCHES, ROOTS AND FRUITS ........ 157 I.12. LATERAL AND SUBJACENT SUPPORT ................................................................. 157 J. MODES OF ACQUIRING EASEMENT ....... 157 J.1. BY TITLE ............................................ 157 J.2. BY PRESCRIPTION ........................... 157 K. EXTINGUISHMENT OF EASEMENTS ...... 158 K.1. MERGER ........................................... 158 K.2. BY A NON-USER FOR 10 YEARS .... 158 K.3. BY IMPOSSIBILITY OF USE ............. 158 K.4. EXPIRATION OF THE TERM OR FULFILLMENT OF RESOLUTORY CONDITION............................................. 158 K.5. RENUNCIATION OF THE OWNER OF THE DOMINANT ESTATE ....................... 158 K.6. OTHER CAUSES NOT MENTION IN NCC 631 ................................................... 159

OCCUPATION OF DOMESTICATED ANIMALS ................................................. 164 PIGEONS AND FISH ............................... 164 HIDDEN TREASURE ............................... 164 LOST MOVABLES; PROCEDURE AFTER FINDING LOST MOVABLES.................... 164 B. DONATION ............................................... 165 B.1. OTHER INSTANCES CONSIDERED AS DONATION.............................................. 165 B.2. NATURE ........................................... 165 B.3. REQUISITES..................................... 165 B.4. WHAT MAY BE DONATED .............. 165 B.5. WHAT MAY NOT BE DONATED...... 165 FUTURE PROPERTY ............................... 165 C. KINDS OF DONATIONS ........................... 166 C.1. AS TO ITS TAKING EFFECT ............. 166 C.2. AS TO CAUSE OR CONSIDERATION ................................................................. 168 C.3. AS TO EFFECTIVITY OR EXTINGUISHMENT ................................. 168 D. FORMALITIES REQUIRED ....................... 168 D.1. HOW MADE AND ACCEPTED ......... 168 D.2. PERFECTION ................................... 168 D.3. QUALIFICATIONS OF DONORS AND DONEES .................................................. 168 E. EFFECTS OF DONATION / LIMITATIONS170 E.1. IN GENERAL ..................................... 170 E.2. SPECIAL PROVISIONS .................... 170 F. VOID DONATIONS [NCC 739-740, 1027] 172 F.1. THOSE MADE BETWEEN PERSONS WHO WERE GUILTY OF ADULTERY OR CONCUBINAGE AT THE TIME OF THE DONATION.............................................. 172 F.2. THOSE MADE BETWEEN PERSONS FOUND GUILTY OF THE SAME CRIMINAL OFFENSE, IN CONSIDERATION THEREOF ................................................................. 172 F.3. THOSE MADE TO A PUBLIC OFFICER OR HIS WIFE, DESCENDANTS AND ASCENDANTS, BY REASON OF HIS OFFICE .................................................... 172 F.4. THOSE MADE TO PERSONS INCAPACITATED TO SUCCEED BY WILL. [NCC. 1027] .............................................. 172 G. REVOCATION V. REDUCTION................. 172 G.1. GROUNDS FOR REDUCTION.......... 172 C. TRADITION ............................................... 177

X. NUISANCE ............................................. 159 A. NUISANCE V. TRESPASS ........................ 159 B. NUISANCE V. NEGLIGENCE .................... 160 C. CLASSES .................................................. 160 C.1. ACCORDING TO NATURE ............... 160 C.2. ACCORDING TO SCOPE OF INJURIOUS EFFECTS ............................. 160 D. DOCTRINE OF ATTRACTIVE NUISANCE . 161 E. LIABILITY IN CASE OF NUISANCE ........... 161 E.1 WHO ARE LIABLE .............................. 161 E.2. LIABILITY OF CREATOR OF NUISANCE ............................................... 161 E.3. LIABILITY OF TRANSFEREES .......... 161 E.4. NATURE OF LIABILITY ..................... 161 E.5. RIGHT TO RECOVER DAMAGES .... 162 NO PRESCRIPTION ................................ 162 F. REGULATION OF NUISANCES ................ 162 F.1. PUBLIC NUISANCE .......................... 162 F.2. PRIVATE NUISANCE ....................... 163

XI. MODES OF ACQUIRING OWNERSHIP 163 A. OCCUPATION .......................................... 164 A.1. REQUISITES ..................................... 164 A.2. KINDS .............................................. 164 A.3. SPECIAL RULES .............................. 164 OCCUPATION OF A SWARM OF BEES .. 164

PRESCRIPTION .......................................... 177

OBLIGATIONS .......................... 181 vii

TABLE OF CONTENTS I. DEFINITION ............................................ 182 II. NATURE AND EFFECT OF OBLIGATIONS ................................................................... 185

B. LOSS OF THE THING DUE OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE ........................................... 215 C. CONDONATION ....................................... 216 D. CONFUSION OR MERGER OF RIGHTS .. 217 E. COMPENSATION ..................................... 217 F. NOVATION............................................... 220

A.OBLIGATION TO GIVE .............................. 185 B. OBLIGATION TO DO OR NOT TO DO ..... 185 C. BREACH ................................................... 186 C.1. COMPLETE FAILURE TO PERFORM ................................................................. 186 C.2. DEFAULT, DELAY, OR MORA ........ 186 C.3. FRAUD (DOLO) IN THE PERFORMANCE OF THE OBLIGATION . 188 C.4. NEGLIGENCE (CULPA) IN THE PERFORMANCE OF THE OBLIGATION . 189 C.5. CONTRAVENTION OF THE TENOR OF THE OBLIGATION .................................... 191 D. LEGAL EXCUSE FOR BREACH: FORTUITOUS EVENT OR ACTS OF THE CREDITOR ..................................................... 191 E. REMEDIES AVAILABLE IN CASE OF BREACH........................................................ 192 E.1. SPECIFIC PERFORMANCE .............. 192 E.2. SUBSTITUTED PERFORMANCE ..... 192 E.3. RESCISSION (RESOLUTION IN RECIPROCAL OBLIGATIONS) ................ 192 E.4. DAMAGES, IN ANY EVENT ............. 193 E.5. SUBSIDIARY REMEDIES OF CREDITORS ............................................ 193

CONTRACTS ............................ 223 I. GENERAL PROVISIONS........................ 224 A. PRINCIPAL CHARACTERISTICS OF CONTRACTS (MARCO) ............................... 224 A. 1. MUTUALITY .................................... 224 A.3. RELATIVITY..................................... 226 A.4. CONSENSUAL ................................ 227 A.5. OBLIGATORY FORCE ..................... 227 B. ELEMENTS OF CONTRACTS .................. 227 C. CLASSIFICATION OF CONTRACTS ........ 228 D. STAGES OF A CONTRACT ...................... 229

II. ESSENTIAL REQUISITES ..................... 229 A. CONSENT ................................................ 229 E. OBJECT OF CONTRACTS ........................ 236 F. CAUSE OF CONTRACTS ......................... 236

III. FORM OF CONTRACTS .......................238 A. KINDS OF FORMALITIES REQUIRED BY LAW ............................................................. 238 A.1. FOR THE VALIDITY OF CONTRACTS (AD ESENTIA / AD SOLIMNITATEM/ SOLEMN CONTRACTS) ......................... 238 A.2. FOR THE PURPOSE OF PROVING THE EXISTENCE OF THE CONTRACT........... 239 (AD PROBATIONEM/ STATUTE OF FRAUDS) ................................................ 239 A.3. FOR THE EFFECTIVITY OF THE CONTRACT AGAINST THIRD PERSONS ................................................................ 240

III. KINDS OF CIVIL OBLIGATIONS ........... 195 A. PURE OBLIGATIONS ............................... 195 B. CONDITIONAL OBLIGATIONS ................ 195 C. OBLIGATIONS WITH A PERIOD OR TERM ...................................................................... 198 D. ALTERNATIVE OR FACULTATIVE OBLIGATIONS ............................................. 200 E. DIVISIBLE AND INDIVISIBLE OBLIGATIONS ..................................................................... 202 F. OBLIGATIONS WITH A PENAL CLAUSE 203

IV. REFORMATION OF INSTRUMENTS .. 240 A. CASES WHERE REFORMATION IS PROPER ...................................................................... 241 A.1. MISTAKE.......................................... 242 A.2. FRAUD ............................................ 242 A.3. INEQUITABLE CONDUCT [ART. 1362] ................................................................ 242 A.4. ACCIDENT [ART. 1364] ................... 242 A.5. SEVERE PACTO DE RETRO / RELATIVE SIMULATION ........................ 242 B. WHO MAY ASK FOR REFORMATION [ART. 1368] ............................................................. 242 C. CASES WHERE REFORMATION IS NOT PROPER ....................................................... 242

IV. JOINT AND SOLIDARY OBLIGATIONS .................................................................. 204 A. JOINT OBLIGATIONS .............................. 204 B. SOLIDARY OBLIGATIONS ...................... 206

V. EXTINGUISHMENT OF OBLIGATIONS 209 A. PAYMENT OR PERFORMANCE .............. 210 A.1 APPLICATION OF PAYMENTS ......... 212 A.2. DATION IN PAYMENT ..................... 212 A.3. PAYMENT BY CESSION .................. 213 A.3. TENDER OF PAYMENT AND CONSIGNATION ..................................... 213

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TABLE OF CONTENTS V. INTERPRETATION OF CONTRACTS ... 243

A.1. ABSOLUTE INCAPACITY ................ 266 A.2. RELATIVE INCAPACITY: MARRIED PERSONS ............................................... 267 A.3. SPECIAL DISQUALIFICATIONS ..... 267 B. EFFECTS OF INCAPACITY ...................... 269 B.1. ABSOLUTE INCAPACITY ................ 269 B.2. RELATIVE INCAPACITY .................. 269 B.3. SPECIFIC INCAPACITY/ SPECIAL DISQUALIFICATIONS ............................ 269

A. RULES ON DOUBTS [ART. 1378] ............ 244

VI. DEFECTIVE CONTRACTS ................... 245 A. RESCISSIBLE CONTRACTS ................... 245 B. VOIDABLE CONTRACTS ........................ 249 C. UNENFORCEABLE CONTRACT .............. 251 D. VOID OR INEXISTENT CONTRACTS ...... 253

VII. NATURAL OBLIGATIONS .................. 255 NATURAL OBLIGATIONS ...................... 255

III. SUBJECT MATTER .............................. 269

VIII. ESTOPPEL ..........................................257

A. REQUISITES OF A VALID SUBJECT MATTER ....................................................... 269 A.1. MUST BE LICIT ................................ 269 A.2. EXISTING, FUTURE, CONTINGENT270 DETERMINATE OR DETERMINABLE .... 271

DEFINITION ............................................257 KINDS OF ESTOPPEL .............................257 LACHES OR “STATE DEMANDS” ......... 258

IX. TRUSTS ............................................... 258 A. GOVERNING RULES ............................... 259 B. PARTIES [ART. 1440] .............................. 259 C. KINDS OF TRUST .................................... 259 C.1. EXPRESS TRUST............................. 259 C.2. IMPLIED TRUST ............................. 260

IV. OBLIGATIONS OF THE SELLER .......... 272 A. OBLIGATIONS OF THE VENDOR IN GENERAL..................................................... 272 B. WHEN SELLER IS NOT THE OWNER ..... 272 C. SALE BY PERSON HAVING A VOIDABLE TITLE ............................................................ 272

SALES ..................................... 262 I. DEFINITION AND ESSENTIAL REQUISITES .................................................................. 263

V. PRICE..................................................... 272 A. MEANING OF PRICE ............................... 272 B. REQUISITES FOR A VALID PRICE ...........273 C. HOW PRICE IS DETERMINED/ CERTAIN273 D. INADEQUACY OF PRICE ....................273 E. WHEN NO PRICE AGREED ............... 274 F. FALSE PRICE VS SIMULATED PRICE 274 G. EARNEST MONEY VS. OPTION MONEY ................................................................ 274

A.DEFINITION OF SALES ............................ 263 B. ESSENTIAL REQUISITES OF A CONTRACT OF SALE....................................................... 263 B.1. ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE ............................. 263 B.2. NON-ESSENTIAL ELEMENTS OF A CONTRACT OF SALE ............................. 263 C. STAGES OF CONTRACT OF SALE .......... 263 PHASES OF A SALE CONTRACT .......... 263 D. OBLIGATIONS CREATED ....................... 264 NATURE OF OBLIGATIONS CREATED PER DEFINITION IN ART.1458 ...................... 264 E. CHARACTERISTICS OF A CONTRACT OF SALE ............................................................ 264 E.1. SALE IS TITLE AND NOT MODE ..... 264 F. SALE DISTINGUISHED FROM OTHER CONTRACTS................................................ 264 DONATION ............................................ 264 F.1. BARTER ........................................... 265 F.2. CONTRACT FOR A PIECE OF WORK ................................................................ 265 F.3. DACION EN PAGO .......................... 265 F.4. CONTRACT OF SALE/CONTRACT TO SELL ....................................................... 266 G. KINDS OF CONTRACT OF SALE ............ 266

VI. FORMATION OF CONTRACT OF SALE ................................................................... 275 A. PREPARATORY....................................... 275 B. PERFECTION ........................................... 278 C. CONSUMMATION ................................... 278 FORMALITIES OF THE CONTRACT ...... 278

VII. TRANSFER OF OWNERSHIP ............ 280 OBLIGATIONS OF THE VENDOR: ......... 280 A. MANNER OF TRANSFER........................ 280 A.1. GENERAL CONCEPTS .................... 280 B. CONCEPT OF DELIVERY......................... 280 B.1. REQUISITES .................................... 280 B.2. WHAT TO DELIVER ........................ 280 B.3. WHERE TO DELIVER ...................... 280 B.4. WHEN TO DELIVER ......................... 281 C. WHEN DELIVERY DOES NOT TRANSFER TITLE ................................... 281 D. KINDS OF DELIVERY .............................. 282 D.1.ACTUAL DELIVERY .......................... 282

II. PARTIES TO A CONTRACT OF SALE .. 266 A. KINDS OF INCAPACITY .......................... 266

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TABLE OF CONTENTS D.2. CONSTRUCTIVE DELIVERY ........... 283 E. DOUBLE SALES ...................................... 284 E.1. RULES GOVERNING SALE OF MOVABLES, IMMOVABLES AND UNREGISTERED LANDS ....................... 284 F. PROPERTY REGISTRATION DECREE .... 285

B.5. IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF ANIMALS ................................................ 297 C. EFFECTS OF WARRANTIES ................... 297 D. EFFECTS OF WAIVERS ........................... 297 E. BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY ........................................... 297 F. WARRANTY IN SALE OF CONSUMER GOODS ........................................................ 299

VIII. RISK OF LOSS ................................... 286 A. GENERAL RULE ...................................... 286 B. PRIOR TO PERFECTION OF CONTRACT286 C. AT TIME OF PERFECTION ...................... 286 D. AFTER PERFECTION BUT BEFORE DELIVERY .................................................... 286 D.1.LOSS ................................................ 286 D.2. DETERIORATION ........................... 286 E. AFTER DELIVERY .................................... 287

XIII. BREACH OF CONTRACT .................. 300 A. GENERAL REMEDIES [ART 1191] ............ 300 B. REMEDIES OF THE SELLER ................... 300 B.1. SALE OF MOVABLES ...................... 300 C. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT – ARTS. 1484-1486............. 302 C.1. WHEN APPLICABLE ........................ 302 C.2. ALTERNATIVE AND EXCLUSIVE REMEDIES.............................................. 303 D. SALE OF IMMOVABLES .......................... 303 D.1. RESCISSION FOR ANTICIPATORY BREACH ................................................. 303 D.2. SPECIFIC PERFORMANCE + DAMAGES OR RESCISSION + DAMAGES ................................................................ 303 E. PD 957, SECTIONS 23 AND 24 ............... 304 F. MACEDA LAW (RA 6552): SALE OF IMMOVABLES ON INSTALLMENT.............. 304 G. REMEDIES OF THE BUYER .................... 305 G.1. SALE OF MOVABLES ...................... 305 G.2. SALE OF IMMOVABLES ................. 305

IX. DOCUMENTS OF TITLE .......................287 A. DEFINITION............................................. 287 B. PURPOSE OF DOCUMENTS OF TITLE .. 287 C. NEGOTIABLE DOCUMENTS OF TITLE ... 287 C.1. WHO MAY NEGOTIATE IT? ............. 287 D. NON-NEGOTIABLE DOCUMENTS OF TITLE ..................................................................... 288 E. WARRANTIES OF SELLER OF DOCUMENTS OF TITLE .............................. 288 F. RULES ON LEVY/GARNISHMENT OF GOODS ........................................................ 288

X. REMEDIES OF AN UNPAID SELLER ... 289 A. DEFINITION OF UNPAID SELLER .......... 289 B. REMEDIES OF UNPAID SELLER ............ 289 JUDICIAL REMEDIES OF AN UNPAID SELLER .................................................. 289 C. ALTERNATIVE REMEDIES OF THE UNPAID SELLER UNDER RECTO LAW ..................... 290

XIV. EXTINGUISHMENT OF SALE ........... 306 A. CAUSES ................................................... 306 B. CONVENTIONAL REDEMPTION ............ 306 B.1. DEFINITION ..................................... 306 B.2. PERIOD ........................................... 306 B.3. BY WHOM EXERCISED................... 307 B.4. FROM WHOM TO REDEEM ........... 307 B.5. HOW EXERCISED ........................... 307 B.6. EFFECT OF REDEMPTION ............. 307 B.7. EFFECT OF NON-REDEMPTION.... 307 B.7. RIGHT TO REDEEM VS. OPTION TO PURCHASE ............................................ 308 C. EQUITABLE MORTGAGE ........................ 308 C.1. PRESUMPTION THAT A CONTRACT IS AN EQUITABLE MORTGAGE (5P-R) ..... 308 C.2. REQUISITES FOR PRESUMPTION OF AN EQUITABLE MORTGAGE................. 309 C.3. RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE ....................... 309

XI. PERFORMANCE OF CONTRACT......... 291 A. DELIVERY OF THING SOLD..................... 291 B. PAYMENT OF PRICE ............................... 293

XII. WARRANTIES .................................... 294 A. EXPRESS WARRANTIES ........................ 294 B. IMPLIED WARRANTIES .......................... 295 B.1. IMPLIED WARRANTY OF TITLE ..... 295 B.2. IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT SERVITUDES.......................................... 296 B.3. IMPLIED WARRANTY AGAINST HIDDEN DEFECTS ................................. 296 B.4. IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF GOODS ............................................. 296

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TABLE OF CONTENTS XVI. THE CONDOMINIUM ACT (RA 4726) 318

C.4. REMEDIES OF APPARENT VENDOR ................................................................ 309 C.5. PERIOD OF REDEMPTION ............ 309 C.6. EXERCISE OF THE RIGHT TO REDEEM ................................................................. 310 C.7. HOW REDEMPTION IS EXERCISED 310 D. LEGAL REDEMPTION .............................. 310 D.1. DEFINITION ..................................... 310 D.2. MANNER ......................................... 310 D.3. PERIOD TO REDEEM ...................... 310 D.4. INSTANCES OF LEGAL REDEMPTION .................................................................. 311

A. DEFINITION OF A CONDOMINIUM ......... 318 A.1. OTHER DEFINITIONS ...................... 318 B. TRANSFERS OR CONVEYANCES OF A UNIT OR AN APARTMENT, OFFICE OR STORE, OR OTHER SPACE THEREIN [SECTION 5, RA 4726] ............................. 319 C. RIGHTS OF A CONDOMINIUM UNIT OWNER (ASIDE FROM RIGHTS ARISING FROM OWNERSHIP) [SECTION 6] ......... 319 D. PARTITION BY SALE [SECTION 8]..... 319 E. DECLARATION OF RESTRICTIONS BY OWNER OF PROJECT - PRECONDITION TO CONVEYANCE [SECTION 9]............. 320 F. ASSESSMENT IN ACCORDANCE WITH DECLARATION OF RESTRICTIONS [SECTION 20] ......................................... 320 G. HOW LIEN ENFORCED AFTER NONPAYMENT OF ASSESSED FEES [SECTION 20] .......................................................... 320 H. CONTENTS OF A DECLARATION OF RESTRICTIONS [SECTION 9] ................. 320 I. INVOLUNTARY DISSOLUTION OF THE CONDOMINIUM CORPORATION [SECTION 12] ........................................................... 320 J.POWER OF ATTORNEY HELD BY CORPORATION IN CASE OF VOLUNTARY DISSOLUTION OF CONDOMINIUM CORPORATION [SECTION 15] ............... 320 K. SALE, EXCHANGE, LEASE, OR DISPOSITION BY CORPORATION OF THE COMMON AREAS [SECTION 16] ............ 321 L. STOCKHOLDER/MEMBER DEMANDING PAYMENT FOR SHARES OR INTEREST AKA APPRAISAL RIGHT [SECTION 17] ... 321 M. REQUIREMENT FOR REGISTRATION OF CONVEYANCE WITH THE REGISTER OF DEEDS [SECTION 18]......................... 321 N. REALTY TAX ON CONDOMINIUMS [SECTION 25] .......................................... 321

XV. THE LAW ON SALE OF SUBDIVISION AND CONDOMINIUM (PD 957) ................ 314 A. DEFINITIONS ........................................... 314 A.1. DEFINITION OF "SALE" OR "SELL" 314 A.2. DEFINITION OF "BUY" OR "PURCHASE" .......................................... 314 B. REQUIREMENTS FOR OWNERS AND DEVELOPERS ............................................... 314 B.1. REGISTRATION OF PROJECTS [SECTION 4, PD 957] .............................. 314 B.2. REGISTRATION OF OWNER [SECTION 4, PD 957] ............................................... 314 B.3. LICENSE TO SELL [SECTION 5, PD 957] ......................................................... 315 C. REQUIREMENT FOR DEALERS, BROKERS, AND SALESMEN (DBS) ....... 316 C.1. REGISTRATION ................................ 316 D. CHARACTERISTICS OF SALE OF A CONDOMINIUM OR SUBDIVISION UNIT AND SIMILAR CONTRACTS ................................. 316 D.1. REGISTRATION OF SALE, ETC [SECTION 17, PD 957] ............................. 316 D.2. MORTGAGES ON UNIT OR LOT BY OWNER OR DEVELOPER [SECTION 18, PD 957] ......................................................... 317 D.3. ADVERTISEMENTS BY THE OWNER OR DEVELOPER [SECTION 19, PD 957] 317 D.4. NON-FORFEITURE OF PAYMENTS (SECTION 23, PD 957) ............................ 317 D.5. FAILURE TO PAY INSTALLMENTS [SECTION 24, PD 957] ............................ 317 D.6. ISSUANCE OF TITLE [SECTION 25, PD 957] ......................................................... 317 D.7. REALTY TAX [SECTION 26, PD 957] ................................................................. 318 D.7. NO OTHER CHARGES [SECTION 27, PD 957] ................................................... 318

SUCCESSION ........................... 322 I. GENERAL PROVISIONS......................... 323 A. DEFINITION ............................................. 323 B. OBJECT OF SUCCESSION AND TRANSMISSION .......................................... 323 C. SUBJECTS OF SUCCESSION .................. 324

II.

TESTAMENTARY SUCCESSION ......324 A. WILLS ...................................................... 324 A.1. IN GENERAL .................................... 324

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TABLE OF CONTENTS I. KINDS OF WILLS................................. 324 II. CHARACTERISTICS OF WILLS .......... 324 III. RULES OF CONSTRUCTION AND INTERPRETATION ................................. 325 IV. GOVERNING LAWS, IN GENERAL ... 326 A.2. TESTAMENTARY CAPACITY AND INTENT ................................................... 326 A.3. FORM .............................................. 326 A.4. CODICILS ......................................... 331 A.5. INCORPORATION BY REFERENCE 331 A.6. REVOCATION .................................. 331 A.7. REPUBLICATION AND REVIVAL ....332 A.8. ALLOWANCE AND DISALLOWANCE OF WILLS ................................................332 I. PROBATE REQUIREMENT ..................332 II. GROUNDS FOR DENYING PROBATE 333 B. INSTITUTION OF HEIR ............................ 333 C. SUBSTITUTION OF HEIRS ...................... 336 D. TESTAMENTARY DISPOSITIONS WITH A CONDITION, A TERM, AND A MODE .......... 337 E. LEGITIME ................................................. 339 F. DISINHERITANCE ................................... 343 F.1. DISINHERITANCE OF CHILDREN AND DESCENDANTS ..................................... 343 F.2. DISINHERITANCE OF PARENTS AND ASCENDANTS ....................................... 344 F.3. DISINHERITANCE OF A SPOUSE .. 344 G. LEGACIES AND DEVISES ....................... 346

A. AS A TYPE OF CONTRACT ..................... 365 A.1. ELEMENTS (STATUTORY): ............. 365 A.2. ELEMENTS (JURISPRUDENTIAL) . 365 A.3. BEING A CONTRACT, IT HAS COC 365 B. AS A LEGAL RELATIONSHIP .................. 365 C. EFFECTS OF AGENCY ............................. 365 C.1. INTEGRATION (MERGER) OF THE PERSONALITY OF THE PRINCIPAL AND THE AGENT ............................................ 365 C.2. EXTENSION (REPRODUCTION) OF THE PERSONALITY OF THE PRINCIPAL THROUGH THE AGENT ......................... 365 C.3. CONSEQUENCES ........................... 365

II. POWERS ................................................366 A. RIGHTS OF AGENTS ............................... 366 A.1. COMPENSATION ............................ 366 A.2. LEND MONEY TO / BORROW MONEY FROM THE AGENCY .............................. 367 A.3. APPOINT A SUBSTITUTE ............... 367 A.4. RETAIN IN PLEDGE THE OBJECTS OF AGENCY ................................................. 368 B. OBLIGATIONS OF AGENTS .................... 369 B.1. ACT WITHIN SCOPE OF AUTHORITY ................................................................ 369 B.2. ACT IN ACCORDANCE WITH INSTRUCTIONS ..................................... 370 B.3. CARRY OUT THE AGENCY ............. 370 B.4. ADVANCE FUNDS ........................... 371 B.5. PREFER THE PRINCIPAL’S INTEREST OVER HIS OWN ...................................... 371 B.6. RENDER ACCOUNT/DELIVER .......372 B.7. PAY INTEREST .................................372 B.8. LIABLE FOR FRAUD/NEGLIGENCE .................................................................372 C. LIABILITY OF AGENTS ............................. 373 C.1. WHEN SOLIDARY ............................ 373 C.2. WHEN PERSONAL .......................... 373

III. LEGAL OR INTESTATE SUCCESSION 349 A. GENERAL PROVISIONS ......................... 349 A.1. RELATIONSHIP ............................... 350 A.2. RIGHT OF REPRESENTATION ....... 351 B. ORDER OF INTESTATE SUCCESSION ... 353

IV. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION............... 355 A. RIGHT OF ACCRETION ........................... 355 B. CAPACITY TO SUCCEED BY WILL OR INTESTACY .................................................. 356 C. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE ............................................. 358 D. COLLATION ............................................ 359 E. PARTITION AND DISTRIBUTION OF ESTATE ........................................................ 360 E.1. IN GENERAL .................................... 360 E.2. EFFECTS OF PARTITION ................ 361 E.3. RESCISSION AND NULLIFICATION OF PARTITION ............................................. 362

III. EXPRESS VS IMPLIED AGENCY .......... 374 A. EXPRESS ................................................. 374 B. IMPLIED ................................................... 374 B.1. ACTS OF THE PRINCIPAL ............... 374 B.2. ACTS OF THE AGENT ..................... 374

IV. AGENCY BY ESTOPPEL ....................... 375 A. BASED ON STATUTE .............................. 375 A.1. TWO MODES ................................... 375 A.2. HOW RESCINDED .......................... 375 B. BASED ON JURISPRUDENCE ................ 375 B.1. REQUISITES .................................... 375

AGENCY .................................. 364

V. GENERAL VS. SPECIAL AGENCY ......... 376

I. DEFINITION OF AGENCY ...................... 365 xii

TABLE OF CONTENTS A. GENERAL AGENCY ..................................376 B. SPECIAL AGENCY ....................................376

D.2. EXCEPTIONS .................................. 384 D.3. DEATH OF AGENT ................... 384 E. DISSOLUTION / ACCOMPLISHMENT / EXPIRATION ................................................ 384

VI. AGENCY COUCHED IN GENERAL TERMS (ACGT)........................................................ 376 VII. AGENCY REQUIRING SPECIAL POWER OF ATTORNEY........................................... 377

PARTNERSHIP ........................ 389 I. CONTRACT OF PARTNERSHIP ............ 390

A. IN GENERAL ............................................ 377 B. EFFECT OF ABSENCE OF SPECIFIC AUTHORITY .................................................. 377 B.1. IN GENERAL..................................... 377 B.2. SALE OF LAND OR ANY INTEREST THEREIN ................................................. 377 B.3. EFFECT OF SPECIFIC AUTHORIZATION ...................................378

A. DEFINITION ............................................. 390 A.1. ELEMENTS (STATUTORY): ............. 390 A.2. ELEMENTS (JURISPRUDENCE)..... 390 B. ESSENTIAL FEATURES .......................... 390 B.1. LAWFUL PURPOSE......................... 390 B.2. COMMON BENEFIT ......................... 391 B.3. JURIDICAL PERSONALITY .............. 391 C. PARTIES ................................................... 391 D. OBJECT..................................................... 391 D.1. OBJECT OF UNIVERSAL PARTNERSHIP ........................................ 391 D.2. OBJECT OF PARTICULAR PARTNERSHIP ....................................... 392 D.3. EFFECT OF UNLAWFUL OBJECT .. 392 E. FORM ....................................................... 392 F. DURATION .............................................. 392 F.1. COMMENCEMENT .......................... 392 F.2. TERM ............................................... 392 F.3. EXTENSION..................................... 392 G.RULES TO DETERMINE EXISTENCE ...... 393 H. KINDS OF PARTNERSHIPS .................... 393 H.1. AS TO THE LEGALITY OF ITS EXISTENCE: ........................................... 393 H.2. AS TO ITS OBJECT: ........................ 393 H.3. AS TO ITS DURATION: ................... 393 H.4. AS TO THE LIABILITY OF THE PARTNERS: ............................................ 393 H.5. AS TO ITS PUBLICITY:.................... 393 H.6. AS TO ITS PURPOSE:..................... 393 I. KINDS OF PARTNERS .............................. 394 J. PARTNERSHIP, DISTINGUISHED FROM OTHER CONTRACTS................................... 395

VIII. AGENCY BY OPERATION OF LAW ....378 IX. RIGHTS AND OBLIGATIONS OF PRINCIPAL.................................................378 A. OBLIGATIONS ..........................................378 A.1. COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT ..............378 A.2. ADVANCE OR REIMBURSE SUMS NECESSARY............................................379 A.3. INDEMNIFY THE AGENT FOR INJURY .................................................................379 A.4. COMPENSATE THE AGENT ........... 380 B. LIABILITY OF THE PRINCIPAL................ 380 B.1. IN GENERAL.................................... 380 B.2. BE SOLIDARILY LIABLE ................. 380 B.3. IF THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL ......... 380

X. IRREVOCABLE AGENCY ....................... 381 XI. MODES OF EXTINGUISHMENT.......... 382 A. IN GENERAL ........................................... 382 B. REVOCATION .......................................... 382 B.1. IN GENERAL.................................... 382 B.2. WHEN REVOCATION IS NOT BINDING ON THIRD PERSONS ............................ 383 B.3. APPOINTMENT OF NEW AGENT .. 383 B.4. DIRECT MANAGEMENT BY THE PRINCIPAL ............................................. 383 B.5. SPECIAL AUTHORITY REVOKES THE GENERAL AUTHORITY WHERE A SPECIAL MATTER IS INVOLVED .......................... 383 B.6. WHEN AGENCY CANNOT BE REVOKED ............................................... 383 C. WITHDRAWAL BY THE AGENT .............. 384 D. DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY......................................... 384 D.1. IN GENERAL ................................... 384

II. RIGHTS AND OBLIGATIONS OF THE PARTNERSHIP .......................................... 397 A. RIGHT TO CONTRIBUTION .................... 397 A.1. CONTRIBUTION OF MONEY OR PROPERTY ............................................. 397 I. AMOUNT OF CONTRIBUTION .......... 397 II. ADDITIONAL CAPITAL CONTRIBUTION ................................................................ 397 A.2. CONTRIBUTION OF INDUSTRY .... 398 B. RIGHT TO APPLY PAYMENT RECEIVED TO PARTNERSHIP CREDIT .............................. 398

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TABLE OF CONTENTS IV. OBLIGATIONS OF PARTNERSHIP / PARTNERS TO THIRD PERSONS ........... 403

B.1. REQUISITES: ................................... 398 B.2. EXCEPTIONS: ................................. 398 C. RIGHT TO RETURN OF CREDIT RECEIVED ..................................................................... 398 D. RIGHT TO INDEMNITY FOR DAMAGES 398 D.1. SET-OFF OF LIABILITY ................... 398 D.2. SUIT FOR DAMAGES ..................... 399 E. RESPONSIBILITY TO PARTNERS ........... 399

A. OBLIGATION TO OPERATE UNDER A FIRM NAME ........................................................... 403 B. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS ...................... 403 B.1. NATURE OF INDIVIDUAL LIABILITY ................................................................ 403 I. SUBSIDIARY........................................ 403 II. PRO RATA .......................................... 404 B.2. LIABILITY OF AN INDUSTRIAL PARTNER ............................................... 404 B.3. STIPULATION AGAINST INDIVIDUAL LIABILITY ................................................ 404 C. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS ...................... 404 C.1. ACTS APPARENTLY FOR THE CARRYING ON OF USUAL BUSINESS .. 404 C.2. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS ................................................................ 404 C.3. ACTS OF STRICT DOMINION ......... 404 C.4. ACTS IN CONTRAVENTION OF A RESTRICTION ........................................ 405 D. CONVEYANCE OF PARTNERSHIP REAL PROPERTY .................................................. 405 D.1. TITLE IN PARTNERSHIP NAME ..... 405 D.2. TITLE IN THE NAME OF OTHER PERSONS ............................................... 405 E. LIABILITY OF THE PARTNERSHIP FOR ADMISSION BY A PARTNER ...................... 405 F. LIABILITY OF THE PARTNERSHIP FOR WRONGFUL ACTS OF A PARTNER............ 405 G. LIABILITY OF THE PARTNERSHIP FOR MISAPPLICATION OF MONEY OR PROPERTY ..................................................................... 405 H. LIABILITY OF THE OTHER PARTNERS UNDER ARTICLES 1822 AND 1823 ............. 406 I. LIABILITY IN CASE OF PARTNERSHIP BY ESTOPPEL ................................................... 406 I.1. PARTNER BY ESTOPPEL ................. 406 I.2. LIABILITY OF A PARTNER BY ESTOPPEL .............................................. 406 I. PERSONAL REPRESENTATION ........ 406 II. PUBLIC REPRESENTATION .............. 406 I.3. EFFECT ON EXISTING PARTNERSHIP OR OTHER PERSONS NOT ACTUAL PARTNERS............................................. 406 I.4. NATURE OF LIABILITY .................... 406 J. LIABILITY OF AN INCOMING PARTNER . 407

III. RIGHTS AND OBLIGATIONS OF PARTNERS AMONG THEMSELVES ........ 399 A. RIGHT TO ASSOCIATE ANOTHER IN SHARE ......................................................... 399 B. RIGHT TO INSPECT PARTNERSHIP BOOKS ..................................................................... 399 C. RIGHT TO A FORMAL ACCOUNT ........... 399 D. PROPERTY RIGHTS OF PARTNERS ...... 400 D.1. IN GENERAL ................................... 400 D.2. PROPERTY AND CAPITAL DISTINGUISHED .................................... 400 E. OWNERSHIP OF CERTAIN PROPERTIES ..................................................................... 400 F. RIGHTS IN SPECIFIC PROPERTY ........... 400 G. INTEREST IN THE PARTNERSHIP ......... 400 G.1. ASSIGNMENT OF INTEREST.......... 400 G.2. CHARGING OF INTEREST BY PERSONAL CREDITORS ........................ 401 H. RIGHT TO PARTICIPATE IN MANAGEMENT ...................................................................... 401 H.1. POWERS OF A MANAGING PARTNER ................................................................. 401 H.2. REVOCATION OF POWER OF MANAGING PARTNER ........................... 401 H.3. MANAGEMENT BY TWO OR MORE PARTNERS .................................. 401 H.4. STIPULATION OF UNANIMITY ...... 402 H.5. MANAGEMENT WHEN MANNER NOT AGREED UPON ............................. 402 H.6. MUTUAL AGENCY ................... 402 I. RIGHT TO PROFITS AND OBLIGATION FOR LOSSES........................................................ 402 I.1. RULES FOR DISTRIBUTION OF PROFITS AND LOSSES ......................... 402 I.2. EXCLUSION OF PARTNER FROM SHARE.................................................... 402 J. OBLIGATION TO RENDER INFORMATION ..................................................................... 403 K. OBLIGATION TO ACCOUNT AND ACT AS TRUSTEE ..................................................... 403

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TABLE OF CONTENTS K. NOTICE TO OR KNOWLEDGE OF THE PARTNERSHIP ............................................ 407

G.5. DOCTRINE OF MARSHALING OF ASSETS ................................................... 412 G.6. DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER ........................... 413 H. RIGHTS OF CREDITORS OF DISSOLVED PARTNERSHIP ............................................. 413 H.1. AS CREDITORS OF THE NEW PARTNERSHIP ........................................ 413 H.2. LIABILITY OF A NEW PARTNER ..... 413 H.3. PRIORITY OF CREDITORS OF DISSOLVED PARTNERSHIP ................... 413 I. RIGHTS OF A RETIRED PARTNER OR A REPRESENTATIVE OF DECEASED PARTNER ...................................................................... 413 J. RIGHT TO AN ACCOUNT .......................... 414

V. DISSOLUTION ...................................... 407 A. CONCEPTS .............................................. 407 B. CAUSES OF DISSOLUTION .................... 407 B.1. WITHOUT VIOLATION OF THE AGREEMENT ......................................... 407 B.2. IN CONTRAVENTION OF THE AGREEMENT ......................................... 408 B.3. BY OPERATION OF LAW................ 408 B.4. BY DECREE OF COURT.................. 408 B.5. OTHER CAUSES ............................. 409 C. EFFECTS OF DISSOLUTION ................... 409 C.1. ON AUTHORITY OF THE PARTNERS ................................................................ 409 C.1.A. WITH RESPECT TO PARTNERS .. 409 C.1.B. WITH RESPECT TO THIRD PERSONS ................................................................ 409 C.2. ON LIABILITY FOR TRANSACTIONS AFTER DISSOLUTION ........................... 409 C.3. ON LIABILITY FOR CONTRACTS AFTER DISSOLUTION BY SPECIFIC CAUSES................................................... 410 C.4. ON EXISTING LIABILITY OF PARTNERS ............................................. 410 D. WINDING UP PARTNERS........................ 410 D.1. WHO MAY WIND UP ........................ 410 D.2. MANNER OF WINDING UP ............ 410 E. RIGHTS OF PARTNERS IN CASE OF DISSOLUTION ............................................... 411 E.1. DISSOLUTION WITHOUT VIOLATION OF THE AGREEMENT .............................. 411 E.2. DISSOLUTION IN CONTRAVENTION OF THE AGREEMENT .............................. 411 I. PARTNER WHO DID NOT CAUSE THE DISSOLUTION ......................................... 411 II. PARTNER WHO CAUSED THE DISSOLUTION ......................................... 411 F. RIGHTS OF PARTNERS IN CASE OF RESCISSION .................................................. 411 G. SETTLING OF ACCOUNTS BETWEEN PARTNERS ................................................... 412 G.1. COMPOSITION OF PARTNERSHIP ASSETS ................................................... 412 G.2. AMOUNT OF CONTRIBUTION FOR LIABILITIES ............................................. 412 G.3. ENFORCEMENT OF CONTRIBUTION ................................................................. 412 G.4. ORDER OF APPLICATION OF ASSETS ................................................................. 412

VI. LIMITED PARTNERSHIP...................... 414 A. DEFINITION .............................................. 414 B. CHARACTERISTICS ................................. 414 C. GENERAL AND LIMITED PARTNERS DISTINGUISHED........................................... 414 D. GENERAL AND LIMITED PARTNERSHIP DISTINGUISHED........................................... 415 E. FORMATION ............................................. 415 E.1. GENERAL REQUIREMENTS ............ 415 E.2. PURPOSE OF FILING ...................... 416 E.3. FIRM NAME ..................................... 416 E.4. FALSE STATEMENT IN THE CERTIFICATE .......................................... 416 REQUISITES: ........................................... 416 E.5. GENERAL AND LIMITED PARTNER AT THE SAME TIME...................................... 416 F. MANAGEMENT ........................................ 416 G. OBLIGATIONS OF A LIMITED PARTNER 417 G.1. OBLIGATIONS RELATED TO CONTRIBUTION ...................................... 417 G.2. LIABILITY TO PARTNERSHIP CREDITORS ............................................ 418 G.3. LIABILITY TO SEPARATE CREDITORS ................................................................. 418 H. RIGHTS OF A LIMITED PARTNER ........... 418 H.1. IN GENERAL .................................... 418 H.2. RIGHT TO TRANSACT BUSINESS WITH THE PARTNERSHIP ...................... 418 H.3. RIGHT TO SHARE IN PROFITS ....... 419 H.4. RIGHT TO RETURN OF CONTRIBUTION ...................................... 419 H.5. PREFERENCE OF LIMITED PARTNERS.............................................. 419 H.6. RIGHT TO ASSIGN INTEREST ........ 419

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TABLE OF CONTENTS H.7. RIGHT TO ASK FOR DISSOLUTION ................................................................ 420 I. DISSOLUTION .......................................... 420 J. SETTLEMENT OF ACCOUNTS ................ 420 J.1. ORDER OF PAYMENT ..................... 420 J.2. SHARE IN THE PARTNERSHIP ASSETS ................................................................ 420 K. AMENDMENT OR CANCELLATION OF CERTIFICATE ................................................ 421 K.1. CANCELLATION OF CERTIFICATE .. 421 K.2. AMENDMENT OF CERTIFICATE ..... 421 K.3. REQUIREMENTS FOR AMENDMENT OR CANCELLATION ............................... 421

B.5. WHEN HOTEL-KEEPER NOT LIABLE ................................................................ 428 B.6. HOTEL-KEEPER’S RIGHT TO RETENTION ........................................... 428 C. JUDICIAL DEPOSIT ................................. 428 C.1. NATURE AND PURPOSE ................ 428 C.2. DEPOSITARY OF SEQUESTERED PROPERTY ............................................. 428 C.3. APPLICABLE LAW .......................... 429

III. GUARANTY AND SURETYSHIP.......... 429 A. NATURE AND EXTENT OF GUARANTY. 429 B. NATURE AND EXTENT OF SURETYSHIP ..................................................................... 432 C. EFFECT OF GUARANTY .......................... 433 C.1. EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND THE CREDITOR ................................................................ 433 C.2. EFFECTS OF GUARANTY BETWEEN THE DEBTOR AND THE GUARANTOR . 435 C.3. EFFECTS OF GUARANTY AS BETWEEN CO-GUARANTORS .............. 436 D. EXTINGUISHMENT OF GUARANTY ....... 437 E. LEGAL AND JUDICIAL BONDS ............... 437

CREDIT TRANSACTIONS......... 422 I. LOAN ..................................................... 423 CONTRACTS OF LOAN ............................... 423 CONTRACT OF LOAN VS. CONTRACT TO LOAN ........................................................... 423 SIMPLE LOAN VS. BARTER ........................ 423 COMMODATUM VS. MUTUUM .................. 423 A. COMMODATUM...................................... 423 A.1. KINDS OF COMMODATUM ............ 424 A.2. PARTIES ......................................... 424 A.3. OBLIGATIONS OF THE BAILEE ..... 424 A.4. OBLIGATIONS OF THE BAILOR .... 424 A.5. LIABILITY FOR DETERIORATION .. 424 A.6. RIGHT OF RETENTION .................. 424 B. MUTUUM ................................................ 425 B.1. OBLIGATIONS OF THE BORROWER ................................................................ 425 B.2. INTEREST AND SUSPENSION OF USURY LAW ........................................... 425 B.3. KINDS OF INTEREST ...................... 425 B.4. WHEN IS COMPOUND INTEREST ALLOWED? ............................................ 425 B.5. REQUISITES FOR INTEREST TO BE CHARGEABLE ........................................ 425 B.6. ELEMENTS OF USURY .................. 426

IV. PLEDGE ................................................ 437 A. CHARACTERISTICS ................................ 438 B. KINDS ...................................................... 438 LEGAL PLEDGE / PLEDGE BY OPERATION OF LAW [ARTS. 2121-2122] .................... 438 C. ESSENTIAL REQUISITES ........................ 438 PROVISIONS APPLICABLE ONLY TO PLEDGE .................................................. 439 D. REQUISITES FOR PERFECTION ............ 439 E. OBLIGATIONS OF PLEDGEE .................. 439 F. RIGHTS OF PLEDGOR............................. 439 G. FORECLOSURE ...................................... 440 G.1. REQUIREMENTS IN SALE OF THE THING PLEDGED BY A CREDITOR, IF CREDIT IS NOT PAID ON TIME ............. 440 G.2. EFFECTS OF THE SALE OF THE THING PLEDGED ................................... 440 H. PLEDGE AS DISTINGUISHED FROM CHATTEL MORTGAGE [ARTS. 2140, 1484] 440 I. PACTUM COMMISSORIUM....................... 440 ELEMENTS .............................................. 441 EFFECT ON PLEDGE .............................. 441 J. EQUITABLE MORTGAGE .......................... 441 ESSENTIAL REQUISITES ........................ 441

II. DEPOSIT ............................................... 426 A. VOLUNTARY DEPOSIT ............................427 A.1. EXTINGUISHMENT ..........................427 A.2. OBLIGATIONS OF DEPOSITOR ......427 B. NECESSARY DEPOSIT .............................427 B.1. KINDS OF NECESSARY DEPOSIT ...427 B.2. DEPOSIT BY TRAVELERS IN HOTELS AND INNS ...............................................427 B.3. EXTENT OF LIABILITY UNDER ART.1998 ............................................... 428 B.4. WHEN HOTEL-KEEPER LIABLE .... 428

V. REAL MORTGAGE ................................ 441 A. OBJECTS OF REAL MORTGAGE ............. 441

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TABLE OF CONTENTS B. CHARACTERISTICS ................................. 441 C. KINDS ....................................................... 441 D. PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE ................................. 442 E. ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE ......................... 442 F. FORECLOSURE OF MORTGAGE ............ 443 F.1. JUDICIAL FORECLOSURE .............. 443 F.2. EXTRAJUDICIAL FORECLOSURE .. 444 F.4. NATURE OF POWER OF FORECLOSURE BY EXTRAJUDICIAL SALE ................................................................ 444 F.5. RIGHT OF MORTGAGEE TO RECOVER DEFICIENCY ........................................... 445 F.6. EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE ....................... 445 G. WAIVER OF SECURITY BY CREDITOR .. 445 H. REDEMPTION ......................................... 445 KINDS: .................................................... 445

WHEN DEBT NOT YET DUE ................... 451 RESPONSIBILITY OF TWO OR MORE PAYEES ................................................... 451 WHEN MONEY OR THING DELIVERED IS OWNED BY THIRD PERSON .................. 451 LIABILITY OF PAYEE ............................... 451 EXEMPTION FROM THE OBLIGATION TO RESTORE THE PAYMENT UNDULY MADE ................................................................ 452 PRESUMPTION OF PAYMENT BY MISTAKE, DEFENSE .............................. 452 C. OTHER QUASI-CONTRACTS .................. 452

IX. CONCURRENCE AND PREFERENCE OF CREDITS ................................................... 453 A. WHEN RULES ON PREFERENCE ARE APPLICABLE ................................................ 453 B. CLASSIFICATION OF CREDITS............... 453 B.1. SPECIAL PREFERRED CREDITS ON SPECIFIC MOVABLE PROPERTY .......... 454 B.2. SPECIAL PREFERRED CREDITS ON SPECIFIC IMMOVABLE PROPERTY AND REAL RIGHTS......................................... 454 B.3. ORDINARY PREFERRED CREDITS 455 B.4. COMMON CREDITS ....................... 455 C. ORDER OF PREFERENCE OF CREDITS . 455 D. EXEMPT PROPERTY ............................... 456

VI. ANTICHRESIS...................................... 446 A. CHARACTERISTICS ................................ 446 B. SPECIAL REQUISITES............................. 446 C. AS DISTINGUISHED FROM OTHER CONTRACTS................................................ 446 D. OBLIGATIONS OF ANTICHRETIC CREDITOR ................................................... 446 E. REMEDIES OF CREDITOR IN CASE OF NON-PAYMENT OF DEBT .......................... 447

LAND, TITLES, & DEEDS ......... 457 I. TORRENS SYSTEM ............................... 458

VII. CHATTEL MORTGAGE ....................... 447

ELEMENTS OF A DEED: ........................ 458 TYPES OF ESTATE: ................................ 458 A. LAWS IMPLEMENTING LAND REGISTRATION ........................................... 459 B. PURPOSES OF LAND REGISTRATION .. 459 C. ADMINISTRATION OF THE TORRENS SYSTEM ....................................................... 460 CERTIFICATE OF TITLE .......................... 461 D. EFFECT OF REGISTRATION UNDER THE TORRENS SYSTEM ...................................... 461

A. CHARACTERISTICS ................................ 447 B. OBLIGATIONS SECURED ....................... 447 C. PROPERTIES COVERED ......................... 447 D. VALIDITY OF CHATTEL MORTGAGE ..... 448 E. FORMAL REQUISITES ............................ 448 F. REGISTRATION OF CHATTEL MORTGAGE ..................................................................... 448 F.1. PERIOD ............................................ 448 F.2. VENUE ............................................ 448 F.3. EFFECT............................................ 448 G. FORECLOSURE ...................................... 449 DISPOSITION OF PROCEEDS ............... 449

II. THE REGALIAN DOCTRINE ................. 463 A. EFFECTS .................................................. 464 B. CONCEPT OF NATIVE TITLE, TIME IMMEMORIAL POSSESSION ...................... 464

VIII. QUASI-CONTRACTS ......................... 449 A.1. OBLIGATIONS OF A GESTOR ........ 450 A.2. OBLIGATIONS OF THE OWNER OF THE PROPERTY OR BUSINESS ............ 450 A.3. EFFECT OF RATIFICATION ............. 451 A.4. EXTINGUISHMENT OF MANAGEMENT ....................................... 451 B. SOLUTIO INDEBITI (UNDUE PAYMENT) . 451

III. CITIZENSHIP REQUIREMENT ............ 465 A. B.

INDIVIDUALS .................................... 465 CORPORATIONS .............................. 466

IV. ORIGINAL REGISTRATION ................ 466 A. KINDS OF ORIGINAL REGISTRATION: .. 466 B. WHO MAY APPLY: .................................. 467

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TABLE OF CONTENTS C. PROCEDURE IN ORDINARY LAND REGISTRATION ........................................... 468 D. EVIDENCE NECESSARY ..........................473 E. REMEDIES: ...............................................473 F. PETITIONS AND MOTIONS AFTER ORIGINAL REGISTRATION ......................... 474

D.4. AS TO THE DEFENSE OF AN EMPLOYER FOR THE NEGLIGENCE OF AN EMPLOYEE ............................................. 492

II. QUASI-DELICT ..................................... 492 A. NEGLIGENCE .......................................... 492 A.1. DEFAULT STANDARD OF CARE: GOOD FATHER OF A FAMILY ............... 492 A.2. STANDARD OF CARE NEEDED IN SPECIFIC CIRCUMSTANCES ................. 493 A.3. PRESUMPTIONS OF NEGLIGENCE ................................................................ 494 I. IN MOTOR VEHICLE MISHAPS .......... 494 II. POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES ............... 496 III. COMMON CARRIERS ....................... 496 IV. RES IPSA LOQUITUR ........................ 496 A.4. PERSONS LIABLE .......................... 497 B. CAUSE ..................................................... 502 C. DEFENSES............................................... 506 C.1. DUE DILIGENCE TO PREVENT THE DAMAGE UNDER ARTICLE 2180 .......... 506 C.2. ACTS OF PUBLIC OFFICERS .......... 506 C.3. AUTHORITY OF LAW...................... 506 C.4. DAMNUM ABSQUE INJURIA .......... 506 C.5. PLAINTIFF’S NEGLIGENCE IS THE PROXIMATE CAUSE .............................. 507 C.6. CONTRIBUTORY NEGLIGENCE OF THE PLAINTIFF ...................................... 507 C.7. FORTUITOUS EVENT ..................... 507 C.8. PLAINTIFF’S ASSUMPTION OF RISK / VOLENTI NON FIT INJURIA.................... 508 C.9. PRESCRIPTION .............................. 508 C.10. WAIVER ......................................... 508 C.11. EMERGENCY RULE OR SUDDEN PERIL DOCTRINE .................................. 509

V. JUDICIAL CONFIRMATION OF IMPERFECT OR INCOMPLETE TITLES.... 475 A. FILING OF THE APPLICATION: .............. 476 B. PROCEDURE IN JUDICIAL CONFIRMATION: ......................................... 477 C. EVIDENCE NECESSARY TO SUBSTANTIATE APPLICATION: .................. 477

VI. CADASTRAL REGISTRATION ............. 477 A. DISTINGUISHED FROM ORDINARY REGISTRATION ............................................ 477

VII. SUBSEQUENT REGISTRATION......... 479 A. NECESSITY AND EFFECTS OF REGISTRATION ........................................... 479 B. TWO TYPES OF DEALINGS .................... 480 C. VOLUNTARY DEALINGS ......................... 481 D. INVOLUNTARY DEALINGS .................... 483 REGISTRATION OF EXECUTION AND TAX DELINQUENCY SALES .......................... 483

VIII. NON-REGISTRABLE PROPERTIES .. 486 IX. DEALINGS WITH UNREGISTERED LANDS ...................................................... 487 EFFECTS OF TRANSACTIONS COVERING UNREGISTERED LAND ......................... 487 PRIMARY ENTRY BOOK AND REGISTRATION BOOK .......................... 487

TORTS .................................... 489 I. PRELIMINARY CONSIDERATIONS ...... 490 A. DEFINITION OF TORT ............................ 490 A.1. ACCORDING TO MANNER OF COMMISSION ........................................ 490 A.2. ACCORDING TO SCOPE ................ 490 B. DEFINITION OF QUASI-DELICT ............. 490 C. CULPA AQUILIANA DISTINGUISHED FROM CRIME ........................................................... 491 D. CULPA AQUILIANA DISTINGUISHED FROM CULPA CONTRACTUAL; PRESENCE OF CONTRACTUAL RELATIONS ....................... 491 D.1. AS TO SOURCE ................................ 491 D.2. AS TO BURDEN OF PROOF ........... 491 D.3. AS TO APPLICABILITY OF THE DOCTRINE OF PROXIMATE CAUSE ...... 491

III. INTENTIONAL TORTS......................... 509 A. HUMAN RELATIONS TORTS .................. 509 A.1. ABUSE OF RIGHT ............................ 509 A.2. ACTS CONTRARY TO LAW .............510 A.3. ACTS CONTRARY TO MORALS ....... 511 A.4. UNJUST ENRICHMENT ................... 512 A.5. VIOLATION OF HUMAN DIGNITY ... 513 FAMILY RELATIONS ............................... 515 SOCIAL RELATIONS................................ 516 ECONOMIC RELATIONS ......................... 516 A.6 DERELICTION OF DUTY .................. 517 A.7. UNFAIR COMPETITION ................... 517 B. INDEPENDENT CIVIL ACTIONS .............. 517 B.1. VIOLATION OF CIVIL AND POLITICAL RIGHTS .................................................... 517

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TABLE OF CONTENTS B.2. DEFAMATION, FRAUD, PHYSICAL INJURIES ................................................. 519 B.3. NEGLECT OF DUTY ........................ 520 B.4. CATCH-ALL INDEPENDENT CIVIL ACTION ................................................... 521

COMPONENTS ............................................ 536 LOSS COVERED; ......................................... 536 EXTENT OR SCOPE OF ACTUAL DAMAGES ..................................................................... 536 IN CONTRACTS AND QUASI-CONTRACTS 536 IN CRIMES AND QUASI-DELICTS .............. 537 EARNING CAPACITY, BUSINESS STANDING ..................................................................... 538 LOSS OR IMPAIRMENT OF EARNING CAPACITY............................................... 538 INJURY TO BUSINESS STANDING OR COMMERCIAL CREDIT .......................... 538 FORMULA FOR THE NET EARNING CAPACITY............................................... 538 DEATH BY CRIME OR QUASI-DELICT .. 538 CIVIL / DEATH INDEMNITY ................... 539 AS TO THE LOSS OF EARNING CAPACITY ................................................................ 539 IN RAPE CASES...................................... 539 ATTORNEY’S FEES AND EXPENSES OF LITIGATION ............................................ 539 INTEREST ................................................ 541

IV. LIABILITY ATTACHED TO SPECIFIC PERSONS .................................................. 521 A. STRICT LIABILITY .................................... 521 A.1. POSSESSOR OR USER OF ANIMALS ................................................................. 521 A.2. PROVINCES, CITIES, AND MUNICIPALITIES ................................... 522 A.3. PROPRIETOR OF BUILDING OR STRUCTURE .......................................... 522 A.4. ENGINEER OR ARCHITECT OF COLLAPSED BUILDING ......................... 523 A.5. OWNERS OF ENTERPRISES OR OTHER EMPLOYERS ............................. 523 A.6. HEAD OF A FAMILY FOR THINGS THROWN OR FALLING ......................... 524 A.7. PRODUCTS LIABILITY .................... 524 I. MANUFACTURERS / PROCESSORS OF FOODSTUFFS ........................................ 524 II. CONSUMER ACT – RA 7394, SECS. 92107 (CH. 1) ............................................... 525 A.8. NUISANCE ...................................... 528 EASEMENT AGAINST NUISANCE ......... 528

III. MORAL DAMAGES.............................. 543 WHEN AWARDED........................................ 543 REQUISITES FOR AWARDING MORAL DAMAGES .............................................. 543 GENERAL PRINCIPLES OF RECOVERY:543 WHEN RECOVERABLE ............................... 545 IN CRIMINAL OFFENSE RESULTING IN PHYSICAL INJURIES .............................. 545 IN QUASI-DELICTS CAUSING PHYSICAL INJURIES ................................................ 545 IN SEDUCTION, ABDUCTION, RAPE AND OTHER LASCIVIOUS ACTS .................... 546 IN ILLEGAL OR ARBITRARY DETENTION OR ARREST ........................................... 546 IN CASE OF MALICIOUS PROSECUTION ................................................................ 546 IN ACTS REFERRED TO IN ARTS. 21, 26, 27, 28, 29, 32, 34 &35, NCC .................. 546 VIOLATION OF HUMAN DIGNITY ......... 547 REFUSAL OR NEGLECT OF DUTY ........ 547 VIOLATION OF CIVIL AND POLITICAL RIGHTS ................................................... 548 IN WILLFUL INJURY TO PROPERTY ..... 549 IN BREACH OF CONTRACT IN BAD FAITH ................................................................ 549 WHO MAY RECOVER MORAL DAMAGES.. 549 RELATIVES OF INJURED PERSONS ..... 550 JURIDICAL PERSONS ............................ 550

DAMAGES ............................... 533 I. DEFINITION ........................................... 534 INJURY VS. DAMAGE VS. DAMAGES ......... 534 WHEN DAMAGES MAY BE RECOVERED ... 534 ELEMENTS FOR RECOVERY OF DAMAGES ..................................................................... 534 CLASSIFICATION ........................................ 534 ACCORDING TO PURPOSE ........................ 534 ACCORDING TO MANNER OF DETERMINATION ....................................... 534 SPECIAL AND ORDINARY .......................... 534 GENERAL DAMAGES ............................. 534 SPECIAL DAMAGES ............................... 534

II. ACTUAL & COMPENSATORY DAMAGES .................................................................. 535 REQUISITES ................................................ 535 WHEN IS A PERSON ENTITLED? .......... 535 ALLEGED AND PROVED WITH CERTAINTY ................................................................ 535 DEGREE OF CERTAINTY REQUIRED AS TO: FACT, CAUSE AND AMOUNT OF DAMAGES .............................................. 535

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TABLE OF CONTENTS FACTORS CONSIDERED IN DETERMINING AMOUNT ................................................ 550

COMPROMISE ............................................. 559

IX.MISCELLANEOUS RULES ................... 559

IV. NOMINAL DAMAGES ......................... 550

DAMAGES THAT CANNOT CO-EXIST ........ 559 NOMINAL WITH OTHER DAMAGES ..... 559 ACTUAL AND LIQUIDATED .................. 559 DAMAGES THAT MUST CO-EXIST ............. 559 EXEMPLARY WITH MORAL, TEMPERATE, LIQUIDATED OR COMPENSATORY ..... 559 DAMAGES THAT MUST STAND ALONE .... 559 NOMINAL DAMAGES .................................. 559

REQUISITES AND CHARACTERISTICS ...... 550 WHEN AWARDED ....................................... 550 NATURE AND DETERMINATION OF AMOUNT ...................................................................... 551

V. TEMPERATE DAMAGES ....................... 551 REQUISITES ................................................ 552 FACTORS IN DETERMINING AMOUNT ..... 552 WHERE THERE ARE RECEIPTS PROVIDED AMOUNTING TO LESS THAN P25,000 552 WHERE NO RECEIPTS WERE PROVIDED ................................................................ 553

PRIVATE INTERNATIONAL LAW ................................................560 I. INTRODUCTION ..................................... 561 A.SCOPE OF CONFLICTS OF LAWS: NATURE, DEFINITION AND IMPORTANCE ................. 561 A.2. DIVERSITY OF LAWS, CUSTOMS AND PRACTICES ............................................. 561 A.2. DEFINITION ..................................... 561 A.3. OBJECT, FUNCTION AND SCOPE .. 561

VI.LIQUIDATED DAMAGES ...................... 553 REQUISITES AND CHARACTERISTICS ...... 553 RULES GOVERNING BREACH OF CONTRACT ..................................................................... 553

VII. EXEMPLARY OR CORRECTIVE DAMAGES................................................. 554

II. JURISDICTION AND CHOICE OF LAW 562

WHEN RECOVERABLE ............................... 554 IN CRIMINAL OFFENSES; NCC ART. 2230 ................................................................ 554 IN CONTRACTS AND QUASI-CONTRACTS; NCC ART. 2232 ...................................... 555 REQUISITES ........................................... 555 REQUISITES TO RECOVER EXEMPLARY DAMAGES AND LIQUIDATED DAMAGES AGREED UPON ...................................... 555 DAMAGES IN CASE OF DEATH .................. 556 RE. CRIMES AND QUASI-DELICTS ............ 556 IN DEATH CAUSED BY BREACH OF CONDUCT BY A COMMON CRIME ....... 556

A. JURISDICTION ........................................ 562 A.1. BASIS OF EXERCISE OF JUDICIAL JURISDICTION ....................................... 562 A.2. WAYS OF DEALING WITH A CONFLICTS PROBLEM .......................... 563 B. CHOICE OF LAW ..................................... 563 B.1. APPROACHES TO CHOICE OF LAW ................................................................ 563 C. THE PROBLEM OF CHARACTERIZATION ..................................................................... 564 C.1 CHARACTERIZATION AND THE SINGLE-ASPECT METHOD ................... 564

VIII. GRADUATION OF DAMAGES........... 557

C.2 DECEPAGE ...................................... 565 D. THE PROBLEM OF RENVOI ................... 565 D.1. DEFINITION..................................... 565 D.2. VARIOUS WAYS OF DEALING WITH THE PROBLEM OF RENVOI .................. 565 E. NOTICE AND PROOF OF FOREIGN LAW ..................................................................... 566 E.1. EXTENT OF JUDICIAL NOTICE ....... 566 E.2. PROOF OF FOREIGN LAW ............. 566 E.3. EXCEPTIONS TO THE APPLICATION OF FOREIGN LAW ................................. 566

RULES.......................................................... 557 IN CRIMES.............................................. 557 IN QUASI-DELICTS ................................ 557 CONTRIBUTORY NEGLIGENCE ................. 557 PLAINTIFF’S NEGLIGENCE ................... 557 IN CONTRACTS, QUASI-CONTRACTS AND QUASI-DELICTS .................................... 557 GROUNDS FOR MITIGATION OF DAMAGES ..................................................................... 558 FOR CONTRACTS: ................................. 558 FOR QUASI-CONTRACTS: .................... 558 FOR QUASI-DELICTS: ........................... 558 RULE WHEN CONTRACTING PARTIES ARE IN PARI DELICTO ............................................. 558 LIQUIDATED DAMAGES ............................. 559

III. PERSONAL LAW ................................. 566 A. NATIONALITY ......................................... 566 A.1. IMPORTANCE OF A PERSONAL LAW ................................................................ 566

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TABLE OF CONTENTS A.2. DETERMINATION OF NATIONALITY ................................................................ 567 B. DOMICILE ................................................ 567 B.1. DEFINITION ..................................... 567 B.2. GENERAL RULES ON DOMICILE .. 567 B.3. KINDS OF DOMICILE...................... 568 C. PRINCIPLES ON PERSONAL STATUS AND CAPACITY .................................................... 568 C.1. DEFINITION ..................................... 568 C.2. LEGISLATIVE JURISDICTION DISTINGUISHED FROM JUDICIAL JURISDICTION ....................................... 568 C.3. BEGINNING AND END OF PERSONALITY ....................................... 568 C.4. ABSENCE........................................ 568 C.5. NAME .............................................. 569 C.6. AGE OF MAJORITY ......................... 569 C.7. CAPACITY ....................................... 569

D.4. REVOCATION ................................. 573 D.5. PROBATE ....................................... 573 D.6. ADMINISTRATION OF ESTATES ... 573 E. CHOICE OF LAW IN TORTS AND CRIMES ..................................................................... 573 E.1. LEX LOCI DELICTI COMMISSI ......... 573 E.2. MODERN THEORIES ON FOREIGN TORT LIABILITY ..................................... 574 E.3. FOREIGN TORT CLAIMS ................ 574 E.4. DISTINGUISHING BETWEEN TORTS AND CRIMES.......................................... 574 E.5. LEX LOCI DELICTI ........................... 574 F. CHOICE OF LAW AFFECTING CORPORATIONS AND OTHER JURIDICAL ENTITIES ...................................................... 575 F.1. CORPORATIONS ............................. 575 F.2. PARTNERSHIPS ............................. 576

V. FOREIGN JUDGMENTS ........................ 577

IV. CHOICE OF LAW PROBLEMS ............. 569

A. RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS ................................ 577 A.1. DISTINCTION BETWEEN RECOGNITION AND ENFORCEMENT ... 577 A.2. BASES OF RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS ........................................... 577 A.3. POLICIES UNDERLYING RECOGNITION AND ENFORCEMENT ... 577 A.4. REQUISITES FOR RECOGNITION OR ENFORCEMENT ...................................... 577 A.5. PROCEDURE FOR ENFORCEMENT ................................................................ 578

A. CHOICE-OF-LAW IN FAMILY RELATIONS ..................................................................... 569 A.1. MARRIAGE ...................................... 569 A.2. DIVORCE AND SEPARATION ......... 571 A.3. ANNULMENT AND DECLARATION OF NULLITY .................................................. 571 A.4. PARENTAL RELATIONS ................. 571 A.5. ADOPTION ...................................... 571 B. CHOICE OF LAW IN PROPERTY .............. 571 B.1. THE CONTROLLING LAW ................ 571 B.2. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY .............................572 B.3. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES ................................572 B.4. EXCEPTION TO LEX SITUS RULE ...572 B.5. SITUS OF CERTAIN PROPERTIES ..572 C. CHOICE OF LAW IN CONTRACTS ...........572 C.1. EXTRINSIC VALIDITY OF CONTRACTS .................................................................572 C.2. INTRINSIC VALIDITY OF CONTRACTS .................................................................572 C.3. CAPACITY TO ENTER INTO CONTRACTS ...........................................573 C.4. CHOICE OF LAW ISSUES IN CONFLICTS CONTRACTS CASES ..........573 C.5. ADHESION CONTRACTS ................573 D. CHOICE OF LAW IN WILLS, SUCCESSION AND ADMINISTRATION OF ESTATES ........573 D.1. EXTRINSIC VALIDITY OF WILLS .....573 D.2. INTRINSIC VALIDITY OF WILLS .....573 D.3. INTERPRETATION OF WILLS .........573

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UP LAW BOC

PERSONS

CIVIL LAW

CIVIL LAW

PERSONS & FAMILY RELATIONS

1

UP LAW BOC

PERSONS

I. Effect and Application of Laws

CIVIL LAW

Conclusive Presumption: That everyone knows the law, even if they have no actual knowledge of the law. Mistake of Fact & Difficult Questions of Law: These may excuse a party from the legal consequences of his conduct; but not ignorance of law:  In specific instances provided by law, mistake as to difficult legal questions has been given the same effect as a mistake of fact. (Tolentino)  The laws referred to by this article are those of the Philippines. There is no conclusive presumption of knowledge of foreign laws. (Tolentino)

A. WHEN LAWS TAKE EFFECT Art. 2. Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette, or in a newspaper of general circulation in the Philippines, unless it is otherwise provided. (As amended by E.O. 200) General Rules: The clause "unless it is otherwise provided" refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. [Tanada vs Tuvera (1986)]

C. RETROACTIVITY OF LAWS Art. 4. Laws shall have no retroactive effect, unless the contrary is provided. (3)

Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or extended. [Tanada vs Tuvera (1986)]

General Rule: All statutes are to be construed as having only prospective operation. Exceptions (1) When the law itself expressly provides Exceptions to Exception: (a) Ex post facto law (b) Impairment of contract (2) In case of remedial statutes (3) In case of curative statutes (4) In case of laws interpreting others (5) In case of laws creating new rights [Bona v. Briones (1918)] (6) Penal Laws favorable to the accused

When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. [Commissioner vs. Hypermix (2012)]

D. MANDATORY OR PROHIBITORY LAWS

Exception: Interpretative regulations and those internal in nature. [Tanada vs Tuvera (1986)]

Art. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity. (4a)

B. IGNORANCE OF THE LAW Art. 3. Ignorance of the law excuses no one from compliance therewith. (2)

Art. 17, par. 3 Prohibitive laws concerning persons, their acts or property, and those

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which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. (11a)

CIVIL LAW incompatible or inconsistent with those of an earlier law.

The fundament is that the legislature should be presumed to have known the existing laws on the subject and not have enacted conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject. [Republic vs. Marcopper Mining (2000)]

E. WAIVER OF RIGHTS Art. 6. Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third person with a right recognized by law. (4a)

G. JUDICIAL DECISIONS Art. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. (n)

Waiver – the relinquishment of a known right with both knowledge of its existence and an intention to relinquish it. [Portland v. Spillman] Exceptions: (1) If the waiver is contrary to law, public order, public policy, morals or good customs (2) If the waiver prejudices a third person (3) If the alleged rights do not yet exist (4) If the right is a natural right

Jurisprudence cannot be considered as an independent source of law; it cannot create law. (1 Camus 38 as cited in Tolentino) The interpretation or construction placed by the courts establishes the contemporaneous legislative intent of the law. The latter as so interpreted and construed would thus constitute a part of that law as of the date the statute is enacted. It is only when a prior ruling of this Court finds itself later overruled, and a different view is adopted, that the new doctrine may have to be applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith in accordance therewith. [Pesca v Pesca (2001)]

F. REPEAL OF LAWS Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary. When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution. (5a)

H. DUTY TO RENDER JUDGMENT

Two Kinds of Repeal (Tolentino) (1) Express or Declared – contained in a special provision of a subsequent law (2) Implied or Tacit – takes place when the provisions of the subsequent law are

Exception: This article does not apply to criminal prosecutions because where there is no law punishing an act, the case must be dismissed. (Tolentino)

Art. 9. No judge or court shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws. (6)

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I. PRESUMPTION AND APPLICABILITY OF CUSTOM

CIVIL LAW



Art. 10. In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. (n)

automatically be considered the next working day If the period arises from a contractual relationship, the act will still be due on that Legal Holiday/Sunday

There obviously exists a manifest incompatibility in the manner of computing legal periods between the Civil Code and the Revised Administrative Code of 1987. Since the Administrative Code is the more recent law, it governs the computation of legal period [CIR vs Primetown (2007)]

Art. 11. Customs which are contrary to law, public order or public policy shall not be countenanced. (n) Art. 12. A custom must be proved as a fact, according to the rules of evidence. (n)

K. APPLICABILITY OF PENAL LAWS J. LEGAL PERIODS

Art. 14. Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in the Philippine territory, subject to the principles of public international law and to treaty stipulations. (8a)

Art. 13. When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours; and nights from sunset to sunrise.

Exemptions under International Law (Theory of Extraterritoriality): (1) When the offense is committed by a foreign sovereign while in Philippine territory (2) When the offense is committed by diplomatic representatives (3) When the offense is committed in a public or armed vessel of a foreign country.

If months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last day included. (7a) Revised Administrative Code Section 31. Legal Periods. - "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day," to a day of twenty-four hours; and "night," from sunset to sunrise.

L. BINDING EFFECT Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. (9a)

Policy on Last Day being a Legal Holiday/Sunday  If the period arises by statute or orders by the government, the last day will

Art. 16. Real property as well as personal property is subject to the law of the country where it is stipulated.

However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional

rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose 4

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succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. (10a)

Juridical Capacity Fitness of man to be the subject of legal relations Passive Aptitude for the Holding and Enjoyment of rights Inherent in natural persons Lost upon death

Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution.

Can exist without capacity to act Cannot be limited or restricted

Lost through death and other causes Must exist with juridical capacity May be restricted or limited

Art. 40. Birth determines personality; but the conceived child shall be considered born for all purposes favorable to it, provided that it be born later with the conditions specified in the following article. Art. 41. For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mother’s womb. However, if the fetus had an intra-uterine life of less than seven months, it is not deemed born if it dies within twenty-four hours after its complete delivery from the maternal womb.

II. Persons and Personality PERSON

Capacity to Act Power to do acts with legal effect Active Aptitude for the Exercise of rights Must be acquired

B. COMMENCEMENT AND TERMINATION OF PERSONALITY

Prohibitive laws concerning persons, their acts or property, and those which have, for their object, public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. (11a)

A. CONCEPT OF PERSONALITY

CIVIL LAW

AND

Birth = complete removal of the fetus from the mother’s womb; before birth, a fetus is merely part of the mother’s internal organs.

Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and may be lost. Note: Juridical capacity can exist even without capacity to act; the existence of the latter implies that of the former.

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Proof that the fetus was alive upon separation is Complete respiration = test/sign of independent life Intra-Uterine Life 7 months or more Less than 7 months

CIVIL LAW

Criminal liability ends with death BUT civil liability may be charged against the estate [People v. Tirol, (1981)]. Note: Article 43 provides a statutory presumption when there is doubt on the order of death between persons who are called to succeed each other (only).

When Considered Born Alive upon delivery Alive only after completion of 24 hours from delivery

The statutory presumption of Article 43 was not applied due to the presence of a credible eyewitness as to who died first [Joaquin v. Navarro, (1948)].

Personality of Conceived Child (1) Limited = only for purposes FAVORABLE to it. (2) Conditional = it depends upon the child being born alive later.

Compare Art. 43 with Rule 131, Sec. 3 (jj), presumption of Survivorship. Art. 43 Rule 131, Sec. 3 (jj) Only use the presumptions when there are no facts to get inferences from Only use for Cannot be used for succession succession purposes purposes In any circumstance Only during death in calamities, wreck, battle or conflagration

Period of Conception = the first 120 days of the 300 days preceding the birth of the child. A conceived child can acquire rights while still in the mother’s womb. It can inherit by will or by intestacy. An aborted fetus had conditional personality but never acquired legal rights/civil personality because it was not alive at the time of delivery from the mother’s womb. No damages can be claimed in behalf of the unborn child. [Geluz vs CA (1961)]

Presumption of Survivorship in the Rules of Court (Rule 131, sec. 3, (jj.) Age Both under 15 Both above 60 One under 15, the other above 60 Both over 15 and under 60; different sexes Both over 15 and under 60; same sex One under 15 or over 60, the other between those ages

C. DEATH Art. 42. Civil personality is extinguished by death. The effect of death upon the rights and obligations of the deceased is determined by law, by contract and by will. Art. 43. If there is a doubt, as between two or more persons who are called to succeed each other, as to which of them died first, whoever alleges the death of one prior to the other, 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.

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Presumed Survivor Older Younger One under 15 Male

Older One between 15 and 60

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D. JURIDICAL PERSONS

CIVIL LAW

E. RESTRICTIONS ON CIVIL CAPACITY

Article 44. The following are juridical persons: (1) The State and its political subdivisions; (2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law; (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member. (35a)

E. 1. PRESUMPTION OF CAPACITY Article 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and may be lost. (n)

E. 2. RESTRICTIONS ON CAPACITY TO ACT

Article 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating or recognizing them. Private corporations are regulated by laws of general application on the subject. Partnerships and associations for private interest or purpose are governed by the provisions of this Code concerning partnerships. (36 and 37a)

Art. 38. Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person from certain obligations, as when the latter arise from his acts or from property relations, such as easements. Art. 39. The following circumstances, among others, modify or limit capacity to act: age, insanity, imbecility, the state of being a deafmute, penalty, prodigality, family relations, alienage, absence, insolvency and trusteeship. The consequences of these circumstances are governed in this Code, other codes, the Rules of Court, and in special laws. Capacity to act is not limited on account of religious belief or political opinion. A married woman, twenty-one years of age or over, is qualified for all acts of civil life, except in cases specified by law.

Article 46. Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization. (38a) Article 47. Upon the dissolution of corporations, institutions and other entities for public interest or purpose mentioned in No. 2 of article 44, their property and other assets shall be disposed of in pursuance of law or the charter creating them. If nothing has been specified on this point, the property and other assets shall be applied to similar purposes for the benefit of the region, province, city or municipality which during the existence of the institution derived the principal benefits from the same. (39a)

General rule: Incapacitated persons are not exempt from certain obligations arising from his acts or property relations.

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I. MINORITY

CIVIL LAW

Effects on Marriage (1) May not yet contract marriage (Art. 5, FC). (2) Marriages, where one of the parties is below 18, even with the consent of parents/guardians, are VOID (Art. 35, FC).

RA 6809 (1989): An act lowering the age of majority from twenty-one to eighteen years. Effects on Contracts

Effect on Crimes (1) General rule: EXEMPTED from criminal liability (2) Exception: Acted with discernment, and the minor is between 15 and 18 years of age.

(1) They cannot give consent to a contract (Art. 1327 (1)) (2) A contract where one of the parties is a minor is voidable(Art. 1390(1)) (3) A contract is unenforceable when both of the parties are minors (incapable of giving consent) (Art. 1403(3)) (4) Minority cannot be asserted by the other party in an action for annulment (Art. 1397) (5) Not obliged to make restitution exceptinsofar as he has been benefited (Art. 1399) (6) Minor has no right to demand the thing/price voluntarily returned by him (Art. 1426) (7) Minor has no right to recover voluntarily paid sum or delivered thing, if consumed in good faith (Art. 1427) (8) Must pay reasonable amount for necessaries delivered to him (Art. 1489)

II. INSANITY Insanity includes many forms of mental disease, either inherited or acquired. A person may not be insane but only mentally deficient (idiocy, imbecility, feeble-mindedness). Effect on Contracts (1) Incapacity to give consent to a contract (Art. 1327(2)) (2) Contracts entered into during lucid intervals are valid (Art. 1328) (3) Restitution of benefits (Art. 1399) (4) Voidable if one of the parties is insane (Art. 1390) (5) Unenforceable if both of the parties are insane (Art. 1403 (3))

Estoppel works against minors who misrepresent their ages in a contract and are compelled to comply with its terms. (active misrepresentation done by minors). [Mercado vs Espiritu (1918)]

Effect on Crimes General rule: EXEMPTED from criminal liability Exception: Acted during lucid interval Effect on Marriage (1) May be annulled if either party was of unsound mind unless the such party after coming to reason, freely cohabited with the other (Art. 45(2), FC) (2) Action for annulment of marriage must be filed by the sane spouse who had no knowledge of the other’s insanity, or by any relative/guardian of the insane before the death of either party; or by the insane spouse during a lucid interval or after regaining sanity (Art. 47(2), FC)

When a minor made no active misrepresentation as to his minority and such minority is known to the other party, the contract is voidable (Art. 1403) as to the minor. [Bambalan vs Miranda (1928)] Minors are obliged to make restitution insofar as they have been benefited (Art. 1399). [Braganza vs Villa Abrille (1959]

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In the absence of proof that the defendant had lost his reason or became demented a few moments prior to or during the perpetration of the crime, it is presumed that he was in a normal condition of mind. It is improper to conclude that he acted unconsciously, in order to relieve him from responsibility on the ground of exceptional mental condition, unless his insanity and absence of will are proven. [USA vs Vaguilar (1914)]

CIVIL LAW

(5) Unenforceable if both of the parties are deaf-mutes and does not know how to write

IV. PRODIGALITY INCOMPETENT INCLUDES PRODIGALS (RULES OF COURT RULE 92, SEC 2) Note: It is not the circumstance of prodigality, but the fact of being under guardianship that restricts capacity to act.

Capacity to act must be supposed to attach to a person who has not previously been declared incapable, and such capacity is presumed to continue so long as the contrary be not proved, that is, that at the moment of his acting he was incapable, crazy, insane, or out his mind [Standard Oil vs Arenas (1911)]

V. CIVIL INTERDICTION (1) It is an accessory penalty imposed upon persons who are sentenced to a principal penalty not lower than reclusion temporal (Art. 41, RPC). (2) Offender is deprived of rights of parental authority, or guardianship, of marital authority, of the right to manage his property and of the right to dispose of such by any act inter vivos (Art. 34, RPC) (3) For the validity of marriage settlements, the participation of the guardian shall be indispensable (Art. 123)

As no man would know what goes on in the mind of another, the state or condition of a person’s mind can only be measured and judged by his behavior. Establishing the insanity of an accused requires opinion testimony which may be given by a witness who is intimately acquainted with the person claimed to be insane, or who has rational basis to conclude that a person was insane based on the witness’ own perception of the person, or who is qualified as an expert, such as a psychiatrist. [Crewlink vs Teringtering (2012)].

VI. FAMILY RELATIONS (1) Justifying circumstance if acted in defense of person/rights of spouse, ascendants, descendants, brothers/sisters, and other relatives up to the 4th civil degree (Art. 11(2), RPC) (2) Mitigating circumstance if acted in the immediate vindication of a grave offense/felony committed against his spouse, ascendants or relatives of the same civil degree (Art. 13(5), RPC) (3) Incestuous and void marriages:  Between ascendants and descendants of any degree;  Between brothers and sisters, whether full or half-blood. (Art. 37, FC) (4) Donations/grants of gratuitous advantage between spouses during the marriage shall

III. DEAF-MUTISM (1) Cannot give consent to a contract if he/she also does not know how to write (Art. 1327(2), CC) (2) Can make a valid WILL, provided: he must personally read the will. The contents of the same have either been read personally by him or otherwise communicated to him by 2 persons (Art. 807, CC) (3) Cannot be a witness to the execution of a will (Art. 820, CC) (4) Voidable if one of the parties is deaf-mute and does not know how to write

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(5)

(6)

(7)

(8)

PERSONS

be VOID, except moderate gifts during family occasions (Art. 87, FC) Prescription does not run between spouses, parent and child, guardian and ward (Art. 1109) Descendants cannot be compelled to testify in a criminal case, against his parents and grandparents  UNLESS: crime was against the descendant OR by one parent against the other (Art. 215, FC) Spouses cannot sell property to each other, except:  Absolute separation is agreed upon in the marriage settlements  Judicial separation of property (Art. 1490) A suit between family members cannot prosper without any showing that earnest effort towards a compromise have been made but have failed (Art. 151, FC)  Exceptions: questions on civil status of persons, validity of a marriage or a legal separation, any ground for legal separation, future support, jurisdiction of courts, future legitime (Art. 2035).

CIVIL LAW

unavoidable consequence of conflicting laws of different states. [Cordora vs COMELEC (2009)]

VIII. ABSENCE Art. 390. After an absence of seven years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of ten years. If he disappeared after the age of seventy-five years, an absence of five years shall be sufficient in order that his succession may be opened. (n) Art. 391. The following shall be presumed dead for all purposes, including the division of the estate among the heirs: 1. A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane; 2. A person in the armed forces who has taken part in war, and has been missing for four years; 3. A person who has been in danger of death under other circumstances and his existence has not been known for four years.

VII. ALIENAGE Dual citizenship is different from dual allegiance. The former arises when, as a result of the concurrent application of the different laws of two or more states, a person is simultaneously considered a national by the said states. Dual allegiance, on the other hand, refers to the situation in which a person simultaneously owes, by some positive act, loyalty to two or more states. While dual citizenship is involuntary, dual allegiance is the result of an individual’s volition. For candidates with dual citizenship, it should suffice if, upon the filing of their certificates of candidacy, they elect Philippine citizenship to terminate their status as persons with dual citizenship considering that their condition is the

Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient. For the purpose of contracting the subsequent marriage under the preceding paragraph the

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spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse.

CIVIL LAW

Requisites of Domicile (Callejo v. Vera) 1. Physical Presence in a fixed place 2. Intent to remain permanently (animus manendi) Kinds of Domicile (1) Domicile of Origin  Domicile of parents of a person at the time he was born. (2) Domicile of Choice  Domicile chosen by a person, changing his domicile of origin.  A 3rd requisite is necessary – intention not to return to one’s domicile as his permanent place. (3) Domicile by Operation of Law (i.e., Article 69, domicile of minor)  A married woman does not lose her domicile to her husband. (RomualdezMarcos vs. Comelec (1995))

Art. 42. The subsequent marriage referred to in the preceding Article shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio. A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed.

F. DOMICILE AND RESIDENCE OF PERSON

III. Family Code A. EFFECT AND RETROACTIVITY

For Natural Persons: The place of their habitual residence (Art. 50)

Art. 255. This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws.

For Juridical Persons: The place where their legal representation is established, or where they exercise their primary functions, unless there is a law or other provision that fixes the domicile (Art. 51)

The Family Code took effect on August 3, 1988.

B. REPEAL AND AMENDMENT Art. 254. If any provision of this Code is held invalid, all the other provisions not affected thereby shall remain valid.

Domicile vs. Residence While domicile is permanent (there is intent to remain), residence is temporary and may be changed anytime (there is no necessary intent to remain).

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IV. Marriage And Personal Relationship Between Spouses

CIVIL LAW

walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs for which defendant must be held answerable in damages in accordance with Article 21 aforesaid. [Wassmer vs Velez (1964)]

A. CONCEPT OF MARRIAGE

Article 21 may be applied in a breach of promise to marry where the woman is a victim of moral seduction. [Baksh vs CA (1993)]

Art. 1, FC. Marriage is a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within the limits provided by this Code.

C. REQUISITES KINDS OF REQUISITES AND EFFECTS OF NON-COMPLIANCE (1) Essential Requisites (Art. 2) (a) Legal Capacity of the contracting parties, who must be a male and a female (b) Consent (of the parties) freely given in the presence of a solemnizing officer. (2) Formal Requisites (Art. 3) (a) Authority of solemnizing officer (b) A valid marriage license Except: (1) Marriages in articulo mortis or when one or both parties are at the point of death, (2) Marriage in isolated places with no available means of transportation, (3) Marriage among Muslims or other ethnic cultural communities, (4) Marriages of those who have lived together as husband and wife without any legal impediment for at least 5 years (c) Marriage Ceremony:  Appearance of contracting parties in the presence of a solemnizing officer  Personal declaration that they take each other as husband and wife in the presence of not less than 2 witnesses

1987 Constitution Article XV, Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State. Marriage is an institution, in the maintenance of which in its purity the public is deeply interested. It is a relation for life and the parties cannot terminate it at any shorter period by virtue of any contract they may make .The reciprocal rights arising from this relation, so long as it continues, are such as the law determines from time to time, and none other. [Goitia vs Campos Rueda (1916)]

B. AGREEMENTS PRIOR TO MARRIAGE Extrajudicial dissolution of the conjugal partnership without judicial approval is void. [Espinosa vs Omana (2011)] Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the abovedescribed preparation and publicity, only to

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EFFECT OF ABSENCE OF REQUISITES Absence Effect

VOID

CIVIL LAW

Defect: Art. 45, FC. A marriage may be annulled for any of the following causes existing at the time of the marriage: xxx (3) that the consent of either party was obtained by fraud, unless such party afterwards, with full knowledge of the facts constituting the fraud, freely cohabited with the other as husband and wife.

Defect or Irregularity VOIDABLE

ESSENTIAL REQUISITES 1. GENDER Note: The best source for citing the requirement of male/female is still statutory, as provided explicitly in the Family Code.

Fraud here refers to matters which relate to the marital relation:  Non-disclosure of previous conviction by final judgment of a crime involving moral turpitude;  Concealment of pregnancy by another man;  Concealment of a sexually transmitted disease;  Concealment of drug addiction, alcoholism, lesbianism, or homosexuality

Silverio v. Republic, (2007): Changing of sex in one’s birth certificate on the basis of sex reassignment was denied; otherwise, it would result in confusion and would allow marriage between persons of the same sex which is in defiance of the law, as marriage is a union between a man and a woman.

2. AGE

FORMAL REQUISITES 1. CEREMONY

Legal Capacity (Art. 5) Male or female 18 years old and above, not under any of the impediments mentioned in Art. 37 (incestuous marriages) & Art. 38 (marriages against public policy), may contract marriage.

Marriage Ceremony No prescribed form or religious rite for the solemnization of marriage is required. (Art. 6) The couple's written agreement where they declare themselves as husband and wife, signed by them before a judge and two capable witnesses, even though it was independently made by them, still counts as a valid ceremony. (Martinez v. Tan, (1909))

3. CONSENT FREELY GIVEN Consent here refers to the consent of the contracting parties; not of the parent/guardian in those cases where such consent is required (when either party is between 18 to 21 years of age).

Minimum requirements prescribed by law: (1) Appearance of contracting parties personally before the solemnizing officer (Art. 3) (2) Personal declaration that they take each other as husband and wife. (Art. 3) (3) Presence of at least two witnesses of legal age. (Art. 3) (4) The declaration shall be contained in the Marriage Certificate. (Art. 6)

Absence: People v. Santiago, (1927): A marriage entered into by a person whose real intent is to avoid prosecution for rape is void for total lack of consent. The accused did not intend to be married. He merely used such marriage to escape criminal liability.

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(5) Marriage certificate shall be signed by the contracting parties and their witnesses and attested by the solemnizing officer. (Art. 6)

(2) Priest, Rabbi, Imam or Minister of any Church or Religious Sect. Must be: (a) Duly authorized by his church or religious sect (b) Registered with the civil registrar general (c) Acting within the limits of the written authority granted to him by his church or religious sect. (d) At least one of the contracting parties belongs to the solemnizing officer’s church or religious sect. (Art. 7) (3) Ship Captain or Airplane Chief may solemnize a marriage in articulo mortis between passengers or crew members (Art. 7, 31) (4) A Military commander of a unit may solemnize marriages in articulo mortis between persons w/in the zone of military operation. (Art. 7, 32) (5) Consul-general, consul or vice-consul may solemnize marriages between Filipino citizens abroad. (Art. 7, 10) (6) Municipal and City Mayors (LGC sec. 444455)

Note: In a marriage in articulo mortis, when one or both parties are unable to sign the marriage certificate, it shall be sufficient for one of the witnesses to write the name of said party, which shall be attested by the solemnizing officer. (Art. 6, par. 2) Places where marriage SHALL be publicly solemnized: (1) Chambers of the judge or in open court (2) Church, chapel, or temple (3) Office of the consul-general, consul, or vice-consul (Art. 8) Exceptions:  Marriages performed in articulo mortis or in remote places. (Art. 29)  Where both parties request in writing that marriage be solemnized at a place designated by them. Non-compliance with this requirement does not invalidate the marriage (premise: more witnesses = more people can notify officer of impediments to marriage).

Exceptions – Art. 35 (1) Marriage is void when solemnized by any person not legally authorized to perform marriages unless either or both parties believed in good faith that the solemnizing officer had legal authority to do so. (Art. 35 (2)) (2) Absence & Irregularity of Authority of a solemnizing officer

2. AUTHORITY OF THE SOLEMNIZING OFFICER Who may solemnize marriage: (1) Incumbent member of the Judiciary within his jurisdiction. (Art. 7) Absence 1. Authority by church/sect 2. Registered w/ civil registrar 3. Acting w/in written authority 4. Either party belong to that church/sect

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Where a judge solemnizes a marriage outside his jurisdiction, there is a resultant irregularity in the formal requisite laid down in Article 3, which while it may not affect the validity of the marriage, may subject the officiating official to administrative liability. [Navarro v. Domagtoy (1996); Aranes v. Occiano (2002)]

Effect VOID VOID IRREGULARITY IRREGULARITY

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A marriage which preceded the issuance of the marriage license is void and the subsequent issuance of such license cannot render valid the marriage. Except in cases provided by law, it is the marriage license that gives the solemnizing officer the authority to solemnize a marriage. [Aranes v Occiano (2002)].

II. Foreign National

3. LICENSE REQUIRED

Stateless persons or refugees from other countries: affidavit stating circumstances showing capacity to contract marriage, instead of certificate of legal capacity (Art. 21)

When either or both parties are foreign nationals: Certificate of legal capacity to contract marriage, issued by a diplomatic or consular official, shall be submitted before a marriage license can be obtained (Art. 21)

GENERAL RULE: License required Article 9 - Issued by local registrar of city or municipality where either contracting party habitually resides

III. Exceptions (1) Marriage in articulo mortis (Art. 27)  The marriage may be solemnized without the necessity of a marriage license.  It remains valid even if ailing party survives. (2) Between passengers or crew members in a ship or airplane (Art. 31) (3) Persons within a military zone (Art. 32) (4) Marriage in Remote and inaccessible places (Art. 28) (5) Marriages by Muslims and Ethnic cultural minorities provided they are solemnized in accordance with their customs, rites or practices. (Art. 33) (6) Marriage by parties who have Cohabited for at least 5 years without any legal impediment to marry each other. (Art. 34, Ninal vs. Badayog (2000))

Article 11 - Each contracting party should file separately. PD 965, Sec.3, par.2 - No marriage license shall be issued by the Local Civil Registrar unless the applicants present a certificate, issued at no cost to the applicants, by an Office of Family Planning that they had received instructions and information on family planning and responsible parenthood. Where Valid: License valid in any part of the Philippines Period of Validity: It will be valid for 120 days from date of issue, automatically cancelled at the expiration of such period. I. Special Situations a. Anyone between 18-21 years old who has not yet been emancipated must present the written consent that was given by his or her parent or guardian. (Art. 14) b. Anyone between 21-25 must ask for advice from his or her parents or guardians. If the advice wasn’t obtained, the marriage license will only be released 3 months after the publication of the application. (Art. 15)

Requisites for the 5-year cohabitation to be valid for the exemption from acquiring a marriage license (1) The man and woman must have been living together as husband and wife for at least five years before the marriage; (2) The parties must have no legal impediment to marry each other; (3) The fact of absence of legal impediment between the parties must be present at the time of marriage;

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(4) 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]; and (5) 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. (Borja-Manzano vs. Judge Sanchez (2001))

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(6) That requirement as to parental advice was complied with, when required (7) That parties have entered into marriage settlements, if any (Art. 22) Note: Not an essential or formal requisite without which the marriage will be void (Madridejo v. de Leon (1930)) Best evidence that a marriage does exist. [Tenebro v. CA (2004)]

4. MARRIAGE CERTIFICATE

D. LAW GOVERNING VALIDITY OF MARRIAGES ABROAD

Absence and irregularity of marriage license and contract

General rule in contracts As to form: Governed by the laws of the country in which they were executed (NCC Art. 17) As to substantive requirements: Laws relating to family rights and duties, or to the status, condition and legal capacity of persons, prohibitive laws regarding the person, his or her property, those which have for their object public order, public policy and good customs bind all Filipinos regardless of location. (NCC Art. 15, 17)

Republic v. CA and Castro (1994): There is a presumption of regularity of official acts, and the issuance of the Civil Registrar of a Certificate of Due Search and Inability to Find the application for a marriage license certifies its inexistence, rendering the marriage VOID. Moreno v. Bernabe (1995): Before a marriage can be solemnized, a valid marriage license must be presented first, otherwise, it is VOID. People v. Borromeo (1984): Non-existence of a marriage contract does not invalidate the marriage as long as all the requisites for its validity are properly complied with.

Marriages Celebrated Abroad GENERAL RULE: Marriages solemnized abroad in accordance with the laws in force in that country shall be valid in the Philippines. (Art 26, par.1)

Marriage Certificate Where parties declare that they take each other as husband and wife; contains the ff: (1) Full name, sex, age of party (2) Citizenship, religion, habitual residence (3) Date and precise time of celebration of marriage (4) That marriage license was properly issued (except in marriages of exceptional character) (5) That parental consent was secured, when required

EXCEPTIONS: (1) Marriage between persons below 18 years old (Art. 35(1)) (2) Bigamous or polygamous marriage (Art. 35(4)) (3) Mistake in identity (Art. 35 (5)) (4) Marriages void under Article 53 (Art. 35 (6)) (5) Psychological incapacity (Art. 36) (6) Incestuous marriages (Art. 37) (7) Marriage void for reasons of public policy (Art. 38)

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Essential requisites Formal requisites Inherent in the parties, Requirements carried everywhere independent of the parties Lex Nationalii – Laws Lex loci celebrationisrelating to family rights if valid where and duties, or to the celebrated, then status, condition, and valid everywhere; legal capacity of forms of contracting persons are binding marriage are to be upon Phil citizens even regulated by the law though living abroad where it is (Art. 15) celebrated. (Art. 26) Foreign marriages void Foreign marriages under Phil law due to may be void under lack of an essential Phil law due to requisite, even if valid absence of a formal under foreign laws, will requisite under not be recognized. foreign laws.

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divorce. Llorente v. CA (2000): Citizenship at the time the divorce is obtained determines its validity. Since H was no longer a Filipino citizen when he divorced W, the nationality principle did not apply to him anymore and the divorce is valid. Garcia v. Recio (2001): A divorce decree obtained by the foreign spouse is recognized under Phil law if it is executed in accordance with the foreigner’s national law. The party must prove divorce as a fact and that said divorce is obtained in conformity with the law allowing it, before the Philippine courts can take judicial notice.

E. COMMON-LAW MARRIAGES Proof of Foreign Marriage in order that it may be upheld: (1) Provisions of the foreign law (2) Celebration of the marriage in accordance with said provisions

Art. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership.

Foreign Divorces  Those obtained by Filipino citizens are void under Philippine law.  If the foreign spouse obtains a valid divorce decree abroad capacitating him/her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law. (Art. 26, par.2)

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family and of the household.

Van Dorn v. Romillo (1985): A divorce obtained by the foreign spouse in accordance with the said spouse’s national law is recognized in the Philippines and releases Filipino spouse from their marriage. Quita v. Dandan (1998): The citizenship of the spouses at the time of the divorce determines their capacity to obtain a valid

Neither party can encumber or dispose by acts inter vivos of his or her share in the property

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acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.

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without being lawfully married, nevertheless there is between them an informal civil partnership which would entitle the parties to an equal interest in property acquired by their joint efforts [Lesaca vs Lesca (1952)]

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation. (144a)

Such form of co-ownership requires that the man and woman living together must not in any way be incapacitated to contract marriage. [Eugenio vs Velez (1990)] The falsity of the affidavit cannot be considered as a mere irregularity in the formal requisites of marriage. The law dispenses with the marriage license requirement for a man and a woman who have lived together and exclusively with each other as husband and wife for a continuous and unbroken period of at least five years before the marriage. The aim of this provision is to avoid exposing the parties to humiliation, shame and embarrassment concomitant with the scandalous cohabitation of persons outside a valid marriage due to the publication of every applicant’s name for a marriage license. [De Castro vs De Castro (2008)]

Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidences of credit.

F. VOID AND VOIDABLE MARRIAGES Presumption of Marriage (1) Presumption in favor of a valid marriage (Art 220, CC) (2) The presumption that a man and a woman deporting themselves as husband and wife have entered into a lawful contract of marriage is satisfactory if uncontradicted. (Sec. 3 (aa), Rule 131, ROC) (3) In marriages of exceptional character, the existence of the marriage is presumed, even in the TOTAL ABSENCE of a marriage license. (Vda. De Jacob v CA (1999)) (4) If a marriage certificate is missing, and all means HAVE NOT YET BEEN EXHAUSTED to find it, then the marriage is presumed to exist (Sevilla v. Cardenas (2006))

If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her shall be forfeited in the manner provided in the last paragraph of the preceding Article. The foregoing rules on forfeiture shall likewise apply even if both parties are in both faith. (144a) Though there is no technical marital partnership between person living maritally

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Absence of a marriage certificate is not proof of absence of marriage. To prove the fact of marriage, the following would constitute competent evidence: (1) the testimony of witnesses to matrimony; (2) documentary photos or videos of the wedding; (3) the couple’s public cohabitation; and (4) birth and baptismal certificates of children born during the union. (Trinidad v CA (1998))

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(1) Marriage where any party is below eighteen years of age even with the consent of parents or guardians (2) Marriage solemnized by any person not legally authorized to perform marriages unless such marriages were contracted with either or both parties believing in good faith that the solemnizing officer had legal authority to do so. Note: One’s belief in good faith that the solemnizing officer has the required authority is a mistake of fact, and not of law. (3) Marriage solemnized without a valid marriage license, except in marriages under exceptional circumstances (4) Bigamous or polygamous marriages not falling under Article 41 (Art. 41: subsequent marriage by present spouse who obtained a declaration of presumptive death for absent spouse prior to the subsequent marriage) (5) There is a mistake as to the identity of the other contracting party (6) Subsequent marriages that are void under Article 53 (Non-compliance with Art. 52)

F. 1. VOID MARRIAGES Type of Void Marriages (1) Absence of any formal/essential requisites (2) Bigamous and polygamous marriages (3) Subsequent marriage, upon reappearance of spouse (4) Bad faith of both spouses (5) Psychologically Incapacitated spouse (6) Void subsequent marriages (7) Incestuous Marriages (8) Non-compliance with recording requirement after declaration of nullity Art. 39. The action or defense for the declaration of absolute nullity shall not prescribe. However, in case of marriage celebrated before the effectivity of this Code and falling under Article 36, such action or defense shall prescribe in ten years after this Code shall taken effect. (As amended by Executive Order 227) (n)

To be considered void on the ground of absence of a marriage license, the law requires that the absence of such marriage license must be apparent on the marriage contract, or at the very least, supported by a certification from the local civil registrar that no such marriage license was issued to the parties. [Alcantara vs Alcantara (2007)]

a. Absence of Requisites Art. 4(1): The absence of any essential or formal requisites shall render the marriage void ab initio, except as stated in Article 35 (a).

An action for nullity of marriage imprescriptible. [Republic vs Dayot (2008)]

Art. 5: Any male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 38, may contract marriage.

is

b. Bigamous and polygamous marriages Article 40 (No Judicial Declaration Of Nullity) A person entered into a subsequent marriage without first getting a judicial declaration of nullity of the first void marriage

Void from the Beginning (Art. 35)

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(b) The spouse present had a well-founded belief that absent spouse is dead; and (c) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse). (2) Subsequent marriage due to extraordinary absence where: (a) Absent spouse had been missing for 2 consecutive years; (b) There is danger of death under the circumstances set forth in Art. 391 CC attendant to the disappearance; (c) The spouse present had a well-founded belief that the missing person is dead; and (d) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse).

Article 41 (Presumptive Death) Failure of the spouse present to obtain a judicial declaration of presumptive death before entering a subsequent marriage Article 44 (Bad Faith of both spouses) Both spouses entering a subsequent marriage after presumptive death, who acted in bad faith It is now settled that the fact that the first marriage is void from the beginning is not a defense in a bigamy charge. As with a voidable marriage, there must be a judicial declaration of the nullity of a marriage before contracting the second marriage. [Mercado vs Tan (2000)] The accused may still be charged with the crime of bigamy, even if there is a subsequent declaration of the nullity of the second marriage, so long as the first marriage was still subsisting when the second marriage was celebrated. [Capili vs People (2013)]

Extraordinary circumstances (Art. 391, CC): (a) ON BOARD VESSEL lost at sea voyage, airplane, (b) ARMED FORCES in war, or (c) DANGER OF DEATH under other circumstances, existence not known

The mere private act of signing a marriage contract bears no semblance to a valid marriage and thus, needs no judicial declaration of nullity. Such act alone, without more, cannot be deemed to constitute an ostensibly valid marriage for which petitioner might be held liable for bigamy unless he first secures a judicial declaration of nullity before he contracts a subsequent marriage. [Morigo vs Morigo (2004)]

Notes:  Institution of a summary proceeding is not sufficient. There must also be a summary judgment. (Balane)  Only the spouse present can file or institute a summary proceeding for the declaration of presumptive death of the absentee. (Bienvenido case)  While an action for declaration of death or absence under Rule 72, Section 1(m), expressly falls under the category of special proceedings, a petition for declaration of presumptive death under Article 41 of the Family Code is a summary proceeding, as provided for by Article 238 of the same Code. [Republic vs Granada (2012)]

c. Subsequent Marriage when one spouse is absent Requirements for Subsequent Marriage to be Valid When Prior Spouse is Absent (Art. 41): (1) Subsequent marriage due to ordinary absence where: (a) Absent spouse had been absent for 4 consecutive years; 20

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

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The belief of the present spouse must be the result of proper and honest to goodness inquiries and efforts to ascertain the whereabouts of the absent spouse and whether the absent spouse is still alive or is already dead. This is drawn from circumstances before and after the disappearance and the nature and extent of inquiries made. [Republic vs Granada (2012)]

circumstances; 4 years under 2 years under extraordinary extraordinary circumstances circumstances As remarriage

As to effect on Subsequent subsequent marriage is marriage automatically terminated by the recording of an affidavit of reappearance of the absent spouse

Note: It is the recording of the affidavit of reappearance that automatically terminates the subsequent marriage. Hence, if absentee spouse reappears without recording affidavit of reappearance, then there is no legal effect. Meanwhile, absentee spouse cannot remarry. (Tolentino) EXCEPTION TO THE EXCEPTION: If there is a judgment annulling the previous marriage or declaring it void ab initio. (Art. 42)

As to ground

Good Faith: PERIOD of absence for PRESUMPTIVE DEATH is MANDATORY thus cannot be shortened by good faith and if be done so will be VOID.

Civil Code

4 years under Absent for at normal least 7 years;

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Upon reappearance, judicial proceeding is necessary to declare marriage null and void

Well founded Generally belief that the believed to be absent spouse dead is dead

Related Provisions

Difference between Absence in the Civil Code and Family Code

As to period

to In order to Declaration of remarry, presumptive summary death is not proceeding is necessary necessary

As to who can Can be The spouses institute the instituted by themselves action the spouse present, any interested party, and the subsequent spouse

Effect of Reappearance of Absent Spouse GENERAL RULE: The subsequent marriage remains valid. EXCEPTION: It is automatically terminated by the recording of the affidavit of reappearance of the absent spouse at the instance of any interested person, with due notice to the spouses of the subsequent marriage. (Art. 42)

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e. Psychological incapacity Contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, even if such incapacity becomes manifest only after its solemnization (Art. 36)

Art. 390, Civil Code. After an absence of 7 years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of 10 years. If he disappeared after the age of 75 years, an absence of 5 years shall be sufficient in order that his succession may be opened.

Republic v. Molina, (1997): (1) The burden of proof to show the nullity of the marriage belongs to the plaintiff. This is to be investigated by the OSG for collusion. (2) The root cause of the psychological incapacity must be: (a) medically or clinically identified, (b) alleged in the complaint, (c) sufficiently proven by the 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 also 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) The essential marital obligations must be those embraced by Articles 68 up to 71 of the Family Code as regards the husband and wife as well as Articles 220, 221, and 225 of the same Code in regard to parents and their children. (7) Interpretations given by the National Appellate Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling/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. No decision shall be handed down unless the Solicitor General issues a certification.

Art. 391, Civil Code. The following shall be presumed dead for all purposes, including the division of the estate among the heirs: 1. A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane; 2. A person in the armed forces who has taken part in war, and has been missing for four years; 3. A person who has been in danger of death under other circumstances and his existence has not been known for four years.

Notes:  Although 7 years is presumption of death of CC, the FC makes an purpose of remarriage requirement to 4 years.

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required for the an absentee in the exception for the by limiting such

d. Bad Faith of Both Spouses Art. 44. If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and all donations by reason of marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law. (n)

Santos v. Bedia-Santos, (1995): Laid down 3 characteristics for determining psychological

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incapacity: gravity, antecedent, and incurability. Tsoi v. CA, (1997): Refusal of husband to have sex was interpreted as psychological incapacity. “A man who can but won’t is psychologically incapacitated” Marcos v. Marcos (2000): Psychological incapacity maybe established by the totality of the evidence presented. Personal medical examination could be dispensed with. Republic v. San Jose (2007): There is no requirement that the respondent be medically examined first. Antonio v. Reyes, (2006): “Pathological liar” considered as psychological incapacity, Molina guidelines met. Kalaw v. Fernandez (2015): In the task of ascertaining the presence of psychological incapacity as a ground for the nullity of marriage, the courts, which are concededly not endowed with expertise in the field of psychology, must of necessity rely on the opinions of experts in order to inform themselves on the matter, and thus enable themselves to arrive at an intelligent and judicious judgment. f. Incestuous marriages Article 37 (Incestuous): (1) Between ascendants and descendants of any degree, legitimate or illegitimate (2) Between brothers and sisters, whether full or half blood, legitimate or illegitimate

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(1) Between collateral blood relatives, legitimate or illegitimate, up to the fourth civil degree. (2) Between step-parents and step-children.  Note: Stepbrothers and stepsisters can marry because marriages between them are not among those enumerated in Article 38. (3) Between parents-in-law and children-inlaw. (4) Between adopting parent and adopted child. (5) Between the surviving spouse of the adopting parent and the adopted child. (6) Between the surviving spouse of the adopted child and the adopter. (7) Between an adopted child and a legitimate child of the adopter. (8) Between adopted children of the same adopter. (9) Between parties where one, with the intention to marry the other, killed that other person's spouse, or his or her own spouse. Relationships outside of Art. 37 and 38 which are not impediments to marriage: brother-inlaw with sister-in-law, stepbrother with stepsister, guardian with ward, adopted with illegitimate child of the adopter, adopted son of the husband with adopted daughter of the wife, parties who have been convicted of adultery h. Non-compliance with recording requirement after declaration of nullity Article 53 (Non-Recording): Subsequent marriage of spouses, where the requirements of recording under Art. 52 have not have been complied with, shall be null and void.

g. Against Public Policy

Article 38 (Against Public Policy):

Art. 52. The judgment of annulment or of absolute nullity of the marriage, the partition

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and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons.

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Article 43 and 44 (Effects of Termination of Bigamous Marriage under Art. 42) Art. 43: (1) Children of subsequent marriage – conceived prior to its termination considered legitimate; custody and support decided by court in a proper proceeding. (2) Property Regime – dissolved and liquidated (party in bad faith shall forfeit his/her share in favor of the common children or if there are none, children of the guilty spouse by a previous marriage, and in case there are none, to the innocent spouse). (3) Donation propter nuptias – remains valid, (but if the donee contracted marriage in bad faith, donations are revoked by operation of law) (4) Insurance benefits – innocent spouse may revoke designation of guilty party as beneficiary, even if such designation is stipulated as irrevocable. (5) Succession Rights – Party in bad faith shall be disqualified to inherit from the innocent spouse, whether testate or intestate.

Previous marriage declared void ab initio or annulled Under the Civil Code (superseded by the Family Code), there was no need for a judicial declaration of nullity of a previous marriage for a subsequent marriage to be valid (People v. Mendoza (1954)) Atienza v. Brillantes, (1995): Even if the judge’s first marriage contracted in 1965 was void for not having a marriage license, the requirement for a judicial declaration of nullity in Art. 40 still applies for his subsequent marriage contracted in 1991. Apiag v. Cantero, (1997): Where both marriages were contracted prior to the effectivity of the FC, the requirement of Art. 40 does not apply to the second marriage where a right is already vested and on which the FC cannot have retroactive effect.

Article 44 (Donations): If both spouses of the subsequent marriage acted in bad faith, all donations by reason of marriage and testamentary dispositions made by one party in favor of the other are revoked by operation of law.

Domingo v. CA, (1993): The judicial declaration of nullity can be invoked for purposes other than remarriage. Article 40 was interpreted as being a requirement for purposes of remarriage but not limited for that purpose. Separation of property is also a valid purpose for filing for a judicial declaration of nullity.

Who may file the petition for nullity of void marriages? GENERAL RULE: Only the husband or wife may file the petition. (AM No. 02-11-10 SC, Sec. 2a)

The word “solely” in Art. 40 referred to validating subsequent marriages but NOT to limiting the purposes for which a judicial declaration of nullity can be invoked.

Specifically, A.M. No. 02-11-10-SC extends only to marriages covered by the Family Code, which took effect on August 3, 1988, but, being a procedural rule that is prospective in application, is confined only to proceedings

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commenced after March 15, 2003. [Ablaza vs Republic (2010)]

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Art. 48 (2): In the cases referred to in the preceding paragraph, no judgment shall be based upon a stipulation of facts or confession of judgment.

EXCEPTIONS: (1) Nullity of marriage cases commenced before the effectivity of A.M. No. 02-11-10-SC (2) Marriages celebrated during the effectivity of the Civil Code. [Carlos vs Sandoval (2008)]

Stipulation of Facts: An admission by both parties after agreeing to the existence of any of the grounds or facts that would constitute a void/voidable marriage

However, the absence of a provision in the Civil Code cannot be construed as a license for any person to institute a nullity of marriage case. Such person must appear to be the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. [Carlos vs Sandoval (2008)]

Confession of judgment: The admission by one party admitting his/her fault to cause the invalidity of the marriage. Participation of the OSG The obvious intent of the AM 02-11-10-SC was to require the OSG to appear as counsel for the State in the capacity of a defensor vinculi (i.e., defender of the marital bond) to oppose petitions for, and to appeal judgments in favor of declarations of nullity of marriage under Article 36 of the Family Code, thereby ensuring that only the meritorious cases for the declaration of nullity of marriages based on psychological incapacity-those sufficiently evidenced by gravity, incurability and juridical antecedence-would succeed. [Mendoza vs Republic (2012)]

Procedure in attacking a void marriage GENERAL RULE: Void Marriages may be attacked collaterally or directly. EXCEPTION: A person in a void marriage must first file for a declaration of nullity in order to subsequently marry Requisites for valid remarriage: Art. 52. The judgment of annulment or of absolute nullity of the marriage the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise the same shall not affect third persons. (n)

No Motion to Dismiss AM 02-11-10-SC Sec.7 prohibits the filing of a motion to dismiss in actions for annulment of marriage. [Aurelio vs Aurelio (2011)] Effect of pendency of action for declaration of nullity: (1) The court shall provide for the support of the spouses, (2) The custody and support of the common children, giving paramount consideration to their moral and material welfare, their choice of parent with whom they wish to remain. (3) The court shall also provide for visitation rights of other parent. (Art. 49)

(1) The previous marriage should be judicially declared void or annulled (final judgment) (Terre v. Terre (1992), Atienza v. Brillantes (1995)); (2) Must comply with the requirements of Art. 52. Safeguard against collusion and No confession of judgment

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(2) The children/guardian/trustee of property may ask for the enforcement of the judgment (Art. 51(2)) (3) The delivery of the presumptive legitimes shall not prejudice the ultimate successional rights, but the value of the properties already received shall be considered as advances on their legitime (Art. 51(3))

Effect of res judicata Suffice it to state that parties are bound not only as regards every matter offered and received to sustain or defeat their claims or demand but as to any other admissible matter which might have been offered for that purpose and of all other matters that could have been adjudged in that case. [Mallion vs Alcantara (2006)]

GENERALLY, children born or conceived within void marriages are illegitimate.

Effect of final judgment declaring nullity The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43 and by Article 44 shall also apply in the proper cases to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45 (Art. 50(1)).

EXCEPTIONS:  Children conceived or born before the judgment under Article 36 has become final and executory (Art. 54)  Children conceived or born of subsequent marriages under Article 53 (Art. 54)

Final judgment in such cases shall provide for the: (1) Liquidation, partition, and distribution of the properties of the spouses (2) Custody and support of the common children (3) Delivery of their presumptive legitimes  Unless such matters had been adjudicated in previous judicial proceedings (Art. 50(2))  All creditors of the spouses/property regime shall be notified of the proceedings for liquidation (Art. 50(2 and 3))

F. 2. VOIDABLE MARRIAGE

OR

ANNULLABLE

Art. 14: In case either or both of the contracting parties, not having been emancipated by a previous marriage, are between the ages of eighteen and twenty-one, In addition to the requirements of the preceding articles:  Exhibit to the local civil registrar the consent to their marriage of their father, mother, surviving parent or guardian, or persons having legal charge of them, in the order mentioned  Manifested in writing by the interested party, who personally appears before the proper local civil registrar, or  In the form of an affidavit made in the presence of two witnesses and attested before any official authorized by law to administer oaths  The personal manifestation shall be recorded in both applications for marriage license, and the affidavit, if one

In the partition, the conjugal dwelling and lot shall be adjudicated to the spouse with whom majority of the common children remain (Art. 102 and 129) (Art. 50(4) Presumptive legitimes, computed as of the date of the final judgment, shall be delivered in cash, property or sound securities: (1) Unless the parties, by mutual agreement judicially approved, had already provided for such (Art. 51(1))

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is executed instead, shall be attached to said applications.

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Commission believes that no such ratification can be made by the parent.

Grounds for Annulment Article 4 states that “xxx A defect in any of the essential requisites shall render the marriage voidable as provided in Article 45.”

Moe v. Dinkins, (1981): In defending the requirement of parental consent, the Court held that the State has power to make adjustments in the constitutional rights of minors based on the following grounds: 1) the peculiar vulnerability of children, 2) to protect minors from immature decision making and prevent unstable marriages, 3) on the presumption that parents act in the best interests of their children in child rearing.

Article 45. Marriage may be annulled on the following grounds existing at time of marriage: (1) One of the parties is 18 or above but below 21 years old, and there is no parental consent. (2) Either party was of unsound mind (insanity). (3) The consent of either party was obtained through fraud (different from mistake in identity) (4) The consent of either party was obtained through force, intimidation, or undue influence. (5) Either party is physically incapable of consummating the marriage (impotence; this is different from sterility, which is the inability to produce offspring). (6) Either party has a serious and incurable sexually-transmissible disease, even if not concealed.*

b. Insanity (a) Mental incapacity or insanity is a vice of consent; insanity (1) of varying degrees, (2) curable being an illness, capable of ratification or convalidation, (3) has lucid intervals, (4) ground only for annulment in many countries (b) Can be ratified by cohabitation after insanity is cured or during a lucid interval (c) Mere mental weakness is not a ground for annulment, but if found grave enough, it may amount to psychological incapacity. (d) Intoxication, somnambulism where one had no mental capacity to give consent is equivalent to insanity (e) Must EXIST AT THE TIME of the celebration of the marriage. Insanity that occurs after the celebration of marriage does not constitute a cause for nullity (Katipunan v. Tenorio (1937)) (f) Law presumes SANITY, burden of proof on party alleging insanity

Action to Annul: Action in rem, concerns status of parties; res is relation between parties or marriage tie; jurisdiction depends on nationality or domicile not the place of celebration. Grounds for Annulment explained: a. Lack of parental consent (a) 18 ≤ x < 21 without parental consent (b) Ratified by party 18 or above but below 21 upon free cohabitation upon reaching 21. (c) TOLENTINO: parents whose consents were wanting may ratify before 21; this right can be waived; however, the Code

c. Fraud (a) Only those enumerated in Art. 46:  Non-disclosure of previous CONVICTION by final judgment of a

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(b)

(c)

(d)

(e)

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crime involving MORAL TURPITUDE  Concealment by wife at the time of marriage, that she was pregnant by another man  Concealment of STD regardless of nature existing at time of marriage  Concealment of drug addiction, habitual alcoholism, homosexuality, lesbianism existing at time of marriage NO other misrepresentation or deceit of CHARACTER, HEALTH, RANK, FORTUNE OR CHASTITY shall constitute FRAUD. Conviction of Crime: requisites are  Moral turpitude  Conviction Concealment of Pregnancy  Fraud against very essence of marriage; importance of procreation of children; an assault to the integrity of the union by introducing ALIEN BLOOD  If husband knew of pregnancy, the marriage cannot be annulled on the ground of concealment May be ratified upon free cohabitation after knowledge of fraud.

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BAR ACTION for annulment; The defect is not the disease, but the FRAUD which VITIATED CONSENT. Buccat v. Mangonon de Buccat, (1941): W gave birth 3 months after marriage, H filed for annulment: concealment of non-virginity. Denied. Court held that it was unbelievable that husband could not have noticed when wife had been at least 6 months pregnant prior to marriage. Aquino v. Delizo, (1960): The Supreme Court granted annulment because the wife concealed the fact that she was 4 months pregnant during the time of the marriage. Since Delizo was “naturally plump,” Aquino could hardly be expected to know, by mere looking, whether or not she was pregnant at the time of the marriage. Almelor v. RTC, (2008): It is the concealment of homosexuality, and not homosexuality per se, that vitiates the consent of the innocent party. Such concealment presupposes bad faith and intent to defraud the other party in giving consent to the marriage.

d. Force, intimidation, undue influence (a) FORCE must be one as to prevent party from acting as a free agent; will destroyed by fear/compulsion (b) INTIMIDATION must be one as to compel the party by a reasonable/wellgrounded fear of an imminent and grave evil upon his person/properties (c) DEGREE OF INTIMIDATION: age, sex, condition of person borne in mind (d) Threat or intimidation as not to act as FREE AGENT; i.e. threatened by armed demonstrations (Tiongco v. Matig-a) (e) Committee added “undue influence”, maybe compelled to enter out of REVERENTIAL FEAR e.g., fear of

Art. 45 STD Art. 46 STD Ground for annulment The STD is a type of fraud which is a ground for annulment Does not have to be Must be concealed concealed Must be serious and Need not be serious incurable nor incurable The STD itself is the It is the concealment ground for annulment that gives rise to the annulment Effect of Cure to Fraud in Art. 46: Recovery or rehabilitation from STD, drug addiction, and habitual alcoholism will NOT

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causing distress to parents, grandparents, etc. (f) May be ratified upon cohabitation after force, intimidation, or undue influence has ceased or disappeared.

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impotency, she is presumed potent; to order her to undergo physical exam does not infringe her right against selfincrimination (Jimenez v Canizares) NOTE: If she continues to refuse the physical exam, she can be held in contempt & ordered confined in jail until she does so (g) Villanueva vs. CA (2006): Absence of cohabitation is not a ground for annulment. (h) RELATIVE IMPOTENCY: may now be invoked because there are cases where one is impotent with respect to his/her spouse but not with other men or women. (i) EXAMPLE: penile erection to other women possible; unusually large penis cannot fit with abnormally small vagina

e. Impotency (a) Must exist at time of marriage, and be continuous and incurable. If incapacity can be remedied or is removable by operation, NOT ANNULLABLE (Sarao v Guevarra(1940)) (b) Physical condition: sexual intercourse with a person of the opposite sex is impossible, not mere sterility (c) Only the potent spouse can file the action for annulment and he/she must not have been aware of the other’s impotency at the time of marriage (Sempio-Diy)  If he/she was aware, it is implied that he/she renounced copulation by consenting to the marriage. (Tolentino) (d) When both spouses are impotent, marriage cannot be annulled because neither spouse is aggrieved. (SempioDiy)  An impotent plaintiff could not have expected copulation with the other spouse. (Tolentino) (e) POTENCY PRESUMED; party who alleges impotency has burden of proof (Jimenez v Canizares (1960)) (f) REFUSAL of wife to be examined DOES NOT PRESUME impotency because Filipino women are inherently shy & bashful; TC must order physical examination because w/o proof of

f.

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Sexually-transmissible disease serious and incurable (a) Should exist at the time of the marriage (b) Should be found serious (c) Should appear to be incurable (d) Reason: danger to the health of spouse & offspring/s (e) Same as incurable impotency (f) Not subject to ratification  cannot be ratified or convalidated by cohabitation:  Affliction of STD is unknown to the other spouse (Balane)  The other spouse must also be free from a similar STD. (Balane)

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Who may file, Prescription, Ratification

Ground (Art. 45) Lack of parental consent Insanity

Who can file (Art. 47) Party 18 or above but below 21 Parent or guardian who did not give consent Sane spouse with no knowledge of the other’s insanity Legal guardian of insane party Insane party

Fraud

Injured party (defrauded party)

Force, intimidation, undue influence Impotence

Injured party

STD

Healthy party

Potent spouse

Prescription (Art. 47) Within 5 years after attaining 21. Before party below 21 reaches 21. Any time before the death of either party

During lucid interval or after regaining sanity, and before death Within 5 years after discovery of fraud Within 5 years after disappearance of force, undue influence, or intimidation Within 5 years after marriage Within 5 years after marriage

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Ratification (Art. 45) Free cohabitation after attaining age of 21.

Free cohabitation of insane party after insane party comes to reason

Free cohabitation after having full knowledge of fraud Free cohabitation after the force or intimidation or undue influence has ceased or disappeared Cannot be ratified but action prescribes Cannot be ratified but action prescribes

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Marriages Not Subject to Ratification/ Convalidation by cohabitation (1) One spouse is incurably impotent (Art. 47 – prescription: 5 years) (2) One spouse has an incurable STD (Art. 47 – prescription: 5 years)

CIVIL LAW

Courts will only determine (1) whether the foreign judgment is inconsistent with an overriding public policy in the Philippines; and (2) whether any alleging party is able to prove an extrinsic ground to repel the foreign judgment, i.e. want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. If there is neither inconsistency with public policy nor adequate proof to repel the judgment, Philippine courts should, by default, recognize the foreign judgment as part of the comity of nations. [Fujiki vs Marinay (2013)]

Presence of Prosecutor Art. 48: To prevent collusion between the parties, fabrication or suppression of evidence, the prosecuting attorney or fiscal shall appear on behalf of the State. Corpuz v. Ochoterena, (2004): In a legal separation or annulment case, the prosecuting attorney must first rule out collusion as a condition sine qua non for further proceedings. A certification by the prosecutor that he was present during the hearing and even crossexamined the plaintiff does not suffice to comply with the mandatory requirement.

G. THE LAW ON SEPARATION OF THE SPOUSES SEPARATION IN FACT Art. 239. When a husband and wife are separated in fact, or one has abandoned the other and one of them seeks judicial authorization for a transaction where the consent of the other spouse is required by law but such consent is withheld or cannot be obtained, a verified petition may be filed in court alleging the foregoing facts.

Marriages dissolved by foreign judgment Aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. The marriage tie when thus severed as to one party, ceases to bind either. [Van Dorn vs Romillo (1985)]

The petition shall attach the proposed deed, if any, embodying the transaction, and, if none, shall describe in detail the said transaction and state the reason why the required consent thereto cannot be secured. In any case, the final deed duly executed by the parties shall be submitted to and approved by the court. (n)

A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad, because of Articles 15 and 17 of the Civil Code. In mixed marriages involving a Filipino and a foreigner, Article 26 of the Family Code allows the former to contract a subsequent marriage in case the divorce is “validly obtained abroad by the alien spouse capacitating him or her to remarry.” A divorce obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided it is consistent with their respective national laws. [Garcia vs Recio (2001)]

AGREEMENT TO SEPARATE A notary public should not facilitate the disintegration of a marriage and the family by encouraging the separation of the spouses and extrajudicially dissolving the conjugal partnership. [Espinosa vs Omana (2011)]

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ABSOLUTE DIVORCE

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(4) Final judgment sentencing the respondent to imprisonment of more than six years, even if pardoned; (5) Drug addiction or habitual alcoholism of the respondent; (6) Lesbianism or Homosexuality of the respondent; (7) Contracting by the respondent of a subsequent Bigamous marriage, whether in the Philippines or abroad; (8) Sexual infidelity or perversion; (9) Attempt by the respondent Against the life of the petitioner; or (10) Abandonment of petitioner by respondent without justifiable cause for more than one year.

Article 26, par. 2 Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law. (As amended by Executive Order 227) If both parties are Muslims, there is a presumption that the Muslim Code or Muslim law is complied with. If together with it or in addition to it, the marriage is likewise solemnized in accordance with the Civil Code of the Philippines, in a so-called combined Muslim-Civil marriage rites whichever comes first is the validating rite and the second rite is merely ceremonial one. But, in this case, as long as both parties are Muslims, this Muslim Code will apply. [Zamoranos vs People (2011)]

People v. Zapata and Bondoc (1951): Adultery is not a continuing crime; it is consummated at every moment of carnal knowledge. Thus, every sexual act is a ground for legal separation. Gandioco v. Peñaranda (1989): For sexual infidelity as a ground for legal separation, there is no need for a prior conviction for concubinage, because legal separation only requires a preponderance of evidence, as opposed to proof beyond reasonable doubt.

One of the effects of irrevocable talaq, as well as other kinds of divorce, refers to severance of matrimonial bond, entitling one to remarry. [Zamoranos vs People (2011)]

Note: The grounds for legal separation are exclusive. (Article 55) These must be filed within 5 years after occurrence of cause (Article 57) (1) Repeated physical violence or grossly abusive conduct directed against the 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;

Lapuz Sy v. Eufemio (1972): The death of one party in a legal separation case abates the action. This is because the death of either spouse automatically dissolves the marriage. An action for legal separation is also purely personal between the spouses. Dela Cruz. v. Dela Cruz (1968): Abandonment is not mere physical estrangement but also financial and moral desertion. There must be an absolute cessation of marital relations, duties, and rights with the intention of perpetual separation.

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Almelor vs RTC (2008): It is the concealment of homosexuality, and not homosexuality per se, that vitiates the consent of the innocent party. Such concealment presupposes bad faith and intent to defraud the other party in giving consent to the marriage. Acts of Violence according to RA 9262 (1) Causing physical harm to the woman or her child; (2) Threatening to cause the woman or her child physical harm; (3) Attempting to cause the woman or her child physical harm; (4) Placing the woman or her child in fear of imminent physical harm; (5) Attempting to compel or compelling the woman or her child to engage in conduct which the woman or her child has the right to desist from or desist from conduct which the woman or her child has the right to engage in, or attempting to restrict or restricting the woman's or her child's freedom of movement or conduct by force or threat of force, physical or other harm or threat of physical or other harm, or intimidation directed against the woman or child. This shall include, but not limited to, the following acts committed with the purpose or effect of controlling or restricting the woman's or her child's movement or conduct: (a) Threatening to deprive or actually depriving the woman or her child of custody to her/his family; (b) Depriving or threatening to deprive the woman or her children of financial support legally due her or her family, or deliberately providing the woman's children insufficient financial support;

(6)

(7)

(8)

(9)

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(c) Depriving or threatening to deprive the woman or her child of a legal right; (d) Preventing the woman in engaging in any legitimate profession, occupation, business or activity or controlling the victim's own money or properties, or solely controlling the conjugal or common money, or properties; Inflicting or threatening to inflict physical harm on oneself for the purpose of controlling her actions or decisions; Causing or attempting to cause the woman or her child to engage in any sexual activity which does not constitute rape, by force or threat of force, physical harm, or through intimidation directed against the woman or her child or her/his immediate family; Engaging in purposeful, knowing, or reckless conduct, personally or through another, that alarms or causes substantial emotional or psychological distress to the woman or her child. This shall include, but not be limited to, the following acts: (a) Stalking or following the woman or her child in public or private places; (b) Peering in the window or lingering outside the residence of the woman or her child; (c) Entering or remaining in the dwelling or on the property of the woman or her child against her/his will; (d) Destroying the property and personal belongings or inflicting harm to animals or pets of the woman or her child; and (e) Engaging in any form of harassment or violence; Causing mental or emotional anguish, public ridicule or humiliation to the woman or her child, including, but not limited to, repeated verbal and emotional abuse, and denial of financial support or custody of

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minor children of access to the woman's child/children.

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Araneta vs. Concepcion, (1956): Courts can still resolve other issues, pending the waiting period or cooling off period. In resolving other issues, courts should try not to touch, as much as possible, on the main issue (i.e. adultery if that is the ground used). However, Court must still receive evidence if just to settle incidental issues of support and custody.

DEFENSES Grounds for denying legal separation (Article 56): (1) Condonation by aggrieved party (2) Consent by aggrieved party to the commission of the offense (3) Connivance between parties in the commission of the offense (4) Mutual guilt or Recrimination between spouses in the commission of any ground for legal separation (5) Collusion between parties to obtain decree of legal separation (6) Prescription of action for legal separation (Art. 57: 5 years from occurrence of the cause of action) (7) Reconciliation of parties during pendency of action (Art. 66 par.1) (8) Death of either party during pendency of action (Lapuz-Sy vs. Eufemio)

Note: This provision of the Family Code dictating a mandatory 6-month cooling-off period does not apply in cases where violence, as used in RA 9262 (Anti-Violence Against Women and their Children), is alleged. The case should be heard as soon as possible by the court. CONFESSION OF JUDGMENT No decree of legal separation shall be based upon a stipulation of facts or a confession of judgment (Art. 60, par. 1. FC). Note: Art. 60 par. 1 applies only if the judgment was based solely on the stipulation of facts or solely on the confession of judgment. Thus, if other grounds were used, Art. 60 par. 1 is not applicable. (Balane)

WHEN TO FILE/TRY ACTIONS An action for legal separation shall be filed within five years from the time of the occurrence of the cause. (Art. 57)

Ocampo v Florenciano (1960): The prohibition on confession of judgment does not mean that the Court will not grant petition if one party admits to being guilty of the charges of adultery. The point of this provision is that the Court should still admit evidence, not decide just based on an admission of guilt. Because what is prohibited is handing down a decree of legal separation based solely on a confession of judgment.

COOLING-OFF PERIOD AND RECONCILIATION EFFORTS Action cannot be tried before six months have elapsed from the filing of the petition (Art. 58). Actions cannot be tried unless the court has attempted to reconcile the spouses, and determined that despite such efforts, reconciliation is highly improbable (Art. 59) Note: This is without prejudice to judicial determination of custody of children, alimony, and support pendente lite.

EFFECTS OF FILING PETITION (1) The spouses are entitled to Live separately, but the marital bond is not severed. (Art. 61 (1))

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(2) Administration of Community or Conjugal Property – If there is no written agreement between the parties, the court shall designate one of them or a third person to administer the ACP or CPG. (Art. 61, par. 2)

CIVIL LAW

prescribes after 5 years from the decree of legal separation. (6) Innocent spouse may also revoke designation of guilty spouse as beneficiary in an Insurance policy, even if such stipulations are irrevocable. (Art. 64. FC, cf. PD 612, sec. 11) (7) Obligation for Mutual support ceases, but the court may order the guilty spouse to support the innocent spouse. (Art. 198) (8) The wife shall continue to use the Surname of the husband even after the decree for legal separation. (Laperal v. Republic (1992))

EFFECTS OF PENDENCY The Court shall provide for: (Art. 62, cf. Art. 49. FC)  Support of spouses Custody of children The court shall give custody of children to one of them, if there is no written agreement between the spouses.  Visitation rights of the other spouse

RECONCILIATION Should the spouses reconcile, they should file a corresponding joint manifestation under oath of such reconciliation, duly signed by them and filed with the court in the same proceeding for legal separation. (Art. 65)

EFFECTS OF LEGAL SEPARATION (1) The spouses can live separately (Art. 63) but the marriage bonds are not severed. (2) The ACP or CPG shall be dissolved and liquidated, and the share of the guilty spouse shall be forfeited in favor the common children, previous children, or innocent spouse, in that order (Art. 63. cf. Art. 43, par. 2). (3) Custody of the minor children shall be awarded to the innocent spouse (Art. 63, cf. Art 213) (4) Guilty spouse shall be disqualified from Inheriting from innocent spouse by intestate succession. The provisions in favor of the guilty party in the will of the innocent spouse shall also be revoked by operation of law. (Art. 63) (5) Donations in favor of the guilty spouse may be revoked (Art. 64) but this action

Effects of Reconciliation (1) Proceedings for legal separation shall be terminated at whatever stage. (Art. 66) (2) If there is a final decree of legal separation, it shall be set aside. (Art. 66) (3) The separation of property and forfeiture of share of guilty spouse shall subsist, unless the spouses agree to revive their former property regime or to institute another property regime. (Art. 66 cf. Art. 67) (4) Joint custody of children is restored. (5) The right to intestate succession by guilty spouse from innocent spouse is restored. (6) The right to testamentary succession depends on the will of the innocent spouse.

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Annex to Void and Voidable Marriages and Legal Separation Grounds Void Marriages (1) One is a minor (2) No authority to marry (3) No valid marriage license (4) Bigamous and polygamous marriages (5) Mistake of identity (6) Void subsequent marriage (7) Psychological incapacity (8) Incestuous Marriages (9) 9. Marriages against public policy

Voidable Marriages (10) Lack of parental consent (11) Insanity (12) Fraud (13) Force, Intimidation or (14) Undue Influence (15) Impotence (16) 6. Serious and Incurable STD

Legal Separation (17) Repeated Physical Violence (18) Pressure to compel to change religious/political affiliations (19) Corruption / Inducement to engage in prostitution (20) Final judgement with sentence of more than 6 yrs. (21) Drug Addiction / Habitual Alcoholism (22) Homosexuality / Lesbianism (23) Bigamous marriage (24) Sexual Infidelity (25) Attempts against the life of petitioner (26) 10. Abandonment without just cause for more than 1 year

Effects of Filing / Pending Decree Void/Voidable Marriages Legal Separation Support for the spouses Custody and support for the children Visitation rights to the other spouse Effects of Affidavit of Reappearance, Judicial Declaration of Nullity, Annulment and Legal Separation Void Marriages Terminated Marriage Voidable Legal Separation (Art. 41) Marriages Status of Marital ties Severed Severed Severed Not Severed Status of Marriage Void ab initio Subsequent marriage Void Valid is terminated (not invalidated) Status of Children born and conceived before termination Illegitimate Legitimate Legitimate Legitimate EXCEPT: Art. 36 and 35 conceived and born before judgment (legitimate) Custody of Children Court Proceeding Court Proceeding Court Proceeding Innocent Spouse Property Relations 1. Dissolution and Liquidation of properties a. Guilty/Bad Faith spouse will forfeit his/her share from the Net Profits to the (in order): i. Common children ii. Children of the guilty spouse by previous marriage

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iii. The innocent spouse 2. Notification of creditors with the proceedings for liquidation 3. Conjugal dwelling to be adjudicated to the spouse who has custody of majority of common children 4. Insurance policy may be revoked only by the innocent spouse (Legal Separation: Only within 5 years) 5. Spouse in bad faith/guilty shall be disqualified to inherit from innocent spouse (intestate succession only in legal separation) Donation Propter Nuptias Valid, but if done contracted marriage in bad faith, revoked by operation of May be revoked law within 5 years

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V. Rights and Obligations Of Spouses

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In case of disagreement, the court shall decide. (Art. 69 (1))

C. SUPPORT

A. LIVE TOGETHER

From the conjugal property; If none, income or the fruits of their separate properties; if none, from their separate properties (liable in proportion to their properties).

GENERAL RULE: It is their obligation to do so (cohabitation). It is also their obligation to observe mutual love, respect and fidelity and render mutual help and support. (Art. 68) EXEMPTION: One spouse living abroad or there are valid and compelling reasons (Art. 69 (2)) – at the discretion of the court. EXEMPTION TO EXEMPTION: Incompatibility with the solidarity of the family (Art. 69 (2))

In the case of a separation de facto, if it is proved that the husband and wife were still living together at the time of his death, it would be safe to presume that she was dependent on the husband for support, unless it is shown that she is capable of providing for herself. [SSS v. Aguas (2006)]

Ilusorio v. Bildner (2000): A person has a purely personal right to consortium (Constitutional right to liberty). Court cannot order a man to go back to the conjugal dwelling. (Shows that what is in Family Code is not the former spousal unity doctrine (Old England)).

D. MANAGEMENT OF FAMILY LIFE This is the right and duty of both spouses.

E. EFFECT OF NEGLECT OF DUTY In case the other spouse neglects his or her duties or commits acts which tend to bring danger, dishonor or injury to the family, the aggrieved party may apply to the court for relief. (Art. 72)  Injury contemplated is physical, moral, emotional or psychological, not financial.

Goitia v. Campos Rueda (1916): If the wife abandons the family domicile (vs obligation of cohabitation) with justifiable cause i.e. being forced to perform lewd sexual acts, the husband’s obligation to support her is not terminated. The law will not permit the husband to terminate the obligation to support his wife by his own wrongful acts in driving the wife to seek protection in her parents’ home.

F. EXERCISE OF PROFESSION Either spouse may exercise any legitimate profession, without need for consent of the other. o The other spouse may only object on valid, serious, and moral grounds. o In case of disagreement, the Court shall decide whether:  The objection is proper, and  Benefit has accrued to the family before OR after the objection.

Arroyo v. Vasquez de Arroyo (1921): A court cannot compel a married woman to go back to her husband, but the court may decree that support be terminated.

B. FAMILY DOMICILE The husband and wife shall fix the family domicile. (Art. 69)

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If BEFORE the objection, enforce resulting obligation against the separate property of the spouse who has not obtained consent. (Art. 73)

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court for judicial separation of property Art. 135 : Sufficient cause for judicial separation of property Art. 136 : Voluntary dissolution of ACP or CPG by the spouses

VI. Property Relations of Spouses

Requirements of marriage settlements and any modification thereof [Art. 77] Made in writing Signed by the parties Executed before the marriage celebration Not to prejudice third persons unless registered in the local civil registry where the marriage is recorded and in registries of property If executed by a person below 21 y.o., valid only when persons required to give consent to the marriage (father, mother, or guardian, respectively) are made parties to the agreement [Art. 78] If executed by a person upon whom civil interdiction has been pronounced or who is subject to any other disability, valid only when his guardian appointed by a competent court is made party to the agreement [Art. 79]

A. MARRIAGE SETTLEMENTS Requisites for Validity Art. 75. Future spouses may agree upon, in the marriage settlement, which property regime will govern their marriage (ACP, CPG, complete separation of property, other regimes). However, in the absence of a marriage settlement, or when the regime agreed upon is void, the system of absolute community of property as established by this Code shall govern.

B. DONATIONS MARRIAGE

Marriage settlements are considered accessory to the marriage, therefore as per Art. 81, stipulations in consideration of future marriage and donations will be void if the marriage does not take place.

BY

REASON

OF

Solis v. Barroso (1928): In donations propter nuptias, the marriage is really a consideration, but not in the sense of giving birth to the obligation. There can be a valid donation even if the marriage never took place, but the absence of marriage is a ground for the revocation of the donation.

Art. 103(3) & 130(3). Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage.

Mateo v. Lagua (1969): Donations propter nuptias are without onerous consideration, marriage being merely the occasion or motive for the donation, not its cause. Being liberalities, they remain subject to reduction for inofficiousness upon the donor’s death, if they should infringe the legitime of a forced heir. Requisites of donations propter nuptias Made before the celebration of marriage Made in consideration of marriage In favor of one or both of the future spouses

Marriage Settlement Rules When modifications can be made General rule: Before marriage is celebrated [Art. 76] Art. 63(2): Property regime is dissolved and liquidated Arts. 66 and 67: Reconciliation in case of legal separation Art. 128: When abandoned spouse petitions the

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donee acted in bad faith. 4. Upon legal separation, if the donee is the guilty spouse. 5. If there is a resolutory condition, and it is not complied with. 6. When donee has committed an act of ingratitude: [Art. 765, CC] a. An offense against person or property of donor, or his wife or children under parental authority. b. An imputation to the donor of any criminal offense, or any act involving moral turpitude, even if proven, unless the crime is committed against the donee, his wife or children under his authority. c. Refusing to support the donor, if he/she is legally required to do so.

Donor must be one of the betrothed or any third person Donations excluded Ordinary wedding gifts given after the celebration of the marriage Donations in favor of future spouses made before marriage but not in consideration thereof Donations made in favor of persons other than the spouses even if founded on the intended marriage Who may donate Spouses to each other Parents of one or both spouses Third persons to either or both spouses Sources of rules governing donations propter nuptias Family code provisions [Arts. 82-87] Ordinary donation provisions [Art. 83; Title III of Book III, NCC] Provisions on testamentary succession and the formalities of wills for donations on future property [Art. 84, par. 2]

Effects of judicial declaration of nullity Donations by reason of marriage shall remain valid except that if the donee contracted marriage in bad faith, such donations made to said donee are revoked by operation of law. [Art. 43 (3)] Revocation by operation of law - Thus, even if spouse in good faith condones the donee, the donation propter nuptias is still forfeited. Effects provided for by Art. 43(2), (3), (4), and (5) and by Art. 44 shall also apply to marriages that are declared void ab initio or annulled by final judgment under Article 40 (Judicial declaration of nullity) and 45 (Voidable marriages). [Art. 50]

Rules for donations before marriage General rule: Future spouses who agree upon a regime other than ACP cannot donate to each other more than 1/5 of their present property (excess shall be considered void). [Art. 84] Donations of property subject to encumbrances (1) Are considered valid. (2) In case of foreclosure: (a) if property value < obligation, donee shall not be liable for the deficiency (b) if property value > obligation, donee shall be entitled to the excess (Art. 85)

Rules for donations during marriage General rule: Spouses cannot donate to each other, directly or indirectly; donations made by spouses to each other during the marriage are void. [Art. 87] These donations refer to donations inter vivos [Tolentino] Exception: Moderate gifts on the occasion of any family rejoicing. Harding v. Commercial Union, (1918): The prohibition on donations can only be assailed by persons who bear such relation to the parties or the property itself, that their rights are being interfered with. Here, the insurance company of the donated car cannot assail the validity of the donation. In addition, the codal exception of

Grounds for revocation of donation propter nuptias [Art. 86] 1. If the marriage is not celebrated or judicially declared void ab initio, except donations made in marriage settlements. 2. When the marriage takes place without the consent of the parents or guardians, as required by law. 3. When the marriage is annulled, and the 40

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By the Nationality Rule [Art. 15], the rule that Absolute Community Property (ACP) is the default mode of property relations absent any marriage settlement applies to all Filipinos, regardless of the place of the marriage and their residence.

“moderate gifts” depends on the income class of the spouses and a car could be considered a “moderate gift” that does not infringe the prohibition of donation between spouses. Nazareno v. Birog, (1947): A spouse cannot donate to persons which the other spouse may inherit from as it constitutes an indirect donation.

Exceptions: (1) Where both spouses are aliens (2) As to the extrinsic validity of contracts affecting property not situated in the Philippines and executed in the country where the property is located (3) As to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a foreign country whose laws require different formalities for its extrinsic validity

Rules for donations between common-law spouses Matabuena v Cervantes, (1971): The donation between common-law spouses falls within the provision prohibiting donations between spouses during marriage. Sumbad v. CA, (1999): The donation made by a man to a woman was held valid because no proof was shown that they were still living in a common-law relationship at the time of the donation. Distinguished from Ordinary Donations Donations propter Ordinary donations nuptias Does not require Express acceptance express acceptance necessary May be made by Cannot be made by minors (Art. 78) minors May include future Cannot include future property property If present property is No limit to donation of donated and property present property is not absolute provided legitimes are community, limited to not impaired 1/5 (Art. 84) Grounds for revocation Grounds for revocation - in Art. 86 - in donation laws

Art. 81. Everything stipulated in marriage settlements in consideration of a future marriage are void if marriage does not take place. However, stipulations that do not depend upon the celebration of marriage (e.g. recognition of paternity of illegitimate child) remain valid. Art. 89. Waiver of rights, interests, shares and effects of the absolute community of property is allowed, except in the following cases: (1) When there is judicial separation of property (2) When the marriage is dissolved by death of one of the spouses (3) When the marriage is annulled *The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits.

Absolute Community of Property and Conjugal Partnership of Gains Art. 80. In absence of a contrary stipulation in a marriage settlement, property relations between Filipino spouses are governed by Philippine laws, regardless of the place of marriage and their residence.

Art. 90. Co-ownership rules shall apply to ACP in matters not provided by the Family Code.

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Comparison of ACP and CPG

When it commences

What it consists of

ABSOLUTE COMMUNITY CONJUGAL PARTNERSHIP OF GAINS PROPERTY At the precise moment of the Default property regime for marriages celebration of the marriage [Art. 88] celebrated before the Family Code took effect (August 3, 1988) For marriages after the Family Code, if agreed to by the parties through a marriage settlement. All the property owned by the Proceeds, products, fruits, and income spouses at the time of the of their separate properties celebration of the marriage or Everything acquired by them within acquired thereafter [Art. 91] marriage through their own efforts Under the ACP, spouses cannot Everything acquired by them by chance exclude specific properties from the regime. Winnings from gambling shall Specific properties (Art. 117) accrue to the community property 1. Acquired by onerous title during the [Art. 95] marriage at the expense of the common fund; 2. Acquired through the labor, industry, work, or profession of either or both spouses 3. Fruits from common property and net fruits of the exclusive property of each spouse 4. Share of either spouse in hidden treasure, whether as finder or owner of property where treasure was found 5. Acquired through occupation such as fishing or hunting 6. Livestock existing at dissolution of partnership in excess of what is brought by either spouse to the marriage 7. Acquired by chance, such as winnings from gambling or betting Moral damages arising from a contract paid from the CPG [Zulueta v. Pan Am (1973)]

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ABSOLUTE COMMUNITY PROPERTY What it consists of

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CONJUGAL PARTNERSHIP OF GAINS

Loans contracted during the marriage are conjugal, and so is any property acquired therefrom [Mendoza v. Reyes (1983)] Property purchased by installment, paid partly with conjugal funds and partly with exclusive funds, if full ownership was vested during the marriage; the CPG shall reimburse the owner-spouse [Art. 118] If a winning ticket is bought by conjugal funds, the prize is conjugal (otherwise, the prize is exclusive property of the spouse who owns the ticket) Improvement on exclusive property: if original value < new value (where new value = value of land + value of improvements + net change in value), then land becomes conjugal property, subject to the reimbursement of the value of the property of the ownerspouse at the dissolution of the CPG Property belonging to one spouse converted into another kind totally different in nature from its original form during marriage becomes conjugal in the absence of proof that the expenses of the conversion were exclusively for the account of the original ownerspouse, subject to reimbursement of the value of the original property from the conjugal partnership What remains Properties acquired before the Property brought into the marriage by exclusive property marriage, for those with legitimate each spouse as his/her own descendants with a former marriage (to protect rights of children by a former marriage)

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What remains exclusive property

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ABSOLUTE COMMUNITY PROPERTY Properties acquired during the marriage by a gratuitous title, i.e. donation, inheritance by testate and intestate succession, including the fruits of such properties Except: When expressly provided by the donor or testator that the property shall form part of the ACP

Properties for personal use Except: Jewelry

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CONJUGAL PARTNERSHIP OF GAINS Property acquired by either spouse during the marriage by gratuitous title

Property acquired by right of redemption, by barter, or by exchange with property belonging to either spouse Plata v. Yatco: Plata purchased property when she was single. When married, she and her husband Bergosa cosigned a mortgage on the property. Upon foreclosure, Bergosa was sued for illegal detainer. A writ of execution on the property was carried out but Plata refused to leave the premises. SC ruled that Plata cannot be held in contempt. Property is not conjugal. Her husband signing as co-mortgagor does not convert it to CPG. She could ignore execution because the decision was for her husband alone. Property purchased with exclusive money of either spouse Property purchased by installment, paid partly with conjugal funds and partly with exclusive funds, if full ownership was vested before the marriage [Art. 118] Even if the installment is completed after the marriage, the property is exclusive if ownership was vested in one spouse before the marriage [Lorenzo v. Nicolas (1952)]

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ABSOLUTE COMMUNITY PROPERTY

Presumption

Charges and Obligations

CONJUGAL PARTNERSHIP OF GAINS All properties acquired during the All property acquired during marriage form part of the ACP, unless the marriage, whether made, it be proven that they are excluded. contracted, or registered in the [Art. 93] name of one spouse, are presumed conjugal unless the contrary is prove. [Art 116]

Arts. 94 1. Support of the following: a. Spouses; b. Common children; c. Legitimate children of previous marriage; d. Illegitimate children – follow the provisions on Support; ACP liable in case of absence or insufficiency of the exclusive property of the debtorspouse but the payment shall be considered as advance to the share of the debtor-spouse.

Arts. 121-123 1. Support of the following: a. Spouses; b. Common children; c. Legitimate children of previous marriage; d. Illegitimate children – follow the provisions on Support; Partnership assets liable in case responsibilities under Art. 121 have been covered and there is absence or insufficiency of the exclusive property of the debtor-spouse but the payment 2. Expenses to enable either spouse to shall be considered as advance commence/ complete a to the share of the debtorprofessional/vocational course or spouse. activity for self-improvement; 2. Expenses to enable either 3. Value donated or promised by both spouse to commence/complete spouses in favor of common legitimate a professional/vocational children for the exclusive purpose of course or activity for selfcommencing/completing a improvement; professional/vocational course or activity for self-improvement 3. Value donated or promised by both spouses in favor of common legitimate children for the exclusive purpose of commencing/completing a professional/vocational course or activity for self-improvement

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Charges and Obligations

PERSONS AND FAMILY RELATIONS ABSOLUTE COMMUNITY PROPERTY If community property is insufficient, the spouses are solidarily liable for the unpaid balance from their separate properties except for: 1. Debts contracted by either spouse before marriage which have not redounded to the benefit of the family; 2. Support of illegitimate children; and 3. Liabilities incurred by either spouse arising from crime or quasidelict. Gambling losses of any kind (i.e. legal or illegal) shall be borne by the losing spouse’s separate property [Art. 95]

CIVIL LAW

CONJUGAL PARTNERSHIP OF GAINS If conjugal partnership property is insufficient, the spouses are solidarily liable for the unpaid balance from their separate properties except for: 1. Debts contracted by either spouse before marriage which have not redounded to the benefit of the family; 2. Support of illegitimate children; and 3. Liabilities incurred by either spouse arising from crime or quasi-delict. Gambling losses of any kind (i.e. legal or illegal) shall be borne by the losing spouse’s separate property [Art. 123] DBP v. Adil (1988): Loan contracts signed by both spouses are conjugal, and they are jointly liable for payment, even if only one spouse signs a subsequent promissory note. Ayala Investment v. Ching (1998): The Supreme Court ruled that the indirect benefits that might accrue to a husband in signing as a surety or guarantee in an agreement not in favor of the family but in favor of his employer corporation are not benefits that can be considered as giving a direct advantage accruing to the family. Hence, the creditors cannot go against the conjugal partnership property in satisfying the obligation subject of the surety agreement. A contrary view would put in peril the conjugal partnership by allowing it to be given gratuitously as in cases of donation of conjugal partnership property, which is prohibited.

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ABSOLUTE COMMUNITY PROPERTY Ownership, administration, enjoyment, and disposition

Charges and Obligations

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CONJUGAL PARTNERSHIP OF GAINS De Ansaldo v. Sheriff of Manila (1937): Spouses are not co-owners of CPG during the marriage and cannot alienate the supposed ½ interest of each in the said properties. The interest of the spouses in the CPG is only inchoate or a mere expectancy and does not ripen into title until it appears after the dissolution and liquidation of the partnership that there are net assets.

Either spouse may, through a will, dispose of his or her interest in the community property. [Art. 97] However, the will should refer only to his or her share in the community property. Donation of one spouse without the consent of the other is not allowed. [Art. 98] Exceptions: 1. Moderate donations to charity due to family rejoicing or distress 2. Moderate gifts by each spouse to the other due to family rejoicing Moderation depends on the family’s socio-economic status.

Art. 124, par. 2: Disposition or encumbrance of conjugal property requires the following:

Consent or approval by both spouses, or

ACP allows donations in excess of one-fifth of present property of future spouses because the donation would form part of the community property once the marriage is celebrated. [Art. 84] Jader-Manalo v. Camaisa (2002): Mere awareness of a transaction is NOT consent.

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Homeowner’s Savings & Loan Bank v. Dallo (2005): In the absence of (court) authority or written consent of the other spouse, any disposition or encumbrance of the conjugal property shall be void. Cheeseman v. IAC (1991): If however, one of the spouses is an alien, the Filipino spouse may encumber or dispose of the property w/o the consent of the former. The property is presumed to be owned exclusively by the Filipino spouse.

Dissolution of the regime

Effect of de facto separation

Terminates upon [Art. 99]: 1. Death of either spouse – follow rules in Art. 103 2. Legal separation – follow rules in Arts. 63 and 64 3. Annulment or judicial declaration of nullity – follow rules in Arts. 50 and 52 Judicial separation of property during marriage – follow rules in Arts. 134 to 138 Rules on de facto separation [Art. 100] De facto separation does not affect the ACP, except that: 1. Spouse who leaves the conjugal home without just cause shall not be entitled to support; however, he/she is still required to support the other spouse and the family 2. If consent is necessary for transaction but is withheld or otherwise unobtainable, authorization may be obtained from the court 3. Support for family will be taken from the ACP 4. If ACP is insufficient, spouses shall be solidarily liable

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Terminates upon [Art. 126; cf. Art. 99]: 1. Death 2. Legal separation 3. Annulment or judicial declaration of nullity Judicial separation of property

Rules on de facto separation [Art. 127] De facto separation does not affect the CPG, except that: 1. Spouse who leaves the conjugal home without just cause shall not be entitled to support; however, he/she is still required to support the other spouse and the family 2. If consent is necessary for transaction but is withheld or otherwise unobtainable, authorization may be obtained from the court 3. Support for family will be taken from the partnership property. 4. If partnership property is insufficient, spouses shall be solidarily liable

CONJUGAL PARTNERSHIP OF GAINS

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PERSONS AND FAMILY RELATIONS 5. If it is necessary to administer or encumber separate property of spouse who left, spouse present may ask for judicial authority to do this 6. If ACP is not enough and one spouse has no separate property, spouse who has property is liable for support, according to provisions on support. Abandonment [Art. 101] Present/aggrieved spouse may petition the court for: 1. Receivership 2. Judicial separation of property 3. Authority to be the sole administrator of the absolute community, subject to precautionary conditions that the court may impose

CIVIL LAW

5. If it is necessary to administer or encumber separate property of spouse who left, spouse present may ask for judicial authority to do this 6. If partnership property is not enough and one spouse has no separate property, spouse who has property is liable for support, according to provisions on support. Abandonment [Art. 128] Present/aggrieved spouse may petition the court for: 1. Receivership 2. Judicial separation of property 3. Authority to be the sole administrator of the partnership property, subject to precautionary conditions that the court may impose

A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without any intention A spouse is deemed to have of returning. abandoned the other when he or she has left the conjugal dwelling Spouse is prima facie considered to without any intention of returning. have abandoned the other spouse and the family if he or she has: Spouse is prima facie considered to 1. Left for a period of 3 months have abandoned the other spouse 2. Failed to inform the other spouse of and the family if he or she has: his or her whereabouts for a period 1. Left for a period of 3 of 3 months months Failed to inform the other spouse of his or her whereabouts for a period of 3 months

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Rules on Abandonment

Partosa-Jo v. CA (1992): Physical separation of the spouses, coupled with the husband’s refusal to give support to the wife, sufficed to constitute abandonment as a ground for an action for the judicial separation of their conjugal property.

Liquidation of assets and liabilities

Procedure [Art. 102] Procedure [Art. 129] 1. Prepare an inventory of all  Inventory of assets of ACP properties and of spouses, with 2. Amounts advanced by CPG in market values payment of personal debts and  Obligations are paid with obligations shall be credited to community property, and the CPG separate obligations not 3. Reimburse each spouse for the charged to ACP paid by use of his/her exclusive funds in respective assets of the acquisition of property or spouses for the value of his or her If obligations exceed the assets of exclusive property, the the ACP, nothing is divided. ownership of which has been Creditors can go after the separate vested by law in the conjugal properties of the spouses, which are partnership solidarily liable for the deficiency 4. Debts and obligations of CPG  Delivery of whatever shall be paid out of the remains in their exclusive conjugal assets, otherwise both property spouses are solidarily liable  Balance, or net remainder is with their exclusive property divided equally between 5. Remains of the exclusive the spouses, irrespective of properties shall be delivered to how much each brought respective owner-spouses into the community

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Liquidation of assets and liabilities

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PROPERTY If personal obligations of a spouse exceed his/her separate property, creditor can go after the share of the spouse on the net remainder of the ACP, without prejudice to the provisions of law on forfeitures and delivery of presumptive legitimes After covering all community obligations and obligations of spouses, balance of separate properties shall be delivered to respective spouses or their heirs, and they will also divide into two equal shares whatever is left of the community assets, without prejudice to the provisions of law on forfeitures and delivery of presumptive legitimes

6. Indemnify loss/deterioration of movables belonging to either spouse, even due to fortuitous event, used for the benefit of the family 7. Net remainder of CPG shall constitute the profits which shall be divided equally between husband and wife except when:  A different proportion  or division was agreed upon in the marriage settlements  There has been a voluntary waiver or forfeiture of such share as provided in the FC 8. Presumptive legitimes are delivered to common children 9. Conjugal dwelling goes to:  Spouse with whom majority of common children choose to remain (below 7 y.o. = deemed to have chosen the mother) Whoever the court chooses in case of lack of majority Rules in case of termination of marriage by death of one of the spouses [Art. 104]: (1)The community property shall be liquidated in the same proceeding for the settlement of the estate of the deceased spouse. (2)If no such judicial settlement proceeding is instituted, surviving spouse shall liquidate the community property either judicially or extra-judicially within one year from the death of the deceased spouse. a. If no liquidation is made within the period, any disposition or encumbrance involving community property of the terminated marriage shall be void.

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b. Non-compliance with liquidation procedures would mean that a subsequently contracted marriage will follow a regime of complete separation of property.

Procedure for liquidation of properties of two marriages [Art. 104]: (1) Determine the capital, fruits, and income of each community upon such proof as may be considered according to the rules of evidence. (2) In case of doubt as to which community the existing properties belong, they shall be divided between two communities in proportion to the capital and duration of each.

Separation of Property of the Spouses and Administration of Common Property by One Spouse During the Marriage Art. 134. In the absence of an express declaration in the marriage settlements the separation of property between spouses during the marriage shall not take place except by judicial order. Such judicial separation of property may either be voluntary or for sufficient cause. Judicial separation of property may either be (1) voluntary or (2) for sufficient cause.

(a) Sufficient Causes and Grounds for Return to Previous Regime Sufficient Causes for Judicial Separation of Grounds for Return to Previous Regime

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Property (Art. 135) (1) Spouse of petitioner has been sentenced to a penalty which carries with it the penalty of civil interdiction (2) Spouse of petitioner is judicially declared an absentee (3) Loss of parental authority of the spouse of petitioner has been decreed by the court (4) Spouse of petitioner has abandoned the latter or failed to comply with his or her obligations to the family (5) The spouse granted the power of administration in the marriage settlements has abused that power

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(Art. 141) (1) Termination of the civil interdiction (2) Reappearance of absentee spouse

(5) Restoration of parental authority to the spouse previously deprived of it (4) When the spouse who left the conjugal home without legal separation resumes common life with the other (3) When the court, being satisfied that the spouse granted the power of administration in will not again abuse that power, authorizes the resumption of said administration (6) At the time of the petition, the spouses (6) Reconciliation and resumption of common have been separated in fact for at least 1 life of the spouses who had been separated year and reconciliation is highly in fact for at least 1 year improbable. (7) When after voluntary dissolution of the ACP or CPG has been judicially decreed upon the joint petition of the spouses, they agree to the revival of the former property regime. No voluntary separation of property may thereafter be granted.

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SEPARATION OF PROPERTY Agreed upon in the marriage settlements by the spouses Mandatory under Arts. 103 & 130 (subsequent marriages contracted by a When it applies surviving spouse without judicial settlement of previous property regime) Default property regime when there is reconciliation between spouses after judicial separation of property Present or future property or both Each spouse’s earnings from his or her own profession, business, or industry What it Natural, industrial or civil fruits of spouse’s separate properties consists of May be total or partial If partial, property not considered separate is presumed to pertain to the ACP Family expenses: Both spouses are liable in proportion to their income; if insufficient, based on the current value of their separate properties Liabilities Creditors for family expenses: Spouses solidarily liable Spouses may own, dispose, possess, and administer separate estates without the consent of the other Administration of exclusive properties may be transferred between spouses Ownership, when: administration, One spouse becomes the other spouse’s guardian enjoyment, and 1. One spouse is judicially declared an absentee disposition 2. One spouse is given the penalty of civil interdiction 3. One spouse becomes a fugitive Conveyance between the spouses is allowed under Art. 1490, NCC. In Re: voluntary dissolution of CPG of Sps. Bernas (1965): A voluntary separation of properties is not perfected by mere consent but upon the decree of the court approving the same. The petition for voluntary separation of property was denied because the children of the 1st and 2nd marriages were not informed; the separation of property may prejudice the rights and shares of the children. Maquilan v. Maquilan (2007): A compromise agreement with judicial recognition is valid, pending petition for declaration of nullity of marriage.

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Property Regime of Unions Without Marriage, Arts. 147-148 Art. 147 Man and woman living together as husband and wife, with capacity to marry (Art.5, without any legal impediment) a. at least 18 years old b. not Art. 37 (incestuous void marriage) Applicability c. not Art. 38 (void marriage by reason of public policy) d. not bigamous Other void marriages due to absence of formal requisite Salaries and Owned in equal shares wages Properties Remains exclusive, provided there is acquired proof through exclusive funds Properties Governed by rules on co-ownership acquired by both through work and industry Owned in equal shares since it is presumed to have been acquired through joint efforts Properties acquired while If one party did not participate in acquisition, presumed to have living together contributed through care and maintenance of family and household

Art. 148 Man and woman living together as husband and wife, NOT capacitated to marry a. Under 18 years old b. Adulterous relationship c. Bigamous/polygamous marriage d. Incestuous marriages under Art. 37 e. Void marriages by reason of public policy under Art. 38

1. In favor of their common children 2. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants In the absence of such descendants, such share belongs to the innocent party

If one party is validly married to another his/her share in the coowned properties will accrue to the ACP/CPG of his/her existing valid marriage

Forfeiture

Separately owned by parties Remains exclusive

Owned in common in proportion to respective contribution

No presumption of joint acquisition. When there is evidence of joint acquisition but none as to the extent of actual contribution, there is a presumption of equal sharing.

If the party who acted in bad faith is not validly married to another, his/her share shall be forfeited in the same manner as that provided in Art 147. The same rules on forfeiture shall apply if both parties are in bad faith.

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Yaptinchay v. Torres (1969): Application of Article 148; there was no proof of actual contribution, while there was a subsisting marriage apart from the union without marriage, therefore, the N. Forbes house goes to the CPG of subsisting marriage Villanueva v. CA (2004): Transfer of certificate and tax declarations are not sufficient proof of joint contribution. Valdez v. QC-RTC (1996): Marriages that have been declared void come under the rules of co-ownership under FC147/148 regardless of the reason.

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VII. Family Relations

Such earnest efforts and the fact of failure must be alleged. The case will be dismissed if it is shown that no such efforts were made. o

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THE FAMILY AS AN INSTITUTION Art. 149. The family being the foundation of the nation is a basic social institution which public policy cherishes and protects. Consequently, family relations are governed by law and no custom practice or agreement destructive of the family shall be recognized or given effect.

Exceptions o The general rule shall not apply to cases which may not be the subject of compromise. o The following cannot be subject of compromise: (Art 2035) (1) Civil status of persons, (2) Validity of marriage or a legal separation, (3) Any ground for legal separation, (4) Future support (as it is presumed to be needed for the survival of the one receiving support), (5) Jurisdiction of courts, (6) Future legitime

General Rules  The family is an institution that is governed by law  The internal aspect of the family is sacred and inaccessible to law because law must respect the freedom of action of man. Art. 150. Family relations include those: (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.

THE FAMILY HOME A. WHAT CONSTITUTES THE FAMILY HOME? General Rules o The family home is the dwelling house where family resides and the land on which it is sustained (Art. 152) o The family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the other’s consent. It may also be constituted by an unmarried head of a family in his or her own property. (Art. 156) o For the purposes of availing of the benefits of a family home as provided for in this Chapter, a person may constitute, or be the beneficiary of, only one home. (Art. 161)

EFFECTS OF FAMILY RELATIONSHIP ON LEGAL DISPUTES Art. 151. No suit between members of the same family shall prosper unless it should appear form the verified complaint or petition that earnest efforts toward a compromise have been made but that the same have failed. If it is shown that no such efforts were in fact made the case must be dismissed. General Rules  Suit between members of the same family shall prosper only if it shall appear in a verified complaint or petition that: o Earnest efforts towards a compromise have been made; o Such efforts have failed; and

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B. WHO MAY CONSTITUTE THE FAMILY HOME?

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D. BENEFICIARIES Art. 154. The beneficiaries of a family home are: 1. The husband and wife, or an unmarried person who is the head of a family; and 2. Their parents, ascendants, descendants brothers, and sisters (legitimate/illegitimate), who are living in the family home and who depend on the head of the family for support

General Rules o The family home may be constituted jointly by the husband and wife or an unmarried head of the family (Art. 152) o A person may constitute and be the beneficiary of only one family home (Art. 161)

C. WHEN IS IT DEEMED CONSTITUTED?

General Rule o Requisites to be a beneficiary: o The relationship is within those enumerated o They live in the family home o They are dependent for legal support on the head of the family o The law explicitly provides that occupancy of the family home either by the owner thereof or by “any of its beneficiaries” must be actual. That which is “actual” is something real, or actually existing, as opposed to something merely possible, or to something which is presumptive or constructive. Actual occupancy, however, need not be by the owner of the house specifically. Rather, the property may be occupied by the “beneficiaries” enumerated in Article 154 of the Family Code, which may include the in-laws where the family home is constituted jointly by the husband and wife. But the law definitely excludes maids and overseers. They are not the beneficiaries contemplated by the Code. [Patricio vs. Dario (2006)] o Requirements for the sale, alienation, donation, assignment, or encumbrance of the family home (Art. 158)

General Rules o The family home is deemed constituted on a house and lot form the time it is occupied as a family residence. o The family home is exempt from the following from the time of its constitution and so long as any of its beneficiaries actually resides therein (Art. 153): (1) Execution (2) Forced sale (3) Attachment Exceptions in the exemption of the family home from execution (Art. 155) (1) Nonpayment of taxes. (2) Debts incurred prior to the constitution of the family home. (3) Debts secured by mortgages on the premises before or after such constitution. (4) Debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.

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PERSONS The written consent of the person constituting it, That of the spouse of the person constituting it, and That of majority of the beneficiaries of legal age

General Rules o

.

E. WHEN TERMINATED Art. 159. The family home shall continue despite the death of one or both of the spouses or of the unmarried head of the family for a period of ten years or for as long as there is a minor beneficiary and the heirs cannot partition the same unless the court finds compelling reasons therefor. The rule shall apply regardless of whoever owns the property or constituted the family home. General Rule o

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Article 159 imposes the proscription against the immediate partition of the family home regardless of its ownership. This signifies that even if the family home has passed by succession to the co-ownership of the heirs, or has been willed to any one of them, this fact alone cannot transform the family home into an ordinary property, much less dispel the protection cast upon it by the law. The rights of the individual co-owner or owner of the family home cannot subjugate the rights granted under Article 159 to the beneficiaries of the family home. [Arriola vs. Arriola (January 28, 2008)]

As a rule, the family home is exempt from execution, forced sale or attachment. However, Article 155(3) of the Family Code explicitly allows the forced sale of a family home “for debts secured by mortgages on the premises before or after such constitution.” In this case, there is no doubt that spouses Fortaleza voluntarily executed on January 28, 1998 a deed of Real Estate Mortgage over the subject property…and assuming that the property is exempt from forced sale, spouses Fortaleza did not set up and prove to the Sheriff such exemption from forced sale before it was sold at the public auction. The spouses Fortaleza neither filed an action nor made a formal offer to redeem the subject property accompanied by an actual and simultaneous tender of payment. It is also undisputed that they allowed the one-year period to lapse from the registration of the certificate of sale without redeeming the mortgage. For all intents and purposes, spouses Fortaleza have waived or abandoned their right of redemption. [Fortaleza vs. Lapitan (2012)]

G. RIGHTS OF CREDITORS Art. 157. The actual value of the family home shall not exceed at the time of its constitution the amount of three hundred thousand pesos in urban areas and two hundred thousand pesos in rural areas or such amounts as may hereafter be fixed by law.

F. WHEN IT MAY BE SOLD Art. 158. The family home may be sold alienated donated assigned or encumbered by the owner or owners thereof with the written consent of the person constituting the same the latter’s spouse and a majority of the beneficiaries of legal age. In case of conflict the court shall decide.

General Rules o In any event, if the value of the currency changes after the adoption of this Code, the value most favorable

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VIII. Paternity Filiation

for the constitution of a family home shall be the basis of evaluation. Urban areas include chartered cities and municipalities All others are deemed to be rural areas

and

Art. 163. The filiation of children may be by nature or by adoption. Natural filiation may be legitimate or illegitimate. (n)

Procedure to avail of right under Art. 160 1. The creditor must file a motion in the court proceeding where he obtained a favorable decision for a writ of execution against the family home. 2. There will be a hearing on the motion where the creditor must prove that the actual value of the family home exceeds the maximum amount fixed by the FC either at the time of its constitution or as a result of improvements introduced thereafter. 3. If the creditor proves that the actual value exceeds the maximum amount the court will order its sale in execution. 4. If the family home is sold for more than the value allowed, the proceeds shall be applied as follows: a. First, the obligation enumerated in Article 157 must be paid 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

Kinds of Filiation [Arts. 163, 164, 165]: (1) Natural  Legitimate  Illegitimate (2) Legal Fiction (Adoption)

A. LEGITIMATE CHILDREN Art. 164. Children conceived or born during the marriage of the parents are legitimate. Children conceived as a result of artificial insemination of the wife with the sperm of the husband or that of a donor or both are likewise legitimate children of the husband and his wife, provided, that both of them authorized or ratified such insemination in a written instrument executed and signed by them before the birth of the child. The instrument shall be recorded in the civil registry together with the birth certificate of the child. (55a, 258a) 1.

Natural/Biological

General Rules o

Liyao v. Liyao (2002): A child conceived or born during a valid marriage is presumed to belong to that marriage, regardless of the existence of extramarital relationships.

The proof that the house is the family home must be alleged against creditors; Applied the rule in Art. 160, FC. [Versola v. Mandolaria (2006)]

2. Artificial Insemination Requisites to be considered legitimate: (a) Artificial insemination made on wife (b) Sperm comes from any of the following:

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  

Husband Third Person Donor Husband and third person donor (c) In case of donor sperm, husband and wife must authorize/ratify insemination in a written instrument  Executed & signed by husband and wife before the birth of the child.  Recorded in the civil registry together with the birth certificate of the child.

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Macadangdang v. CA (1980): Mere proximate separation between the spouses is not sufficient physical separation to constitute as ground for impugning legitimacy. Andal v. Macaraig (1951): Serious illness of the husband which absolutely prevented him from having sexual intercourse with his wife, like if the husband was already in comatose or in a vegetative state, or sick with syphilis in the tertiary stage so that copulation was not possible. But tuberculosis, even in its most crucial stage, does not preclude copulation between the sick husband and his wife.

Dual consent is required whether the semen used comes from the husband or a third person donor [Tolentino]

Jao v. CA (1987): Blood-type matching is an acceptable means of impugning legitimacy, covered by Art. 166(2), under "biological or other scientific reasons." But this is only conclusive of the fact of non-paternity.

De Castro v. Assidao-De Castro, (2008): Common children born before the annulment are legitimate, and therefore entitled to support from each of the spouses.

Benitez-Badua v. CA (1994): Only the man (and his heirs in certain situations) can impugn the legitimacy of the child

Impugning Legitimacy Grounds for impugning legitimacy of a child are [Art. 166]: (1) Physical impossibility for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the child's birth due to: a. Physical incapacity of the husband to have sexual intercourse with his wife b. Husband and wife were living separately as to make sexual intercourse impossible c. Serious illness of the husband absolutely preventing sexual intercourse (2) Other biological or scientific reasons, except Artificial Insemination (3) And in case of Artificial Insemination, the written consent of either parent was vitiated through fraud, violence, mistake, intimidation, or undue influence

Legitimacy with regard to the mother: (1) Child considered legitimate although [Art. 167]: (a) Mother may have declared against its legitimacy (b) Mother may have been sentenced as an adulteress (also applies to wife who was raped) (2) If the marriage is terminated and the mother contracted another marriage within 300 days after the termination of the former marriage, the following rules shall govern in the absence of proof to the contrary [Art 168]: (a) If born before 180 days after the solemnization of the subsequent marriage – child is considered conceived during the former marriage, provided it be born within 300 days

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after termination of the former marriage (b) If born after 180 days following the celebration of the subsequent marriage – child is considered conceived during such marriage, even if it be born within 300 days after the termination of the former marriage

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If the birth of the child has been concealed or was unknown to the husband, the above periods shall be counted: (1) From the discovery or knowledge of the birth of the child, or (2) From the discovery or knowledge of its registration, whichever is earlier.

Note: The legitimacy or illegitimacy of a child born after 300 days following the termination of the marriage – burden of proof upon whoever alleges the status. [Art. 169]

GENERAL RULE: Only the husband can impugn the legitimacy of a child. If he does not bring an action within the prescribed periods, he cannot file such action anymore thereafter, and this is also true with his heirs.

If nobody asserts the legitimacy or illegitimacy of the child described in Art. 169, the child should be considered illegitimate unless legitimacy is proved. Legitimacy cannot be presumed here since the birth was beyond the 300-day period of gestation. While it goes against the policy of law to lean in favor of legitimacy, this interpretation is better than the anomalous situation created by Art. 169, which is a child without a status. [Tolentino]

EXCEPTION: That the heirs of the husband may file the action or continue the same within the periods prescribed in Art. 170 [Art. 171]: (a) If the husband died before the expiration of the period fixed for bringing his action (b) If he should die after the filing of the complaint without having desisted therefrom (c) If the child was born after the death of the husband.

Action for Impugning Legitimacy [Arts. 170 and 171] May be brought within 1, 2, or 3 years from the knowledge of the birth, or the knowledge of registration of birth. (1) Within 1 year  if husband or any heirs reside in the same city or municipality where the child was born or his birth was recorded. (2) Within 2 years  if the husband or all heirs live in the Philippines but do not reside in the same city or municipality where the child's birth took place or was recorded (3) Within 3 years  if the husband or all heirs live outside the Philippines when the child's birth took place or was recorded in the Philippines

Sayson v. CA (1992): Legitimacy can only be attacked directly.

B. PROOF OF FILIATION Art. 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or

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(2) Any other means allowed by the Rules of Court and special laws. (265a, 266a, 267a)

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(c) To be entitled to the legitimate and other Successional rights granted to them by the Civil Code

Legitimate children may establish their filiation by any of the following [Art. 172]: (1) Primary Evidence  Their record of birth appearing in the civil registry.  An admission of his filiation by his parent in a public document or a private handwritten instrument and signed by said parent (2) Secondary Evidence  Proof of open and continuous possession of status as legitimate child  Any other means stated by the rules of court or special laws Note: Only in the absence of primary evidence can secondary evidence be admitted

C. ILLEGITIMATE CHILDREN Art. 165. Children conceived and born outside a valid marriage are illegitimate, unless otherwise provided in this Code. (n) Who are illegitimate children GENERAL RULE: Those conceived and born outside of a valid marriage. [Art. 165] EXCEPTIONS: (1) Children of marriages void under Art. 36 (psychological incapacity); and (2) Under Art. 53 (subsequent marriages which did not comply with Art. 52). (Sempio-Dy)

Action for Claiming Filiation (Legitimate Children) [Art. 173]: (a) The child can bring the action during his or her lifetime (b) If the child dies during minority or in a state of insanity, such action shall be transmitted to his heirs, who shall have a period of five years within which to institute the action. (c) The action commenced by the child shall survive notwithstanding the death of either or both of the parties

Art. 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children. The action must be brought within the same period specified in Article 173, except when the action is based on the second paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent. (289a) GENERAL RULE: Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence (primary or secondary) as legitimate children. Action for Claiming Filiation [Art. 175]: (a) For actions based on primary evidence, the same periods stated in Art. 173 apply. (b) For actions based on secondary evidence, the action may only be brought during the lifetime of the alleged parent.

Rights of Legitimate Children [Art. 174]: (a) To bear the Surnames of the father and the mother, in conformity with the provisions of the Civil Code on surnames (b) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of the Code on Support

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Mendoza v. Melia (1966): Baptismal certificates are given probative value only for births before 1930. Birth certificates must be signed by the parents and sworn for it to be admitted as evidence.

CIVIL LAW

by the parents and family of the child as legitimate, constant attendance to the child's support and education, and giving the child the reputation of being a child of his parents. Agustin v. CA (2005): DNA evidence can be used as proof of paternity.

Baluyut v. Baluyut (1990): Unsigned birth certificates are not evidence of recognized filiation.

De Jesus v. Estate of Decedent Juan Gamboa Dizon (2001): 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.

Acebedo v. Arquero (2003): Baptismal certificates are only conclusive of the sacrament administered, and cannot be used as proof of filiation. Lim v. CA (1975): Marriage certificates cannot be used as proof of filiation.

Gono-Javier vs. Court of Appeals (1994): Mere possession of status as an illegitimate child does not make a recognized illegitimate child but is only a ground for bringing an action to compel judicial recognition by the assumed parent.

Jison v. CA (1998): Rule 130, Sec. 40 is limited to objects commonly known as family possessions reflective of a family's reputation or tradition regarding pedigree like inscriptions on tombstones, monuments, or coffin plates.

Estate of Rogelio Ong v. Diaz (2007): DNA evidence can still be used even after the death of the parent.

Eceta v. Eceta (2004): Signature of the father on the birth certificate is considered as an acknowledgement of paternity and mere presentation of a duly authenticated copy of such certificate will successfully establish filiation.

Gotardo v. Buling (2012): There are four significant procedural aspects of a traditional paternity action that parties have to face: a prima facie case, affirmative defenses, presumption of legitimacy, and physical resemblance between the putative father and the child. A prima facie case exists if a woman declares — supported by corroborative proof — that she had sexual relations with the putative father; at this point, the burden of evidence shifts to the putative father. Further, the two affirmative defenses available to the putative father are: (1) incapability of sexual relations with the mother due to either physical absence or impotency, or (2) that the mother had sexual relations with other men at the time of conception.

Heirs of Rodolfo Bañas v. Heirs of Bibiano Bañas (1985): "Su padre [Your father]" ending in a letter is only proof of paternal solicitude and not of actual paternity. Signature on a report card under the entry of "Parent/Guardian" is likewise inconclusive of open admission. De Jesus v. Syquia (1933): By "open and continuous possession of the status of a legitimate child" is meant the enjoyment by the child of the position and privileges usually attached to the status of a legitimate child, like bearing the paternal surname, treatment

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Perla v. Baring and Perla (2012): To prove open and continuous possession of the status of an illegitimate child, 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.

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Grande v. Antonio (2014): The use of the word “may” in Art. 176 readily shows that an acknowledged illegitimate child is under no compulsion to use the surname of his illegitimate father. The word “may” is permissive and operates to confer discretion upon the illegitimate children.

Meanwhile, the lack of participation of the supposed father in the preparation of a baptismal certificate renders this document incompetent to prove paternity. Baptismal certificates are per se inadmissible in evidence as proof of filiation and they cannot be admitted indirectly as circumstantial evidence to prove the same

(c) Shall be entitled to Support in conformity with the Family Code (d) Legitime shall consist of one-half of the legitime of a legitimate child.

D. LEGITIMATED CHILDREN Art. 177. Only children conceived and born outside of wedlock of parents who, at the time of the conception of the former, were not disqualified by any impediment to marry each other may be legitimated. (269a)

Art. 176. Illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code. The legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child. Except for this modification, all other provisions in the Civil Code governing successional rights shall remain in force.(287a)

GENERAL RULE: "Legitimated" children are illegitimate children who because of the subsequent marriage of their parents are, by legal fiction, considered legitimate. To be capable of legitimation: (1) The child must have been conceived and born outside of wedlock; and (2) The parents, at the time of the child's conception, were not disqualified by any impediment to marry each other, or disqualified only because either or both of them were below 18 y.o. (Art. 177 as amended by RA 9858)

Rights of Illegitimate Children: (a) Use the Surname and be under the parental authority of the mother (b) However, may use the surname of their father if  Their filiation has been expressly recognized by the father through the record of birth appearing in the civil register; or  There is an admission in a public document or private handwritten instrument made by the father.  Provided, the father has the right to institute an action before the regular courts to prove non-filiation during his lifetime [RA 9255]

Procedure and Effects: (a) Legitimation shall take place by a subsequent valid marriage between the parents. The annulment of a voidable marriage shall not affect the legitimation. [Art. 178]

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(b) Effects of legitimation shall retroact to the time of the child’s birth [Art. 180] (c) Legitimation of children who died before the celebration of the marriage shall benefit their descendants [Art. 181] Effect on parentchild relationship

Grounds for impugning legitimation: (1) The subsequent marriage of the child's parents is void. (2) The child allegedly legitimated is not natural. (3) The child is not really the child of the alleged parents. (Sempio-Dy) Rights: The same as those of legitimate children [Art. 179]

Same status and rights with that of a legitimate child not only in relation to the legitimizing parents but also to other relatives

with exceptions allowing only one of them to apply [RA 8552] Creates a relationship only between the child and the adopting parents

ADOPTION is a juridical act, which creates between two persons a relationship similar to that which results from legitimate paternity and filiation.

Impugning legitimation [Art. 182] (1) May be made only by those who are prejudiced in their rights (2) Within five years from the time their cause of action accrues

It requires a proceeding in rem, and may only be proven by a judicial decree issued by a court of competent jurisdiction, not by open and continuous cohabitation.

IX. Adoption

RA 8552 – Domestic Adoption Law (February 25, 1998)

LEGITIMATION

ADOPTION The law creates by The law merely Legal effect fiction a makes legal relation what exists by which did nature not in fact exist Persons Natural Strangers affected Children (generally) Procedure Extrajudicial Always by acts of parents judicial decree Who should Both parents Both apply parents,

A. WHO CAN ADOPT A. Filipino Citizens (Sec. 7a) (a) Of legal age (b) With full civil capacity and legal rights (c) Of good moral character and has not been convicted of any crime involving moral turpitude (d) Emotionally and psychologically capable of caring for children (e) At least sixteen (16) years older than adoptee, except when adopter is biological parent of the

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adoptee or is the spouse of the adoptee’s parent (f) In a position to support and care for his/her children in keeping with the means of the family (g) Has undergone pre-adoption services B. Aliens (Sec. 7b) - Same for Filipinos provided further that: (1) His/her country has diplomatic relations with the Philippines (2) Has been living in the Philippines for 3 continuous years prior to the filing of application and maintains such residence until the decree is entered (provided that absences not exceeding 60 days per 1 year for professional, business, or emergency reasons are allowed) (3) Has been certified by his/her diplomatic or consular office or any appropriate government agency that he/she has the legal capacity to adopt in his/her country (4) His/her government allows the adoptee to enter his/her country as his/her adoptee (5) Has submitted all the necessary clearances and such certifications as may be required

CIVIL LAW with his/her spouse a relative within the 4th degree of consanguinity or affinity of the Filipino spouse C. Guardians With respect to their wards, after the termination of the guardianship and clearance of his/her accountabilities.

Husband and wife shall adopt jointly, EXCEPT: (1) If one spouse seeks to adopt the legitimate child of the other (2) If one of the spouses seeks to adopt his/her illegitimate child provided that the other spouse has signified his/her consent (3) If spouses are legally separated from each other Note: If spouses jointly adopt, parental authority shall be jointly exercised by them.

B. WHO CAN BE ADOPTED (Sec. 8) (a) Minor who has been administratively or judicially declared available for adoption (b) Legitimate child of one spouse by another (c) Illegitimate child by a qualified adopter to improve the child’s status to that of legitimacy (d) A person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter(s) as his/her child since minority (e) A child whose previous adoption has been rescinded (f) A child whose biological or adoptive parent(s) has died, provided that no proceedings shall be initiated within 6 months from the time of death of said parent(s)

**Items 3, 4 and 5 may be waived under the following circumstances: (a) Adopter is a former Filipino Citizen who seeks to adopt a relative within the 4th degree of consanguinity or affinity (b) Adopter seeks to adopt the legitimate or illegitimate child of his/her Filipino spouse (c) Adopter is married to a Filipino Citizen and seeks to adopt jointly

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Exceptions to the Requirement of a Certification that the Child is Available for Adoption (Sec. 4):  Adoption of an illegitimate child by his/her biological parent;  Adoption of a child by his/her stepparent;  Adoption by a relative within the 4th civil degree by consanguinity or affinity

Counseling on her options other than adoption Explaining to her the implications of losing her parental authority over the child

Continuing services shall be provided after relinquishment to cope with feelings of loss, etc. and other services for his/her reintegration to the community

Persons whose written consent is necessary for adoption (Sec. 9) (1) The prospective adoptee if 10 years or older (2) The prospective adoptee’s biological parents, legal guardian or the government instrumentality or institution that has custody of the child (3) The prospective adopters’ legitimate and adopted children who are 10 years or older (4) The prospective adopters’ illegitimate children, if any, who are 10 years or older and living with them (5) The spouse, if any, of the person adopting or to be adopted.

Biological parent(s) who decide to keep the child shall be provided with adequate services and assistance to fulfill their parental responsibilities Biological parent(s) who decide to put the child for adoption shall sign the Deed of Voluntary Commitment (DVC), which shall be rescissible within 3 months from signing of the same

2. Involuntary Commitment of abandoned or neglected child

Note: A decree of adoption shall be effective as of the date the original petition was filed. It also applies in case the petitioner dies before the issuance of the decree of adoption to protect the interest of the adoptee.

Filing of a petition at Regional DSWD in the form of an affidavit and with the required supporting documents

C. PRE-ADOPTION PROCEDURES 1.

CIVIL LAW

Posting of the petition, then recommendation by the Regional Director of the DSWD (5 days each)

Voluntary Commitment of biological mother wanting to put her child up for adoption

Issuance of certification by DSWD Secretary declaring the child legally available for adoption

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3. Required supporting documents for a petition for the declaration of involuntary commitment: (a) Social Case Study Report by DSWD / LGU / institution charged with child’s custody (b) Proof of efforts to locate the child’s parents/known relatives - Written certification that a local/national radio/TV case was aired on 3 different occasions - Publication in 1 newspaper of general circulation - Police report / barangay certification of due diligence - Returned registered mail to last known address of parents (c) Birth certificate, if available (d) Recent photo and photo upon abandonment of child

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Placement

Supervised Trial Custody

Home Study Report

Recommendation and Consent of DSWD

File Petition for Adoption within 30 days from Receipt of Consent from DSWD

Adoption Decree

D. ADOPTION PROCEDURES Inquiry of prospective adopters at DSWD

Note: DSWD must certify the child as legally available for adoption as a prerequisite for adoption proceedings. (RA 9253) After the decree of adoption, the court may also issue a travel authority, if needed; DSWD to provide post adoption services

Attendance of DSWD Adoption Fora and Seminars (include counseling)

Application for Adoption

The case study report by the DSWD/LGU is indispensable. Without it, the adoption decree shall be void. (DSWD v. Judge Belen (1997))

Case Study Report

E. WHO MAY NOT ADOPT/ BE ADOPTED

Certificate of Availability for Adoption

Art. 184 (as amended by RA 8552) The following may not adopt: (1) The guardian, with respect to the ward, prior to the approval of the final accounts rendered upon the termination of the guardianship

Matching

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(2) Any person convicted of a crime of moral turpitude

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(3) When the surviving spouse AND illegitimate children AND adopters concur, they shall inherit on a 1/3-/1/3-1/3 basis

F. RIGHTS OF AN ADOPTED CHILD

(4) When only adopters survive, they shall inherit 100% of the estate

(a) Parental Authority Except in cases where the biological parent is the adopter’s spouse, all legal ties between biological parent and adoptee shall be severed, and the same shall then be vested on the adopters. [Sec. 16] (b) Legitimacy The adoptee shall be considered the legitimate son/daughter of the adopters for all intents and purposes, and as such is entitled to all rights and obligations provided by law to legitimate children born to them without discrimination of any kind. [Sec. 17] (c) Succession In legal and intestate succession, the adopter 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. [Sec. 18]

(5) When only collateral blood relatives survive, ordinary rules of legal or intestate succession shall apply (d) Name An adopted child shall bear the surname of the adopter (CC, Art. 365). RA 8552 allows the change of first name to be instituted in the same proceeding as the adoption: “the decree of adoption shall state the name by which the child is to be known”. (e) Nationality Adoption does not confer citizenship: Sec. 3, Art. 4 of the Constitution: Philippine citizenship may be lost/acquired [only] in the manner provided by law. The right to confer citizenship belongs to the State (political) and cannot be granted by a citizen through adoption. Adoption creates a relationship between the adopter and adoptee, not between the State and the adoptee.

Art. 190 as amended. Rules on legal or intestate succession to the estate of the adoptee:

G. RESCISSION OF ADOPTION

(1) Legitimate and illegitimate children, descendants and the surviving spouse of the adoptee shall inherit in accordance with the ordinary rules of legal/intestate succession

Adoptee may file action for rescission, with the assistance of DSWD if he/she is a minor or over 18 but incapacitated, based on the ff grounds (Sec. 19): (1) Repeated physical and verbal maltreatment by adopters despite having undergone counseling (2) Attempt on life of adoptee (3) Sexual assault or violence

(2) When the surviving spouse OR illegitimate children AND adopters concur, they shall inherit on a 50-50 basis

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(4) Abandonment or failure to comply with parental obligations

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Note: Rescission contemplates a situation where the adoption decree remains valid until its termination

Note: Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter. However, the adopter may disinherit the child based on causes enumerated in CC, Art. 919: (1) Conviction of an attempt on the life of the adopter (2) Having accused, without grounds, the adopter of a crime punishable by imprisonment for more than 6 years (3) Conviction of adultery/concubinage with the adopter’s spouse (4) Having caused the adopter to make or change a will by force, intimidation or undue influence (5) Refusal without just cause to support the adopter (6) Maltreatment of the adopter by word/deed (7) Living a dishonorable/disgraceful life (8) Conviction of a crime which carries with it the penalty of civil interdiction

H. RECTIFICATION OF SIMULATED BIRTH Simulation of birth is the tampering of LCR records to make it appear that a certain child was born to a person who is not his/her biological parent, causing said child to lose his/her true identity/status. Sec. 21-b (RA 8552) Any person who shall cause the fictitious registration of the birth of a child under the name(s) of a person(s) who is not his/her biological parent(s) shall be guilty of simulation of birth, and shall be punished by prision mayor in its medium period and a fine not exceeding P50,000.00. Sec. 22 (RA 8552) A person who has, prior to the effectivity of RA 8552, simulated the birth of a child shall not be punished for such act, PROVIDED: - The simulation was for the child’s best interest - Child has been treated consistently as his own - Petition filed within 5 years of RA 8552’s effectivity (2003)

Effects of Rescission [Sec. 20]: (1) 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) Reciprocal rights and obligations of the adopters and the adoptee shall be extinguished (3) 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 (5) Vested rights prior to judicial rescission shall be respected

Three-in-one Procedure - Correction of entries in birth certificate - Deed of Voluntary Commitment or Declaration of abandonment - Adoption decree

I. RA 8043 – THE LAW ON INTERCOUNTRY ADOPTION (June 7, 1995) INTER-COUNTRY ADOPTION refers to the socio-legal process of adopting a Filipino

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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

that adoption is allowed under his/her national laws (i) Possesses all the qualifications and none of the disqualifications provided in applicable Philippine laws.

I. 1. WHO CAN ADOPT

I. 2. WHO CAN BE ADOPTED

Any foreign national or a Filipino citizen permanently residing abroad who has the qualifications and none of the disqualifications under the Act may file an application if he/she: (a) Is 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 (b) If married, his/her spouse must jointly file for the adoption (c) 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 (d) Has not been convicted of a crime involving moral turpitude (e) Is eligible to adopt under his/her national law (f) Is 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 (g) 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 (h) Comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and

(a) Only a legally-free child may be the subject of inter-country adoption. (b) A legally-free child is one who has been voluntarily or involuntarily committed to the DSWD of the Philippines, in accordance with the Child and Youth Welfare Code. (c) No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally (last resort). (d) In order that such child may be considered for placement, the following documents must be submitted to the Board:  Child study  Birth Certificate / Foundling Certificate  Deed of Voluntary Commitment/ Decree of Abandonment/ Death Certificate of parents  Medical Evaluation / History  Psychological Evaluation, as necessary  Recent photo of the child Tamargo v. CA (1992): Where the petition for adoption was granted after the child had shot and killed a girl, the Supreme Court did not consider the retroactive effect given to the decree of adoption so as to impose a liability upon adopting parents at a time when adopting parents had no actual or physically custody over the child. Retroactive effect may perhaps be given to the granting of the petition for adoption where such is essential to permit the accrual of some benefit or advantage in favor of the

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X. Support

adopted child. In the instant case, however, 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 and which they could not have prevented would be unfair and unconscionable.

A. WHAT IT COMPRISES Consists of everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family. [Art. 194]  Education includes a person’s schooling or training for some profession, trade or vocation, the right to which shall subsist beyond the age of majority. [Art. 194]  Transportation includes expenses in going to and from school, or to and from place of work. [Art. 194]

Lazatin v. Campos (1979): Adoption is a juridical act, proceeding in rem. Because it is artificial, the statutory requirements in order to prove it must be strictly carried out. Petition must be announced in publications and only those proclaimed by the court are valid. Adoption is never presumed.

B. WHO ARE OBLIGED

Santos v. Aranzanso (1966): Validity of facts behind a final adoption decree cannot be collaterally attacked without impinging on that court’s jurisdiction.



DSWD v. Belen (1997): Participation of the appropriate government instrumentality in performing the necessary studies and precautions is important and is indispensable to assure the child’s welfare. Landingin v. Republic (2006): Consent for adoption must be written and notarized. Sayson v. CA (1992): Adopted children do not have a right to represent their adopters in successional interests. Although an adopted child is deemed to be a legitimate child and have the same rights as the latter, these rights do not include the right of representation (because the adopted child has no right to inherit from the grandparent). The relationship created by the adoption is between only the adopting parents and the adopted child. It does not extend to the blood relatives of either party.

To support each other: o Spouses; o Legitimate ascendants and descendants; o Parents and their children (legitimate and illegitimate) and the children of the latter (legitimate and illegitimate); o Legitimate brothers and sisters, whether of full or half-blood; [Art. 195] o Illegitimate brothers and sisters, whether of full or half-blood, except when the need for support of one (of age) is due to a cause imputable to his/her fault or negligence. [Art. 196]

Note: Both legitimate and children are entitled to support.

illegitimate

 Properties answerable for support From the separate property of the obligor. If no separate property, the ACP/CPG (if financially capable) shall advance the support, to be deducted from the obligor’s share upon liquidation of such regime. [Art. 197]

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who called for the physician’s services for the childbirth of their daughter-in-law, it is the woman’s husband who is bound to pay the fees due to the physician.

Order of support o If there are multiple obligors  Spouse  Descendants, nearest in degree  Ascendants, nearest in degree  Brothers and Sisters [Art. 199]

Lacson v. San Jose-Lacson (1968): Man is still liable for support in arrears since the mother advanced it from a stranger (the uncle of the daughters).

The order of liability among ascendants and descendants would be: (1) legitimate children and descendants, (2) legitimate parents and ascendants, (3) illegitimate children and their descendants. [Tolentino]

Lacson v. Lacson (2006): Acknowledgment of and commitment to comply with support obligation through a note in his own handwriting is proof that a demand was made.

When two or more are obliged to give support, the payment shall be divided between them in proportion to their resources;

Gotardo v. Buling (2012): The amount of support is variable and, for this reason, no final judgment on the amount of support is made as the amount shall be in proportion to the resources or means of the giver and the necessities of the recipient.

Also, in case of urgent need and by special circumstances, judge may order only one obligor to furnish support without prejudice to reimbursement from other obligors of the share due from them (Art. 200). o

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If there are multiple recipients and only one obligor, and the latter has no sufficient means to satisfy all claims:  Observe order in Article 199 as to whose claim shall be satisfied first;  But if the concurrent obligees are the spouse and a child subject to parental authority, the child shall be preferred. [Art. 200]

 Stranger gives support When, without the knowledge of the person obliged to give support, it is given by a stranger, the stranger has the right to claim the same from the person obliged, unless it appears that he gave it without intention of being reimbursed. [Art. 206] 

Person obliged refuses or fails to give support When the person obliged to give support unjustly refuses or fails to give support when urgently needed, any third person may furnish support to the needy individual, with right of reimbursement from the person obliged to give support. This particularly applies when the father or mother of a minor child unjustly refuses to support or fails to give support to the child when urgently needed. [Art. 207]

The above preference given to a child under parental authority over the spouse should prevail only if the person obliged to support pays it out of his separate property. So if the support comes from ACP or CPG, the above rule of preference for the child does not apply. [Tolentino] Pelayo v. Lauron (1909): Even if the parents-in-law were the ones

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Contractual support or that given by will o The excess in amount beyond that required for legal support shall be subject to levy on attachment or execution. [Art. 208]



 Reason: The amount of support agreed upon in the contract or given in the will can be more than what the recipient needs (Sempio-Diy).

except from the date of judicial or extrajudicial demand. [Art. 203] Support pendente lite may be claimed in accordance with the Rules of Court. [Art. 203] Payment shall be made within the first 5 days of each corresponding month. When the recipient dies, his heirs shall not be obliged to return what he has received in advance. [Art. 203]

F. OPTIONS

Furthermore, contractual support shall be subject to adjustment whenever modification is necessary due to changes in circumstances manifestly beyond the contemplation of the parties. [Art. 208]

 

Payment of the amount; or Receiving and maintaining the recipient in the home of the provider, unless there is a legal or moral obstacle for doing so.

G. ATTACHMENT

C. SUPPORT DURING MARRIAGE LITIGATION

The right to receive support as well as any money or property obtained as such support shall not be levied upon on attachment or execution. (Art. 205)

Pending legal separation or annulment, and for declaration of nullity, support pendente lite for spouses and children will come from the ACP/CPG. After final judgment granting the petition, mutual support obligation between spouses ceases. (But in legal separation, court may order guilty spouse to give support to innocent spouse.) [Art. 198]

This is to protect that which the law gives to the recipient against want and misery. [Tolentino]

XI. Parental Authority and Custody of Children

Note: De facto separation does not affect the ACP and the CPG, except that the spouse who leaves the conjugal home without just cause shall not be entitled to support. [Art. 100]

Parental authority 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 this under certain circumstances (Manresa).

D. AMOUNT The amount of support is in proportion to the means of the provider and the needs of the receiver, and can be reduced or increased if such circumstances change. [Arts. 201, 202]

PARENTAL AUTHORITY INCLUDES [ART. 209]: (1) The caring for and rearing of children for civic consciousness and efficiency; (2) The development of the moral, mental and physical character and well-being of said children

E. WHEN DEMANDABLE 

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the child, are ordinarily entitled to custody as against all persons. [Santos v CA (1995)]

Parental authority and responsibility may not be renounced or transferred except in the cases authorized by law. [Art. 210]

WHO EXERCISES AUTHORITY IN CASES OF DEATH, ABSENCE, UNSUITABILITY, REMARRIAGE, OR SEPARATION OF PARENTS:

CASES WHEN PARENTAL AUTHORITY AND RESPONSIBILITY MAY BE TRANSFERRED OR RENOUNCED:

(1) In case one parent is absent or already dead, the present or surviving parent [Art. 212] Remarriage of the surviving parent shall not affect his/her parental authority over the children, unless the court appoints another person to be the guardian of the children or their property [Art. 212] (2) In case of a void/annulled marriage, and there is no agreement between spouses, the parent designated by the court [Art. 43 par. 1; Art. 49] (3) Innocent spouse gets custody of minor children in legal separation [Art. 63 par. 3] (4) The court shall take into account all relevant considerations, especially the choice of the child over seven years of age, unless the parent chosen is unfit [Art. 213 par. 1] (5) Substitute parental authority [Art. 214] (a) In case of death, absence or unsuitability of the parents, substitute parental authority shall be exercised by the surviving grandparent (b) When several grandparents survive, the one designated by the court shall exercise parental authority, taking into account all relevant considerations, especially the choice of the child over seven years of age, unless the grandparent chosen is unfit

• Adoption; • Guardianship; or • Commitment of the child in an entity or institution engaged in child care or in a children’s home

RULES AS TO THE EXERCISE OF PARENTAL AUTHORITY: • Jointly exercised by the father and mother over their common children, but in case of disagreement, the father's decision shall prevail, unless there is a judicial order to the contrary [Art. 211] • Exercised by the mother if the child is illegitimate [Art.176] • Children under parental authority shall always observe respect and reverence towards their parents and are obliged to obey them [Art. 211]

CHARACTERISTICS AUTHORITY:

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PARENTAL

(1) Natural right and duty of parents [Art. 209, FC] (2) Cannot be renounced, transferred or waived, except in cases authorized by law [Art 210, FC] (3) Jointly exercised by the father and the mother [Art. 211, FC] (4) Purely personal and cannot be exercised through agents (5) Temporary

PARENTAL PREFERENCE RULE: The natural parents, who are of good character and who can reasonably provide for

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Descendant’s Privilege of Refusal to Testify [Art. 215]: No descendant shall be compelled, in a criminal case, to testify against his parents and grandparents.

CIVIL LAW

SUBSTITUTE PARENTAL AUTHORITY OVER DISADVANTAGED CHILDREN (Art. 217) Entrusted in summary judicial proceedings to: (1) Heads of children’s homes (2) Orphanages (3) Similar institutions duly accredited by the proper government agency (such as the DSWD)

Exception: When such testimony is indispensable in (1) a crime against the descendant, or (2) a crime by one parent against the other.

TENDER YEARS PRESUMPTION: NO child under 7 years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise. [Art. 213 par 2; Art. 363, NCC; Gamboa v. CA (2007)]

WHO ARE DISADVANTAGED CHILDREN: (1) (2) (3) (4) (5)

Examples of compelling reasons are: (1) When the mother is insane; (2) With a communicable disease that might endanger the life or health of the child; (3) Is maltreating the child; or (4) Has another child by another man who lives with her. [Cervantes v. Fajardo (1989)]

Foundlings Abandoned Neglected Abused Others similarly situated

PERSONS EXERCISING SPECIAL PARENTAL AUTHORITY [Art. 218 FC] (1) School, its administrators and teachers; or (2) The individual, entity or institution engaged in child care Note: Exercised over minor child while under their supervision, instruction or custody.

Note: Alleged lesbianism [Gualberto v. Gualberto (2005)], prostitution or infidelity to husband does not necessarily make a mother unfit as parent. It must be shown that such lesbianism, prostitution or infidelity adversely affect the child.

XII. Emancipation Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years.

PERSONS EXERCISING SUBSTITUTE PARENTAL AUTHORITY IN DEFAULT OF PARENTS OR JUDICIALLY APPOINTED GUARDIAN (IN THIS ORDER): • The surviving grandparent [Art. 214, FC] • Oldest brother or sister, over 21 years old, unless unfit or unqualified. • Child’s actual custodian, over 21 years old, unless unfit or unqualified.

Art. 236. Emancipation shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life, save the exceptions established by existing laws in special cases.

Note: The same order applies to the appointment of judicial guardian over the property of the child

Contracting marriage shall require parental consent until the age of twenty-one.

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Persons between ages twenty-one and twenty-five, shall be obliged to ask their parents orguardian for advice upon the intended marriage.  No advice or unfavorable advice: marriage license shall not be issued till after three months following the completion of the publication of the application therefor  Sworn statement by the contracting parties that advice has been sought, together with written advice if any or refusal to give advice: attached to the application for the marriage license [Art. 15, FC]

CIVIL LAW

A verified petition alleging the following facts is required when [Art. 239]:  A husband and wife are separated in fact; or,  One has abandoned the other Situation: Where one of them seeks judicial authorization for a transaction where the consent of the other spouse is required by law but such consent is withheld or cannot be obtained The petition shall: (1) Attach the proposed deed, if any, embodying the transaction, if none, shall describe in detail the said transaction and state the reason why the required consent thereto cannot be secured. (2) The final deed duly executed by the parties shall be submitted to and approved by the court.

Nothing in this Code shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below twenty-one years of age mentioned in the second and third paragraphs of Article 2180 of the Civil Code. RA 6809: By virtue of this law, emancipation can no longer take place by virtue of the minor’s marriage or by the concession of the parents to a minor in a recorded public instrument.

Separate Claim for Damages: Claims for damages by either spouse, except costs of the proceedings, may be litigated only in a separate action. [Art. 240] Jurisdiction: Jurisdiction over the petition shall, upon proof of notice to the other spouse, be exercised by the proper court authorized to hear family cases, if one exists, or in the regional trial court or its equivalent sitting in the place where either of the spouses resides. [Art. 241]

XII. Summary Judicial Proceedings Under FC A. PROCEDURAL RULES PROVIDED FOR IN THIS TITLE SHALL APPLY TO [ART. 238]:

Notification to other spouse: (1) Upon the filing of the petition, the court shall notify the other spouse, whose consent to the transaction is required, of said petition, ordering said spouse to show cause why the petition should not be granted, on or before the date set in said notice for the initial conference. (2) The notice shall be accompanied by a copy of the petition and shall be served at

(1) Separation in fact between husband and wife (2) Abandonment by one of the other (3) Incidents involving parental authority

B. SEPARATION IN FACT

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the last known address of the spouse concerned. [Art. 242]

CIVIL LAW

Rules applicable for administering or encumbering separate property of spouse: The petition for judicial authority to administer or encumber specific separate property of the abandoning spouse and to use the fruits or proceeds thereof for the support of the family shall also be governed by these rules. [Art. 248]

Procedure: (1) A preliminary conference shall be conducted by the judge personally without the parties being assisted by counsel. (2) After the initial conference, if the court deems it useful, the parties may be assisted by counsel at the succeeding conferences and hearings. [Art. 243] (3) If the petition is not resolved at the initial conference, said petition shall be decided in a summary hearing. Basis of summary hearing (at the sound discretion of the court): • Affidavits • Documentary evidence • Oral testimonies at the court’s sound discretion. If testimony is needed, the court shall specify the witnesses to be heard and the subject-matter of their testimonies, directing the parties to present said witnesses. [Art. 246(a)]

C. INCIDENTS INVOLVING PARENTAL AUTHORITY Procedure (1) Such petitions shall be verified and filed in the proper court of the place where the child resides. [Art. 250] (2) Upon the filing of the petition, the court shall notify the parents or, in their absence or incapacity, the individuals, entities or institutions exercising parental authority over the child. [Art. 251] Note: • Petitions filed under Articles 223, 225 and 235 of this Code involving parental authority shall be verified. [Art. 249] • The rules in Chapter 2 hereof shall also govern summary proceedings under this Chapter insofar as they are applicable [Art. 253] • The foregoing rules in Chapter 2 (Separation in Fact) and (Incidents Involving Parental Authority) hereof shall likewise govern summary proceedings filed  Declaration of presumptive death [Art. 41]  Delivery of presumptive legitime [Art. 51]  Fixing of family domicile [Art. 69]  Disagreements regarding one spouse’s profession, occupation, business, or activity [Art. 73]  Disposition or encumbrance of common property in ACP where one spouse is

When appearance of spouses required: 1. In case of non-appearance of the spouse whose consent is sought, the court shall inquire into the reasons for his failure to appear, and shall require such appearance, if possible. [Art. 244] 2. If, despite all efforts, the attendance of the non-consenting spouse is not secured, the court may proceed ex parte and render judgment as the facts and circumstances may warrant. In any case, the judge shall endeavor to protect the interests of the non-appearing spouse. [Art. 245] Nature of judgment: The judgment of the court shall be immediately final and executory. [Art 247]

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incapacitated or unable to participate in the administration; administration of absolute community in a disagreement and the wife takes recourse within five years [Art. 96]  Disposition or encumbrance of common property in CPG where one spouse is incapacitated or unable to participate in the administration; administration of partnership property in a disagreement and the wife takes recourse within five years, [Art. 124]

CIVIL LAW

Every parent and every person holding substitute parental authority shall see to it that the rights of the child are respected and his duties complied with, and shall particularly, by precept and example, imbue the child with highmindedness, love of country, veneration for the national heroes, fidelity to democracy as a way of life, and attachment to the ideal of permanent world peace. [Art. 358, NCC] The government promotes the full growth of the faculties of every child.

When wife and husband are de facto separated and the CPG is insufficient, the spouse present shall, upon a petition, be given judicial authority to administer or encumber any specific property of the other spouse and use the fruits and proceeds thereof to satisfy the latter’s share. [Art. 127]

The government will establish, whenever possible: (1) Schools in every barrio, municipality and city where optional religious instruction shall be taught as part of the curriculum at the option of the parent or guardian; (2) Puericulture and similar centers;
 (3) Councils for the Protection of Children; and (4) Juvenile courts. [Art. 359, NCC]

XIII. Care and Education of Children

The Council for the Protection of Children shall look after the welfare of children in the municipality.

Every child: (1) Is entitled to parental care; (2) Shall receive at least elementary education; (3) Shall be given moral and civic training by the parents or guardian; (4) Has a right to live in an atmosphere conducive to his physical, moral and intellectual development. [Art. 356, NCC]

Functions: (1) Foster the education of every child in the municipality (2) Encourage the cultivation of the duties of parents (3) Protect and assist abandoned or mistreated children, and orphans (4) Take steps to prevent juvenile delinquency (5) Adopt measures for the health of children (6) Promote the opening and maintenance of playgrounds (7) Coordinate the activities of organizations devoted to the welfare of children, and secure their cooperation. [Article 360, NCC]

Duties of the child: (1) Obey and honor his parents or guardian; (2) Respect his grandparents, old relatives, and persons holding substitute parental authority; (3) Exert his utmost for his education and training; (4) Cooperate with the family in all matters that make for the good of the same. [Art. 357, NCC]

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Juvenile courts will be established, as far as practicable, in every chartered city or large municipality.[Art. 361, NCC]

(b) Her maiden first name and her husband's surname or (c) Her husband's full name, but prefixing a word indicating that she is his wife, such as "Mrs." The wife cannot claim an exclusive right to use the husband’s surname. She can’t be prevented from using it; but neither can she restrain others from using it. [Tolentino] (2) In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden name and surname. If she is the innocent spouse, she may resume her maiden name and surname. However, she may choose to continue employing her former husband's surname, unless [Art. 371]: (a) The court decrees otherwise, or (b) She or the former husband is married again to another person. (3) When legal separation has been granted, the wife shall continue using her name and surname employed before the legal separation. [Art. 372] (4) A widow may use the deceased husband's surname as though he were still living, in accordance with Article 370. [Art 373]

Whenever a child is found delinquent by any court, the father, mother, or guardian may in a proper case be judicially admonished. [Art. 362, NCC]

XIV. Surnames A. SURNAMES OF CHILDREN (1) Legitimate and legitimated children shall principally use the surname of the father. [Art. 364] (2) An adopted child shall bear the surname of the adopter. [Art. 365] (3) A natural child acknowledged by both parents shall principally use the surname of the father. If recognized by only one of the parents, a natural child shall employ the surname of the recognizing parent. [Art 366] (4) Natural children by legal fiction shall principally employ the surname of the father [Art. 367] (5) Illegitimate children referred to in Article 287 shall bear the surname of the mother. [Art 368] (6) Children conceived before the decree annulling a voidable marriage shall principally use the surname of the father. [Art. 369]

B. WIFE AFTER MARRIAGE

AND

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C. CONFUSION AND CHANGE OF NAMES In case of identity of names and surnames, the younger person shall be obliged to use such additional name or surname as will avoid confusion. [Art. 374] In case of identity of names and surnames between ascendants and descendants, the word "Junior" can be used only by a son. Grandsons and other direct male descendants shall either [Art. 375]: (1) Add a middle name or the mother's surname, or (2) Add the Roman Numerals II, III, and so on.

DURING

(1) A married woman may use [Art. 370]: (a) Her maiden first name and surname and add her husband's surname, or

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Art. 43. If there is a doubt as between two or more persons who are called to succeed each other as to which of them died first whoever alleges the death of one prior to the other 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.

Usurpation of a name and surname may be the subject of an action for damages and other relief. [Art. 377] The unauthorized or unlawful use of another person's surname gives a right of action to the latter [Art. 378]

Note: Article 43 provides a statutory presumption when there is doubt on the order of death between persons who are called to succeed each other (only).

The employment of pen names or stage names is permitted, provided it is done in good faith and there is no injury to third persons. Pen names and stage names cannot be usurped. [Art. 379]

Joaquin v. Navarro (1948): The statutory presumption of Article 43 was not applied due to the presence of a credible eyewitness as to who died first.

Except as provided in the preceding article, no person shall use different names and surnames. [Art 380]

Presumption in the Rules of Court (Rule 131, sec. 3, (jj.) (Presumption of survivorship)

Illegitmate Children shall use the surname and shall be under the parental authority of their mother. However, they may use the surname of their father if their filiation has been expressly recognized by their father through: (a) record of birth in civil register (b) admission in public document (c) admission in private handwritten document

Age Both under 15 Both above 60 One under 15, the other above 60 Both over 15 and under 60; different sexes Both over 15 and under 60; same sex One under 15 or over 60, the other between those ages

Presumed Survivor Older Younger One under 15 Male

Older One between 15 and 60

XV. Rules Governing Persons who are Absent

Note: Applicable only to two or more persons who perish in the same calamity, and it is not shown who died first, and there are no particular circumstances from which it can be inferred.

A. PROVISIONAL MEASURES IN CASE OF ABSENCE [ARTS. 381-383]

Article 41. A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage,

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• Only the deserted spouse can file or institute a summary proceeding for the declaration of presumptive death of the absentee. (Bienvenido case) • There must have been diligent efforts on the part of the deserted spouse to locate the absent spouse. These diligent efforts correspond to the requirement of the law for a well-founded belief.

the prior spouse had been absent for four consecutive years and the spouse present has a well founded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient. General rule: Marriage contracted by any person during the subsistence of a previous marriage is void.

Exception to the Exception: Art. 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired.

Exceptions: The following subsequent marriage of the present spouse is valid: (1) Subsequent marriage due to ordinary absence where: (a) The prior spouse had been absent for 4 consecutive years; (b) The spouse present had a wellfounded belief that absent spouse is dead; and (c) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse). (2) Subsequent marriage due to extraordinary absence where: (a) The prior spouse had been missing for 2 consecutive years; (b) There is danger of death attendant to the disappearance [Art. 391, Civil Code]; (c) The spouse present had a wellfounded belief that the missing person is dead; and (d) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse).

Art. 382. The appointment referred to in the preceding article having been made, the judge shall take the necessary measures to safeguard the rights and interests of the absentee and shall specify the powers, obligations and remuneration of his representative, regulating them, according to the circumstances, by the rules concerning guardians. Art. 383. In the appointment of a representative, the spouse present shall be preferred when there is no legal separation. If the absentee left no spouse, or if the spouse present is a minor, any competent person may be appointed by the court. Requisites: The judge may appoint a person to represent absentee when: (1) Person disappears from his domicile (2) His whereabouts are unknown (3) No agent to administer his property (4) An interested party, a relative, or a friend files the action

Notes: • Institution of a summary proceeding is not sufficient. There must also be a summary judgment. (Balane)

Who may be appointed as representative?

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(1) Spouse present shall be preferred when there is no legal separation (2) If no spouse or spouse is incapacitated, any competent person

CIVIL LAW (3) Relatives who may succeed by the law of intestacy; (4) Those who may have some right over the property of the absentee, subordinated to the condition of his death.

B. DECLARATION OF ABSENCE, [ARTS. 384-389]

C. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE, [ARTS. 387-389]

Art. 384. Two years having elapsed without any news about the absentee or since the receipt of the last news, and five years in case the absentee has left a person in charge of the administration of his property, his absence may be declared.

Art. 387. An administrator of the absentee's property shall be appointed in accordance with Article 383.

Art. 385. The following may ask for the declaration of absence: 1. The spouse present; 2. The heirs instituted in a will, who may present an authentic copy of the same; 3. The relatives who may succeed by the law of intestacy; 4. Those who may have over the property of the absentee some right subordinated to the condition of his death.

Art. 388. The wife who is appointed as an administratrix of the husband's property cannot alienate or encumber the husband's property, or that of the conjugal partnership, without judicial authority. Art. 389. The administration shall cease in any of the following cases: 1. When the absentee appears personally or by means of an agent; 2. When the death of the absentee is proved and his testate or intestate heirs appear; 3. When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title. In these cases the administrator shall cease in the performance of his office, and the property shall be at the disposal of those who may have a right thereto.

Art. 386. The judicial declaration of absence shall not take effect until six months after its publication in a newspaper of general circulation. When may absence be declared? • Two years without any news about the absentee • Five years if the absentee left a person in charge of administration of his property • Declaration takes effect only after six months after publication in a newspaper of general circulation

Who may administer the property? • Spouse present shall be preferred when there is no legal separation • If no spouse or spouse is incapacitated, any competent person

Who may ask for a declaration of absence? (1) Spouse present (2) Heirs instituted in a will, who may present an authentic copy of the same;

When will the administration of property cease?

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Administrator shall cease in performance of his office, and property shall be disposed in favor of those who have a right thereto when (1) Absentee appears personally or by means of an agent (2) Testate or intestate heirs appear, upon proof of death of absentee (3) Third person appears, with a proper document showing he has acquired absentee’s property by purchase or other title

D. PRESUMPTION [ARTS. 390-392]

OF

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• If absentee disappeared after age of 75, 5 years shall be sufficient. Extraordinary Absence Only 4 years is required for presumption to arise if: (1) A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane; (2) A person in the armed forces who has taken part in war, and has been missing for four years; (3) A person who has been in danger of death under other circumstances and his existence has not been known for four years.

DEATH,

Art. 390. After an absence of 7 years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of 10 years. If he disappeared after the age of 75 years, an absence of 5 years shall be sufficient in order that his succession may be opened.

Note: • Although 7 years is required for the presumption of death of an absentee in the Civil Code, Art. 41 of the Family Code makes an exception for the purpose of remarriage by limiting such requirement to 4 years. • Art. 41 also limits the required 4 years in Art. 391 for absence under exceptional circumstances to only 2 years.

Art. 391. The following shall be presumed dead for all purposes, including the division of the estate among the heirs: 1. A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane; 2. A person in the armed forces who has taken part in war, and has been missing for four years; 3. A person who has been in danger of death under other circumstances and his existence has not been known for four years.

Art. 392. If the absentee appears or without appearing his existence is proved he shall recover his property in the condition in which it may be found and the price of any property that may have been alienated or the property acquired therewith; but he cannot claim either fruits or rents.

XVI. Funerals

General rule: A person shall be presumed dead for all purposes after absence for a period of 7 years.

The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order established for support, under Article 294 [Art. 305]: (1) Spouse

Exception: Succession • In succession, 10 years is required for presumption of death.

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(2) Descendants in the nearest degree. In case of descendants of the same degree, the oldest shall be preferred. (3) The ascendants in the nearest degree. In case of ascendants, the paternal shall have a better right (4) The brothers and sisters, the oldest shall be preferred. (5) Municipal authorities – if there are no persons who are bound to support or if such persons are without means

CIVIL LAW

Guidelines in making funeral arrangements (1) The persons who are preferred in the right to make funeral arrangements may waive the right expressly or impliedly in which case the right and duty immediately descend to the person next in the order. (2) It must be in keeping with the social position of the deceased. (3) Law shall prevail over the will of the persons who have the right to control the burial of deceased – exhumation, evidential purpose, disposition of corpse by deceased, mutilation of corpses and autopsies. (4) Corpses which are to be buried at public expenses may also be used for scientific purposes under certain conditions. (5) Expressed wishes of the deceased is given priority provided that it is not contrary to law and must not violate the legal and reglementary provisions concerning funerals and disposition of the remains (time, manner, place or ceremony) (6) In the absence of expressed wishes, his religious beliefs or affiliation shall determine the funeral rights. (7) In case of doubt, the persons in Art. 199 shall decide. (8) Any person who disrespects the dead or interferes with the funeral shall be liable for material and moral damages.

Nature of funeral: Every funeral shall be in keeping with the social position of the deceased. [Art. 306] The funeral shall be: (1) In accordance with the expressed wishes of the deceased. (2) In the absence of such expression, his religious beliefs or affiliation shall determine the funeral rites. (3) In case of doubt, the form of the funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other members of the family [Art. 307] Note: No human remains shall be retained, interred, disposed of or exhumed without the consent of the persons mentioned in articles 294 and 305. Damages: Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to the family of the deceased for damages, material and moral [Art. 309]

XVII. Entries in the Civil Register

Funeral Expenses: The construction of a tombstone or mausoleum shall be deemed a part of the funeral expenses, and shall be chargeable to the conjugal partnership property, if the deceased is one of the spouses [Art. 310].

A.

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Art. 407. Acts, events and judicial decrees concerning the civil status of persons shall be recorded in the civil register.

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Art. 413. All other matters pertaining to the registration of civil status shall be governed by special laws.

Art. 408. The following shall be entered in the civil register: 1. Births; 2. marriages; 3. deaths; 4. legal separations; 5. annulments of marriage; 6. judgments declaring marriages void from the beginning; 7. legitimations; 8. adoptions; 9. acknowledgments of natural children; 10. naturalization; 11. loss, or 12. recovery of citizenship; 13. civil interdiction; 14. judicial determination of filiation; 15. voluntary emancipation of a minor; and 16. changes of name.

B. RA 9048 AS AMENDED BY RA 10172 AN ACT AUTHORIZING THE CITY OR MUNICIPAL CIVIL REGISTRAR OR THE CONSUL GENERAL TO CORRECT A CLERICAL OR TYPOGRAPHICAL ERROR IN AN ENTRY AND/OR CHANGE OF FIRST NAME OR NICKNAME IN THE CIVIL REGISTER WITHOUT NEED OF A JUDICIAL ORDER, AMENDING FOR THIS PURPOSE ARTICLES 376 AND 412 OF THE CIVIL CODE OF THE PHILIPPINES

Art. 409. In cases of legal separation, adoption, naturalization and other judicial orders mentioned in the preceding article, it shall be the duty of the clerk of the court which issued the decree to ascertain whether the same has been registered, and if this has not been done, to send a copy of said decree to the civil registry of the city or municipality where the court is functioning.

General rule: No entry in a civil register shall be changed or corrected without a judicial order Exception: Clerical or typographical errors; Change of: first name or nickname, day and month in the date of birth, or sex of a person This exception applies where it is patently clear that there was a clerical or typographical error or mistake in the entry, which can be corrected or changed by the concerned city or municipal civil registrar or consul general in accordance with the provisions of this Act and its implementing rules and regulations

Art. 410. The books making up the civil register and all documents relating thereto shall be considered public documents and shall be prima facie evidence of the facts therein contained. Art. 411. Every civil registrar shall be civilly responsible for any unauthorized alteration made in any civil register, to any person suffering damage thereby. However, the civil registrar may exempt himself from such liability if he proves that he has taken every reasonable precaution to prevent the unlawful alteration.

Note: • Clerical or typographical error refers to a mistake committed in the performance of clerical work in writing, copying, transcribing or typing an entry in the civil register that is harmless and innocuous

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(i.e. misspelled name, misspelled place of birth, mistake in the entry of day and month in the date of birth or the sex of the person or the like, which is visible to the eyes or obvious to the understanding, and can be corrected or changed only by reference to other existing record or records) • Before the amendment by RA 10172, no correction must involve the change of sex, nationality, age or status of the petitioner. After the amendment, change of sex can now be subjected to correction without judicial order under the rules of this Act. • Civil Register refers to the various registry books and related certificates and documents kept in the archives of the local civil registry offices, Philippine Consulates and of the Office of the Civil Registrar General.

CIVIL LAW

Citizens of the Philippines who are presently residing or domiciled in foreign countries may file their petition, in person, with the nearest Philippine Consulates. The petitions filed with the city or municipal civil registrar or the consul general shall be processed in accordance with this Act and its implementing rules and regulations. All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once. Grounds Who may file the petition and where? (1) Any person having direct personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register (2) Verified petition with the local civil registry office of the city or municipality (a) where the record being sought to be corrected or changed is kept (b) where the interested party is presently residing or domiciled, if it will be impractical to submit in the place where record is kept (i.e. when party has migrated to another place in the country) (c) nearest Philippine Consulates, if the petitioner is presently residing or domiciled in foreign countries

Sec. 3. Who May File the Petition and Where. – Any person having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register may file, in person, a verified petition with the local civil registry office of the city or municipality where the record being sought to be corrected or changed is kept. In case the petitioner has already migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected or changed, the petition may be filed, in person, with the local civil registrar of the place where the interested party is presently residing or domiciled. The two (2) local civil registrars concerned will then communicate to facilitate the processing of the petition.

Note: All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once. Sec. 4. Grounds for Change of First Name or Nickname. – The petition for change of first name or nickname may be allowed in any of the following cases: (1) The petitioner finds the first name or nickname to be ridiculous, tainted with

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dishonor or extremely difficult to write or pronounce. (2) The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community: or (3) The change will avoid confusion.

CIVIL LAW

certificate and other documents issued by religious authorities; nor shall any entry involving change of gender corrected except if the petition is accompanied by a certification issued by an accredited government physician attesting to the fact that the petitioner has not undergone sex change or sex transplant. The petition for change of first name or nickname, or for correction of erroneous entry concerning the day and month in the date of birth or the sex of a person, as the case may be, shall be published at least once a week for two (2) consecutive weeks in a newspaper of general circulation.

Sec. 5. Form and Contents of the Petition. – The petition for correction of a clerical or typographical error, or for change of first name or nickname, as the case may be, shall be in the form of an affidavit, subscribed and sworn to before any person authorized by the law to administer oaths. The affidavit shall set forth facts necessary to establish the merits of the petition and shall show affirmatively that the petitioner is competent to testify to the matters stated. The petitioner shall state the particular erroneous entry or entries, which are sought to be corrected and/or the change sought to be made.

Furthermore, the petitioner shall submit a certification from the appropriate law enforcement agencies that he has no pending case or no criminal record. The petition and its supporting papers shall be filed in three (3) copies to be distributed as follows: first copy to the concerned city or municipal civil registrar, or the consul general; second copy to the Office of the Civil Registrar General; and third copy to the petitioner

The petition shall be supported with the following documents: (1) A certified true machine copy of the certificate or of the page of the registry book containing the entry or entries sought to be corrected or changed. (2) At least two (2) public or private documents showing the correct entry or entries upon which the correction or change shall be based; and (3) Other documents which the petitioner or the city or municipal civil registrar or the consul general may consider relevant and necessary for the approval of the petition.

C. RULE 108, RULES OF COURT CANCELLATION OR CORRECTION ENTRIES IN THE CIVIL REGISTRY

OF

Sec. 1. Who may file petition. - Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register, may file a verified petition for the cancellation or correction of any entry relating thereto, with the Court of First Instance of the province where the corresponding civil registry is located.

No petition for correction of erroneous entry concerning the date of birth or the sex of a person shall be entertained except if the petition is accompanied by earliest school record or earliest school documents such as, but not limited to, medical records, baptismal

Sec. 2. Entries subject to cancellation or correction. - Upon good and valid grounds,

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the following entries in the civil register may be cancelled or corrected: (a) births; (b) marriages; (c) deaths; (d) legal separations; (e) judgments of annulments of marriage; (f) judgments declaring marriages void from the beginning; (g) legitimations; (h) adoptions; (i) acknowledgments of natural children; (j) naturalization (k) election, loss or recovery of citizenship (l) civil interdiction; (m) judicial determination of filiation; (n) voluntary emancipation of a minor; and (o) changes of name.

Sec. 7. Order. - After hearing, the court may either dismiss the petition or issue an order granting the cancellation or correction prayed for. In either case, a certified copy of the judgment shall be served upon the civil registrar concerned who shall annotate the same in his record.

Sec. 3. Parties. - When cancellation or correction of an entry in the civil register is sought, the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding.

Where filed? - Verified petition for cancellation or correction of entry in the civil registy may be filed with the Regional Trial Court of the province where the corresponding civil registry is located

Sec. 4. Notice and publication. - Upon the filing of the petition, the court shall, by an order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province.

Entries subject to Cancellation/Correction • Births • Marriages • Deaths • Legal separations • Judgments of annulments of marriage • Judgments declaring marriages void from the beginning • Legitimations • Adoptions • Acknowledgments of natural children • Naturalization • Election, loss or recovery of citizenship • Civil interdiction • Judicial determination of filiation • Voluntary emancipation of a minor • Changes of name

Who may file petition? - Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register

Sec. 5. Opposition. - The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice, file his opposition thereto. Sec. 6. Expediting proceedings. - The court in which the proceeding is brought may make orders expediting the proceedings, and may also grant preliminary injunction for the preservation of the rights of the parties pending such proceedings.

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PROPERTY

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I. Property – All things which are, or may be, the object of appropriation. [NCC 414]

CIVIL LAW

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements; (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included; (7) Fertilizer actually used on a piece of land; (8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant; (9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast; (10) Contracts for public works, and servitudes and other real rights over immovable property.

I. Characteristics (1) Utility – capacity to satisfy human wants (2) Substantivity and Individuality – separate and autonomous existence (3) Susceptibility of being appropriated – what cannot be appropriated because of their distance, depth, or immensity cannot be considered ‘things’ (i.e. stars, ocean)

II. Classification A. HIDDEN TREASURE Hidden treasure –any hidden and unknown deposit of money jewels aor other precious objects, the lawful ownership of which does not appear. [NCC 439] Owner of the land, building or other property on which the hidden treasure was found, also owns it, subject to: (a) Right of a finder by chance who is not a trespasser/intruder: ½ of treasure (b) Right of a usufructuary who finds treasure: ½ of treasure (c) Right of State to acquire things of interest to science or the arts [NCC 438]

CATEGORIES OF IMMOVABLES (a) By nature (b) By incorporation (c) By destination (d) By analogy

B. BASED ON MOBILITY [IMMOVABLE OR MOVABLE]

Immovables by Nature: cannot be moved from place to place; their intrinsic qualities have no utility except in a fixed place. (pars. 1 & 8)

B. 1. REAL OR IMMOVABLE PROPERTY NCC 415. (1) Land, buildings, roads and constructions of all kinds adhered to the soil; (2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable; (3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;

(1) Par. 5 (a) Building - their adherence to the land must be permanent and substantial. (b) Buildings have been considered as immovables, despite:

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(i) Treatment by the parties e.g. they constitute a separate mortgage on the building and the land [Punzalan v. Lacsamana] (ii) Separate Ownership i.e. a building on rented land is still considered an immovable. [Tolentino]

CIVIL LAW separation will be substantial e.g. wells, sewers, aqueducts and railways (i) Whether attached by the owner himself or some other person

(3) Par. 7 Actually used (it has been spread over the land) Immovables by Destination: are essentially movables but by the purpose for which they have been placed in an immovable, partake of the nature of an immovable [Par. 4, 5, 6 & 9]

(2) Par. 8 (a) Mineral Deposits (i) Minerals still deposited in the soil; (ii) When minerals have been extracted, they become chattel. (b) Slag Dump: dirt and soil taken from a mine and piled upon the surface of the ground. Minerals can be found inside the dump. (c) Waters: those still attached to or running thru the soil or the ground.

(1) Par. 4 (a) Placed by the owner or by the tenant (as agent); (i) With intention of attaching them permanently even if adherence will not involve breakage or injury. (b) Where the improvement or ornaments placed by the lessee are not to pass to the owner at the expiration of the lease, they remain movables for chattel mortgage purposes. [Davao Sawmill v. Castillo (1935)]

Immovables by Incorporation: are essentially movables but are attached to an immovable in such a way as to be an integral part [Par. 2, 3, & 7] (1) Par. 2 (a) Trees and plants: only immovables when they are attached to the land or form an integral part of an immovable (i) When they have been cut or uprooted, they become movables. (b) By special treatment of Act 1508 (Chattel Mortgage Law), growing crops may be subject of a Chattel Mortgage. (c) For the purpose of attachment: growing crops are to be attached in the same manner as realty. (Rule 59, Sec. 7)

Par. 3 v. Par. 4 Par. 3 Cannot be separated from immovable without breaking or deterioration

Par. 4 Can be separated from immovable without breaking or deterioration Must be placed by Need not be placed by the owner, or by his the owner agent, expressed or implied Real property by Real property by incorporation and incorporation destination (2) Par. 5 Immovability depends upon their being destined for use in the industry or work in the tenement;

(2) Par. 3 (a) Res vinta in Roman Law (b) “Attachment in a fixed manner”: breakage or injury in case of

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The moment they are separated, (from the immovable or from the industry or work in which they are utilized) they recover their condition as movables. If it is still needed for the industry but separated from the tenement temporarily, the property continues to be immovable. Requisites for Immovability in Par. 5: Placed by the owner or the tenant (as

CIVIL LAW

(4) Par. 9  A floating house tied to a shore and used as a residence is considered real property, considering that the waters on which it floats are considered immovables.  But if the floating house makes it a point to journey from place to place, it assumes the category of a vessel, and is considered a movable. Immovables by Analogy: Contracts for public works, servitudes, other real rights over immovable property e.g. usufruct and lease of real property for a period of 1 year and registered [Par. 10]

agent); The machine, receptacle, instrument, implement must also be ESSENTIAL to the business in order to be considered realty. [Mindanao Bus Co. v City Assessor (1962)] Except: Estoppel Parties may, by agreement, treat as personal property that which by nature would be real, as long as no third parties would be prejudiced. That characterization is effective between the parties. [Makati Leasing v. Wearever (1983)] Effect of Attachment Machinery becomes part of the immovable. The installation of machinery and equipment in a mortgaged sugar central for the purpose of carrying out the industrial functions and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon. [Berkenkotter v. Cu Unjieng(1935)]

Note: Enumeration in Art. 415 not absolute.  Parties may by agreement treat as, but effective only as to them. It is based, partly, upon the principle of estoppel. [Evangelista vs. Alto Surety(1958)]  For purposes of taxation, improvements on land are commonly taxed as realty, even though for some purposes, they might be considered as personalty. It is a familiar phenomenon to see things classified as real property for purposes of taxation, which on general principle, might be considered personal property. [Manila Electric v. Central Bank (1962)]

B.2. PERSONAL OR MOVABLE

(3) Par. 6 (a) Requisites: (i) Placed by the owner or the tenant (as agent); (ii) With the intention of permanent attachment; (iii) Forming a permanent part of the immovable.

NCC 416 & 417. (1) Those movables susceptible of appropriation which are not included in the preceding article; (2) Real property which by any special provision of law is considered as personalty; (3) Forces of nature which are brought under control by science; and (4) In general, all things which can be

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(4) By forces of nature  e.g. electricity, gas, heat, oxygen

transported from place to place without impairment of the real property to which they are fixed. (5) Obligations and actions which have for their object movables or demandable sums; and (6) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate.

TESTS TO DETERMINE CHARACTER

CIVIL LAW

B. 3. IMPORTANCE AND SIGNIFICANCE OF CLASSIFICATION UNDER THE NCC (1) In criminal law (a) Usurpation of property can take place only with respect to real property. [RPC 312] (b) Robbery and theft can be committed only against personal property. [RPC 293, 308]

MOVABLE

(1) By exclusion  Everything NOT included in Article 415  Parties cannot by agreement treat as immovable that which is legally movable

(2) In the forms of contracts: (a) Subject matter of specific contracts: (i) Only real property can be the subject of real mortgage [NCC 2124] and antichresis. [NCC 2132] (ii) Only personal property can be the subject of voluntary deposit [NCC 1966], pledge [NCC 2094] and chattel mortgage. [Act 1508] (b) Donations of real property are required to be in a public instrument [NCC 749] but a donation of a movable may be made orally or in writing. [NCC 748]

(2) By description (a) Ability to change location – whether it can be carried from place to place; (b) Without substantial injury to the immovable to which it is attached. The steel towers built by MERALCO are not buildings or constructions since they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place, without breaking the material or causing deterioration to the object they are attached. [Board of Assessment Appeals v. Meralco]

(3) For acquisitive prescription: (a) Real property can be acquired by prescription in 30 years (bad faith) and 10 years (good faith). (NCC 1137, 1134) (b) Movables can be acquired by prescription in 8 years (bad faith) and 4 years (good faith). (NCC 1132)

(3) By special provision of law (a) Growing crops under the Chattel Mortgage Law (b) Machinery installed by a lessee not acting as agent of the owner [Davao Sawmill v. Castillo] (c) Intellectual property – considered personal property; it consists in the pecuniary benefit which the owner can get by the reproduction or manufacture of his work.

(4) Actions for recovery of possession: (a) Possession of real property recovered through accion reivindicatoria, accion publiciana, forcible entry and unlawful detainer. (b) Possession of movable property recovered through replevin.

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C.1. PUBLIC DOMINION

(5) Venue of actions: (a) Real actions - Actions concerning real property are commenced in the court that has jurisdiction over the area where the real property is situated. [Rules of Court Rule 4 Sec. 1] (b) Personal actions - Commenced where the plaintiff or any of the principal plaintiffs, or where the defendant or any of the principal defendants resides, or if a non-resident defendant, where he may be found, at the election of the plaintiff. [Rule 4 Sec. 2]

Property of public dominion is outside the commerce of man. They cannot be the subject matter of private contracts, cannot be acquired by prescription and they are not subject to attachment and execution nor burdened with a voluntary easement. Public Dominion Public Domain Public Lands

As defined by NCC 420 Used in Art XII, Section 2, 1987 Constitution Public Land Act

CHARACTERISTICS

(6) The governing law (Private International Law): (a) Immovables - governed by the law of the country where they are located. (b) Movables - governed by the personal laws of the owner. (which in some cases is the law of his nationality and in other cases, the law of his domicile)

 Not owned by the State but pertains to it as territorial sovereign; to hold in trust for the interest of the community.  Purpose: For public use, and not for use by the State as a juridical person.  Cannot be the subject of appropriation either by the State or by private persons.

CLASSIFICATIONS

(7) In affecting third persons: (a) In transactions involving real property – must be recorded in the Registry of Property to affect third persons. (b) In transactions involving personal property – registration is not required, except for chattel mortgages. [Chattel Mortgage Register, NCC 2140] (c)

Administered by the State [NCC 420 (1) Those intended for public use. (roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character) May be used by everybody, even by strangers or aliens but nobody can exercise over it the rights of a private owner.

C. BASED ON OWNERSHIP/RIGHTSHOLDER

(2) Those intended for some public service: may be used only by authorized persons but exists for the benefit of all. e.g. fortresses, unleased mines and civil buildings.

NCC 419. Property is part of either the public dominion or private ownership. Churches and other consecrated objects are considered outside the commerce of man; they are considered neither public nor private property.

(3) Those for the development of the national wealth. Includes natural resources such as minerals, coal, oil and forest.

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(4) Patrimonial property: (a) Owned by the State over which it has the same rights as private individuals in relation to their own property. (b) Subject to the administrative laws and regulations on the procedure of exercising such rights. E.g. friar lands, escheated properties and commercial buildings. (c) Purpose: (i) Enables the State to attain its economic ends. (ii) Serves as a means for the State’s subsistence and preservation. (iii) Enables the State to fulfill its primary mission. (d) Conversion of Property of Public Dominion for Public Use to Patrimonial Property: (i) Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State [NCC 422, Civil Code] (ii) An express Declaration by the State (either by the Congress or by the President, if the power was provided by law) that the public dominion property has been converted into patrimonial property, even though it was classified as alienable or disposable. [Heirs of Malabanan v. Republic (2009)]









Administered by Municipal Corporations [NCC 424] (1) Property for public use, in the provinces, cities, and municipalities, consist of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. (2) Patrimonial property Corporations:

of

CIVIL LAW  The province or municipality, as a juridical entity, also possesses private property to answer for its economic necessities.  Classification of Properties of provinces, cities, and municipalities [Salas v. Jarencio, (1972)] (i) Properties acquired with their own funds in their private or corporate capacity over which the political subdivision has ownership and control. (ii) Properties of public dominion held in trust for the State’s inhabitants are subject to the control and supervision of the State. A municipal corporation must prove that they acquired the land with their own corporate funds Presumption: that land comes from the State upon the creation of the municipality. All lands in the possession of the municipality Exception: for those acquired with its private funds, are deemed to be property of public dominion, held in trust for the State for the benefit of its inhabitants. Congress has paramount power to dispose of lands of public dominion in a municipality, the latter being a subdivision only for purposes of local administration. [Salas v. Jarencio, (1972)]

C.2. PRIVATE OWNERSHIP Can be exercised by the state in its private capacity or by private persons.

KINDS (1) Patrimonial property - Property owned by the State and its political subdivisions in their private capacity; all property of the State not included in NCC 420 (on public dominion) [NCC 421-424]

Municipal

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(2) Property belonging to private persons, either individually or collectively [NCC 425]  Property of private ownership, besides the patrimonial property of the State, provinces, cities, and municipalities, consists of all property belonging to private persons, either individually or collectively.  Refers to all property belonging to private persons, natural or juridical, either individually or collectively (coowned property)

DETERMINATION VIEWS)

(TWO

CIVIL LAW

Private Land converted to Property of Public Dominion through abandonment and reclamation  Through the gradual encroachment or erosion by the ebb and flow of the tide, private property may become public IF the owner appears to have ABANDONED the land, and permitted it to be totally destroyed so as to become part of the shore. The land having disappeared on account of the gradual erosion, and having remained submerged until they were reclaimed by the government, they are public land. [Government v. Cabangis (1929)]

DIFFERENT

(1) Determined by how the property was used In Province of Zamboanga v. City of Zamboanga (1968), property was considered patrimonial for they were not for public use.

D. BASED ON CONSUMABILITY [NCC 418]

(2) Determined by how the property was acquired According to Salas v. Jarencio (1972), the absence of a title deed to any land, showing that it was acquired with its private or corporate funds, the presumption is that such land came from the State upon the creation of the municipality.

(1) Movables which cannot be used in a manner appropriate to their nature without their being consumed. (e.g. food) (2) Consumable goods cannot be the subject matter of a commodatum unless the purpose of the contract is not the consumption of the object, as when it is merely for exhibition.

CONVERSION

All others not falling under ‘consumable’ e.g. money in coin.

Only applies to movable property, determined by nature.

D.1. CONSUMABLE

D.2. NON-CONSUMABLE

Alienable Public Land converted to Private Property through Prescription  Alienable public land held by a possessor – personally/through predecessors-ininterest, openly, continuously and exclusively – for 30 years is CONVERTED to private property by the mere lapse or completion of the period. The application for confirmation is mere formality, because land had already been converted, giving rise to a registrable title. [Director of Lands v. IAC(1986)]

E. BASED ON SUSCEPTIBILITY TO SUBSTITUTION Only applies to movables, determined by the intention of the parties.

E.1. FUNGIBLES Things that, because of their nature or the will of the parties, are capable of being substituted by others of the same kind, not having a distinct individuality.

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E.2. NON-FUNGIBLES

G.4. BY REASON OF SUSCEPTIBILITY TO DIVISION

(1) Things that cannot be substituted for another; (2) If the parties agreed that the same thing be returned, it is not fungible.

Public Agricultural Land; Mineral Land; Timber Land; National Parks.

G.5. BY REASON OF DESIGNATION

G. OTHER CLASSIFICATIONS

(1) Generic That which indicates its homogenous nature, but not the individual such as a horse, house, dress, without indicating it. (2) Specific That which indicates the specie or its nature and the individual, such as “the white horse of X”.

G.1. BY THEIR PHYSICAL EXISTENCE (1) Corporeal All property the existence of which can be determined by the senses. (res qui tangi possunt) (2) Incorporeal (a) Things having abstract existence, created by man and representing value. (b) Includes rights over incorporeal things, credits, and real rights other than ownership over corporeal things.

G.2. BY THEIR DEPENDENCE

AUTONOMY

G.6. EXISTENCE IN POINT OF TIME (1) Present Those which exist in actuality, either physical or legal, such as, the erected building. (2) Future Those which do not exist in actuality, but whose existence can reasonably be expected with more or less probability, such as ungathered fruits.

OR

(1) Principal Those to which other things are considered dependent or subordinated, such as the land on which a house is built. (2) Accessory Those which are dependent upon or subordinated to the principal. They are destined to complete, enhance or ornament another property.

G.3. BY SUSCEPTIBILITY DETERIORATION

THEIR

(1) Divisible Those which can be divided physically or juridically without injury to their nature e.g.: piece of land or an inheritance. (2) Indivisible Those which cannot be divided without destroying their nature or rendering impossible the fulfillment of the juridical relation of which they are object.

F. BASED ON THE CONSTITUTION [ARTICLE XII, SEC 3] (1) (2) (3) (4)

CIVIL LAW

III. Ownership A. DEFINITION AND CONCEPT  Independent right of exclusive enjoyment and control of a thing.  Has the purpose of deriving all advantages required by the reasonable needs of the owner/holder of right and promotion of general welfare.  A complete subjection to an owner’s will.

TO

(1) Deteriorable Those that deteriorate through use or by time. (2) Non-deteriorable. 99

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C.3. PROTECTING PROPERTY C.3.1 BASIC DISTINCTIONS

 May be exercised in everything not prohibited by public law or the rights of another.

REAL RIGHTS V. PERSONAL RIGHTS

B. TYPES OF OWNERSHIP

Real Rights Rights that confer upon its holder an autonomous power to derive directly from a thing certain economic advantages independently of whoever the possessor of the thing.

(1) Full Ownership With complete rights over the property. (2) Naked Ownership Absence of jus fruendi and jus utendi. (3) Sole Ownership Ownership vested only in one person. (4) Co-Ownership Ownership vested in 2 or more persons.

C. RIGHT IN GENERAL C.1. RIGHTS INCLUDED OWNERSHIP [NCC 428]

CIVIL LAW

Personal Rights Rights of a person to demand from another as a definite passive subject, the fulfillment of a prestation to give, to do or not to do.

IN

Real Rights Definite active subject who has a right against ALL persons generally as an indefinite passive subject. Object is generally a corporeal thing.

(1) Right to enjoy and dispose of a thing, without other limitations than those established by law. (2) Right of action against the holder and possessor of the thing in order to recover it.

Personal Rights Definite active subject (creditor) and a definite passive subject (debtor).

Subject matter is always an incorporeal thing. Generally Personal right extinguished by the survives the subject loss or destruction of matter. the thing over which it is exercised. It is directed against It is binding or the whole world, enforceable only giving rise to real against a particular actions against 3rd person giving rise to persons. personal actions against such debtor.

C.2. BUNDLE OF RIGHTS (1) Jus Utendi: right to enjoy and receive what the property produces. (2) Jus Fruendi: right to receive the fruits. (3) Jus Accessiones: right to the accessories. (4) Jus Abutend: right to consume a thing by use. (5) Jus Disponendi: right to alienate, encumber, transform or even destroy the thing owned. (6) Jus Vindicandi: right to recover possession of property based on a claim of ownership. (7) Jus Possidendi: right to possess the property. (Implied from all the other rights)

REAL ACTION V. PERSONAL ACTION (ROC, RULE 4 SEC 1-2) Real action Actions affecting title to or possession of real property or any interest therein. Personal action All other actions. 100

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ACTION IN REM V. ACTION IN PERSONAM V. ACTION QUASI IN REM

 Prior physical possession by the plaintiff is not required.  The action must be filed within 1 year AFTER dispossession / unlawful possession / demand to vacate.

Action in rem Action against a property, judgment binding against the whole world. Action in personam Action against a specific person, judgment binding against that particular person.

Distinction between forcible entry and unlawful detainer (1) Forcible Entry: Lawful possessor deprived through FISTS:  FISTS (Force, Intimidation, Strategy, Threats, Stealth)  Prescription: 1 year from dispossession (force, intimidation, threats) or from knowledge of dispossession (strategy, stealth). (2) Unlawful Detainer: Possessor refused to vacate upon demand by owner.  Legal possession (by permission/ tolerance) becomes unlawful upon failure to vacate.  Prescription of action: 1 year from last notice to vacate.

Action quasi in rem Action against a specific property with respect to a person.

C.3.2. REMEDIES DOCTRINE OF SELF-HELP [NCC 429430] 



CIVIL LAW

The owner 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. Every owner may enclose or fence his land or tenements by any other means without detriment to servitudes constituted thereon.

Movable property Replevin  For manual delivery of property  Prescription of Right: 4 years (good faith) or 8 years (bad faith)

ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF PROPERTY Immovable Property Accion Reivindicatoria Recovery of ownership of real property.  Including but not limited to possession.  Prescription of Action: 30 years.

Requisites for recovery of property [NCC 434] (1) Property must be identified; Through a relocation survey and a title properly identifying boundaries and location. (2) Plaintiff must rely on the strength of his title and not on weakness of defendant’s title.  Right must be founded on positive title and not on lack or insufficiency of defendant’s.  Ei incumbit probatio qui dicit, non qui negat: He who asserts, not he who denied must prove.

Accion Publiciana Recovery of a better right to possess (de jure).  Judgment as to who has the better right of possession.  Also, actions for ejectment not filed within 1 year must be filed as accion publiciana.  Prescription: 10 years. Accion Interdictal A summary action for recovery of physical possession through either an action for Forcible Entry or Unlawful Detainer.

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CIVIL LAW

(a) Private property or its use as the object of the expropriation; (b) The property or its use is taken by the State or by competent authority; (c) The purpose of the taking is for public use; (d) The taking must be attended with due process of law; and (e) There is payment of just compensation.

D. LIMITATIONS ON OWNERSHIP D.1. GENERAL LIMITATIONS: TAXATION, EMINENT DOMAIN, POLICE POWER POLICE POWER PROPERTY TAKEN WITH NO COMPENSATION FOR GENERAL WELFARE.  When any property is condemned or seized by competent authority in the interest of health, safety or security, the owner thereof shall not be entitled to compensation, unless he can show that such condemnation or seizure is unjustified. [Art. 436, Civil Code]

Note:  Expropriation may be exercised on both real and personal property. [Rule 67, Rules of Court]  Expropriation may be exercised not only on property but also its use such as the use of telephone lines [Republic v PLDT (1969)]

Requisites To justify the exercise of police power, the following must appear [US v Toribio(1910)]: (a) The interests of the public generally, require such interference (as distinguished from those of a particular class); and (b) The means are reasonably necessary for the accomplishment of a purpose, and not unduly oppressive.

D.2. SPECIFIC LIMITATIONS: IMPOSED BY LAW, SIC UTERE TUO, NUISANCE, STATE OF NECESSITY, EASEMENTS, AND THOSE VOLUNTARILY IMPOSED BY THE OWNER: SERVITUDES, MORTGAGES IMPOSED BY CONTRACT. (1) Legal Servitudes Once requisites are satisfied, the servient owner may ask the Court to declare the existence of an easement. (a) Art. 644 & 678: Aqueduct (b) Art. 679: Planting of trees (c) Art. 670: Light and View (d) Art. 649 & 652: Right of Way (e) Art. 637: Passage of water from upper to lower tenements (f) Art. 676: Drainage of buildings (g) Art. 684-687: Lateral and subjacent support

TAXATION Forced contribution to the operation of government.

EMINENT DOMAIN Property taken for public use/purpose, but subject to due process and payment of just compensation. Requisites To justify the exercise of the right of eminent domain, the following requisites must all be present:

(2) Must not injure the rights of a third person (a) Sic Utere Tuo Ut Alienum Non Laedas (b) The owner of a thing cannot make use thereof in such manner as to injure the rights of a third person. [NCC 431] 102

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CIVIL LAW

A nuisance is any act, omission, establishment, business, condition of property, or anything else which: (a) Injures or endangers the health or safety of others; (b) Annoys or offends the senses; (c) Shocks, defies or disregards decency or morality; (d) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (e) Hinders or impairs the use of property. [NCC 694]

(3) Actions in a State of Necessity The owner of a thing has no right to prohibit the interference of another with the same, if the interference is necessary to avert an imminent danger and the threatened damage, compared to the damage arising to the owner from the interference, is much greater. The owner may demand from the person benefited, indemnity for the damage to him. [NCC 432] (4) Nuisance

SUMMARY OF ACTIONS Action Forcible Entry / Unlawful Detainer Accion Publiciana

Venue

Summon

Prayer

Real Action

In personam

Possession

Prior physical 1 year possession

Real Action Real Action

In personam In personam

Possession

Real right of 10 years Possession [NCC 555(4)] Ownership GF: 10 years BF: 30 years [NCC 1137]

Possession

Accion Reividicatoria

Reconveyance Quieting of Title Replevin

Real Action Real Action Personal Action

In personam Quasi-in rem In personam

Title

Basis

Ownership

Quieting of Ownership Title Possession Ownership

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Exceptiion: Torrens Title; Exception to exception: laches 10 years (NCC 1456) Imprescriptible GF: 4 years BF: 8 years

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IV. Accession

(1) (2) (3) (4)

Accession – the right by virtue of which the owner of a thing becomes the owner of everything that is produced thereby, or which is incorporated or attached thereto, either naturally or artificially. [NCC 440]

CIVIL LAW

Possession in good faith Usufruct Lease Antichresis

In cases where there is a clear and convincing evidence to prove that the principal and the accessory are not owned by one and the same person or entity, the presumption shall not be applied and the actual ownership shall be upheld. In a number of cases, we recognized the separate ownership of the land from the building and brushed aside the rule that accessory follows the principal. [Villasi v. Garcia (2014)]

Accessories – things joined to or included with the principal thing for the latter’s embellishment, better use, or completion.

A. CLASSIFICATION OF ACCESSION (1) Accession Discreta (fruits) – the right pertaining to the owner of a thing over everything produced thereby (by internal forces). (2) Accession Continua – the right pertaining to the owner of a thing over everything that is incorporated or attached thereto either naturally or artificially; by external forces (by external forces). (a) Over Immovables (i) Industrial (ii) Natural (1) Alluvion (2) Avulsion (3) Change of Course of River (4) Formation of Islands (b) Over Movables (i) Conjunction and Adjunction (ii) Commixtion and Confusion (iii) Specification

FRUITS All periodical additions to a principal thing produced by forces inherent to the thing itself. KINDS OF FRUITS (1) Natural – spontaneous products of soil and the young and other products of animals [NCC 442 (1)]. Under the rule partus sequitur ventrem, to the owner of female animals would also belong the young of such animals although this right is lost when the owner mixes his cattle with those of another. (2) Industrial – produced by lands of any kind through cultivation or labor [NCC 442 (2)]. Standing trees are not fruits since they are considered immovables although they produce fruits themselves. However, they may be considered as industrial fruits when they are cultivated or exploited to carry on an industry.

A.1. WITH RESPECT TO IMMOVABLES ACCESSION DISCRETA Right of ownership to the fruits. [NCC 441] General Rule: To the owner of the principal belongs the natural, industrial and civil fruit.

(3) Civil – easily prorated for under NCC 544 they are deemed to accrue daily and belong to the possessor in good faith in that proportion.

Exceptions:

Notes:

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(a) Natural and Industrial Fruits are real property while still ungathered. (b) Only those that are manifest or born are considered as natural or industrial fruits.

PRINCIPLES APPLICABLE ACCESSION DISCRETA

Presumptions (a) All works, sowing and planting are presumed made by the owner. (b) All works are presumed made at the owner’s expense, unless the contrary is proved. (c) The owner of the principal thing owns the natural, industrial and civil fruits, except when the following persons exist: (i) Possessor in Good Faith (ii) Usufructuary (iii) Lessee (iv) Antichretic creditor

TO

(1) Time of Accrual depending on kind:  Annuals: from the time seedlings appear on the ground.  Perennials: from the time fruits actually appear on the plants.  Young of animals: from the time they are in the womb, although unborn – beginning of maximum ordinary period of gestation.  Fowls: from the time of incubation.

Meaning of bad faith (1) On the part of the landowner Whenever the building, planting or sowing was done with the knowledge and without opposition on his part. (2) On the part of owner of materials Allows the use of his materials without protest.

(2) A receiver of fruits has the obligation to pay the expenses incurred by a third person in the production, gathering and preservation. [NCC 443]  Exception: Receiver does not have to pay if fruits are recovered before gathering from a possessor in bad faith, receiver does NOT have to pay indemnity.  But if recovered after fruits have been gathered, receiver must pay since the fruits have been separated from immovable, hence accession principles will not apply.

PRINCIPLES APPLICABLE ACCESSION CONTINUA

CIVIL LAW

(3) On the part of the builder, planter and sower Knows that he does not have title to the land, nor the right to build thereon OR no permission of the owner of the materials to pay their value. Note  Bad faith leads to liability for damages and the loss of the works or the improvement without reimbursement.  Bad faith of one party neutralizes the bad faith of the other.

TO

(4) Accession Continua Natural Land deposits, etc.

(1) Accession Continua Artificial or Industrial Building, planting or sowing on land owned by another (over immovables).

(a) Alluvium Soil is gradually deposited on banks adjoining the river. There can be no acquisition of soil deposited on the shores of the sea [De Buyser v. Director of Lands (1983)]

General Rule: Whatever is built, planted or sown on the land of another + improvements or repairs made thereon, belong to the owner of the land subject to the rules on BPS.

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Requisites (1) Deposit of soil or sediment is gradual and imperceptible; (2) As a result of the action of the currents of the waters of the river and should have no human intervention; (3) Land where the accretion takes place is adjacent to the banks of the rivers; and (4) Deemed to Exist: When the deposit of the sediment has reached a level higher than the highest level of the water during the year.

CIVIL LAW

(c) Change Of Course Of River Requisites: (1) Change in the natural course of the waters of the river; and (2) Such change causes the abandonment of the river beds. “Natural Bed”: ground covered by its waters during the highest floods. [Binalay v Manalo (1991)] (3) Such change is sudden or abrupt Results (1) Owners whose lands are occupied by the new course automatically become owners of the old bed, in proportion to the area they lost (2) Owners of the lands adjoining the old bed are given the right to acquire the same by paying the value of the land. *Not exceeding the value of the land invaded by the new bed (the old property of the owner) (3) The new bed opened by the river on a private estate shall become of public dominion.

Effect The riparian owner automatically owns the Alluvion BUT it does not automatically become registered property in his name. [Grande v CA (1962)] Rationale  To offset the owner’s loss from possible erosion due to the current of the river;  To compensate for the subjection of the land to encumbrances and legal easements.

(d) Formation of Islands They belong to the State if: (1) Formed on the seas within the jurisdiction of the Philippines. (2) Formed on lakes, or (3) Formed on navigable or floatable rivers: (a) Capable of affording a channel or passage for ships and vessels; (b) Must be sufficient not only to float bancas and light boats, but also bigger watercraft; (c) Deep enough to allow unobstructed movements of ships and vessels. TEST: can be used as a highway of commerce, trade and travel.

(b) Avulsion A portion of land is segregated from one estate by the forceful current of a river, creek or torrent and transferred to another. Requisites (1) Segregation and transfer of land is sudden and abrupt; (2) Caused by the current of the water; and (3) The portion of land transported must be known and identifiable. OR (4) Can also apply to sudden transfer by other forces of nature such as land transferred from a mountain slope because of an earthquake.

They belong to the owners of the nearest margins or banks if: (1) Formed through successive accumulation of alluvial deposits (2) On non-navigable and non-floatable rivers (3) If island is in the middle: divided longitudinally in half.

Effect The ownership of the detached property is retained by the owner subject to removal within 2 years from the detachment.

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CIVIL LAW

Landowner [LO] in Good Faith

Landowner [LO] in Bad Faith

Rights of Landowner [NCC 448] Options: (1) Buy (only after payment of indemnity for Builder, necessary, useful and ornamental expenses [NCC Planter, Sower 546 and 548]); [BPS] (2) Sell to BP (unless the value of the land is in Good Faith considerably more than that of the building or trees); or Remedy: Rent to BP if LO does not want to buy (3) Rent to S.

Absolute Duties of Landowner [NCC 447]: (1) Pay damages; and (2) Allow removal; or (3) Buy or pay for value of improvement.

Rights of Landowner [NCC 449-452] Same as though both Options: landowner and BPS are in (1) Appropriate the improvements without paying good faith Builder, indemnity; Planter, Sower (2) Demolish/Removal of the work of BPS at the [BPS] expense of BPS; in Bad Faith (3) Sell to BP; or (4) Rent to the S Absolute right to Damages from BPS.

Landowner [LO] in Good Faith

Landowner [LO] in Bad Faith

Right of Landowner [NCC 447] Absolute Duties of Landowner [NCC 447]: Owner of To buy the improvements unless OM can (1) Pay damages; and Material [OM] remove without damage. (2) Allow removal in any event; or in Good Faith (3) Pay for value. Absolute Rights of Landowner [NCC 447] Same as though both landowner and Owner of (1) To appropriate the materials without material man are in good faith Material [OM] payment. in Bad Faith (2) Right to damages from OM.

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Landowner Good faith Options: (1) Right to acquire improvements and pay indemnity to BPS; subsidiarily liable to OM; (2) Sell the land to BP except if the value of the land is considerably more; or (3) Rent to sower. Good faith Options: (1) Right to acquire improvements and pay indemnity to BPS; (2) Sell land to BP except if the value of the land is considerably more; or (3) Rent to sower. Good faith (1) Landowner has right to collect damages from BPS in any case and the option to either (a) Acquire improvements w/o paying for indemnity; (b) Demolition or restoration; or (c) Sell to BP, or to rent to sower (2) Pay necessary expenses to BPS. Bad faith Same as when all acted in good faith under Article 453 Bad faith (1) Acquire improvement after paying indemnity and damages to BPS unless the latter decides to remove. (2) Subsidiarily liable to OM for value of materials.

PROPERTY

BPS

CIVIL LAW

Owner of Material [OM]

Good faith Good faith (1) Right of retention until (1) Collect value of material necessary and useful primarily from BPS and expenses are paid; subsidiarily to landowner if (2) To pay value of materials BPS is insolvent; and to OM. (2) Limited right of removal (if the removal will not cause any injury) Good faith Bad faith (1) Right of retention until (1) Lose the material without necessary and useful right to indemnity. expenses are paid. (2) Must pay for damages to (2) Keep BPS without BPS. indemnity to OM and collect damages from him. Bad faith Bad faith Recover necessary expenses (1) Recover value from BPS for preservation of land from (as if both are in good landowner unless landowner faith) sells land. (2) If BPS acquires improvement, remove materials if feasible w/o injury (3) No action against landowner but may be liable to landowner for consequential damages Bad faith Bad faith Same as when all acted in Same as when all acted in good faith under Article 453 good faith under Article 453 Good faith Good faith (1) May remove (1) Remove materials if improvements. possible w/o injury (2) Be indemnified for (2) Collect value of materials damages in any event from BPS; subsidiarily from (3) Pay OM the value of the landowner materials

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Landowner Good faith Options: (3) Right to acquire improvements and pay indemnity to BPS; subsidiarily liable to OM; (4) Sell the land to BP except if the value of the land is considerably more; or Rent to sower. Good faith (1) Landowner has right to collect damages from BPS in any case and the option to either (a) Acquire improvements w/o paying for indemnity; (b) Demolition or restoration; or (c) Sell to BP, or to rent to sower (2) Pay necessary expenses to BPS. Bad faith Acquire improvements and pay indemnity and damages to BPS unless the latter decides to remove materials.

PROPERTY

BPS

CIVIL LAW

Owner of Material [OM]

Bad faith Good faith (1) Right of retention until (1) Collect value of materials necessary expenses are primarily from BPS and paid. subsidiarily from (2) Pay value of materials to landowner. OM and pay him (2) Collect damages from damages. BPS. (3) Absolute right to remove materials in any event. Bad faith Good faith (1) Right to necessary (1) Collect value of materials expenses. primarily from BPS and (2) Pay value of materials to subsidiarily from OM. landowner (3) Pay damages to OM/LO. (2) Collect damages from BPS (3) If BPS acquires improvements, absolute right of removal in any event.

Good faith Bad faith (1) Receive indemnity for (1) No right to indemnity. damages. (2) Loses right to material. (2) Absolute right of removal of improvements in any event.

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A.2. WITH PROPERTY TYPES

PROPERTY

RESPECT

TO

MOVABLE

Ownership of new object formed by adjunction (1) If union was made in good faith The owner of principal thing acquires the accessory, with obligation to indemnify the owner of the accessory for its value in its uncontroverted state.

(1) Conjunction or Adjunction Process where 2 movables belonging to different owners are attached to each other to form a single object. (2) Mixture The union of material where components lose their identity.

CIVIL LAW

(2) If union was in bad faith, NCC 470 applies:  Owner of accessory in bad faith loses the thing incorporated and has the obligation to indemnify the owner of the principal thing for damages.  If owner of principal is in bad faith, owner of the accessory has a right to choose between the owner of principal paying him its value or that the thing belonging to him be separated, even though for this purpose it be necessary to destroy the principal thing; and in both cases, there shall be indemnity for damages

the

(3) Specification Transforming or giving of a new form to another’s material through labor.

CONJUNCTION / ADJUNCTION Requisites (1) There are 2 movables belonging to 2 different owners; (2) They are united in such a way that they form a single object; and (3) They are so inseparable that their separation would impair their nature or result in substantial injury to either component.

Test to determine the principal thing In the order of application, the principal is that: (1) To which the other has been united as an ornament or for its use or perfection (“Rule of importance and purpose”). (2) Of greater value. (3) Of greater volume. (4) That of greater merits, taking into consideration all the pertinent legal provisions, as well as the comparative merits, utility and volume of their respective things. [Manresa]

Kinds (1) Inclusion or engraftment – e.g. a diamond is set on a gold ring (2) Soldadura or soldering – e.g. when lead is united or fused to an object made of lead (a) Ferruminacion if both the accessory and principal objects are of the same metal; and (b) Plumbatura, if they are of different metals (3) Escritura or writing – e.g. when a person writes on paper belonging to another; (4) Pintura or painting – e.g. when a person paints on canvas belonging to another; (5) Tejido or weaving – e.g. when threads belonging to different owners are used in making textile

When separation allowed (1) When separation will not cause any injury; or (2) When the accessory is much more precious: (a) Owner of accessory may demand separation even though the principal thing may suffer.

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SPECIFICATION

(b) Owner who caused the union shall bear the expenses for separation even if he acted in good faith. (3) When the owner of the principal is in bad faith.

Definition Takes place when the work of a person is done on the material of another, such material, in consequence of the work itself, undergoes a transformation.

MIXTURE Kinds (1) Commixtion: mixture of solid things (2) Confusion: mixture of liquid things

Rules (1) Person in good faith General rule Worker becomes the owner but must indemnify the owner (who was also in good faith) for the value of the material. Exception If the material is more valuable than the new thing, the owner of the material may choose: (a) To take the new thing but must pay for the work or labor; or (b) To demand indemnity for the material.

Rules (1) Mixture by will of the owners: (a) Primarily governed by their stipulations. (b) In the absence of stipulation, each owner acquires a right or interest in the mixture in proportion to the value of his material. (2) Mixture caused by an owner in good faith or by chance (a) Share of each owner shall be proportional to the value of the part that belonged to him. (b) If things mixed are exactly the same kind, quality and quantity, divide the mixture equally. (c) If things mixed are of different kind or quality, a co-ownership arises. (d) If they can be separated without injury, the owners may demand separation. (e) Expenses are borne by the owners pro rata. (f) NOTE: Good faith does not necessarily exclude negligence, which gives rise to damages. (3) Mixture caused by an owner in bad faith (a) Actor forfeits the thing belonging to him. (b) Actor also becomes liable for damages. (4) Mixture made with knowledge and without objection of the other owner Rights to be determined as though both acted in good faith.

If the owner was in bad faith, maker may appropriate the new thing without paying the owner OR require the owner to pay him the value of the thing or his work, with right to indemnity (2) Person in bad faith General rule (a) Owner may either appropriate the new thing to himself without paying the maker OR (b) Owner may demand value of material plus damages Exception The first option is not available in case the value of the work, for artistic or scrientific reasons, is considerably more than that of the material (3) Person made use of material with consent and without objection of owner Rights shall be determined as though both acted in good faith

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V. Quieting of Title

CIVIL LAW

E. THE ACTION TO QUIET TITLE DOES NOT APPLY:

OR INTEREST IN AND REMOVAL OR PREVENTION OF CLOUD OVER TITLE TO OR INTEREST IN REAL PROPERTY

(1) To questions involving interpretation of documents; (2) To mere written or oral assertions of claim, unless made in a legal proceeding or asserting that an instrument or entry in plaintiff’s favor is not what it purports to be; (3) To boundary disputes; (4) To deeds by strangers to the title unless purporting to convey the property of the plaintiff; (5) To instruments invalid on their face; or (6) Where the validity of the instrument involves a pure question of law.

A. IN GENERAL A remedy or form of proceeding originating in equity jurisprudence. Equity comes to the aid of the plaintiff who would suffer if the instrument (which appear to be valid but is in reality void, ineffective, voidable or unenforceable) was to be enforced.

B. PURPOSE (1) To declare: (a) The invalidity of a claim on a title; or (b) The invalidity of an interest in property. (2) To free the plaintiff and all those claiming under him from any hostile claim on the property.

F. REQUIREMENTS F.1. REQUISITES OF AN ACTION TO QUIET TITLE (1) There is a CLOUD on title to real property or any interest to real property; (2) The plaintiff must have legal or equitable title to, or interest in the real property; and (3) Plaintiff must return the benefits received from the defendant.

C. NATURE: QUASI IN REM  A suit against a particular person or persons in respect to the res and the judgment will apply only to the property in dispute.  The action to quiet title is characterized as proceeding quasi in rem. Technically, it is neither in rem nor in personam. In an action quasi in rem, an individual is named as a defendant. However, unlike suits in rem, a quasi in rem judgment is conclusive only between the parties. [Spouses Portic v. Cristobal]

“Cloud on title” means 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. A cloud exists if: (1) There is a claim emerging by reason of: (a) Any instrument e.g. a contract, or any deed of conveyance, mortgage, assignment, waiver, etc. covering the property concerned; (b) Any record, claim, encumbrance e.g. an attachment, lien, inscription, adverse claim, lis pendens, on a title; or

D. JUSTIFICATIONS TO BRING AN ACTION TO QUIET TITLE (1) To prevent future or further litigation on the ownership of the property. (2) To protect the true title and possession. (3) To protect the real interest of both parties. (4) To determine and make known the precise state of the title for the guidance of all.

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(c) Any proceeding e.g. an extrajudicial partition of property. (2) The claim should appear valid or effective and extraneous evidence is needed to prove their validity or invalidity; (a) Test: Would the owner of the property in an action for ejectment brought by the adverse party be required to offer evidence to defeat a recovery? (b) As a general rule, a cloud is not created by mere verbal or parole assertion of ownership or an interest in property. (3) Such instrument, etc. is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, or has been extinguished or terminated, or has been barred by extinctive prescription; and (4) Such instrument, etc. may be prejudicial to the true owner or possessor.

CIVIL LAW

G. QUIETING OF TITLE V. REMOVAL OF CLOUD Quieting of Title

Removal of Cloud

There isn’t always an adverse claim (eg. land registration cases)

There is always an adverse claim by virtue of an instrument, record, claim, encumbrance or proceeding.

H. PRESCRIPTION / PRESCRIPTION OF ACTION

NON-

PRESCRIPTION OF ACTION (1) When the plaintiff is in possession of the property, the action to quiet title does not prescribe. Rationale for Rule “The owner of real property who is in possession thereof may wait until his possession is invaded or his title is attacked before taking steps to vindicate his right. A person claiming title to real property, but not in possession thereof, must act affirmatively and within the time provided by the statute. Possession is a continuing right as is the right to defend such possession. So it has been determined that an owner of real property in possession has a continuing right to invoke a court of equity to remove a cloud that is a continuing menace to his title. Such a menace is compared to a continuing nuisance or trespass which is treated as successive nuisances or trespasses, not barred by statute until continued without interruption for a length of time sufficient to affect a change of title as a matter of law." [Pingol v. CA] (2) When the plaintiff is not in possession of the property, the action to quiet title may prescribe. (a) 10 yrs. – ordinary prescription (b) 30 yrs. – extraordinary prescription (in bad faith)

F.2. REQUISITES OF AN ACTION TO PREVENT A CLOUD: (1) Plaintiff has a title to a real property or interest therein; (2) Defendant is bent on creating a cloud on the title or interest therein. The danger must not be merely speculative or imaginary but imminent; and (3) Unless the defendant is restrained or stopped, the title or interest of the plaintiff will be prejudiced or adversely affected. The plaintiff must have legal or equitable title to, or interest in the real property [NCC 477] (1) Legal title: the party is the registered owner of the property. (2) Equitable title: the person has the beneficial ownership of the property. The plaintiff must return the benefits received from the defendant [NCC 479]

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VI. Co-ownership

(3) The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the contrary is proved.

The form of ownership when the ownership of an undivided thing or right belongs to different persons. [NCC 484]

Each co-owner has absolute control over his ideal share  Every co-owner has absolute ownership of his undivided interest in the co-owned property and is free to alienate, assign or mortgage his interest except as to purely personal rights. While a co-owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a coowner, he cannot alienate the shares of his other co-owners – nemo dat quod non habet. [Acabal v. Acabal]

A. REQUISITES (1) Plurality of owners; (2) Object must be an undivided thing or right; and (3) Each co-owner’s right must be limited only to his ideal or abstract share of the physical whole.

B. WHAT GOVERNS CO-OWNERSHIP (1) Contracts; (2) Special laws; and (3) The Civil Code

C. CHARACTERISTICS OWNERSHIP

OF

CIVIL LAW

Mutual respect among co-owners with regard to use, enjoyment, and preservation of the things as a whole (1) The property or thing held pro-indiviso is impressed with a fiduciary character: each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his co-owners. (2) Until a judicial division is made, the respective part of each holder cannot be determined. The effects of this would be: (a) Each co-owner exercises, together with the others, joint ownership over the pro indiviso property, in addition to his use and enjoyment of the same (b) Each co-owner may enjoy the whole property and use it. (3) Redemption exercised by a co-owner inures to the benefit of his other coowners [Mariano v CA (1993)]

CO-

(1) There are 2 or more co-owners. (2) There is a single object which is not materially or physically divided and over which and his ideal share of the whole. (3) There is no mutual representation by the co-owners. (4) It exists for the common enjoyment of the co-owners. (5) It has no distinct legal personality. (6) It is governed first of all by the contract of the parties; otherwise, by special legal provisions, and in default of such provisions, by the provisions of Title III on Co-Ownership. There are ideal shares defined but not physically identified [NCC 485] (1) The share of the co-owners, in the benefits as well as in the charges, shall be proportional to their respective interests. (2) Any stipulation in a contract to the contrary shall be void.

Only limitation A co-owner cannot use or enjoy the property in a manner that shall injure the interest of his other co-owners. [Pardell v. Bartolome]

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D. SOURCES OF CO-OWNERSHIP

the thing owned in common, insofar as his share is concerned. Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement.

D.1. LAW (1) Cohabitation: co-ownership common law spouses

CIVIL LAW

between

The Family Code, in the following provisions, made the rules on coownership apply:  Art. 147: between a man and a woman capacitated to marry each other  Art. 148: between a man and a woman not capacitated to marry each other  Art. 90: if matter is not provided in the FC Chapter on ACP, then rules on coownership will apply

A donor or testator may prohibit partition for a period which shall not exceed twenty years. Neither shall there be any partition when it is prohibited by law. No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the coownership. By the creation of a Universal Partnership of all present property NCC 1778. A partnership of all present property is that in which the partners contribute all the property which actually belongs to them to a common fund, with the intention of dividing the same among themselves, as well as all the profits which they may acquire therewith.

(2) Purchase creating implied trust If two or more persons agree to purchase property and by common consent, the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. [NCC 1452]

NCC 1779. In a universal partnership of all present property, the property which belonged to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as all the profits which they may acquire therewith. A stipulation for the common enjoyment of any other profits may also be made; but the property which the partners may acquire subsequently by inheritance, legacy, or donation cannot be included in such stipulation, except the fruits thereof

(3) Easement of Party Wall: co-ownership of part-owners of a party wall (NCC 658) (4) Condominium Law: co-ownership of the common areas by holders of units Sec. 6, RA 4726. The Condominium Act. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the incidents of a condominium grant are as follows: (c) Unless otherwise, provided, the common areas are held in common by the holders of units, in equal shares, one for each unit.

D.3. INTESTATE SUCCESSION

D.2. CONTRACT By Agreement of Two or More Persons

Co-ownership between the heirs before partition of the estate

Article 494, Civil Code. No co-owner shall be obliged to remain in the co-ownership. Each coowner may demand at any time the partition of

NCC 1078. Where there are two or more heirs, the whole estate of the decedent is, before its

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partition, owned in common by such heirs, subject to the payment of debts of the deceased.  For as long as the estate is left undivided the heirs will be considered co-owners of the inheritance.  If one of the heirs dies, his heirs will in turn be co-owners of the surviving original heirs.

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his own name with third persons are governed by the provisions relating to co-ownership.

E. RIGHTS OF CO-OWNERS E.1. RIGHT TO SHARE IN THE BENEFITS AS WELL AS THE CHARGES [NCC 485]  Proportional to their interests;  Stipulation to the contrary is void;  Portion belonging to the co-owners is presumed equal.

D.4. TESTAMENTARY DISPOSITION OR DONATION INTER VIVOS (1) When a donation is made to several persons jointly, it is understood to be in equal shares, and there shall be no right of accretion among them, unless the donor has otherwise provided. [NCC 753] (2) A donor or testator may prohibit partition for a period which shall not exceed 20 years.

E.2. RIGHT TO USE THE THING OWNED IN COMMON [NCC 486] Limitations That he use the thing in accordance with the purpose for which it is intended. That he uses it in such a way as to not injure the interest of the co-ownership or prevent the other co-owners from using it.

D.5. BY FORTUITOUS EVENT OR BY CHANCE

RIGHT TO BRING AN EJECTMENT [NCC 487]

(1) Co-ownership between owners of 2 things that are mixed by chance or by will of the owners:

ORDER

IN

RIGHT TO COMPEL OTHER CO-OWNERS TO CONTRIBUTE TO THE EXPENSES OF PRESERVATION AND TO THE TAXES [NCC 488]

[NCC 472] Each owner shall acquire a right proportional to the part belonging to him, bearing in mind the value of the things mixed or confused.

(1) Any one of the other co-owners may exempt himself by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. (2) No waiver if it is prejudicial to the coownership

(2) Hidden Treasure [NCC 438] When the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half shall be allowed to the finder.

D.6. BY OCCUPANCY

RIGHT TO REPAIR [NCC 489]

Harvesting and Fishing: Co-ownership by two or more persons who have seized a res nullius thing

(1) Repairs for preservation may be made at the will of one of the co-owners but he must first notify his co-owners. (2) Expenses to improve or embellish, decided upon by a majority.

D.7. BY ASSOCIATIONS AND SOCIETIES WITH SECRET ARTICLES Articles are kept secret among the members and any one of the members may contract in

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RIGHT TO OPPOSE ALTERATIONS [NCC 491]

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(2) If 2 or more co-owners wish to exercise this right, redemption will be made in proportion to their share in the thing

(1) Consent of all the others is needed to make alterations, even if the alteration benefits all. (2) If the withholding of the consent is clearly prejudicial to the common interest, the courts may afford relief (3) Reason for the rule: alteration is an act of ownership, not of mere administration.

Note: Rules on Co-Ownership does not apply to CPG or ACP. (1) These are governed by the Family Code. (2) Even void marriages and cohabitation of incapacitated persons are governed by FC 50, 147, and 148.

F. RULES

RIGHT TO FULL OWNERSHIP OF HIS PART AND OF THE FRUITS AND BENEFITS PERTAINING THERETO [NCC 493]

F.1. ON RENUNCIATION OF SHARE (DIFFERENT FROM RENUNCIATION OF CO-OWNERSHIP) (1) Other co-owners may choose not to contribute to the expenses by renouncing so much of his undivided interest as may be equivalent to his share of the necessary expenses and taxes. (2) Renunciation must be express; thus, failure to pay is not a renunciation of the right. (3) Requires the consent of other co-owners because it is a case of dacion en pago (cessation of rights) involving expenses and taxes already paid. (J.B.L. Reyes) (4) Cannot renounce his share if it will be prejudicial to another co-owner.

(1) Therefore he may alienate, assign or mortgage it, and even substitute another person in its enjoyment except when personal rights are involved. (2) The effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

RIGHT TO PARTITION [NCC 494] (1) Each may demand at any time the partition of the thing, insofar as his share is concerned. (2) An agreement to keep the thing undivided for a certain period NOT exceeding 10 years is valid. (3) Term may be extended by a new agreement. (4) Donor or testator may prohibit partition, period NOT to exceed 20 years. (5) No partition may be made if prohibited by law. (6) Right does not prescribe.

F.2. REPAIRS FOR PRESERVATION (1) First, notify other co-owners, as far as practicable. (2) Co-owner may advance expenses for preservation even without prior consent; he is entitled to reimbursement.

F.3. EMBELLISHMENTS IMPROVEMENTS

OR

(1) Notify co-owners of improvements and embellishments to be made.

RIGHT TO REDEMPTION [NCC 1619]

If no notification is made, the co-owner who advanced the expenses will only have the right to be reimbursed if he proves the

(1) May exercise this in case the shares of other co-owners are sold to a third person

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necessity of such repairs and reasonableness of the expenses.

the

Registration under the Torrens system is constructive notice of title but it not sufficient notice of the act of repudiation. [Adille v CA]

Exception: If proven that had there been a notification, they could have hired another who would charge less or that they know of a store that sells the needed material at a cheaper price The reimbursement will be limited to the amount that should have been spent had he notified the others, and the difference shall be borne by him alone. (2) Decisions followed.

by

the

majority

must

CIVIL LAW

G.4. PARTITION OR DIVISION Procedure for Partition  Governing rule: Rule 69 of the Rules of Court.  How: By agreement of parties or by judicial decree.  Form: Oral or Written (Statute of Frauds does not operate here because it is not a conveyance of property but a mere segregation or designation of which parts belong to whom)  The Rules of Court do not preclude agreements or settlements.

be

G. TERMINATION OR EXTINGUISHMENT

Action for Partition will determine: (1) Whether or not the plaintiff is indeed a coowner of the property (2) How the property will be divided between the plaintiff and defendant.

G.1. TOTAL DESTRUCTION OF THING OR LOSS OF THE PROPERTY CO-OWNED Is there still co-ownership if a building is destroyed? Yes, over the land and the debris.

G.2. MERGER OF ALL INTERESTS IN ONE PERSON

Effects (1) Confers exclusive ownership of the property adjudicated to a co-heir. (2) Co-heirs shall be reciprocally bound to warrant the title to and the quality of each property adjudicated. (3) Reciprocal obligation of warranty shall be proportionate to the respective hereditary shares of co-heirs. (4) An action to enforce warranty must be brought within 10 years from the date the right accrues. (5) The co-heirs shall not be liable for the subsequent insolvency of the debtor of the estate.

G.3. ACQUISITIVE PRESCRIPTION By whom (1) A third person. [NCC 1106] (2) A co-owner against the other co-owners. Requisites for acquisitive prescription against co-owners [Adille v CA (1988)]: (1) A co-owner repudiates the co-ownership; (2) The act of repudiation is clearly made known to other co-owners; (3) The evidence thereon is clear and conclusive; and (4) The co-owner has been in possession thru open, continuous, exclusive and notorious possession of the property for the period required by law.

Unless partition is effected, each heir cannot claim sole ownership over a definite portion of the land. Heirs become the undivided owner of the whole estate. Until said partition, he cannot alienate a specific part of the estate.

Note: there is a presumption that possession of a co-owner is NOT adverse

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Until then, they can only sell their successional rights. [Carvaria v. CA]

The holding of a thing or the enjoyment of a right. [NCC 523]

Rights against individual co-owners in case of partition [NCC 497] (1) The creditors are allowed to take part in the partition. Reason for the rule: They own part of the interest of the co-owners who made the assignment or alienation.

A. CONCEPT OF POSSESSION  To possess, in a grammatical sense, means to have, to physically and actually occupy a thing, with or without right. [Sanchez Roman]  It is the holding of a thing or a right, whether by material occupation or by the fact that the thing or the right is subjected to the action of our will. [Manresa]  Possession includes the idea of occupation. It cannot exist without it. (Exceptions: NCC 537)  It is an independent right apart from ownership. Ownership differs from possession in that an owner may validly convey the property itself while a possessor may not.

Intervention of creditors and assignees General Rule: Creditors may take part in the division. They need to establish the existence of the credit during co-ownership. Exception: If the partition was already executed Exception to the exception: If there was fraud, or a previous formal opposition to the partition.

Right of possession (jus possessionis) Independent right

Rules on notice to creditors and assignees: (1) The law does not expressly require previous notice to the creditors and assignees before a partition, but the right of creditors and assignees to take part in the division presupposes the duty to notify. (2) If notice is not given, the partition will not be binding on them. (3) Once notice has been given, it is the duty of creditors and assignees to intervene and make known their stand. (a) If they fail, they cannot question the division made, except in cases of fraud. (b) If they formulate a formal question, they can contest such partition

B. ESSENTIAL POSSESSION

Right to possess (jus possidendi) Incident to ownership

REQUISITES

OF

(1) Corpus possessionis: Holding (actual or constructive) of a thing or exercise of a right, if right is involved. (a) General Rule: Possession and cultivation of a portion of a tract under claim of ownership of all is a constructive possession of all, if the remainder is not in adverse possession of another. [Ramos v. Director of Lands (1918)] (b) Doctrine of constructive possession applies when the possession is under title calling for the whole. It does not apply where possession is without title.

Partition in case co-owners cannot agree on the partition of an indivisible thing (NCC 498)

(2) Animus possidendi: Intention to possess (a) There is no possession if the holder does not want to exercise the rights of a possessor.

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NAME AND POSSESSION IN THE NAME OF ANOTHER [NCC 524]

(b) Implied from the acts of the possessor. (c) May be contradicted and rebutted by evidence – to prove that the person who is in possession does not in fact exercise power or control and does not intend to do so.

(1) In one’s own name – the fact of possession and the right to such possession is found in the same person. (2) In the name of another – the one in actual possession is without any right of his own, but is merely an instrument of another in the exercise of the latter’s possession. Kinds of possession in the name of another (1) Necessary – arises by operation of law e.g. representatives who exercise possession in behalf of a conceived child, juridical persons, persons not sui juris and the conjugal partnership

C. DEGREES OF POSSESSION (1) Mere holding or possession without title and in violation of the right of the owner (a) possession of a thief or usurper of land (b) Here, both the possessor and the public know that the possession is wrongful. (2) Possession with juridical title but not that of ownership (a) e.g. possession of a tenant, depository agent, bailee trustee, lessee, antichretic creditor. (b) This possession is peaceably acquired. (c) This degree of possession will never ripen into full ownership as long as there is no repudiation of concept under which property is held.

(2) Voluntary – effected through the mutual consent of the parties (a) e.g. agents or administrators appointed by the owner or possessor. (b) Third person may also voluntary exercise possession in the name of another, but it does not become effective unless ratified by the person in whose name it is exercised.

(3) Possession with just title or title sufficient to transfer ownership, but not from the true owner (a) e.g. possession of a vendee from a vendor who pretends to be the owner. (b) This degree of possession ripens into full ownership by lapse of time.

D.2. POSSESSION IN THE CONCEPT OF AN OWNER, AND POSSESSION IN THE CONCEPT OF A HOLDER WITH THE OWNERSHIP BELONGING TO ANOTHER [NCC 525] (1) Possession in Concept of Holder (a) One who possesses as a mere holder, not in the concept of owner, acknowledges in another a superior right which he believes to be ownership, whether his belief be right or wrong. (b) e.g. tenant, usufructuary, borrower in commodatum.

(4) Possession with a just title from the true owner (a) This is possession that springs from ownership.

D. CASES OF POSSESSION

(2) Possession in Concept of Owner (a) May be exercised by the owner himself or one who claims to be so.

D.1. POSSESSION FOR ONESELF, OR POSSESSION EXERCISED IN ONE’S OWN

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(b) When a person claims to be the owner of a thing, whether he believes so or not, acting as an owner, and performing acts of ownership, and he is or may be considered as the owner by those who witness his exercise of proprietary rights, then he is in the possession of an owner. This is the kind of possession that ripens into ownership under Article 540, when such possession is public, peaceful and uninterrupted. [see Art. 1118].

CIVIL LAW

(c) The belief of a possessor that he is the owner of the thing must be based upon the title or mode of acquisition, such as a sale, a donation, inheritance or other means of transmitting ownership; for without this, there can be no real, well-grounded belief of one’s ownership. (d) Error in the application of the law, in the legal solutions that arise from such application, in the appreciation of legal consequence of certain acts, and in the interpretation of doubtful provisions or doctrines, may properly serve as basis for good faith. (e) A misconception of the law, no matter how honest cannot have the effect of making one a possessor in good faith when he does not hold a title valid in form or a deed sufficient in terms to transfer property.

Effects of Possession in Concept of an Owner (1) Converted into ownership by the lapse of time necessary for prescription. (2) Possessor can bring all actions necessary to protect his possession, availing himself of any action which an owner can bring, except accion reivindicatoria which is substituted by accion publiciana. (3) He can ask for the inscription of possession in the registry of property. (4) Upon recovering possession from one who has unlawfully deprived him of it, he can demand fruits and damages. (5) He can do on the thing possessed everything that the law authorizes an owner to do; he can exercise the right of pre-emption and is entitled to the indemnity in case of appropriation.

(2) Possessor in bad faith – one who knows his title is defective. (a) Only personal knowledge of the flaw in the title or mode of acquisition can make him a possessor in bad faith for bad faith is not transmissible from one person to another. (b) Mistake upon a doubtful or difficult question of law as a basis of good faith. (c) Mistake or ignorance of the law, by itself, cannot become the basis of good faith. What makes the error or ignorance a basis of good faith is the presence of an apparent “doubt” or “difficulty” in the law. In other words, the law is complex, ambiguous, or vague such that it is open to two or more interpretations. (d) When the ignorance of the law is gross and inexcusable, as when a person of average intelligence would know the law, such ignorance cannot

D.3. POSSESSION IN GOOD FAITH AND POSSESSION IN BAD FAITH [NCC 526] (1) Possessor in good faith – one who is unaware that there exists a flaw in the title or mode og acquisition which invalidates his acquisition. (a) Good faith – consists in the possessor’s belief that the person from whom he received a thing was the owner of the same and could convey his title. (b) It implies freedom from knowledge and circumstances which ought to put a person on inquiry.

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be the basis of good faith. Otherwise, the intendment of Article 3 which states that, “Ignorance of the law excuses no one from compliance therewith,” will be defeated.

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(2) By subjection to the action of one’s will (a) This mode refers more to the right of possession than to possession as a fact. The “action of our will” must be juridical, in the sense that it must be according to law. (b) It includes: (i) Tradicion symbolica – by delivering some object or symbol placing the thing under the control of the transferee. (ii) Tradicion longa manu – by the transferor pointing out to the transferee the things that are being transferred.

What Things May be Possessed [NCC 530] Only things and rights which are susceptible of being appropriated may be the object of possession. What May Not Be Possessed by Private Persons (1) Res Communes (2) Property of Public Dominion (3) Right under discontinuous and/or nonapparent easement

(3) By execution of proper acts under legal formalities (a) This mode refers to juridical acts or the acquisition of possession by sufficient title evidenced by the performance of required formalities. (b) Examples: (i) Donations; (ii) Succession; (iii) Contracts (like a sale with right to repurchase); (iv) Judicial possession; (v) Execution of judgments; (vi) Execution and registration of public instruments; (vii) Inscription of possessory information titles. (c) The execution of the required formalities is equivalent to delivery of the property.

E. ACQUISITION OF POSSESSION E.1. WAYS OF ACQUIRING POSSESSION [NCC 531] (1) By material occupation (a) “Material occupation” – used in its ordinary meaning and not in its technical meaning under NCC 712, which defines occupation as a mode of acquiring ownership. (b) Possession acquired by material occupation is only possession as a fact, not the legal right of possession. (c) Constructive delivery is considered as an equivalent of material occupation in two situations where such occupation is essential to the acquisition of possession: (i) Tradicion brevi manu – takes place when one who possess a thing by title other than ownership, continues to possess the same under a new title, that of ownership. (ii) Tradicion constitutum possessorium – takes place when the owner alienates the thing, but continues to possess the same under a different title.

E.2. BY WHOM MAY POSSESSION BE ACQUIRED [NCC 532] (1) (2) (3) (4)

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without prejudice to proper case of negotiorum gestio [Arts. 2144, 2149, 2150] (5) Qualifiedly, minors and incapacitated persons

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concerned to substitute him, if the owner is in a position to do so. (b) This juridical relation does not arise in either of these instances: (i) When the property or business is not neglected or abandoned; (ii) If in fact the manager has been tacitly authorized by the owner.

(1) By the same person Elements of personal acquisition (a) Must have the capacity to acquire possession; (b) Must have the intent to possess; and (c) The possibility to acquire possession must be present.

(4) Qualifiedly, minors and incapacitated persons [NCC 535] (a) Incapacitated – all those who do not have the capacity to act (insane, lunatic, deaf-mutes who cannot read and write, spendthrifts and those under civil interdiction). (b) Object of possession – things only, not rights. (c) Method of acquisition – material occupation; acquisition by means for which the incapacitated person has the capacity, such as acquisition by succession, testate or intestate, or by donations propter nuptias, pure and simple donations.

(2) By his legal representative Requisites of acquisition through another (a) That the representative or agent has the intention to acquire the thing or exercise the right for another, and not for himself; and (b) That the person for whom the thing has been acquired or the right exercised, has the intention of possessing such thing or exercising such right, Note (a) Bad faith is personal and intransmissible. Only the person who acted in bad faith must suffer its effects; his heir should not be saddled with the consequences. (b) Good faith can only benefit the person who has it; and the good faith of the heir cannot erase the effects of bad faith of his predecessor.

F. WHAT DO NOT POSSESSION [NCC 537]

AFFECT

F.1. ACTS MERELY TOLERATED (1) Those which because of neighborliness or familiarity, the owner of property allows another person to do on the property; (2) Those services or benefits which one’s property can give to another without material injury or prejudice to the owner, who permits them out of friendship or courtesy; (3) Acts of little disturbances, which a person, in the interest of neighborliness or friendly relations permits others to do on his property, although continued for a long time, no right will be acquired by prescription.

(3) By any person without any power whatsoever but subject to ratification, without prejudice to proper case of negotiorum gestio [NCC 2144, 2149, 2150] (a) Whoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue until the termination of the affair and its incidents, or to require the person

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Note: Permissive use merely tolerated by the possessor cannot affect possession and cannot be the basis of acquisitive prescription. Possession to constitute the foundation of prescriptive right must be possession under claim of title; it must be adverse. [Cuaycong v. Benedicto]

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(2) If there are two or more possessors, the one longer in possession; (3) If the dates of possession are the same, the one who presents a title; or (4) If all conditions are equal, the thing shall be placed in judicial deposit pending determination of possession or ownership through proper proceedings.

F.2. ACTS EXECUTED CLANDESTINELY AND WITHOUT THE KNOWLEDGE OF THE POSSESSOR [NCC 1108]

G. EFFECTS OF POSSESSION G.1. RIGHTS OF A POSSESSOR IN GOOD FAITH (1) Right to be protected and respencted in possession; (NCC 539) (2) Right to bring action to restore possession; (3) Right to the fruits already received; (NCC. 544) (4) Right to a share in pending fruits and the production, gathering, and preservation of such; (NCC. 545) (5) Right to necessary expenses; (NCC. 546) (6) Right to retain the thing until reimbursed; (NCC. 546) (7) Right to remove useful improvements removable without damage to the principal thing or to refund its value; (upon election by the owner) (NCC. 547) (8) Right to recover removable ornaments. (NCC. 548)

Possession has to be in the concept of an owner, public, peaceful and uninterrupted.

F.3. ACTS OF VIOLENCE AS LONG AS THE POSSESSOR OBJECTS THERETO (I.E. FILES A CASE) [NCC 536] (1) Possession cannot be acquired through force or intimidation. Includes forcibly taking away the property from another and also when one occupied the property in the property in the absence of another, and repels the latter upon his return. (2) Effect on Possession Acts mentioned do not constitute true possession. They do not interrupt the period of prescription nor affect the rights to the fruits.

G.2. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH (1) Pay in proportion to the charges, expenses of cultivation and the net proceeds upon cessation of good faith; (NCC 545) (2) Costs of litigation; (NCC 550) (3) Liability to the deterioration/loss of a thing possessed if acted through fraudulent intent/negligence. (NCC 552)

RULES TO SOLVE CONFLICTS OF POSSESSION [NCC 538] General Rule: Possession cannot be recognized in two different personalities, except in cases of co-possession by co-possessors without conflict of claims of interest. In case of conflicting possession – preference is given to: (1) Present possessor or actual possessor;

G.3. RIGHTS OF A POSSESSOR IN BAD FAITH (1) Right to be respected in possession;

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(NCC 539) (2) Right to necessary expenses and the production, gathering, and preservation of fruits; (NCC. 545 and 546) (3) Does not have right to reimbursement of expenses for luxury but may remove them as long as the principal thing suffers no injury, or may sell them to the owner.

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after such unlawful deprivation (Rule 70) (b) May ask for writ of preliminary mandatory injunction within 10 days from filing of complaint in forcible entry (NCC 539). (c) The same writ is available in unlawful detainer actions upon appeal. (NCC 1674) (2) Accion Publiciana (a) This action is based on the superior right of possession; no issue of ownership is settled. (b) Action for the recovery of possession of real property upon mere allegation and proof of a better title. (c) This must be instituted within 10/30 years (or else acquisitive prescription will deny recovery).

G.4. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH (1) Reimburse the value of the fruits received and which the legitimate possessor could receive; (NCC 549) (2) Pay in proportion to the charges, expenses of cultivation and the net proceeds upon cessation of good faith; (NCC 545) (3) Costs of litigation; (NCC 550) (4) Liability to the deterioration/loss of a thing possessed in every case, including fortuitous events. (NCC 552)

(3) Accion Reivindicatoria (a) This action is for the recovery of possession based on a claim of ownership. (b) It is an action setting up title and the right to possession. (c) This action is not barred by a judgment in an action for forcible entry and unlawful detainer.

G.5. RIGHT TO BE PROTECTED IN HIS POSSESSION [NCC 539] (1) Every possessor has a right to be respected in his possession; if disturbed, possessor has a right to be protected in or restored to said possession. (2) Every possessor includes all kinds of possession, from that of an owner to that of a mere holder, except that which constitutes a crime. (3) Reason for the rule: To prevent anyone from taking the administration of justice into his own hands. Even the owner cannot forcibly eject the possessor, but must resort to the courts.

(4) Action for Replevin This is a prayer to recover possession of movable property

RULES (1) Lawful possessor can employ self-help (NCC 429) (2) To consolidate title by prescription, the possession must be under claim of ownership, and it must be peaceful, public and uninterrupted. (3) It is only the conviction of ownership externally manifested, which generates ownership.

ACTIONS TO RECOVER POSSESSION (1) Forcible Entry and Unlawful Detainer (Summary proceedings) (a) Action by a person deprived of the possession of any land or building by force, intimidation, strategy, threat, or stealth (FISTS) at any time within 1 year

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(4) Acts of possessory character done by virtue of a license or mere tolerance by the real owner are not sufficient and will not confer title by prescription or adverse possession. (5) The following cannot acquire title by prescription: (a) Lessees, trustees, pledges, tenants on shares or planters and all those who hold in the name or representation of another; (b) Mere holders placed in possession of the property by the owner, such as agents, employees; (c) Those holding in a fiduciary character, like receivers, attorneys, depositaries and antichretic creditors; (d) Co-owner, with regard to common property; Except: When he holds the same adversely against all of them with notice to them of the exclusive claim of ownership. (i) Possession of real property presumes possession of the movables therein (NCC 542); (ii) Each co-owner is deemed to have exclusive possession of the part which may be allotted to him upon the division, for the entire period during which the co-possession lasted. (6) Interruption in the possession of the whole or a part of a thing possessed in common shall be to the prejudice of all the possessors. (NCC 543)

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(3) Civil fruits are deemed to accrue daily and belong to the possessor in good faith in that proportion. Provision is based on the following reasons of equity:  The fruits received are generally used for the consumption and livelihood of the possessor, and his life and expenses may have been regulated in view of such fruits.  The owner has been negligent in not discovering or contesting the possession of the possessor; it would be unjust after the possessor has been thus allowed to rely on the efficacy of the title, to require him to return the fruits he has received on the basis of that title.  Between the owner, who has abandoned his property and left it unproductive, and the possessor, who has contributed to the social wealth, by the fruits he has produced, the law leans toward the latter.

RIGHT OF THE POSSESSOR IN GOOD FAITH Only limited to the fruits of the thing. He must restore the fruits received from the time such good faith ceased. He has no rights to the objects which do not constitute fruits. Legal interruption of possession in good faith Takes place when an action is filed against him—from the time he learns of the complaint, from the time he is summoned to the trial.

G.6. ENTITLEMENT TO FRUITS – POSSESSOR IN GOOD/BAD FAITH [NCC 544, 549]

Effect of cessation of good faith (NCC 545) (a) If at the time the good faith ceases, there should be any natural or industrial fruits, the possessor shall have a right to a part of the expenses of cultivation, and to a part of the net harvest, both in proportion to the time of the possession.

(1) Possessor in good faith is entitled to the fruits received before the possession is legally interrupted. (2) Natural and industrial fruits are considered received from the time they are gathered or severed.

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(b) The charges divided on the same basis by the two possessors.  “Charges” – Those which are incurred, not on the thing itself but because of it (e.g. taxes, contributions in favor of the government) (c) The owner of the thing may give the possessor in good faith the right to finish the cultivation and gathering of the growing fruits, as an indemnity for his part of the expenses of cultivation and the net proceeds.  The possessor in good faith who refuses to accept this concession shall lose the right to be indemnified in any other manner.

surrounding an estate, an irrigation system, planting in an uncultivated land, a fishpond, an elevator in the building, electric lighting system (2) They are reimbursed only to the possessor in GF as a compensation or reward for him. A possessor in BF cannot recover such expenses. (3) If the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them, unless the person who recovers the possession refunds the expenses or pays the increase in value which the thing may have acquired by reason thereof.

When fruits are insufficient There should only be reimbursement of expenses; but each possessor should suffer a proportionate reduction due to the insufficiency of the harvest.

(1) They do not affect the existence or the substance of the thing itself, but only the comfort, convenience or enjoyment of the possessor. (2) They are not the subject of reimbursement, because the law does not compensate personal whims or caprices, e.g. Opening of a garden, placing fountains and statues in it, adorning the ceilings with paintings, and the walls with reliefs.

D.3. EXPENSES FOR LUXURY

D. REIMBURSEMENT FOR EXPENSES – POSSESSOR IN GOOD/BAD FAITH [NCC 546-552] D.1. NECESSARY EXPENSES (1) Imposed by the thing itself for its preservation and have no relation to the desire or purpose of the possessor. (2) They are the “cost of living” for the thing and must be reimbursed to the one who paid them, irrespective of GF or BF. (a) Only the possessor in GF may retain the thing until he has been reimbursed therefor. (3) The expenses are not considered improvements; they do not increase the value of the thing, but merely prevent them from becoming useless.

Useful Expenses

Expenses for Luxury

Those which Those which merely increased the income embellished the derived from the thing thing Result: Increase in the products, either absolutely, or because Result: Benefit or of greater facilities for advantage is only producing them for the convenience of definite Includes expenses possessors resulting in real benefit or advantage to the thing

D.2. USEFUL EXPENSES (1) Incurred to give greater utility or productivity to the thing, e.g. Wall

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Useful Expenses

Expenses for Luxury

Possessor in GF

The utility is for the Result: Benefit or possessor or advantage is only for particular persons the convenience of alone and is definite possessors therefore accidental. Notes (1) Costs of litigation over the property shall be borne by every possessor. [NCC 550] (2) Improvements caused by nature or time shall always inure to the benefit of the person who has succeeded in recovering possession [NCC 551]  Includes all the natural accessions referred to by articles 457-465, and all those that do not depend upon the will of the possessor. (e.g. widening of the streets, rising of fountains of fresh or mineral water, increase of foliage of trees) Possessor in GF

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Possessor in BF

Charges Must share with the legitimate possessor, in Same as with GF proportion to the time (545) of the possession (545) Necessary Expenses Right to reimbursement and retention in the meantime (546)

Reimbursement only (546)

Useful Expenses Right of retention until reimbursed; Owner’s option to reimburse him either for expenses or for increase in value which the thing may No right to have acquired (546) reimbursement and no right of Limited right of removal removal (547) – should not damage principal and owner does not exercise option of paying the expenses or increase in value (547)

Possessor in BF

Fruits Received Entitled to the fruits while possession is in GF Must reimburse and before legal the legitimate interruption (544) possessor (549) Pending Fruits Entitled to part of the expenses of cultivation, and to a part of the net harvest, in proportion to the time of the possession.

Ornamental Expenses Limited right of removal Limited right of (548) removal (549) Deterioration or Loss

Must reimburse the legitimate Indemnity may be, at the possessor (549) owner’s option, 1. In money, OR 2. By allowing full cultivation and gathering of the fruits (545)

No liability unless due to fraud or negligence Liable in after becoming in BF case (552) (552)

every

Costs of Litigation Bears cost (550)

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UNLAWFUL A MOVABLE

(4) Movable properties possessed through a crime can never be acquired through prescription.

E.1. POSSESSION OF MOVABLE ACQUIRED IN GOOD FAITH (IN CONCEPT OF OWNER) IS EQUIVALENT TO TITLE [NCC 559]

E.3. FINDER OF LOST MOVABLE [NCC 719-720]

E. LOSS DEPRIVATION PROPERTY

OR OF

(1) Possessor has actual title defeasible only by true owner.

which

(1) Whoever finds a movable, which is not a treasure, must return it to its previous possessor. (2) If the previous possessor is unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place. (3) The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. (4) If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction eight days after the publication. (5) Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses. (6) If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found.

is

Requisites of Title (a) Possession in GF; (b) The owner has voluntarily parted with the possession of the thing; and (c) The possession is in the concept of an owner. (2) Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession. When the owner can recover (a) Has lost the thing; or (b) Has been unlawfully deprived thereof. (3) If the current possessor has acquired it in good faith at a public sale, owner must reimburse the price paid in order to recover the property.

E.2. PERIOD TO RECOVER [NCC 1140, 1132, 1133]

E.4. DISTINGUISHED FROM VOIDABLE TITLE [NCC 1506]

(1) Actions to recover movable properties prescribe after 8 years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a lesser period. (2) Ownership of movable properties prescribes through uninterrupted possession for 4 years in good faith. (3) Ownership of personal property also prescribes through uninterrupted possession for 8 years, without need of any other condition.

(1) A seller of goods with a voidable title not avoided at the time of the sale: The buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title. (2) A movable lost or which the owner has been unlawfully deprived acquired by a possessor in good faith at a public sale: The owner can always recover the

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movable provided he reimburses the price paid.

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authorizes the owner to do until he is ousted by one who has a better right. (7) This is whether possession is in good faith or in bad faith [NCC. 528]

F. EFFECTS OF POSSESSION IN THE CONCEPT OF AN OWNER

PRESUMPTION IN FAVOR OF THE POSSESSOR—FOR ACQUISITIVE PRESCRIPTION

Possession may lapse and ripen into full ownership. General Rule: Presumption of just title and cannot be obliged to show or prove it. [NCC 541]  Basis: Possession is presumed ownership, unless the contrary is proved. This presumption is prima facie and it prevails until contrary is proved.  Just title: that which is legally sufficient to transfer the ownership or the real right to which it relates.  For the purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. [NCC 1129]

(1) Of good faith until contrary is proved (NCC 527) (a) Presumption is only juris tantum because possession is the outward sign of ownership. Unless such proof of bad faith is presented, the possessor will be held to be in good faith. (b) So long as the possessor is not actually aware of any defect invalidating his title, he is deemed a possessor in good faith. (2) Of continuity of initial good faith in which possession was commenced; possession in good faith does not lose this character except in case and from the moment possessor became aware or is not unaware of improper or wrongful possession (NCC 528) (a) Good faith ceases from the date of the summons to appear at the trial. [Cordero v Cabral (1983)] (b) Good faith ceases when there is: (i) Extraneous evidence; or (ii) A suit for recovery of the property by the true owner.

Exception For the purposes of prescription, just title must be proved; it is never presumed. [NCC 1131] (1) Possessor may bring all actions necessary to protect his possession except accion reivindicatoria. (2) May employ self-help under Art. 429. (3) Possessor may ask for inscription of such real right of possession in the registry of property. (4) Has right to the fruits and reimbursement of expenses (assuming he is possessor in good faith) (5) Upon recovery of possession which he was unlawfully deprived of, may demand fruits and damages. (6) Generally, he can do on the things possessed everything that the law

(3) Of enjoyment of possession in the same character in which possession was required until contrary is proved [NCC 529] (4) Of non-interruption of possession in favor of present possessor who proves

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possession at a previous time until the contrary is proved [NCC 554] (a) Possession is interrupted for the purposes of prescription, naturally or civilly. [NCC 1120] (b) Possession is naturally interrupted when through any cause it should cease for more than one year [NCC 1121] (c) Old possession is not revived if a new possession should be exercised by the same adverse claimant [NCC 1121] (d) If the natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription [NCC 1122] (e) Civil interruption is produced by judicial summons to the possessor. [NCC 1123] (f) Judicial summons shall be deemed not to have been issued and shall not give rise to interruption [NCC 1124]: (i) If it should be void for lack of legal solemnities; (ii) If the plaintiff should desist from the complaint or should allow the proceedings to lapse; (iii) If the possessor should be absolved from the complaint (g) In all these cases, the period of the interruption shall be counted for the prescription

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(i) Possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of the death of the decedent (c) Of just title in favor of possessor in concept of owner (NCC 541) (d) Exclusive Possession of Common Property (NCC. 543)

G. LOSS/TERMINATION POSSESSION [NCC 555]

OF

(1) By the abandonment of the thing; (2) By an assignment made to another either by onerous or gratuitous title; (3) By the destruction or total loss of the thing, or because it goes out of commerce; (4) By the possession of another, subject to the provisions of Art. 537, if the new possession has lasted longer than 1 year. But the real right of possession is not lost till after the lapse of 10 years.

G.1. ABANDONMENT  Includes the giving up of possession, and not necessarily of ownership by every possessor.  It is the opposite of occupation. It consists of the voluntary renunciation of all the rights which the person may have in a thing, with intent to lose such a thing. To be effective, it is necessary that it be made by a possessor in the concept of an owner.  It must be clearly appear that the spes recuperandi is gone and the animus revertendi is finally given up.

(5) Non-interruption of possession of property unjustly lost but legally recovered [NCC. 561] (6) Other presumptions with respect to specific properties of property rights (a) Of extension of possession of real property to all movables contained therein so long as in is not shown that they should be excluded (NCC 542) (b) Non-interruption of possession of hereditary property (NCC 553)

G.2. ASSIGNMENT, GRATUITOUS OR ONEROUS

EITHER

Complete transmission of ownership rights to another person, gratuitously or onerously.

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THAN ONE YEAR; REAL RIGHT OF POSSESSION NOT LOST AFTER 10 YEARS – SUBJECT TO NCC 537

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care of man; they are under the ownership of man, and do not become res nullius unless they are abandoned.

(1) Acts merely tolerated, and those executed clandestinely and without the knowledge of the possessor of a thing, or by violence, do not affect possession. (2) Possession that is lost here refers only to possession as a fact (de facto), not the legal right of possession (de jure). It is the possession that the new possessor acquires. (3) Real right of possession is lost only after 10 years. (4) After 1 year, the actions for forcible entry and unlawful detainer can no longer be brought. But accion publiciana may still be instituted to recover possession de jure.

VIII. Usufruct Usufruct gives a 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. [NCC 562]

A. OBJECTS OF USUFRUCT (1) Independent Rights A servitude which is dependent on the tenement to which it attaches cannot be the object of usufruct. (2) Things (a) Non-consumable things. (b) Consumable things, but only as to their value if appraised, or on an equal quantity and quality if they were not appraised.

H. RULES FOR LOSS OF MOVABLES (1) The possession of movables is not deemed lost so long as they remain under the control of the possessor, even though for the time being he may not know their whereabouts. (NCC 556) (2) Control – judicial control or right, or that the thing remains in one’s patrimony. (3) Wild animals are possessed only while they are under one's control. (NCC 560) (a) Domesticated or tamed animals – if they retain the habit of returning to the premises of the possessor.

(3) Unproductive things e.g. sterile or absolutely unproductive land, or things for mere pleasure, such as promenades, statues or paintings, even if they do not produce any utility.

B. CHARACTERISTICS (1) It is a real right; (2) Of temporary duration; (3) The purpose is to derive all advantages from the thing due to normal exploitation.

I. KINDS OF ANIMALS (1) Wild— those which live naturally independent of man. (2) Domesticated— those which, being wild by nature, have become accustomed to recognize the authority of man. When they observe this custom, they are placed in the same category as domestic and when they lose it, they are considered as wild. (3) Domestic or Tame— those which are born and reared ordinarily under the control and

B.1. NATURAL CHARACTERISTICS (1) Includes only the right to use (jus utendi) and the right to the fruits (jus fruendi). (2) Usufructuary must preserve the form or substance of the thing. (a) Preservation is a natural requisite, not essential because the title constituting it or the law may provide otherwise.

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(b) Reasons for preserving form and substance (i) To prevent extraordinary exploitation; (ii) To prevent abuse, which is frequent; (iii) To prevent impairment. (c) Exception: In an abnormal usufruct, alteration is allowed. (3) Usufruct is extinguished by the death of the usufructuary. (a) Natural because a contrary intention may prevail.

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(i) If the usufructuary is authorized to alienate the thing in case of necessity, it is the usufructuary who determines the question of necessity.

C.2. BY PERSON ENJOYING THE RIGHT OF USUFRUCT (1) Simple: only one usufructuary enjoys the property. (2) Multiple: several usufructuaries enjoy the property. (a) Simultaneous: at the same time. (b) Successive: one after the other.

C. CLASSIFICATION

Limitations On Successive Usufruct (1) If usufruct is by donation, ALL donees must be alive. [NCC 756] (2) Fiduciary or first heir and the second heir must be alive at the time of the death of the testator. [NCC 863] (3) If by testamentary succession, there must be only 2 successive usufructuaries, and both must be alive or at least already conceived at the time of the testator’s death. [NCC 869]

C.1. BY ORIGIN (1) Voluntary: created by the will of private persons (a) By act inter vivos – such as contracts and donations: (i) By alienation of the usufruct; (ii) By retention of the usufruct; (iii) Where a usufruct is constituted inter vivos and for valuable consideration, the contract is unenforceable unless in writing. (b) By act mortis causa – such as testament.

C.3. BY OBJECT OF USUFRUCT Usufruct may be constituted on the whole or a part of the fruits of the thing or on a right, provided it is not strictly personal or intransmissible. [NCC 564]

(2) Legal: as provided by law. Usufruct of parents over the property of unemancipated children. (now limited to the collective daily needs of the family) [(FC 26)]

RIGHTS (1) Must not be strictly personal or intransmissible. (2) Usufruct over a real right is by itself a real right. (a) Right to receive present or future support cannot be the object of the usufruct.

(3) Mixed: created both by law and the acts of persons. (a) The rights and duties of the usufructuary provided by law may be modified or eliminated by the parties. (b) The title constituting the usufruct may validly authorize the usufructuary to alienate the thing itself held in usufruct.

THINGS

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(1) Normal: involves non-consummable things where the form and substance are preserved. (2) Abnormal or irregular: when the usufruct includes things which cannot be used without being consumed. (a) The usufructuary has right to make use of them under the obligation of paying their appraised value at the termination of the usufruct, if they were appraised when delivered. (b) If they were not appraised, he has the right to return the same quantity and quality, or pay their current price at the time the usufruct ceases. [NCC 574] (c) In reality, the usufruct is not upon the consumable things themselves, but upon the sum representing their value or upon a quantity of things of the same kind and quality. (d) The usufructuary, in effect, becomes the owner of the things in usufruct, while the grantor becomes a mere creditor entitled to the return of the value or of the things of the same quantity and quality (as if converted into a simple loan).

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the donor, if the clause does not contain any declaration to the contrary, the former is understood to be liable to pay only the debts which appear to have been previously contracted. In no case shall the donee be responsible for the debts exceeding the value of the property donated, unless a contrary intention clearly appears. NCC 759: There being no stipulation regarding the payment of debts, the donee shall be responsible therefor only when the donation has been made in fraud of creditors. The donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation.

C.5. BY THE TERMS OF THE USUFRUCT (1) Pure: no terms or conditions. (2) Conditional: either suspensive or resolutory. (3) With a term or period (a) Ex die: from a certain day. (b) In diem: up to a certain day. (c) Ex die in diem: from a certain day up to a certain day.

D. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY

C.4. BY THE EXTENT OF THE USUFRUCT AS TO THE FRUITS

D.1. RIGHTS AS TO THE THING AND ITS FRUITS

(1) Total: all consumed by the usufruct. (2) Partial: only on certain aspects of the usufruct’s fruits.

RIGHT TO ENJOY THE PROPERTY

AS TO THE OBJECT

Right to enjoy the property to the same extent as the owner, but only with respect to its use and the receipt of its fruits. (1) Usufructuary cannot extract products which do not constitute fruits because he is bound to preserve the form and substance of the thing. (2) Usufructuary rights may be transferred, assigned or otherwise disposed of by the usufructuary.

(1) Singular: only on particular property of the owner. (2) Universal: pertains to the whole property; A universal usufructuary must pay the debts of the naked owner, if stipulated. Article 758 and 759 on donations apply. NCC 758: When the donation imposes upon the donee the obligation to pay the debts of

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(3) Not exempt from execution and can be sold at public auction.

possessor and usufructuary

HIDDEN TREASURE

Fruits already matured at the time of the termination of the usufruct, which ordinarily would have already been gathered by the usufructuary, may remain ungathered for no fault imputable to him, but because of malice or an act imputable to the naked owner or a 3rd person, or even due to force majeure or fortuitous event.

As to hidden treasure, usufructuary is considered a stranger without a right to a share, unless he is also the finder of the treasure (1) With respect to hidden treasure which may be found on the land or tenement, he shall be considered a stranger. (2) Hidden treasure belongs to the owner of the land, building, or other property on which it is found. (3) Nevertheless, when the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half thereof shall be allowed to the finder.

RIGHT TO CIVIL FRUITS (1) Civil fruits – deemed to accrue daily, and belong to the usufructuary in proportion to the time the usufruct may last. (2) Whenever a usufruct is constituted on the right to receive a rent or periodical pension, whether in money or in fruits, or in the interest on bonds or securities payable to bearer, each payment due shall be considered as the proceeds or fruits of such right. (3) Whenever it consists in the enjoyment of benefits accruing from a participation in any industrial or commercial enterprise, the date of the distribution of which is not fixed, such benefits shall have the same character. (a) In either case, they shall be distributed as civil fruits.

RIGHT TO FRUITS PENDING AT THE BEGINNING OF USUFRUCT Fruits pending at the beginning of the usufruct Belong to usufructuary

the

Fruits pending at the termination of the usufruct

the Belong to the naked owner

Without need to The owner shall reimburse the expenses reimburse to the to the owners usufructuary ordinary cultivation expenses from the proceeds of the fruits (not to exceed the value of the fruits)

*Note: If the usufruct is constituted only on the land and not the building built thereon then the right to the fruits by the usufructuary would not extend to the building. The building is considered as a separate and distinct prinicipal which produces its own fruits. [Gabuya v Cui (1971)]

Without prejudice to the Rights of innocent right of 3rd persons e.g. if 3rd parties should the fruits had been not be prejudiced. planted by a possessor in good faith, the pending crop expenses and charges shall be prorated between said

RIGHT TO ENJOY ANY INCREASE THROUGH ACCESSIONS AND SERVITUDES, INCLUDING PRODUCTS OF HUNTING AND FISHING. RIGHT TO LEASE THE THING

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General rule: The usufructuary may lease the thing to another but this shall terminate upon the expiration of the usufruct, saving leases of rural lands, which shall be considered as subsisting during the agricultural year.

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(a) As corollary to the right of the usufructuary to all the rent, to choose the tenant, and to fix the amount of the rent, she necessarily has the right to choose herself as the tenant thereof; and, as long as the obligations she had assumed towards the owner are fulfilled. [Fabie v. Gutierrez David (1945)] (6) A lease executed by the owner before the creation of the usufruct is not extinguished by such usufruct.

Exceptions (1) Legal usufructs cannot be leased. (2) Caucion juratoria (lease would show that the usufructuary does not need the property badly) Effect of the transfer of right: (1) The transfer or lease of the usufruct does NOT terminate the relation of the usufructuary with the owner. (2) Death of the transferee does not terminate the usufruct but it terminates upon the death of the usufructuary who made the transfer.

Limitations on the Right to Lease the Property (1) Usufructuary cannot alienate a thing in usufruct: (a) Cannot alienate or dispose of the objects included in the usufruct; (b) Cannot renounce a servitude; (c) Cannot mortgage or pledge a thing. (d) EXCEPT: (i) When the right of usufruct is converted into the right of ownership; (ii) When the things are consumable; (NCC 574); (iii) When the things by their nature are intended for sale, such as the merchandise in a commercial establishment; and (iv) When the things, whatever their nature, are delivered under appraisal as equivalent to their sale. (2) Future crops may be sold but such sale would be void if not ratified by the owner. (a) The buyer’s remedy is to recover from the usufructuary. (3) Only voluntary usufruct can be alienated. (4) The usufructuary-lessor is liable for the act of the substitute. (a) A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through

RULES AS TO LEASE (3) The property in usufruct may be leased even without the consent of the owner. (4) The lease should be for the same period as the usufruct. (a) EXCEPT: leases of rural lands continues for the remainder of the agricultural year. (b) A lease executed by the usufructuary before the termination of the usufruct and subsisting after the termination of the usufruct must be respected, but the rents for the remaining period will belong to the owner. (c) If the usufructuary has leased the lands or tenements given in usufruct, and 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 lessee. [NCC, 568] (5) It is the usufructuary and not the naked owner who has the right to choose the tenant.

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D.2. RIGHTS AS TO THE LEGAL RIGHT OF USUFRUCT ITSELF

the fault or negligence of the person who substitutes him. [NCC, 590]

RIGHT TO IMPROVE THE THING, BUT IMPROVEMENT INURES TO THE BENEFIT OF THE NAKED OWNER

RIGHT TO USUFRUCT

MORTGAGE

RIGHT

OF

(1) The usufructuary may alienate his right of usufruct, even by a gratuitous title; but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct. [NCC. 572] (2) Does not include parental usufruct because of personal and family considerations.

(1) Usufructuary is not entitled to reimbursement. (2) Whenever the usufructuary can remove the improvements without injury to the property in usufruct, he has the right to do so, and the owner cannot prevent him from doing so even upon payment of their value. (3) This right does not involve an obligation – if the usufructuary does not wish to exercise it, he cannot be compelled by the owner to remove the improvements. (4) This right to remove improvements can be enforced only against the owner, not against a purchaser in good faith to whom a clean title has been issued. (5) Usufructuary may set off the improvements against any damage to the property. (a) The improvements should have increased the value of the property, and that the damages are imputable to the usufructuary. (b) Increase in value and the amount of damages are set off against each other. (c) If the damages exceed the increase in value, the difference should be paid by the usufructuary as indemnity. (d) If the increase in value exceeds the damages, and the improvements are of such nature that they can be removed without injury to the thing in usufruct, the settlement of the difference must be agreed upon by the parties. (e) If the improvements cannot be removed without injury, the excess in value accrues to the owner. (6) Registration of improvements – to protect usufructuary against 3rd persons

RIGHT TO ALIENATE THE USUFRUCT EXCEPT IN PURELY PERSONAL USUFRUCTS OR WHEN TITLE CONSTITUTING IT PROHIBITS THE SAME Parental usufruct is inalienable.

D.3. OBLIGATIONS AT THE BEGINNING OF THE USUFRUCT OR BEFORE EXERCISING THE USUFRUCT (1) To make, after notice to the owner or his legitimate representative, an inventory of all the property, which shall contain an appraisal of the movables and a description of the condition of the immovables; and (2) To give security, binding himself to fulfill the obligations imposed upon him in accordance with this Chapter. Note: These requirements are NOT conditions precedent to the commencement of the right of the usufruct but merely to the entry upon the possession and enjoyment of the property.

TO MAKE AN INVENTORY (1) Requisites (a) Immovables must be described; and (b) Movables must be appraised because they are easily lost or deteriorated.

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(2) Concurrence of the owner in the making of the inventory. (3) Expenses for the making of the inventory are borne by the usufructuary. (4) The inventory may be in a private document, except when immovables are involved. (a public instrument is prescribed to affect 3rd persons) (5) Failure to make an inventory does not affect the rights of the usufructuary to enjoy the property and its fruits. (a) A prima facie presumption arises that the property was received by the usufructuary in good condition. (b) Even if he is already in possession, he may still be required to make an inventory. (6) Exception to the requirement of inventory (a) When no one will be injured, the usufructuary may be excused from this obligation.

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(iii) Approval of the court; and (iv) Sworn promise. (b) A usufructuary under this can neither alienate his right nor lease the property, for that would mean that he does not need the dwelling or the implements and furniture. (4) Effect of filing a bond (a) Retroactivity: upon giving the security, the usufructuary will be entitled to all the benefits accruing since the time when he should have begun to receive them. (5) Effect of failure to give bond: [NCC 586] (a) The owner may demand that the immovable properties be placed under administration; (i) That the movable properties be sold; (ii) That the public bonds, instruments of credit payable to order or to bearer be converted into registered certificates or deposited in a bank or public institution; and (iii) That the capital or sums in cash and the proceeds of the sale of the movable property be invested in safe securities. (b) The owner may, until the usufructuary gives security, retain in his possession the property in usufruct as administrator, subject to the obligation to deliver to the usufructuary the net proceeds, after deducting the sums, which may be agreed upon or judicially allowed him for such administration.

TO GIVE A BOND FOR THE FAITHFUL PERFORMANCE OF DUTIES AS USUFRUCTUARY (1) Any kind of sufficient security is allowed, e.g. cash, personal bond, mortgage. (2) No bond is required in the following: (a) No prejudice would result; [Art. 585] (b) Usufruct is reserved by a donor; [Art. 584] (i) Gratitude on the donee’s part demands that the donor be excused from filing the bond. (c) Title constituting usufruct excused usufructuary. (3) A usufructuary may take possession under a caucion juratoria (bond by oath) [Art. 587] (a) It is only by way of exception that a caucion juratoria is allowed, and only under the special circumstances: (i) Proper court petition; (ii) Necessity for delivery of furniture, implements or house included in the usufruct;

D.4. DURING THE USUFRUCT (1) To take care of the thing like a good father of a family; (2) To undertake ordinary repairs; (3) To notify owner of need to undertake extraordinary repairs;

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(4) To pay for annual charges and taxes on the fruits; (5) To notify owner of any act detrimental to ownership; (6) To shoulder the costs of litigation regarding the usufruct; and (7) To answer for fault or negligence of alienee, lessee or agent of usufructuary.

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(3) If the defects are caused by the ordinary use of the thing, the usufructuary may exempt himself from making the repairs by returning to the owner the fruits received during the time that the defects took place. Except: When the ordinary repairs are due to defects caused by the fault of the usufructuary

TO TAKE CARE OF THE THING LIKE A GOOD FATHER OF A FAMILY (1) When damages are caused to the property by the fault or negligence of the usufructuary, the naked owner need not wait for the termination of the usufruct before bringing the action to recover proper indemnity. (2) The bad use of a thing, which causes considerable injury, entitles the owner to demand the delivery and administration of the thing. (3) The exercise of this remedy does NOT extinguish the usufruct.

(4) If the usufructuary fails to make the repairs even after demand, the owner may make them at the expense of the usufructuary

TO NOTIFY OWNER OF NEED TO UNDERTAKE EXTRAORDINARY REPAIRS (1) Extraordinary repairs (a) Those caused by exceptional circumstances, whether or not they are necessary for the preservation of the thing; or (b) Those caused by the natural use of the thing, but are not necessary for its preservation.

TO UNDERTAKE ORDINARY REPAIRS The usufructuary is obliged to make the ordinary repairs needed by the thing given in usufruct. [NCC 592] (1) Ordinary repairs: (a) Such as are required by the wear and tear due to the natural use of the thing and are indispensable for its preservation; (b) Deteriorations or defects arise from the natural use of the thing; (c) Repairs are necessary for the preservation of the thing.

(2) General Rule: Naked owner must make the extraordinary repairs. The usufructuary is obliged to pay legal interest on the amount while usufruct lasts. (3) If the extraordinary repairs are indispensable, and the naked owner fails to undertake them, the usufructuary may make such repairs. (4) Requisites: (a) There must be due notification to the naked owner of the urgency – if it is not urgent, there is no obligation to give notice;

(2) The usufructuary is bound to pay only for the repairs made during the existence of the usufruct. (a) If the defects existed already at the time the usufruct began, the obligation to defray the ordinary repairs falls upon the owner.

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(i) The naked owner failed to make them; and (ii) The repair is needed for preservation. (b) The usufructuary that has made the extraordinary repairs necessary for preservation is entitled to recover from the owner the increase in value, which the tenement acquired by reason of such works. (c) Usufructuary may retain until he is paid.

To deliver the thing in usufruct to the owner in the condition in which he has received it, after undertaking ordinary repairs. Exception: Abnormal usufruct – A thing of the same kind, quantity and quality is returned; if with appraised value, must return value appraised.

E. SPECIAL CASES OF USUFRUCT E.1. USUFRUCT OVER A PENSION OR A PERIODICAL INCOME [NCC 570] (1) Each payment due shall be considered as the proceeds or fruits of such right. (2) The usufruct shall be distributed as civil fruits.

TO PAY FOR ANNUAL CHARGES AND TAXES ON THE FRUITS It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary. There is no merit in the contention of distinguishing public lands into alienable and indisposable. All properties owned by the government, without any distinction, are exempt from taxation. [Board of Assessment Appeals of Zamboanga del Sur v. Samar Mining Company, Inc.(1971)]

TO NOTIFY OWNER OF ANY DETRIMENTAL TO OWNERSHIP (NCC 601)

CIVIL LAW

E.2. USUFRUCT OF PROPERTY OWNED IN COMMON [NCC 582] (1) The usufructuary takes the place of the owner as to: (a) Management; (b) Fruits; and (c) Interest. (2) Effect of partition: (a) The right of the usufructuary is not affected by the division of the property in usufruct among the co-owners. (b) After partition, the usufruct is transferred to the part allotted to the co-owner.

ACT

TO SHOULDER THE COSTS OF LITIGATION REGARDING THE USUFRUCT (NCC 602)

E.4. USUFRUCT CONSTITUTED ON A FLOCK OR HERD OF LIVESTOCK [NCC 591]

TO ANSWER FOR FAULT OR NEGLIGENCE OF THE ALIENEE, LESSEE OR AGENT OF THE USUFRUCTUARY (NCC 590)

(1) On sterile stock: same rules on consumable property govern. (i.e. replacement upon termination) (2) On fruitful stock: (a) Must replace ordinary losses of the stock with the young if: (i) Some animals die from natural causes; or (ii) Some animals are lost due to rapacity of beasts of prey.

The usufructuary is made liable for the acts of the substitute. While the substitute answers to the usufructuary, the usufructuary answers to the naked owner.

D.5. AT THE TIME OF THE TERMINATION OF THE USUFRUCT

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(b) No obligation to replace if: (i) There is a total loss of animals because of some unexpected or unnatural loss (like contagious disease or any other uncommon event, provided the usufructuary has no fault); or If all perish, the usufructuary should deliver the remains to the owner. (ii) There is a partial loss. If a part of the stock perishes, the usufruct subsists on the remainder.

E.8. USUFRUCT OVER AN ENTIRE PATRIMONY [NCC 598] Applies when: (1) The usufruct is a universal one (2) And the naked owner – Has debts or is obliged to make periodical payments (whether or not there be known capital) General rule: The usufructuary is not liable for the owner’s debts. Exceptions: (1) When it is so stipulated; in which case the usufructuary shall be liable for the debt specified; (2) If there is no specification, he is liable only for debts incurred by the owner before the usufruct was constituted; or (3) When the usufruct is constituted in fraud of creditors.

E.5. USUFRUCT OVER FRUIT BEARING TREES AND SPROUT AND WOODLANDS [NCC 575-576] The usufructuary can: (1) Use dead trunks and those cut off or uprooted by accident; (2) Make usual cuttings that owner used to do; and (3) Cut the trees that are not useful.

In no case shall the usufructuary be responsible for debts exceeding the benefits under the usufruct. (except when the contrary intention appears)

E.6. USUFRUCT ON A RIGHT OF ACTION [NCC 578]

E.9. USUFRUCT OVER DETERIORABLE PROPERTY

(1) The action may be instituted in the usufructuary’s name. As the owner of the usufruct, he is properly deemed a proper party-in-interest. (2) If the purpose is the recovery of the property or right, he is still required under Art. 578 to obtain the naked owner’s authority. (3) If the purpose is to object to or prevent disturbances over the property, no special authority from the naked owner is needed.

E.7. USUFRUCT ON PROPERTY [NCC 600]

CIVIL LAW

(1) The usufructuary shall have the right to make use thereof in accordance with the purpose for which they are intended. (2) It is sufficient if the usufructuary returns the things in the condition in which they may have been found at the time of the expiration of the usufruct despite ordinary defects caused by use and deterioration produced by age and time. Except: when such defects were caused through the usufructuary’s fraud and negligence. (3) If the usufructuary does not return the things upon the expiration of the usufruct, he should pay an indemnity equivalent to the value of the things at the time of such expiration.

MORTGAGED

(1) When the usufruct is universal and some objects are mortgaged, apply Art. 598. (2) If the usufructuary mortgaged the usufruct himself, he is liable to pay his own debt.

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E.10. USUFRUCT OVER CONSUMABLE PROPERTY [NCC 574]

G.1. DEATH OF USUFRUCTUARY Exceptions (1) In multiple usufructs: it ends at the death of the last survivor (NCC 611) (a) If simultaneously constituted: all the usufructuaries must be alive (or at least conceived) at the time of constitution. (b) If successively constituted: (i) If by virtue of donation – all the donees-usufructuaries must be living at the time of the donation; (ii) If by will – there should only be 2 successive usufructuaries and both must have been alive at the time of testator’s death.

(1) The usufructuary shall have the right to make use of them under the obligation of paying their appraised value at the termination of the usufruct, if they were appraised when delivered. (2) If not appraised, he shall have the right to return at the same quantity and quality, or pay their current price at the time the usufruct ceases.

F. RIGHTS OF THE OWNER (1) At the beginning of the usufruct See obligations of usufructuary at the beginning of the usufruct) (2) During the usufruct (a) Retains title to the thing or property. (b) He may alienate the property: he may not alter the form or substance of the thing; nor do anything prejudicial to the usufructuary. (c) He may construct buildings, make improvements and plantings, provided: (i) The value of the usufruct is not impaired; and (ii) The rights of the usufructuary are not prejudiced.

G. EXTINGUISHMENT TERMINATION [NCC 603]

CIVIL LAW

(2) If the period is fixed by reference to the life of another or there is a resolutory condition. Death does not affect the usufruct and the right is transmitted to the heirs of the usufructuary until the expiration of the term or the fulfillment of the condition. (3) When a contrary intention clearly appears: (a) If the usufructuary dies before the happening of a resolutory condition, the usufruct is extinguished. (b) Usufruct is personal and it CANNOT be extended beyond the lifetime of the usufructuary. [Sanchez Roman and SC]

/

(1) By the death of the usufructuary, unless a contrary intention clearly appears; (2) By the expiration of the period for which it was constituted, or by the fulfillment of any resolutory condition provided in the title creating the usufruct; (3) By merger of the usufruct and ownership in the same person; (4) By renunciation of the usufructuary; (5) By the total loss of the thing in usufruct; (6) By the termination of the right of the person constituting the usufruct; or (7) By prescription.

G.2. EXPIRATION OF PERIOD OR FULFILLMENT OF RESOLUTORY CONDITION IMPOSED ON USUFRUCT BY PERSON CONSTITUTING USUFRUCT (1) In favor of juridical persons [NCC. 605] (a) Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. (b) If before the expiration of such period the town is abandoned, or the

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corporation or association is dissolved, the usufruct shall be extinguished. (2) Time that may elapse before a 3rd person attains a certain age. [NCC. 606] (a) Usufruct subsists for the number of years specified, even if the 3rd person should die before the period expired unless the usufruct has been expressly granted only in consideration of the existence of the person.

Situation

Illustration: H was the usufructuary of land owned by X. x dies, leaving in his will, the naked ownership of the land to H. the usufruct is extinguished because now H is both the naked owner and the usufructuary.

Art. 608 If destroyed property is insured before termination of the usufruct

G.4. RENUNCIATION OF USUFRUCT (1) Waiver: A voluntary surrender of the rights of the usufructuary, made by him with the intent to surrender them.

(2) Limitations: (a) Must be express: tacit renunciation is not sufficient; (b) Does not need the consent of naked owner; and (c) If made in fraud of creditors, they may rescind the waiver through an action under Article 1381 (accion pauliana).

Situation

LOSS

When insurance premium paid by owner and usufructuary (par. 1)

If owner rebuilds, usufruct subsists on new building. If owner does not rebuild, interest upon insurance proceeds paid to usufructuary.

When the insurance taken by the naked owner only because usufructuary refuses to contribute to the premium (par. 2)

Owner entitled to insurance money (no interest paid to usufructuary). If he does not rebuild, usufruct continues over remaining land and/or owner may pay interest on value of both materials and land (607). If owner rebuilds, usufruct does not continue on new building, but owner must pay interest on value of land and old materials.

OF

Effect

Art. 607 If destroyed property is not insured If the building forms part of an immovable under usufruct

Effect

If usufruct is on the Usufruct continues over building only the land and materials (plus interests), if owner does not rebuild. If owner rebuilds, usufructuary must allow owner to occupy the land and to make use of materials; but the owner must pay interest on the value of both the land and the materials.

G.3. MERGER OF RIGHTS OF USUFRUCT AND NAKED OWNERSHIP IN ONE PERSON

G.5. EXTINCTION OR PROPERTY [NCC 608]

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Usufruct continues over the land and materials (plus interests), if owner does not rebuild.

When

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Situation

Effect

taken by usufructuary only depends on value of usufructuary’s insurable interest

to the usufructuary. No obligation to rebuild. Usufruct continues on the land. Owner has no share in insurance proceeds.

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(3) If usufructuary alone was given the indemnity, he must give it to the naked owner and compel the latter to return either the interest or to replace the property. He may even deduct the interest himself, if the naked owner fails to object.

H.2. BAD USE OF THING IN USUFRUCT [NCC 610] Bad use does not extinguish the usufruct but: (1) Entitles the owner to demand delivery and administration of the thing. (2) The bad use must cause considerable injury not to the thing, but to the owner.

G.6. TERMINATION OF THE RIGHT OF PERSON CONSTITUTING THE USUFRUCT Example: usufructs constituted by a vendee a retro terminate upon redemption.

G.7. PRESCRIPTION

IX. Easement

(1) Adverse possession against the owner or the usufructuary. (2) It is not the non-use which extinguishes the usufruct by prescription, but the use by a 3rd person. (3) There can be no prescription as long as the usufructuary receives the rents from the lease of the property, or he enjoys the price of the sale of his right.

(1) An encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. [NCC. 613] (2) A real right which burdens a thing with a prestation of determinate servitudes for the exclusive enjoyment of one who is NOT an owner of a tenement. (3) A real right by virtue of which the owner has to ABSTAIN from doing or ALLOW somebody else to do something to his property for the benefit of another. Dominant Estate – the immovable in favor of which the easement is established.

H. CONDITIONS NOT AFFECTING USUFRUCT H.1. EXPRORPIATION OF THING IN USUFRUCT [NCC 609]

Servient Estate – the immovable which is subject to the easement .

3 SITUATIONS (1) If naked owner alone was given the indemnity, he has the option: (a) To replace with equivalent thing; or (b) To pay to the usufructuary legal interest on the indemnity. This requires a security to be given by the naked owner for the payment of the interest. (2) If both the naked owner and the usufructuary were separately given indemnity, each owns the indemnity given to him, the usufruct being totally extinguished.

A. CHARACTERISTICS A.1. ESSENTIAL FEATURES: (1) It is a real right – it gives an action in rem or real action against any possessor of the servient estate (a) Owner of the dominant estate can file a real action for enforcement of right to an easement

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(b) Action in rem: an action against the thing itself, instead of against the person.

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patendo), but not in the right to demand that the owner of the servient do something (servitus in faciendo) except if such act is an accessory obligation to a praedial servitude (obligation propter rem) Servient owner merely allows something to be done to his estate.

(2) It is a right enjoyed over another property (jus in re aliena) – it cannot exist in one’s property (nulli res sua servit) When the dominant and the servient estates have the same owner, the easement is extinguished. Separate ownership is a prerequisite to an easement.

Exceptions: Praedial servitudes (a) Right to place beams in an adjoining wall to support a structure. (b) Right to use another’s wall to support a building.

(3) It is a right constituted over an immovable by nature (land and buildings), not over movable properties. [NCC 613] Immovable: used in its common and not in the legal sense, meaning only property immovable BY NATURE can have easements.

(7) It is inherent or inseparable from estate to which they actively or passively belong (NCC 617) (a) Easements are merely accessory to the tenements, and a “quality thereof.” They cannot exist without tenements. (b) Easements exist even if they are not expressly stated or annotated as an encumbrance on the titles. (8) It is intransmissible – it cannot be alienated separately from the tenement affected or benefited Any alienation of the property covered carries with it the servitudes affecting said property. But this affects only the portion of the tenement with the easement, meaning the portions unaffected can be alienated without the servitude.

(4) It limits the servient owner’s right of ownership for the benefit of the dominant estate. (a) Right of limited use but no right to possess the servient estate. (b) There exists a limitation on ownership: the dominant owner is allowed to enjoy or use part of the servient estate, or imposes on the owner a restriction as to his enjoyment of his own property. (i) Being an abnormal limitation of ownership, it cannot be presumed. (5) It creates a relation between tenements There is no transfer of ownership, but a relationship is created, depending on the type of easement.

(9) It is indivisible (NCC 618) (a) If the servient estate is divided between two or more persons, the easement is not modified, and each of them must bear it on the part that corresponds to him. (b) If the dominant estate is divided between two or more persons, each of them may use the easement in its entirety, without changing the place

(6) Generally, it may consist in the owner of the dominant estate demanding that the owner of the servient estate refrain from doing something (servitus in non faciendo) or that the latter permit that something be done over the servient property (servitus in

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of its use, or making it burdensome in any other way.

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apparent easements can be created by prescription.

B.4. AS INDICATION OF ITS EXISTENCE

(10) It has permanence – once it attaches, whether used or not, it continues and may be used anytime Perpetual: exists as long as property exists, unless it is extinguished.

(1) Apparent: Made known and continually kept in view by external signs that reveal the use and enjoyment of the same. (2) Non-apparent: No external indication of their existence.

B. CLASSIFICATION

Note: Also important prescription.

B.1. AS TO RECIPIENT OF BENEFITS (1) Real or Praedial: exists for the benefit of a particular tenement. (2) Personal: exists for the benefit of persons without a dominant tenement e.g. usus habitatio (right to reside in a house) and operae servorum (right to the labor of slaves) in Roman law.

for

purposes

of

B.5. BY THE OBJECT OR OBLIGATION IMPOSED [NCC 616] (1) Positive: Imposes upon the owner of the servient estate the obligation of allowing something to be done, or doing it himself. (2) Negative: Prohibits the owner of the servient estate from doing something that he could lawfully do if the easement did not exist. e.g. Negative Easement of Light and View: An opening is made on the wall of the dominant estate, and the easement consists of imposing upon the servient estate the obligation to not build anything that would obstruct the light.

B.2. AS TO CAUSE OR ORIGIN (1) Legal: created by law, whether for public use or for the interest of private persons.  Once requisites are satisfied, the owner of the dominant estate may ask the Court to declare that an easement is created.  Example: Natural drainage of waters, Abutment of land, Aqueduct, etc. (2) Voluntary: Created by the will of the owners of the estate through contract.

Note: Prescription starts to run from service of notarial prohibition.

Note: There is no such thing as a JUDICIAL EASEMENT. The Courts cannot create easements, they can only declare the existence of one, if it exists by virtue of the law or will of the parties.

C. GENERAL RULES (1) Nulli res sua servi: No one can have a servitude over one’s own property. (2) Servitus in faciendo consistere nequit: A servitude cannot consist in doing. (a) Although some easements seem to impose a positive prestation upon the owner of the servient estate, in reality, the primary obligation is still negative. (b) Illustration: Under Article 680: the owner of a tree whose branches extend over to a neighboring property is required to cut off the extended

B.3. AS TO ITS EXERCISE [NCC 615] (1) Continuous: Use is or may be incessant, without the intervention of any man (2) Discontinuous: Used at intervals, and dependent upon the acts of man. Note: This classification is important in determining prescription: only continuous and

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branches, but the real essence of the easement is the obligation NOT TO ALLOW the branches of the tree to extend beyond the land. (3) Servitus servitutes esse non potes: There can be no servitude over another servitude. (4) A servitude must be exercised civiliter – in a way least burdensome to the owner of the land. (5) A servitude must have a perpetual cause

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easement, commenced to exercise it upon the servient estate. (2) In negative easements, from the day on which the owner of the dominant estate forbade, by an instrument acknowledged before a notary public, the owner of the servient estate from executing an act which would be lawful without the easement.

D.4. DETERMINES HOW EASEMENT IS LOST BY PRESCRIPTION [NCC 631 (2)]

D. RELEVANCE OF CLASSIFICATIONS D.1. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY PRESCRIPTION

By nonuser for 10 years: (1) With respect to discontinuous easements, this period shall be computed from the day on which they ceased to be used. (2) With respect to continuous easements, from the day on which an act contrary to the same took place.

Continuous and apparent easements may be acquired by prescription of 10 years [NCC. 620]

D.2. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY TITLE (1) Continuous nonapparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title. [NCC. 622] (2) The existence of an apparent sign of easement between two estates, established or maintained by the owner of both, shall be considered, as a title in order that the easement may continue actively and passively.

E. CREATION E.1. BY TITLE (1) Continuous and apparent easements may be acquired by virtue of a title. [NCC 620] (2) Continuous nonapparent easements, and discontinuous ones, whether apparent or not, are acquired only by virtue of a title. [NCC 622] (3) The absence of a document or proof showing the origin of an easement which cannot be acquired by prescription may be cured by a deed of recognition by the owner of the servient estate or by a final judgment. [NCC 623] (4) The existence of an apparent sign of easement between two estates, established or maintained by the owner of both, shall be considered as a title in order that the easement may continue actively and passively.

Unless: At the time the ownership of the two estates is divided, the contrary should be provided in the title of conveyance of either of them, or the sign aforesaid should be removed before the execution of the deed. This provision shall also apply in case of the division of a thing owned in common by two or more persons. [NCC. 624]

Unless: at the time the ownership of the two estates is divided, the contrary should be provided in the title of conveyance of either of them, or the sign aforesaid should be removed before the execution of the deed. This provision shall also

D.3. DETERMINES HOW TO COMPUTE THE PRESCRIPTIVE PERIOD [NCC 621] (1) In positive easements, from the day on which the owner of the dominant estate, or the person who may have made use of the

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apply in case of the division of a thing owned in common by two or more persons. [NCC 624]

(b) By the provisions of Chapter 2, title VII, Book II.

F. VOLUNTARY EASEMENTS

E.2. BY LAW (LEGAL EASEMENTS)

(1) Every owner of a tenement or piece of land may establish thereon the easements which he may deem suitable, and in the manner and form which he may deem best. [NCC 688] (2) The owner of a thing, the usufruct of which belongs to another, may impose, without the consent of the usufructuary, any servitudes which will not injure the right of usufruct. [NCC 689] (3) Whenever the naked ownership belongs to one person and the beneficial ownership to another, no perpetual voluntary easement may be established thereon without the consent of both owners. [NCC 690] (4) Consent of all co-owners is required to impose an easement on an undivided tenement. [NCC 691]

(1) Easements imposed by law have for their object either public use or the interest of private persons. [NCC 634] (2) These easements may be modified by agreement of the interested parties, whenever the law does not prohibit it or no injury is suffered by a third person. [NCC 636]

E.3. BY WILL OF THE (VOLUNTARY EASEMENTS)

OWNERS

Every owner of a tenement or a piece of land may establish the easements that he may deem suitable and best. [NCC 688] Note: If an owner constitutes an easement over his own property and makes such easement available to the general public, said owner may not arbitrarily discriminate against certain persons by not letting them use the easement. [Negros Sugar Company v Hidalgo (1936)]

H. RIGHTS AND OBLIGATIONS OF OWNERS OF DOMINANT AND SERVIENT ESTATES

E.4. BY PRESCRIPTION Continuous and apparent easements may be acquired by prescription of 10 years. [NCC 620]

H.1. RIGHTS OF DOMINANT ESTATE OWNER

G. LEGAL EASEMENTS G.1. LAW EASEMENTS

GOVERNING

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(1) To use the easement and exercise all rights necessary for it [NCC 625, 626] (a) The owner of the dominant estate is granted the right to use the principal easement, and all accessory servitudes. (b) Example: Easement of drawing water carries with it the easement of right of way to the place where water is drawn. (c) Limitation: Only for the original immovable and the original purpose.

LEGAL

(1) For public easements (a) Special laws and regulations relating thereto. (ex: PD 1067 and PD 705) (b) By the provisions of Chapter 2, Title VII, Book II, NCC. (2) For private legal easements (a) By agreement of the interested parties whenever the law does not prohibit it and no injury is suffered by a 3rd person.

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(2) In a right of way, to ask for change in width of easement sufficient for needs [NCC 651]

(a) The contribution is in proportion to the benefits which each may derive from the work. (b) Anyone who does not wish to contribute may exempt himself by renouncing the easement for the benefit of the others. (c) If the owner of the servient estate should make use of the easement in any manner whatsoever, he shall also be obliged to contribute to the expenses in the proportion stated, saving an agreement to the contrary.

(3) To renounce totally the easement, if he desires to be exempt from contributing to the expenses. The needs of the dominant property ultimately determine the width of the passage. And these needs may vary from time to time. [Encarnacion v. Court of Appeals]

H.2. OBLIGATIONS ESTATE OWNER

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DOMINANT

(1) To use the easement for the benefit of immovable and in the manner originally established [NCC 626] If established for a particular purpose, the easement cannot be used for a different one. However, if established in a general way, without specific purpose, the easement can be used for all the needs of the dominant estate.

(5) To do at his expense all necessary works for the use and preservation of the easement [NCC 627] The necessity of the works determines extent of such works.

H.3. RIGHTS OF THE SERVIENT ESTATE OWNER (1) To retain ownership and use of his property (a) The owner of the servient estate retains the ownership of the portion on which the easement is established, and may use the same in such a manner as not to affect the exercise of the easement. [NCC 630] (b) The servient owner must respect the use of the servitude, but retains ownership and use of the same, in a manner not affecting the easement.

(2) To notify the owner of the servient estate before making repairs and to make repairs in a manner least inconvenient to the servient estate [NCC 627(2)] (3) Not to alter the easement or render it more burdensome (a) The owner of the dominant estate may make repairs at his expense, but he cannot alter the easement or make it more burdensome. [NCC 627] (b) Making the easement more burdensome means widening the easement. [Valderrama v. North Negros Sugar Co. (1925)]

(2) To change the place and manner of the use of the easement [NCC 629] General rule: The owner of the servient estate cannot impair the use of the servitude. Exceptions: (a) By reason of either: (i) The place/manner originally assigned, the use of such

(4) To contribute to expenses of works necessary for use and preservation of servitude, if there are several dominant estates, unless he renounces his interest [NCC 628]

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easement has become VERY INCONVENIENT to the owner; or (ii) The easement should prevent him from making any important works, repairs or improvements thereon; (b) The change must be done at his expense; (c) He offers another place or manner equally convenient; and (d) he change is done in such a way that no injury is caused to the dominant owner or to those who may have a right to use the easement.

(13) Lateral and subjacent support [NCC 684-687]

I.1. NATURAL DRAINAGE (1) Lower estates are obliged to receive the waters which naturally and without the intervention of man descend from the higher estates (as well as the stones or earth which they carry with them). (2) The owner of the lower estate cannot do any works that will impede this easement. (3) The owner of the higher estate cannot do any works that will increase the burden.

I.2. RIPARIAN BANKS

(3) To use the easement May use the easement but must also contribute proportionately to the expenses.

H.4. OBLIGATIONS ESTATE OWNER

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(1) The banks of rivers and streams 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. (2) Estates adjoining the banks of navigable or floatable rivers are subject to the easement of towpath for the exclusive service of river navigation and floatage. (3) If it be necessary to occupy lands of private ownership, the proper indemnity shall first be paid.

SERVIENT

(1) Not to impair the use of the easement [NCC 629 (1)] (2) To contribute proportionately to expenses if he uses the easement [NCC 628(2)] Unless there is an agreement to the contrary

I.3. DRAINAGE OF BUILDINGS

(3) To pay for the expenses incurred for the change of location or form of the easement

(1) The owner of a building is obliged to construct its roof or covering in such manner that the rain water shall fall on his own land or on a street or public place, and NOT on the land of his neighbor, even though the adjacent land may belong to two or more persons, one of whom is the owner of the roof. (2) Even if it should fall on his own land, the owner shall be obliged to collect the water in such a way as not to cause damage to the adjacent land or tenement.

I. KINDS OF LEGAL EASEMENTS (1) Natural drainage [NCC 637] (2) Riparian banks [NCC 638] (3) Drainage of buildings [NCC 674] (4) Dam [NCC 639] (5) Drawing water [NCC 640-641] (6) Aqueduct [NCC 642-646] (7) Sluice gate [NCC 647] (8) Right of way [NCC 649-657] (9) Party wall [NCC 658-666] (10) Light and view [NCC 667-681] (11) Intermediate distances [NCC 677-681] (12) Nuisance [NCC 682-683]

I.4. DAM

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Whenever it should be necessary to build a dam, and the person who is to construct it is not the owner of the banks, or lands which must support it, he may establish the easement of abutment of a dam, after payment of the proper indemnity.

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courtyards, annexes, or outhouses, or on orchards or gardens already existing. (4) This easement does not prevent the owner of the servient estate from closing or fencing it, or from building over the aqueduct in such manner as not to cause the latter any damage, or render necessary repairs and cleanings impossible. (5) This easement is considered as continuous and apparent, even though the flow of the water may not be continuous, or its use depends upon the needs of the dominant estate, or upon a schedule of alternate days or hours.

I.5. DRAWING WATER (1) Compulsory easements for drawing water or for watering animals can be imposed only for reasons of public use in favor of a town or village, after payment of the proper indemnity. (2) Easements for drawing water and for watering animals carry with them the obligation of the owners of the servient estates to allow passage to persons and animals to the place where such easements are to be used, and the indemnity shall include this service. (3) The width of the easement must not exceed 10 meters.

I.7. SLUICE GATE (1) The construction of a stop lock or sluice gate in the bed of the stream from which the water is to be taken, for the purpose of improving an estate. (2) Such person may demand that the owners of the banks permit its construction, after payment of damages, including those caused by the new easement to such owners and to the other irrigators.

I.6. AQUEDUCT (1) Any person who may wish to use upon his own estate any water of which he can dispose shall have the right to make it flow through the intervening estates, with the obligation to indemnify their owners, as well as the owners of the lower estates upon which the waters may filter or descend. (2) Person desiring to make use of this right is obliged to: (a) To prove that he can dispose of the water and that it is sufficient for the use for which it is intended; (b) To show that the proposed right of way is the most convenient and the least onerous to third persons; and (c) To indemnify the owner of the servient estate in the manner determined by the laws and regulations (3) Easement of aqueduct for private interest cannot be imposed on buildings,

I.8. RIGHT OF WAY Who may demand (1) The owner of the dominant estate; or (2) Any person with the real right to cultivate or use the dominant estate e.g. a usufructuary. Note: a lessee cannot demand such easement, because the lessor is the one bound to maintain him in the enjoyment of the property. Requisites (1) The dominant estate is surrounded by other immovables owned by other persons; (2) There must absolutely be no access to a public road or highway;

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(a) Even if there is access, it is difficult or dangerous to use, or grossly insufficient; (b) Mere inconvenience in the use of an outlet does not render the easement a necessity; (c) An adequate outlet is one that is sufficient for the purpose and needs of the dominant owner, and can be established at a reasonable expense; (d) Does not necessarily have to be by land – an outlet through a navigable river if suitable to the needs of the tenement is sufficient; (3) The isolation of the immovable is NOT due to the dominant owner’s own acts e.g. if he constructs building to others obstructing the old way; and (4) There is payment of indemnity; (a) If right of way is permanent and continuous for the needs of the dominant estate = value of the land + amount of damage caused to the servient estate; (b) If right of way is limited to necessary passage for cultivation of the estate and for gathering crops, without permanent way = damage caused by encumbrance. Rules for establishing Right of Way (1) Must be established at the point least prejudicial to the servient estate. [NCC 650] (2) Insofar as consistent with the first rule, where the distance from the dominant estate to a public highway is shortest. (a) The criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance although this is a matter of judicial appreciation. While shortest distance may ordinarily imply least prejudice, it is not always so as when there are permanent structures obstructing the shortest distance; while on the other

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hand, the longest distance may be free of obstructions and the easiest or most convenient to pass through. [Quimen v. CA (1996)] (b) The fact that LGV had other means of egress to the public highway cannot extinguish the said easement, being voluntary and not compulsory. The free ingress and egress along Mangyan Road created by the voluntary agreement between the parties is thus legally demandable with the corresponding duty on the servient estate not to obstruct the same. [La Vista Association v. CA] (3) The width of the easement of right of way shall be that which is sufficient for the needs of the dominant estate, and may accordingly be changed from time to time. [NCC 651] Obligations In Permanent And Temporary Easements Of Right Of Way Temporary Permanent right of way right of way Indemnity Consists of the damages and the value of the land.

Consists of the damages only.

Necessary repairs Dominant owner to spend on Servient such. owner spend such.

to on

Share in taxes The dominant owner shall reimburse a proportionate share of taxes to the proprietor of the servient estate.

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Rules on indemnity for estates enclosed through a sale, exchange, partition or donation. Sale, exchange or partition

building, to carry materials through the estate of another, or to raise therein scaffolding or other objects necessary for the work, the owner of such estate shall be obliged to permit the act, after receiving payment of the proper indemnity for the damage caused him. [NCC 656] (3) Right of way for the passage of livestock known as animal path, animal trail, watering places, resting places, animal folds. [NCC 657] (a) Easements of the right of way for the passage of livestock known as animal path, animal trail or any other, and those for watering places, resting places and animal folds, shall be governed by the ordinances and regulations relating thereto, and, in the absence thereof, by the usages and customs of the place. (b) Without prejudice to rights legally acquired, the animal path shall not exceed in any case the width of 75 meters, and the animal trail that of 37 meters and 50 centimeters. (c) Whenever it is necessary to establish a compulsory easement of the right of way or for a watering place for animals, the provisions of this Section and those of Articles 640 and 641 shall be observed. In this case the width shall not exceed 10 meters

Donation

Buyer, grantee or donee as dominant owners The buyer or grantee The donee shall pay shall grant the right of the donor indemnity. way without indemnity. Seller, grantor or donor as dominant owners The seller or grantor shall pay indemnity.

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The donee shall grant the right of way without indemnity.

Extinguishment of Right of Way (1) The owner has joined the dominant estate to another abutting the public road. (2) A new road is opened giving access to the isolated estate. Notes on extinguishment (1) Extinguishment is NOT automatic. The owner of the servient estate must ask for such extinguishment. (2) Indemnity paid to the servient owner must be returned: (a) If easement is permanent: value of the land must be returned (b) If easement is temporary: nothing is to be returned

I.9. PARTY WALL

Special Rights of Way (1) Right of way to carry materials for the construction, repair, improvement, alteration or beautification of a building through the estate of another. (2) Right of way to raise on another’s land scaffolding or other objects necessary for the work. (a) If it be indispensable for the construction, repair, improvement, alteration or beautification of a

Refers to all those mass of rights and obligations emanating from the existence and common enjoyment of wall, fence, enclosures or hedges, by the owners of adjacent buildings and estates separated by such objects. Nature (1) A common wall which separates two estates, built by common agreement at

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the dividing line such that it occupies a portion of both estates on equal parts. (2) A party wall is a special form of coownership (a kind of compulsory coownership). (a) Each owner owns part of the wall but it cannot be separated from the other portions belonging to the others. A party wall has a special characteristic that makes it more of an easement as it is called by law. (b) An owner may use a party wall to the extent of the ½ portion on his property. Co-Ownership

Party Wall

Before division of shares, a co-owner cannot point to any definite portion of the property as belonging to him.

Shares of the coowners cannot be physically segregated but they can be physically identified.

None of the co-owners There is may use the limitation community property for his exclusive benefit because he would be invading the rights of the others.

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(3) In fences, walls and live hedges dividing rural lands. Note: A title or an exterior sign, or any other proof showing that the entire wall in controversy belongs exclusively to one of the adjoining property-owners may rebut these presumptions. When Existence Of An Exterior Sign Is Presumed [NCC 660] (1) Whenever in the dividing wall of buildings there is a window or opening. (2) Whenever one side is 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. (3) Whenever the entire wall is built within the boundaries of one of the estates. (4) Whenever 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. (5) Whenever 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. (6) Whenever the dividing wall, being built of masonry, has stepping stones, which at certain intervals project from the surface on one side only, but not on the other. (7) Whenever lands enclosed by fences or live hedges adjoin others that are not enclosed.

such

In a co-ownership, Any owner may free partial renunciation is himself from allowed. contributing to the cost of repairs and construction of a party wall by renouncing all his rights thereto.

Note: The deposit of earth or debris on one side alone is an exterior sign that the owner of that side is the owner of the ditch or drain. The presumption is an addition to those enumerated in NCC 660.

When Existence Of Easement Of Party Wall Is Presumed (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, or towns, or in rural communities.

Right Of Owners Of A Party Wall (1) Generally, part-owners may use the wall in proportion to their respective interests, provided that: 154

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(a) The right to use by the other party is not interfered with; (b) The consent by the other owner is needed if a party wants to open a window; and (c) The condition of the building is determined by experts. (2) To increase the height of the wall.  He does this at his expense, including the thickening of the wall on his land.  He shall indemnify the other party for any damages. (3) To acquire a half-interest in any increase in height or thickness of the wall, paying a proportionate share in the cost of the work and the value of the land covered.  Note that the value of the land must be appraised at the time of acquisition. (4) To renounce his part ownership of a party wall if he desires to demolish his building supported by the wall.  He shall bear all the expenses of repairs and work necessary to prevent any damage which the demolition may cause to the party wall.

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(e) Bear the increased expenses for preservation

I.10. EASEMENT OF LIGHT AND VIEW Definition (1) Easement of light (jus luminum) is the right to admit light from the neighboring estate by virtue of the opening of a window or the making of certain openings. (2) Easement of view (jus prospectus) is the right to make openings or windows, to enjoy the view through the estate of another and the power to prevent all constructions or works which would obstruct such view or make the same difficult. (a) Necessarily includes the easement of light. (b) It is possible to have light only without a view. Nature (1) Positive: Opening a window through a party wall (a) When a part owner of a party wall opens a window therein, such act implies the exercise of the right of ownership by the use of the entire thickness of the wall. (b) The easement is created only after the lapse of the prescriptive period. (2) Negative: Formal prohibition upon the owner of the adjoining land or tenement. Formal means that the prohibition has been notarized [Cortes v Yu-Tibo (1903)] (a) When a person opens a window on his own building, he is exercising his right of ownership on his property, which does not establish an easement. (b) Coexistent is the right of the owner of the adjacent property to build on his own land, even if such structures cover the window. (c) If the adjacent owner does not build structures to obstruct the window,

Obligations Of Owners Of A Party Wall (1) To contribute proportionately to the repair and maintenance of the party wall unless he renounces his part-ownership. (a) This includes the renunciation of the share in the wall + the land (b) He cannot renounce his part if his building is being supported by the party wall (2) If he raises the height of the wall, he must: (a) Bear the cost of maintenance of the additions; (b) Bear the cost of construction, if the wall cannot support the additional height; (c) Give additional land, if necessary to thicken the wall; (d) Pay for damages, if necessary, even if temporary; and

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such is considered mere tolerance and NOT a waiver of the right to build. (d) An easement is created only when the owner opens up a window and subsequently prohibits or restrains the adjacent owner from doing anything that may tend to cut off or interrupt the light and the prescriptive period has lapsed.

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(iii) The dividing line between the two properties in cases of oblique views. Effect If Distances Are Not Complied With (1) Windows are considered unlawful openings and may be ordered by the Court to be closed. (2) Even if the adjoining owner does not object to the construction of such structures at first, he cannot be held to be in estoppel, unless the 10-year period of acquisitive prescription has passed.

Rules And Restrictions On Openings And Structures Openings for light (1) When the wall is 2 meters or more away from another’s tenement: (a) An owner may build any kind of opening without restriction. (2) When the wall is contiguous (less than 2 meters) to another’s tenement: (a) Openings are made at the height of the ceiling joists (horizontal beams) or immediately under the ceiling; (b) Size: 30 cm square; (c) With iron grating imbedded in the wall; (d) With a wire screen.

Note: (1) In buildings separated by a public way or alley, not less than 3 meters wide, the distances required (2 m, 60 cm) do not apply. (2) If an easement is acquired to have direct views, balconies or belvederes, the owner of the servient estate must not build at less than 3 meters from the boundary line of the two tenements. (a) The distances may be stipulated by the parties, but should not be less than what is prescribed by the law (2 meters and 60 cm).

Openings for view (1) The following structures cannot be built without following the prescribed distances: (a) Window, apertures, balconies and other projections with a direct view upon or towards an adjoining land must have a distance of 2 meters between the wall and the contiguous property. (b) For structures with a side or oblique view (at an angle from the boundary line), there should be a distance of 60 centimeters. (c) Measured from: (i) The outer line of the wall if the openings do not project. (ii) The outer line of the openings if they project.

Notes on the Acquisition of the Easement (1) Period of acquisitive prescription will only start to run from the time the owner asserting the servitude has forbidden the owner of the adjoining tenement from doing something he could lawfully do. (2) THUS, although the action to compel the closure might have prescribed, the owner of the adjoining estate may still build on his own land a structure that might obstruct the view.

I.11. INTERMEDIATE DISTANCES [NCC 677]

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NCC 677, in effect, establishes an easement in favor of the State. The general prohibition is dictated by the demands of national security.

(1) The proprietor is prohibited from making dangerous excavations upon his land as to deprive any adjacent land or building of sufficient lateral or subjacent support. (2) Easement of lateral and subjacent support is deemed essential to the stability of buildings. (3) Support is lateral when a vertical plane divides the supported and supporting lands. (4) Support is subjacent when the supported land is above the supporting land.

The following must comply with the regulations or customs of the place: (1) Construction of aqueduct, well, sewer, etc. (NCC 678) Constructions, which by reason of their nature or products are dangerous or noxious. (2) Planting of trees (NCC 679) (a) No trees shall be planted near a tenement or piece of land belonging to another except at the distance authorized by the ordinances or customs of the place. (b) In the absence of regulations: (i) At least 2 meters from the dividing line of the estates if tall trees are planted. (ii) At least 50 centimeters if shrubs or small trees are planted. (c) In case of violation, a landowner shall have the right to demand the uprooting of the plant even if it has grown spontaneously.

J. MODES EASEMENT

ACQUIRING

A juridical act which gives rise to the servitude (e.g. law, donations, contracts or wills) (1) If the easement has been acquired but no proof of existence of easement available, and the easement is one that cannot be acquired by prescription, the defect may be cured by: (a) Deed of recognition by owner of servient estate: By an affidavit or a formal deed acknowledging the servitude; or (b) By final judgment: Owner of the dominant estate must file a case in Court to have the easement declared by proving its existence through other evidence.

(1) If the branches of any tree should extend over a neighboring estate, tenement, garden or yard, the owner of the latter shall have the right to demand that they be cut-off. (2) If it be the roots of a neighboring tree, which should penetrate into the land of another, the latter may cut them off himself within his property. (3) Fruits naturally falling upon adjacent land belong to the owner of said land.

AND

OF

J.1. BY TITLE

BRANCHES, ROOTS AND FRUITS

I.12. LATERAL SUPPORT

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(2) The existence of an apparent sign is considered as title. Illustration: The presence of 4 windows was considered an apparent sign that created a negative easement of light and view (altius non tollendi) i.e. not to build a structure that will cover the windows. [Amor v. Florentino (1943)].

SUBJACENT

J.2. BY PRESCRIPTION Requisites

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(1) The easement must be continuous and apparent; (2) The easement must have existed for 10 years; and (3) There is NO NEED for good faith or just title.

(1) Owner of dominant estate does not exercise right over easement. (2) This is inaction, and not outright renunciation. (3) This is due to the voluntary abstention by the dominant owner, and not due to a fortuitous event. (4) Computation of the period: (a) Discontinuous easements: counted from the day they ceased to be used. (b) Continuous easements: counted from the day an act adverse to the exercise of the easement took place. (i) E.g. in an easement of light and view, the erection of works obstructing the servitude would commence the period of prescription. (5) The use by a co-owner of the dominant estate bars prescription with respect to the others. (6) Non-user cannot extinguish servitudes not yet exercised. [Francisco v Paez (1930)]

Note Mere passage which was permitted and is under an implied license cannot be a basis of prescription [Archbishop of Manila v Roxas (1912)]

K. EXTINGUISHMENT EASEMENTS

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OF

(1) By merger in the same person of the ownership of the dominant and servient estates; (2) By non-user for ten years; (3) When either or both of the estates fall into such condition that the easement cannot be used; (4) By the expiration of the term or the fulfillment of the condition, if the easement is temporary or conditional; (5) By the renunciation of the owner of the dominant estate; or (6) By the redemption agreed upon between the owners of the dominant and servient estates.

K.3. BY IMPOSSIBILITY OF USE (1) Impossibility referred to must render the entire easement unusable for all time. (2) Impossibility of using the easement due to the condition of the tenements (e.g. flooding) only suspends the servitude until it can be used again. (3) Except: If the suspension exceeds 10 years, the easement is deemed extinguished by non-user.

K.1. MERGER Must be absolute, perfect and definite, and not merely temporary. (1) Absolute: Ownership of the property must be absolute, thus not applicable to lease, usufruct, etc. (2) Perfect: Merger must not be subject to a condition. (3) If the merger is temporary, there is at most a suspension of the easement, but no extinguishment.

K.4. EXPIRATION OF THE TERM OR FULFILLMENT OF RESOLUTORY CONDITION Applicable only to voluntary easements.

K.5. RENUNCIATION OF THE OWNER OF THE DOMINANT ESTATE

K.2. BY A NON-USER FOR 10 YEARS

Must be specific, clear, express (distinguished from non-user).

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(a) Owner of the dominant estate has joined to another abutting on a public road. (b) A new road is opened giving access to the isolated estate. (c) Requisite: the public highway must substantially meet the needs of the dominant estate in order that the easement may be extinguished (d) Owner of the servient estate may demand that the easement be extinguished. (e) Owner of the servient estate must return indemnity he received (value of the land)

K.6. OTHER CAUSES NOT MENTION IN NCC 631 (1) Annulment and rescission of the title constituting the voluntary easement; (2) Termination of the right of grantor of the voluntary easement; (3) Abandonment of the servient estate; (a) Owner of the servient estate gives up ownership of the easement (e.g. the strip of land where the right of way is constituted) in favor of the dominant estate. (b) The easement is extinguished because ownership is transferred to the dominant owner, who now owns both properties. (4) Eminent domain; or (a) The government’s power to expropriate property for public use, subject to the payment of just compensation. (5) Special cause for extinction of legal rights of way; if right of way no longer necessary. (a) NCC 655 (i) If the right of way granted to a surrounded estate ceases to be necessary because its owner has joined it to another abutting on a public road, the owner of the servient estate may demand that the easement be extinguished, returning what he may have received by way of indemnity. The interest on the indemnity shall be deemed to be in payment of rent for the use of the easement. (ii) The same rule shall be applied in case a new road is opened giving access to the isolated estate. (iii) In both cases, the public highway must substantially meet the needs of the dominant estate in order that the easement may be extinguished. (6) Right of way ceases to be necessary:

X. Nuisance A 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) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (5) Hinders or impairs the use of property. Note: To constitute a nuisance there must be an arbitrary or abusive use of property or disregard of commonly accepted standards set by society. A municipal body has the power to declare and abate nuisances. BUT it has no power to find as fact that a particular thing is a nuisance. The determination of whether or not a nuisance exists is a judicial function, because to declare something a nuisance is to deprive its use. [Iloilo Cold Storage v Mun. Council of Iloilo (1913)]

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Nuisance

Trespass

Use of one’s own property in such a manner as to cause injury to the property or right or interest of another, and generally results from the commission of an act beyond the limits of the property affected.

Direct infringement of another’s right of property.

Injury is consequential.

Injury immediate.

An act, occupation or structure which is a nuisance at all times and under any circumstances, regardless of location or surroundings. (2) Nuisance per accidens or in fact (a) One that becomes a nuisance by reason of circumstances and surroundings. (b) It is not a nuisance by its nature but it may become so by reason of the locality, surrounding, or the manner in which it is conducted, managed, etc. Note: Dams or fishponds on noavigable waters are not nuisance per se. (Monteverde v Generoso [1928])

is

B. NUISANCE V. NEGLIGENCE Nuisance

Negligence

Whether it was unreasonable for the defendant to act as he did in view of the threatened danger or harm to one in plaintiff’s position.

Whether the defendant’s use of his property was unreasonable as to plaintiff, without regard to foreseeability of injury.

Per se

Per accidens

The wrong is Proof of the act and established by proof of its consequences the mere act. It are necessary. becomes a nuisance as a matter of law.

Liability for the Liability is based on resulting injury to a want of proper others regardless of the care degree of care or skill exercised to avoid such injury. Principles ordinarily apply where the cause of action is for continuing harm caused by continuing or recurrent acts which cause discomfort or annoyance to plaintiff in the use of his property.

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C.2. ACCORDING TO INJURIOUS EFFECTS

SCOPE

OF

Test: not the number of persons annoyed but the possibility of annoyance to the public by the invasion of its rights – the fact that it is in a public place and annoying to all who come within its sphere.

Principles ordinarily apply where the cause of action is for harm resulting from one act which created an unreasonable risk of injury.

(1) Public  The doing of or the failure to do something that injuriously affects the safety, health or morals of the public.  It causes hurt, inconvenience or injury to the public, generally, or to such part of the public as necessarily comes in contact with it.

C. CLASSES C.1. ACCORDING TO NATURE (1) Nuisance per se or at law

(2) Private

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He who creates a nuisance is liable for the resulting damages and his liability continues as long as the nuisance continues. (1) There must be a breach of some duty on the part of the person sought to be held liable for damages resulting from a nuisance before an action will lie against him. (2) No one is to be held liable for a nuisance which he cannot himself physically abate without legal action against another for that purpose. (3) Where several persons, acting independently, cause damage by acts which constitute a nuisance, each is liable for the damage which he has caused or for his proportionate share of the entire damage.

 One which violates only private rights and produces damages to but one or a few specific persons. (3) Mixed

D. DOCTRINE NUISANCE

OF

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ATTRACTIVE

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. [Jarco Marketing Corp. v. CA (1999)] Basis of liability – The attractiveness is an invitation to children. Safeguards to prevent danger must therefore be set up.

E.3. LIABILITY OF TRANSFEREES The grantee of land upon which there exists a nuisance created by his predecessors in title is NOT responsible therefore merely because he becomes the owner of the premises, or merely because he permits it to remain.

Note: A swimming pool or water tank is not an attractive nuisance, for while it is attractive, it cannot be a nuisance, being merely an imitation of the work of nature. [Hidalgo Enterprises v. Balandan (1952)]

He shall be liable if he knowingly continues the nuisance. Generally, he is not liable for continuing it in its original form, unless he has been notified of its existence and requested to remove it, or has actual knowledge that it is a nuisance and injurious to the rights of others.

E. LIABILITY IN CASE OF NUISANCE E.1 WHO ARE LIABLE Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it. (NCC. 696)

If the transferee cannot physically abate the nuisance without legal action against another person, then he shall not be liable for such nuisance.

E.4. NATURE OF LIABILITY

E.2. LIABILITY NUISANCE

OF

CREATOR

All persons who participate in the creation or maintenance of a nuisance are jointly and severally liable for the injury done.

OF

If 2 or more persons who create or maintain the nuisance act entirely independent of one

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another, and without any community of interest, concert of action, or common design, each is liable only so far as his acts contribute to the injury.

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Action for Abatement (1) The district health officer shall take care that one or all of the remedies against a public nuisance are availed of. (2) If a civil action is brought by reason of the maintenance of a public nuisance, such action shall be commenced by the city or municipal mayor. (3) The district health officer shall determine whether or not abatement, without judicial proceedings, is the best remedy against a public nuisance. (4) A private person may file an action on account of a public nuisance if it is especially injurious to him.

For solidary liability, there must be some joint or concurrent act or community of action or duty, or the several wrongful acts done at several times must have concurred in their effects as one single act to produce the injury complained of.

E.5. RIGHT TO RECOVER DAMAGES The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence. [NCC 697]

General rule: An individual has no right of action against a public nuisance. The abatement proceedings must be instituted in the name of the State or its representatives.

Abatement and damages are cumulative remedies.

Exception: An individual who has suffered some special damage different from that sustained by the general public may maintain a suit in equity for an injunction to abate it, or an action for damages which he has sustained.

NO PRESCRIPTION The action to abate a public or private nuisance is NOT extinguished by prescription. [NCC. 1143(2)]

F. REGULATION OF NUISANCES F.1. PUBLIC NUISANCE

The action becomes a tort if an individual has suffered particular harm, in which case the nuisance is treated as a private nuisance with respect to such person.

Remedies The remedies against a public nuisance are: (1) A prosecution under the Penal Code or any local ordinance; (2) A civil action; or (3) Extrajudicial abatement. (a) It must be reasonably and efficiently exercised (b) Means employed must not be unduly oppressive on individuals, and (c) No more injury must be done to the property or rights of individuals than is necessary to accomplish the abatement. (d) No right to compensation if property taken or destroyed is a nuisance.

Requisites of the right of a private individual to abate a public nuisance (1) That demand be first made upon the owner or possessor of the property to abate the nuisance; (2) That such demand has been rejected; (3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and (4) That the value of the destruction does not exceed P3000. Rules

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(1) The right must be exercised only in cases of urgent or extreme necessity. The thing alleged to be a nuisance must be existing at the time that it was alleged to be a nuisance. (2) A summary abatement must be resorted to within a reasonable time after knowledge of the nuisance is acquired or should have been acquired by the person entitled to abate. (3) The person who has the right to abate must give reasonable notice of his intention to do so, and allow thereafter a reasonable time to enable the other to abate the nuisance himself. (4) The means employed must be reasonable and for any unnecessary damage or force, the actor will be liable. The right to abate is not greater than the necessity of the case and is limited to the removal of only so much of the objectionable thing as actually causes the nuisance. (5) The property must not be destroyed unless it is absolutely necessary to do so.

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(2) To enjoin the sale or destruction of the property; (3) An action for the proceeds of its sale and damages if it has been sold; or (4) To enjoin private parties from proceeding to abate a supposed nuisance.

XI. Modes of Acquiring Ownership (1) (2) (3) (4) (5) (6) (7)

Occupation By operation of Law Donation Tradition Intellectual Property Prescription Succession

Mode is a specific cause which produces dominion and other real rights as a result of the co-existence of special status of things, capacity and intention of persons and fulfillment of the requisites of law. Title is every juridical right which gives a means to the acquisition of real rights but in itself is insufficient to produce them.

F.2. PRIVATE NUISANCE Remedies The remedies against a private nuisance are: (1) A civil action; or (2) Extrajudicial abatement. (a) The procedure for extrajudicial abatement of a public nuisance by a private person will also be followed. (b) The person extrajudicially abating a nuisance liable for damages if: (i) If he causes unnecessary injury; or (ii) If an alleged nuisance is later declared by the courts to be not a real nuisance.

It is not by contract but by delivery that the ownership of property is transferred (Non nudis pactis, dominia rerum transferentur). Contracts only constitute titles or rights to transfer or acquisition of ownership, while delivery is the mode of accomplishing the same. Mode

Title

Directly and Serves merely to give immediately the occasion for its produces a real right. acquisition or existence.

Remedies of the property owner A person whose property is seized or destroyed as a nuisance may resort to the courts to determine whether or not it was in fact a nuisance. (1) An action for replevin;

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Proximate cause

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The owner of a swarm of bees shall have a right to pursue them to another’s land, indemnifying the possessor of the latter for the damage.

Title

Essence of the right, Means whereby that which is to be created “essence” is or transmitted. transmitted.

If the owner has not pursued the swarm, or ceases to do so within 2 consecutive days, the possessor of the land may occupy or retain the same.

A. OCCUPATION Note: Ownership of land cannot be acquired by occupation.

A.1. REQUISITES

The 20 days to be counted from their occupation by another person. This period having expired, they shall pertain to him who has caught and kept them.

(1) The property must be a corporeal personal property susceptible of appropriation; (2) The property is either res nullius (no owner) or res derelict (abandoned property); (3) There is seizure or apprehension with the intent to appropriate; and (4) There is an observance of requisites or conditions prescribed by law.

OCCUPATION ANIMALS

OF

DOMESTICATED

Wild animals are possessed only while they are under one's control; domesticated or tamed animals are considered domestic or tame if they retain the habit of returning to the premises of the possessor.

A.2. KINDS Of Animals (1) Wild or feral animals – seizure (hunting/fishing) in open season by means NOT prohibited. (2) Tamed/domesticated animals – General Rule: belong to the tamer, but upon recovering freedom, are susceptible to occupation UNLESS claimed within 20 days from seizure by another. (3) Tame/domestic animals – not acquired by occupation EXCEPT when ABANDONED.

PIGEONS AND FISH Pigeons and fish which from their respective breeding places pass to another pertaining to a different owner shall belong to the latter, provided they have not been enticed by some artifice or fraud.

HIDDEN TREASURE He who by chance discovers hidden treasure in another’s property: ½ shall be allowed to the finder.

Of Other Personal Property (1) Abandoned – may be acquired (2) Lost (3) Hidden treasure – finder gets ½ by occupation; landowner gets ½ by accession; EXCEPT in CPG system, share goes to the partnership.

If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things found be of interest to science or the arts, the State may acquire them at their just price, which shall be divided in conformity with the rule stated.

A.3. SPECIAL RULES OCCUPATION OF A SWARM OF BEES

LOST MOVABLES; PROCEDURE AFTER FINDING LOST MOVABLES

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Whoever finds a movable, which is not treasure, must return it to its previous possessor. If unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place.

(1) Bilateral contract creating unilateral obligations on the donor’s part. (2) Requires CONSENT of BOTH donor and donee though it produces obligations only on the side of the DONOR, unless it is an onerous donation.

The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best.

B.3. REQUISITES (1) (2) (3) (4) (5)

If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at a public auction eight days after the publication.

Consent and capacity of the parties; Animus Donandi (intent to donate); Delivery of thing donated; Form as prescribed by law; and Impoverishment of donor’s patrimony and enrichment on part of donee.

B.4. WHAT MAY BE DONATED All present property or part thereof of the donor (1) Provided he reserves, in full ownership or usufruct, sufficient means for support of himself and all relatives entitled to be supported by donor at the time of acceptance. (2) Provided that no person may give or receive by way of donation, more than he may give or receive by will (NCC 752); also, reserves property sufficient to pay donor’s debts contracted before donation, otherwise, donation is in fraud of creditors (NCC 759, 1387). (3) If donation exceeds the disposable or free portion of his estate, the donation is inofficious. (4) EXCEPTIONS: (a) Donations provided for in marriage settlements between future spouses – must be not more than 1/5 of present property. (b) Donation propter nuptias by an ascendant consisting of jewelry, furniture or clothing not to exceed 1/10 of disposable portion.

Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses. If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, onetenth of the sum or of the price of the thing found.

B. DONATION Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.

B.1. OTHER INSTANCES CONSIDERED AS DONATION (1) When a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt. (2) When the gift imposes upon the donee a burden that is less than the value of the thing given.

B.5. WHAT MAY NOT BE DONATED FUTURE PROPERTY

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(1) Donations cannot comprehend future property. (2) “Future property” is understood as anything which the donor does not currently own although the donor may or may not own it later. (Osorio v Osorio [1921]) (3) Inheritance is NOT considered as future property. (Osorio v Osorio [1921])

As to minors Can’t be made by minors

May be made by minors (FC 78)

As to future property Cannot include future property

C. KINDS OF DONATIONS C.1. AS TO ITS TAKING EFFECT

May include future property (same rule as wills)

Limit as to donation of present property

(1) Donation Inter Vivos [NCC 729] Donation which shall take effect during the lifetime of the donor, though the property shall not be delivered till after the donor's death.

No limit to donation of present property provided legitimes are not impaired.

If present property is donated and property regime is ACP, limited to 1/5.

Grounds for revocation

Irrevocable EXCEPT for the ff grounds: (a) Subsequent birth of the donor’s children; (b) Donor’s failure to comply with imposed conditions; (c) Donee’s ingratitude; or (d) Reduction of donation by reason of inofficiousness.

Law on donations

See below (FC 86)

Causes for revocation of donation propter nuptias: (1) If the marriage is not celebrated or judicially declared void ab initio, except donations made in the marriage settlements; (2) When the marriage takes place without the consent of the parents or guardian, as required by law; (3) When the marriage is annulled, and the donee acted in bad faith; (4) Upon legal separation, the one being the guilty spouse; (5) If it is with a resolutory condition and the condition is complied with; or (6) When the donee has committed an act of ingratitude as specified by the provisions of the Civil Code on donations in general.

(2) Donation by Reason of Marriage/ Donation Propter Nuptias [FC 86] Requisites (a) Must be made BEFORE the celebration of marriage; (b) Made in CONSIDERATION of the marriage; and (c) Made in FAVOR of ONE or BOTH of the future spouses.

Ordinary Donations v. Donations Propter Nuptias Ordinary Propter Nuptias

Donation between spouses General Rule: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be VOID. The prohibition applies to

Express acceptance Necessary

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Not required

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persons living together as husband and wife without a valid marriage.

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Inter vivos

Mortis causa premature and ineffective because there can be no contract regarding future inheritance.

Exception: Moderate gifts which the spouses may give each other on the occasion of any family rejoicing.

As to transfer of ownership for right of disposition

(3) Donation Mortis Causa [NCC 728] (a) It only becomes effective upon the death of the donor. (b) The donor’s death ahead of the donee is a suspensive condition for the existence of the donation.

Ownership is immediately transferred. Delivery of possession is allowed after death.

Characteristics: (a) The transferor retains ownership and control of the property while alive; (b) The transfer is revocable at will before his death; and (c) The transfer will be VOID if the transferor should survive the transferee.

As to revocation Irrevocable – may Revocable upon be revoked only for exclusive will of the reasons donor. provided in CC 760, 764, 765.

Inter Vivos v. Mortis Causa Inter vivos Mortis causa

the the

As to reduction or suppression When it is When it is excessive or excessive or inofficious, it is reduced inofficious, being first, or even suppressed. preferred, it is reduced only after the donations mortis causa had been reduced or exhausted.

As to formalities Executed and accepted with formalities prescribed by CC.

Upon acceptance by the donee, but the effect of such retroacts to the time of death of the donor.

Must be in the form of a will, with all the formalities for the validity of wills.

As to effectivity Effective during the Effective after the death lifetime of the of the donor. donor.

Notes  The NATURE of the act, whether it’s one of disposition or of execution, is CONTROLLING to determine whether the donation is mortis causa or inter vivos.  What is important is the TIME of TRANSFER of ownership even if transfer of property donated may be subject to a condition or a term.

As to acceptance Acceptance must be made after the death of Acceptance must the donor, the donation be made during being effective only after the lifetime of the the death of donor. donor. Acceptance during the donor’s lifetime is

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(1) Must be made in a public instrument specifying the donated property and the burdens assumed by the donee. (2) The acceptance must be either: (a) In the same instrument; or (b) In another public instrument notified to the donor in authentic form and noted in both deeds. (3) Exceptions: (a) Donations propter nuptias – need no express acceptance. (b) Onerous donations – form governed by the rules of contracts.

 Whether the donation is inter vivos or mortis causa depends on whether the donor intended to transfer ownership over the properties upon the execution of the deed. [Gestopa v. CA (2002)]

C.2. AS TO CAUSE OR CONSIDERATION (1) Simple - made out of pure liberality or because of the merits of the donee. (2) Remuneratory - made for services already rendered to the donor. (3) Onerous - imposes a BURDEN inferior in value to property donated. (a) Improper - burden EQUAL in value to property donated (b) Sub-modo or modal - imposes a prestation upon donee as to how property donated will be applied. (c) Mixed donations – e.g. sale for price lower than value of property.

C.3. AS TO EXTINGUISHMENT

EFFECTIVITY

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D.2. PERFECTION Acceptance (1) Donation is perfected upon the donor’s learning of the acceptance. (2) Acceptance may be made during the lifetime of both donor and donee. (3) A document merely correcting the deed of donation does not constitute a new deed of donation so there is no need for a new acceptance (Osorio v Osorio [1921])

OR

(1) Pure – donation is without conditions or periods (2) Conditional – donation is subject to suspensive or resolutory conditions. (3) With a term

Who May Accept Donee: must accept personally or through an authorized person with special power for the purpose. [NCC 745]

D. FORMALITIES REQUIRED

Note: A joint donation (donation to two or more persons) could not be accepted by a done, independently of the other donee/s. (Genato v Lorenzo [1968])

D.1. HOW MADE AND ACCEPTED Movable properties [NCC 748] (1) The donation of a movable may be made orally or in writing. (2) Oral donation: requires the simultaneous delivery of the thing or of the document representing the right donated. (3) If the value of the movable donated exceeds P5,000, the donation and the acceptance should be in writing, otherwise, the donation is void.

Time Of Acceptance Acceptance must be done during the lifetime of the donor and the donee.

D.3. QUALIFICATIONS OF DONORS AND DONEES

Immovable properties [NCC 749]

Who May Give Donations

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All persons who may contract and dispose of their property may make a donation. [NCC 735] (b) Note: (1) Donor’s capacity shall be determined as of the time of the making of the donation. [NCC 737] (2) Capacity to donate is required for donations inter vivos and NOT in donations mortis causa. (3) Donor’s capacity is determined as of the time of the donation. Subsequent incapacity is immaterial.

(c)

(d)

Who May Receive Donations (1) All who are not specially disqualified by law. (NCC 738) (2) Minors and others who cannot enter into a contract: acceptance may be made through their parents or legal representatives. [NCC 741] (3) Donations made to conceived and unborn children: those who would legally represent them if they were already born may accept the donations. [NCC 737]

(e)

(f)

Who May Not Give or Receive Donations (1) By reason of public policy (NCC 739) (a) Those made between persons guilty of adultery or concubinage at the time of the donation; (b) Those made between persons guilty of the same criminal offense if the donation is made in consideration thereof; or (c) Those made to a public officer, his spouse, descendants, and/or ascendants by reason of the office.

(g)

(h)

lead a corrupt or immoral life, or attempted against their virtue; Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; 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; 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; Any person convicted of adultery or concubinage with the spouse of the testator; Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; 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; Any person who falsifies or forges a supposed will of the decedent.

NCC 1027: (a) The 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) The relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or

(2) By reason of the donee’s unworthiness [NCC 1032 and 1027 except (d)]

NCC 1032: (a) Parents who have abandoned their children or induced their daughters to

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institution to which such priest or minister may belong; (c) A 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; nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant, descendant, brother, sister, or spouse, shall be valid; (d) Any physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness; or (e) Individuals, associations and corporations not permitted by law to inherit.

(b) When the donation to husband and wife is joint with the right of accretion UNLESS the donor provides otherwise. (7) Donations by a person to his non-heirs are collationable. (Liguez v CA) (8) Donations made to one’s heirs must expressly prohibit collation to be exempted from collation. (De Roma v CA [1987])

E.2. SPECIAL PROVISIONS (1) Reservation by donor of power to dispose (in whole or in part) or to encumber property donated [NCC 755]  The donor may reserve the right to dispose of some things donated, or of some amount, which shall be a charge thereon.  But if he should die without having made use of this right, the property or amount reserved shall belong to the donee.

(3) By reason of prejudice to creditors or heirs (voidable)

E. EFFECTS LIMITATIONS

OF

DONATION

CIVIL LAW

/

(2) Donation of naked ownership to one donee and usufruct to another [NCC 756]  The naked ownership and the usufruct may be donated separately, provided that all the donees are living at the time of the donation.

E.1. IN GENERAL (1) The donee may demand actual delivery of thing donated; (2) The donee is SUBROGATED to the rights of the donor in the property donated; (3) The donor is NOT obliged to warrant the things donated EXCEPT in onerous donations where the donor is liable for eviction up to the extent of the burden; [NCC 754] (4) The donor is liable for EVICTION or HIDDEN DEFECTS in case of bad faith on his part; [NCC 754] (5) In donation propter nuptias, the donor must RELEASE the property donated from mortgages and other encumbrances UNLESS the contrary has been stipulated; (6) Donations to several donees jointly: NO right of accretion EXCEPT: (a) When the donor provides otherwise; or

(3) Conventional reversion in favor of donor or other person [NCC 757]  If made in favor of the donor: Reversion may be for any case and circumstance.  If made in favor of other persons: Such persons must be living at the time of the donation.  If the rule is violated, the stipulation on reversion is void but the donation is still valid. (4) Payment of donor’s debt [NCC 758]  If expressly stipulated: the donee must pay only the debts contracted before the donation unless specified otherwise. But

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in no case shall the donee be responsible for debts exceeding the value of the property donated unless clearly intended. If there’s no stipulation – the donee will be answerable only for the donor’s debt only in case the donation is in fraud of creditors.

CIVIL LAW

illegitimate children, even though they be posthumous; (b) If the child of the donor, whom the latter believed to be dead when he made the donation, should turn out to be living; or (c) If the donor subsequently adopt a minor child.

(5) Illegal or impossible conditions [NCC 1183]  Impossible conditions: those contrary to good customs or public policy and those prohibited by law shall annul the obligation, which depends upon them.  If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.  The condition not to do an impossible thing shall be considered as not having been agreed upon.

The donation shall be revoked or reduced insofar as it exceeds the portion that may be freely disposed of by will, taking into account the whole estate of the donor at the time of the birth, appearance or adoption of a child. (8) Inofficious Donations (a) The donation shall be reduced with regard to the excess. (b) But this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. (c) Only those who, at the time of the donor's death, have a right to the legitime and their heirs and successors-in-interest may ask for the reduction or inofficious donations. (d) If, there being two or more donations, the disposable portion is not sufficient to cover all of them, those of the more recent date shall be suppressed or reduced with regard to the excess.

(6) Double donations Rule: Priority in time, priority in right.  If movable: one who first took possession in good faith.  If immovable: one who recorded in registry of property in good faith o If there is no inscription, the one who first took possession in good faith. o If there is no possession, one who can present the oldest title. (7) Excessive/Inofficious Donations A type of donation in which a person gives or receives more than what he may give or receive by will. [NCC 752]

(9) Scope of amount [NCC 750-752] (a) The donations may comprehend all the present property of the donor, or part thereof.

Donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or illegitimate, may be revoked or reduced by the happening of any of these events: (a) If the donor, after the donation, should have legitimate or legitimated or

Provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor

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(b) Donations cannot comprehend future property.

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Revocation

Reduction

Total withdrawal of Amount is only insofar amount, whether as the legitime is the legitime is prejudiced impaired or not

Future property is understood anything which the donor cannot dispose of at the time of the donation. (10) In fraud of creditors [NCC 759] (a) Donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation. (b) The donee shall be responsible therefor only when the donation has been made in fraud of creditors.

Benefits the donor

Benefits the donor’s heirs (except when made on the ground of the appearance of a child)

G.1. GROUNDS FOR REDUCTION (1) Inofficiousness A donation where a person gives or receives more than what he may give or receive by will is inofficious. [NCC 752] (2) Subsequent birth, reappearance of child or adoption of minor by donor

F. VOID DONATIONS [NCC 739-740, 1027] F.1. THOSE MADE BETWEEN PERSONS WHO WERE GUILTY OF ADULTERY OR CONCUBINAGE AT THE TIME OF THE DONATION

Effects of subsequent birth, reappearance or adoption: (a) A donation is VALID if it does not exceed the free part computed as of the birth, adoption or reappearance of the child. (b) The donee must return the property or its value at the time of the donation. (c) The fruits must be returned from the filing of the action. (d) Mortgages by the donee are valid but may be discharged subject to reimbursement from the donee.

NOTE: The spouse of the donor or donee may bring the action for declaration of nullity and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.

F.2. THOSE MADE BETWEEN PERSONS FOUND GUILTY OF THE SAME CRIMINAL OFFENSE, IN CONSIDERATION THEREOF F.3. THOSE MADE TO A PUBLIC OFFICER OR HIS WIFE, DESCENDANTS AND ASCENDANTS, BY REASON OF HIS OFFICE

Extent of revocation: only to the extent of the presumptive legitime of the child. (a) Insufficient means of support (b) In fraud of creditors (c) Prescription – 4 years from either: (i) Birth of first legitimate child; (ii) Legitimation, adoption, recognition of first child; (iii) Judicial declaration of filiation; or

F.4. THOSE MADE TO PERSONS INCAPACITATED TO SUCCEED BY WILL. [NCC. 1027]

G. REVOCATION V. REDUCTION

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(iv) Knowledge of information on the existence of a child believed to be dead.

Effect as to fruits [NCC 768] When the donation is revoked for any of the causes stated in NCC 760, or by reason of ingratitude, or when it is reduced because it is inofficious, donee shall not return the fruits except from the filing of the complaint.

REVOCATION (1) Failure to comply with any of the conditions imposed by the donor upon the donee (2) For additional legitime for subsequent birth, reappearance or adoption (3) Ingratitude The following cases are forms of ingratitude: (1) If the donee should commit some offense against the person, the honor or the property of the donor, or of his wife or children under his parental authority; (2) If the donee imputes to the donor 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 donee himself, his wife or children under his authority; or (3) If he unduly refuses him support when the donee is legally or morally bound to give support to the donor.

 If the revocation is based upon noncompliance with any of the conditions imposed in the donation, the donee shall return not only the property but also the fruits thereof which he may have received after having failed to fulfill the condition.

Applies to all donations EXCEPT: (1) Mortis causa (2) Propter nuptias (3) Onerous donations Notes: (1) Founded on moral duty: one who received a donation must be grateful to his benefactor. (2) Conviction is NOT necessary. (3) Time to file action for revocation – within 1yr from knowledge of the offense. Who may file Donor must bring action transmissible to his heirs.

himself;

CIVIL LAW

not

Effect of revocation on alienations and encumbrances [NCC 766] (1) Alienations and mortgages effected before the notation of the complaint for revocation in the Registry of Property shall subsist. (2) Later ones shall be void.

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What may be donated All present property of the donor or part thereof

Limitation: (1) He reserves in full ownership or in usufruct, sufficient means for his support and for all relatives who are at the time of the acceptance of the donation are, by law, entitled to be supported Effect of non-reservation: reduction of the donation (2) He reserves sufficient property at the time of the donation for the full settlement of his debts Effect of non-reservation: considered to be a donation in fraud of creditors, and donee may be liable for damages

What may not be donated (1) Future property; those which the donor cannot dispose of at the time of the donation [NCC 751] (2) More than what he may give or receive by will [NCC 752] If exceeds: inofficious Donations made to several persons jointly No accretion – one donee does not get the share Exception: those given to husband and wife, of the other donees who did not accept (Article except when the donor otherwise provides 753) Donor Who are allowed: All persons who may contract (of Who are not allowed: legal age) and dispose of their property [NCC 735] (1) Guardians and trustees with respect to the property entrusted to them [NCC 736] Donor’s capacity is determined at the time of the (2) Made between person who are guilty of making of donation [NCC 737] adultery or concubinage [NCC 739] Made between persons found guilty of the same criminal offense, in consideration thereof [NCC 739] Donee Who are allowed to accept donations: Those who Who are not allowed: are not specifically disqualified by law (Article 738) (1) Made between person who are guilty of adultery or concubinage [NCC 739] Those who are allowed, with qualifications: (2) Made between persons found guilty of the (1) Minors and others who are incapacitated (see same criminal offense, in consideration thereof Article 38), provided that their acceptance is [NCC 739] done through their parents or legal (3) Made to a public officer or his wife, descendant representatives [NCC 741] and ascendants, by reason of his office [NCC

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(2) Conceived and unborn children, provided that 739] the donation is accepted by those who would (4) Those who cannot succeed by will [NCC 740] legally represent them if they were already born Those made to incapacitated persons, although simulated under the guise of another contract [NCC 743] Acceptance of the donation Who may accept [NCC 745] When to accept: during the lifetime of the donor or (1) Donee personally donee [NCC 746] (2) Authorized person with a special power for the purpose or with a general sufficient power What the donee acquires with the thing He shall be subrogated to all the rights and actions that would pertain to the donor in case of eviction [NCC 754] Obligation of the donor No obligation to warrant [NCC 754]

Exception: when the donation is onerous Obligation of the donee

If the donation so states, the donee may be Exception: when contrary intention appears obliged to pay the debts previously contracted by the donor and in no case shall he be responsible for the debts exceeding the value of the thing donated [NCC 758] What may be reserved by the donor Right to dispose of some of the things donated, or If the donor dies without exercising this right of some amount which shall be a charge thereon Reversion The property donated may be restored or returned Limitation to (2): the third person would be living to at the time of the donation (1) Donor or his estate; or (2) Another person Revocation/Reduction Time of Action

Transmissibility

Effect

Liability (Fruits)

Birth, appearance, adoption Within 4 years from Transmitted to children Property is returned Fruits returned from the birth, legitimation and and descendants upon If the property has been filing of the complaint adoption the death of donor sold, its value at the time of donation shall be returned. If the property was mortgaged, the donor may redeem the mortgage, with right to

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Time of Action

Transmissibility

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Effect

Liability (Fruits)

recover the amount from the donee Non-compliance with condition Within 4 years from non- May be transmitted to compliance donor’s heirs and may be exercised against donee’s heirs

Property returned, Fruits received after alienations and having failed to fulfill mortgages void subject condition returned to rights of third persons in good faith

Ingratitude Within 1 year after Generally not knowledge of the fact transmitted to heirs of and it was possible for donor/ donee him to bring the action

Property returned, but Fruits received from the alienations and filing of the complaint mortgages effected returned before the notation of the complaint for revocation in the registry of property subsist

Failure to reserve sufficient means for support At any time, by the donor or relatives Not transmissible entitled to support

Reduced to the extent Donee entitled necessary to provide support

Inofficiousness for being in excess of what the donor can give by will Within 5 years from the Transmitted to donor’s Donation takes effect on Donee entitled death of the donor heirs the lifetime of donor. Reduction only upon his death with regard to the excess Fraud against creditors Rescission within 4 Transmitted to creditor’s Returned for the benefit Fruits returned/ if years from the heirs or successors-in- of the creditor who impossible, indemnify perfection of donation/ interest brought the action creditor for damages knowledge of the donation

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alienates a thing but remains in possession in another concept as lesee or depositary. (3) Quasi tradition: delivery of incorporeal things or rights by the use by the grantee of his rights with the grantor’s consent. (4) Tradicion by operation of law: delivery which is not included in the foregoing modes of delivery and where the delivery is effected solely by virtue of an express provision of law.

C. TRADITION It is a derivative mode of acquiring ownership and other real rights by virtue of which, there being intention and capacity on the part of the grantor and grantee and the pre-existence of said rights in the estate of the grantor, they are transmitted to the grantee through a just title. REQUISITES (1) Pre-existence in the estate of the grantor of the right to be transmitted; (2) Just cause or title for the transmission; (3) Intention on the part of the grantor to grant and on the part of the grantees to acquire; (4) Capacity to transmit and to acquire; and (5) An act that gives it outward form, physically, symbolically, or legally.

Prescription DEFINITION By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law.

PURPOSE (1) Ownership is transferred, among other means, by tradition. (2) The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. KINDS (1) Real Tradition: physical delivery (2) Constructive Tradition: when the delivery of the thing is not real or material but consists merely in certain facts indicative of the same (a) Symbolical Tradition: done through the delivery of signs or things which represent that which is being transmitted. (e.g. keys or title itself) (b) Tradition by public instrument: consists in the substitution of real delivery of possession by a public writing with the delivery of a document which evidences the transaction. (c) Tradicio longa manu: made by the grantor pointing out to the grantee the thing to be delivered. (d) Tradicio brevi manu: takes place when the grantee is already in possession of the thing. (e.g. when the lessee buys the thing leased to him) (e) Tradicion constitutum possessorium: similar to brevi manu but in the opposite sense – when the owner

CIVIL LAW

In the same way, rights and conditions are lost by prescription. It is a means of acquiring ownership and other real rights or losing rights or actions to enforce such rights through the lapse of time. RATIONALE It is purely statutory in origin. It is founded on grounds of public policy which requires for the peace of society, that juridical relations susceptible of doubt and which may give rise to disputes, be fixed and established after the lapse of a determinate time so that ownership and other rights may be certain for those who have claim in them. KINDS OF PRESCRIPTION (1) Acquisitive prescription (2) Extinctive prescription ACQUISITIVE PRESCRIPTION (1) The acquisition of ownership and other real rights through possession of a thing in the manner and condition provided by law. (2) May be ordinary or extraordinary: (a) Ordinary: requires possession of things in good faith and with just title for the time fixed by law.

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(b) Extraordinary: acquisition of ownership and other real rights without need of title or of good faith or any other condition.

ownership and other of rights, whether real real rights or personal Vests the property and Vests the property and raise a new title in the raise a new title in the occupant occupant

Prescription where possession in good faith converted into possession in bad faith: Ordinary (1) Movable properties - 4 years (2) Immovable properties - 10 years Extraordinary: (1) Movable properties - 8 years (2) Immovable properties - 30 years As a mode of acquisition, prescription requires existence of following: (1) Capacity of the claimant to acquire by prescription; (2) A thing capable of acquisition by prescription; (3) Adverse possession of the thing under certain conditions; and (4) Lapse of time provided by law.

Merely results in the loss of a real or personal right, or bars the cause of action to enforce said right

Can be proven under the general issue without its being affirmatively pleaded

Should be affirmatively pleaded and proved to bar the action or claim of the adverse party

BY OFFENDER The offender can never acquire, through prescription, movable properties possessed through a crime. REGISTERED LANDS PD 1529 (AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES) No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession.

Note:  For extraordinary prescription, only first 4 are required  Possession has to be in the concept of an owner, public, peaceful, and uninterrupted.

RIGHTS NOT EXTINGUISHED BY PRESCRIPTION [NCC 1143] (1) To demand a right of way, regulated by NCC 649; (2) To bring an action to abate a public or private nuisance.

EXTINCTIVE PRESCRIPTION The loss or extinguishment of property rights or actions through the possession by another of a thing for the period provided by law or through failure to bring the necessary action to enforce one’s right within the period fixed by law.

ACTION TO QUIET TITLE IF PLAINTIFF IS IN POSSESSION (1) When plaintiff is in possession of the property: the action to quiet title does not prescribe. (2) The reason is that the owner of the property or right may wait until his possession is disturbed or his title is assailed before taking steps to vindicate his right.

Acquisitive Prescription Extinctive Prescription

Applicable

Results in the acquisition of ownership or other real rights in a person as well as the loss of said ownership or real rights in another

NO PRESCRIPTION APPLICABLE

The following are only required in ordinary prescriptions: (1) Good faith of the possessor; and (2) Proof of just title

Requires positive action of the possessor (a claimant) who is not the Owner

CIVIL LAW

Requires inaction of the owner out of possession or neglect of one with a right to bring his action

to Applicable to all kinds

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VOID CONTRACTS (1) The action or defense for the declaration of the inexistence of a contract does not prescribe. [NCC 1410] (2) The title is susceptible to direct as well as to collateral attack. [Ferrer v. Bautista, 1994]

(1) The action rescribes in 8 years from the time the possession thereof is lost. [NCC 1140] (2) However, the action shall not prosper if it is brought after 4 years when the possessor has already acquired title by ordinary acquisitive prescription. [NCC 1132] (3) If the possessor acquired the movable in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid.

ACTION TO DEMAND PARTITION No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership. [NCC 494]

TO RECOVER IMMOVABLES (1) Real actions prescribe after 30 years [NCC 1141] (2) UNLESS the possessor has acquired ownership of the immovable by ordinary acquisitive prescription through possession of 10 years. [NCC 1134] (3) Action for reconveyance (a) Based on fraud: Prescribes 4 years from the discovery of fraud. (b) Based on implied or constructive trust: 10 years from the alleged fraudulent registration or date of issuance of certificate of title over the property.

PROPERTY OF PUBLIC DOMINION Prescription, both acquisitive and extinctive, does not run against the State in the exercise of its sovereign function to protect its interest EXCEPT with respect to its patrimonial property which may be the object of prescription. (NCC 1113) PRESCRIPTION LACHES

DISTINGUISHED

Prescription

FROM

Laches

Concerned with the Concerned with the fact of delay effect of delay

OTHER ACTIONS (1) Action to foreclose mortgage: prescribes after 10 years from the time the obligation secured by the mortgage becomes due and demandable (2) Actions that Prescribe in 10 Years [NCC 1144] (a) Upon a written contract (b) Upon an obligation created by law (c) Upon a judgment

A question or a matter Principally a question of time of inequity of permitting a claim to be enforced, this inequity being founded on some subsequent change in the condition or the relation of the parties Statutory

NOT statutory

Applies at law

Applies at equity

The computation of the period of prescription of any cause or right of action, which is the same as saying prescription of the action, should start from the date the cause of action accrues or from the day the right of the plaintiff is violated. [Nabus v. CA, 1991]

Cannot be availed of Being a defense of unless it is especially equity, need not be pleaded as an specifically pleaded affirmative allegation Based on a fixed time

CIVIL LAW

NOT based on a fixed time

PRESCRIPTION OR LIMITATION OF ACTIONS

(3) Actions that Prescribe in 6 Years [NCC 1145] (a) Upon an oral contract (b) Upon a quasi-contract

TO RECOVER MOVABLE PROPERTIES

(4) Actions that Prescribe in 4 Years [NCC 1145]

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(a) Upon an injury to the rights of the plaintiff (b) Upon a quasi-delict BUT when the action arises from any act of any public officer involving the exercise of powers arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within 1 year.

CIVIL LAW starts anew the prescriptive period [The Overseas Bank of Manila v. Geraldez, (1979)] Not all acts of acknowledgement of a debt interrupt prescription. To produce such effect, the acknowledgment must be “written”, so that the payment, if not coupled with the communication signed by the payor would interrupt the running of the period of prescription [PNB v. Osete (1968)]

(5) Actions that Prescribe in One Year or Less [NCC 1147] (a) For forcible entry or unlawful detainer (b) For defamation (6) Other Actions that Prescribe in 1 Year under the Civil Code (a) To recover possession de facto [NCC 554 (4)] (b) To revoke a donation on the ground of ingratitude [NCC 769] (c) To rescind or recover damages if immovable is sold with non-apparent burden or servitude [NCC 1560 (3,4)] (d) To enforce warranty of solvency in assignment credits [NCC 629] (7) Where Periods of Other Actions Not Fixed in the Civil Code and in Other Laws All other actions whose periods are not fixed in the Civil Code or in other laws must be brought within 5 years from the time the right of action accrues. [NCC 1149] (8) Interruption [NCC 1155] The prescription of actions is interrupted when: (a) They are filed before the court (b) When there is a written extrajudicial demand by the creditors (c) When there is any written acknowledgment of the debt by the debtor Civil actions are deemed commenced from the date of the filing and docketing of the complaint with the Clerk of Court. [Cabrera v. Riano (1963)] A written extrajudicial demand wipes out the period that has already elapsed and

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OBLIGATIONS

CIVIL LAW

CIVIL LAW

OBLIGATIONS

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I. DEFINITION

CIVIL LAW

Classification of Obligations AS TO SANCTION (1) CIVIL OBLIGATION (or perfect obligation) – give a right of action to compel their performance; the sanction is judicial process (2) NATURAL OBLIGATION – midway between civil and purely moral obligations; there is a juridical tie, but performance is left to the will of the debtor; after voluntary fulfillment by the obligor, the sanction is the law (3) MORAL OBLIGATION (or imperfect obligation) – the sanction is conscience or morality

Art. 1156. An obligation is a juridical necessity to give, to do or not to do. Elements of an Obligation (1) ACTIVE SUBJECT (Obligee/Creditor): The person who has the right or power to demand the prestation. (2) PASSIVE SUBJECT (Obligor/Debtor): The person bound to perform the prestation. (3) PRESTATION (Object): The conduct required to be observed by the debtor/obligor (to give, to do, or not to do). (4) VINCULUM JURIS (Juridical or Legal Tie; Efficient Cause): That which binds or connects the parties to the obligation. (De Leon)

Natural Obligations Art. 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being 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 the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles.

Different Kinds of Prestations (1) TO GIVE: real obligation; to deliver either (a) a specific or determinate thing, or (b) a generic or indeterminate thing. (2) TO DO: positive personal obligation; includes all kinds of work or service. (3) NOT TO DO: negative personal obligation; to abstain from doing an act; includes the obligation not to give.

Natural obligations are midway between civil obligations and purely moral obligations. It is distinguished from moral in that it produces some juridical effects (ex. Right to retention), but is distinguished from moral in that it does not give rise to an action to compel its performance [Tolentino].

Requisites of a Prestation: (1) Must be possible, physically and juridically; (2) Must be determinate, or at least, determinable; (3) Must have a possible equivalent in money.

Payment is voluntary when the debtor knows that the obligation is a natural one.

Art. 1156 provides the definition of civil obligations only; it does not cover natural obligations.

“Fulfillment” does not refer only to the delivery of things, but also to the performance of an act, the giving of security, and the execution of a document.

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Rules: (1) The promise to perform a natural obligation is as effective as performance itself, and converts the natural obligation to a civil obligation. (2) Partial payment of a natural obligation does not make it civil; the part paid cannot be recovered, but payment of the balance cannot be enforced. The exception would be if the natural obligation is susceptible of ratification. (3) Guaranties for the performance of a natural obligation are valid. (4) Payment of a natural obligation is not subject to reduction by reason of inofficiousness, appearance of children or ingratitude.

CIVIL LAW

Requisites under Art 1424 (1) There is a civil obligation (2) The right to sue upon it has already lapsed by extinctive prescription (3) Obligor performs contract voluntarily Consequence: Obligor cannot recover what he has delivered or value of the service he rendered. Art. 1425. When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot recover what he has paid. Requisites under Art 1425 (1) There is a debt (2) Action upon the debt has prescribed (3) A third person, without the knowledge or against the will of the debtor, pays the debt (4) Debtor voluntarily reimburses the third person

The contractor builds additional works, but is paid the additional cost of such works. Payor characterizes the payment as a "mistake," and not a "voluntary" fulfillment under Art. 1423 of the Civil Code. Hence, it urges the application of the principle of solution indebiti. However, it is not enough to prove that the payments made by payor to contractor were "not due" because there was no prior authorization or agreement with respect to additional works. There is a further requirement that the payment by the debtor was made either through mistake or under a cloud of doubt. In short, for the provisions on solution indebiti to apply, there has to be evidence establishing the frame of mind of the payor at the time the payment was made [Uniwide v Titan-Ikeda, 2006].

Consequence: Obligor cannot recover what he has paid. Art. 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned.

Examples of Natural Obligations Art. 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered.

Art. 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith.

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Art 1426 and 1427 Distinguished 1426 1427 Presupposes a prior No prior annulment annulment is involved Refers to any object Refers to money or fungible things Consumption in Requires good faith is not consumption in good required faith

law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable. Requisites under Art 1430 (1) There is a will providing for a legacy (2) The will is declared void because it was not executed in accordance with the formalities required by law (3) Heir pays legacy

Art. 1428. When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. Requisites under Art 1428 (1) There is a civil obligation (2) An action to enforce such has failed (3) Defendant voluntarily performs obligation

CIVIL LAW

Consequence: irrevocable.

Payment

is

effective

and

As to Subject Matter (1) REAL – obligation to give (2) PERSONAL – obligation to do or not to do the As to the Affirmativeness or Negativeness of the Obligation (1) POSITIVE/AFFIRMATIVE – obligation to give or to do (2) NEGATIVE: obligation not to give or not to do

Consequence: Defendant cannot demand return of what he has delivered or the payment of the value of the service Art. 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by the payer.

As to Persons Obliged (1) UNILATERAL – only one of the parties is bound (2) BILATERAL – both parties are bound a. Reciprocal – performance by one is dependent on the performance by the other b. Non-reciprocal – performance by one is independent of the other [Paras]

Requisites under Art 1429 (1) Decedent incurred in debt during his lifetime (2) Heir voluntarily pays debt (3) Value of debt exceeds value of heir’s inheritance

Sources of Obligations Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.

Consequence: Payment is valid and heir cannot rescind it. Art. 1430. When a will is declared void because it has not been executed in accordance with the formalities required by

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A single act or omission may give rise to different causes of action. A concurrence of scope in regard to negligent acts does not destroy the distinction between the civil liability arising from a crime and the responsibility for cuasi-delitos or culpa extracontractual. The same negligent act causing damages may produce civil liability arising from a crime... or create an action for cuasidelito or culpa extra-contractual. [Barredo vs. Garcia, 1942]

4. To deliver its 1170) accessions and 3. To fruits from the accessories (1166) time the obligation to (a) accessions – deliver arises (1164) everything which is 4. Not to be produced by a thing, compelled to receive a or which is different one, incorporated or although of the same attached thereto, value as, or more excluding fruits valuable than that (b) accessories – which is due (1244) things destined for the embellishment, use or preservation of another thing of more importance 5. To pay damages in case of breach (1170) To Give a Generic Thing 1. To take care of the 1. To ask that the thing (1163) obligation be 2. To deliver a thing of complied with (1165) the quality intended 2. To ask that the by the parties taking obligation be into consideration the complied with by a purpose of the third person at the obligation and other expense of the debtor circumstances (1246) 3. To recover - Creditor cannot damages in case of demand a thing of breach (1165) superior quality; 4. Not to be neither can the debtor compelled to receive a deliver a thing of different one, inferior quality. although of the same 4. To pay damages in value as, or more case of breach (1170) valuable than that which is due (1244)

II. NATURE AND EFFECT OF OBLIGATIONS A.OBLIGATION TO GIVE Limited Generic Thing Particularly Object is When the designated or designated generic physically only by its objects are segregated class/ genus/ confined to a from all species. particular others of the class. same class (Art. 1460); Identified by individuality. Cannot be Can be substituted substituted against the by any of the obligee’s will. same class and same kind. Specific Thing

CIVIL LAW

Generic Thing

B. OBLIGATION TO DO OR NOT TO DO Rights and Duties of Parties Duties of the Debtor Rights of the Creditor To Do 1. To do it (1167) 1. To have the 2. To shoulder the obligation executed at cost of execution the cost of the debtor should he fail to do it (1167) (1167) 2. To recover 3. To undo what has damages in case of been poorly done breach (1170) (1167)

Duties of the Debtor Rights of the Creditor To Give a Specific Thing 1. To preserve or take 1. To compel delivery care of the thing due (1165) (1163) 2. To recover 2. To deliver the thing damages in case of itself (1165) breach, exclusive or in 3. To deliver the fruits addition to specific of the thing (1164) performance (1165; 185

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4. To pay damages in Note: The debtor case of breach (1170) cannot be compelled to perform his obligation. The ultimate sanction of civil obligations is indemnification of damages. Not To Do 1. Not to do what 1. To ask to undo what should not be done should not be done, at 2. To shoulder cost of the debtor’s expense. undoing what should (1168) not have been done 2. To recover (1168) damages, where it 3. To pay damages in would be physically or case of breach (1170) legally impossible to undo what should not have been done, because of : a. the very nature of the act itself; b. rights acquired by third persons who acted in good faith; c. when the effects of the acts prohibited are definite in character and will not cease even if the thing prohibited be undone.

CIVIL LAW

Art. 1234. 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. In order that there may be substantial performance of an obligation, there must have been an attempt in good faith to perform, without any willful or intentional departure therefrom. The deviation from the obligation must be slight, and the omission or defect must be technical and unimportant, and must not pervade the whole or be so material that the object which the parties intended to accomplish in a particular manner is not attained. The non-performance of a material part of a contract will prevent the performance from amounting to a substantial compliance… The compulsion of payment is predicated on the substantial benefit derived by the obligee from the partial performance. Although compelled to pay, the obligee is nonetheless entitled to an allowance for the sum required to remedy omissions or defects and to complete the work agreed upon. [International Hotel Corp v Joaquin, 2013]

C. BREACH The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. [Cannu v Galang, 2005]

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

C.1. COMPLETE FAILURE TO PERFORM Substantial Breach 1. Total breach 2. Amounts to nonperformance, basis for rescission (resolution) under Art. 1191 and payment of damages

C.2. DEFAULT, DELAY, OR MORA

Slight or Casual Breach 1. Partial breach 2. There is partial/ substantial performance in good faith 3. Gives rise to liability for damages only (1234)

Failure to perform an obligation on time which constitutes breach of the obligation. [De Leon] Rules on Default, Delay, or Mora Unilateral Obligations Reciprocal Obligations General Rule: Neither party incurs in “No demand, no delay if the other does delay.” not comply or is not ready to comply in a The mere expiration proper manner with 186

UP LAW BOC of the period fixed by the parties is not enough in order that the debtor may incur in delay. 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. (1169 par. 1)

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Mora solvendi – Delay on the part of the debtor to fulfil his obligation either to give (ex re) or to do (ex persona).

what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1169 par. 3)

Requisites: 1. Obligation must be liquidated, due and demandable 2. Non-performance by the debtor within the period agreed upon 3. Demand, judicial or extra-judicial, by the creditor, unless demand is not necessary under the circumstances enumerated in Art 1169 par (2).

No delay if neither performs.

Exceptions: Demand is not necessary in order that delay may exist under the circumstances listed in Art 1169 par 2, (1)(3).

There is no mora solvendi in: a) Negative obligations because delay is impossible [De Leon] b) Natural obligations [Tolentino] Effects: 1. The debtor is liable for damages. [Art. 1170] 2. For determinate objects, the debtor shall bear the risk of loss, even if the loss is due to fortuitous events.

Demand may be judicial or extrajudicial. When demand is not necessary in order that delay may exist (Art. 1169 par 2) (1) When the obligation or the law expressly so declare; Note: It is insufficient that the law or obligation fixes a date for performance. It must further state expressly that after the period lapses, default will commence; OR (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 demand would be useless, as when the obligor has rendered it beyond his power to perform.

Moraaccipiendi – Delay on the part of the creditor to accept the performance of the obligation Requisites: (1) Debtor offers performance. (2) Offer must be in compliance with the prestation as it should be performed. (3) Creditor refuses performance without just cause. Effects: (1) The responsibility of the debtor is reduced to fraud and gross negligence. (2) The debtor is exempted from risk of loss of the thing, which is borne by the creditor.

Kinds of Delay; Requisites and Effects (1) Mora Solvendi (2) Mora Accipiendi (3) Compensatio Morae

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(3) The expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor. (4) If the obligation bears interest, the debtor does not have to pay from the time of delay. (5) The creditor is liable for damages. (6) The debtor may relieve himself of the obligation by consigning the thing.

Second infractor not liable for damages at all; only the first infractor is liable, but with his liability mitigated

CIVIL LAW Does not appear to consider which infractor first committed the breach

Articles 1192 and 2215 are not irreconcilably conflicting. The plaintiff referred to in Article 2215(1) should be deemed to be the second infractor, while the one whose liability for damages may be mitigated is the first infractor. Furthermore, the directions to equitably temper the liability of the first infractor in Articles 1192 and 2215 are both subject to the discretion of the court, despite the word "shall" in Article 1192, in the sense that it is for the courts to decide what is equitable under the circumstances. (Ong v Bognalbal, 2006)

Compensatiomorae – Delay of both parties in reciprocal obligations. Effects: 1. Delay of the obligor cancels delay of obligee (and vice versa) hence it is as if there is no default. 2. The liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. [Art. 1192]

C.3. FRAUD (DOLO) IN THE PERFORMANCE OF THE OBLIGATION Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.

Cessation of the Effects of Mora: (1) Express or implied renunciation by the creditor; (2) Prescription.

Fraud (dolo) is the deliberate or intentional evasion of the normal fulfilment of an obligation. [De Leon]

Equitable Tempering under Art. 1192 vs. Under Art. 2215 [Ong v Bognalbal, 2006] Art 1192 Art 2215 “In case both parties “In contracts, quasihave committed a contracts, and quasibreach of the delicts, the court may obligation, the equitably mitigate the liability of the first damages under infractorshall be circumstances other equitably tempered than the case referred by the courts. xxx” to in the preceding article, as in the ff. instances: (1) That the plaintiff himself has contravened the terms of the contract xxx”

A waiver of future fraud is void but past fraud may be subject of a valid waiver by the aggrieved party. [De Leon] Distinguished from Casual Fraud Causal Fraud Fraud in the (dolo causante and Performance dolo incidente) [Art. 1170] [Arts. 1338, 1344] Definition The deliberate and Every kind of intentional evasion of deception for the the normal fulfilment purpose of leading of obligations. another party into [International error and execute a Corporate Bank v particular act. 188

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CIVIL LAW (2) It must have induced the other party to enter into the contract; (3) It must have been serious; and (4) It must have resulted in damage or injury to the party seeking annulment. [Tolentino]

Gueco, 2001] When Present During the During the time of performance of a pre- birth or perfection of existing obligation the obligation Purpose To evade normal To secure consent of fulfilment of another to enter the obligation contract(dolo causante) To influence a party regarding an incident to the contract (dolo incidente) Result Breach of the Vitiation of consent obligation Remedy Obligee may recover Innocent party may damages (1344) annul the contract(if dolo causante) Damages (both dolo causante or incidente) Obligation Involved Valid obligation Voidable obligation(if dolo causante) Valid obligation (if dolo incidente)

C.4. NEGLIGENCE (CULPA) IN THE PERFORMANCE OF THE OBLIGATION Art. 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. The fault or negligence of the obligor 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] Diligence Required [De Leon] (1) By stipulation of the parties (2) By law, in the absence of stipulation (3) Diligence of a good father of a family, if both the contract and law are silent. (1173 par 2) (4) Future negligence may be waived except in cases where the nature of the obligation or the public requires another standard of care (i.e. common carriers) Note: Only future simple negligence may be waived. Future gross negligence may not be waived since such negligence amounts to fraud.

Dolo Causante – that which determines or is the essential cause of the contract Dolo Incidente–refers only to some particular or accident of the obligation In order that fraud may vitiate consent, it must be the dolo causante and not merely the dolo incidente, inducement to the making of the contract. The false representation was used by plaintiff to get from defendant a bigger share of net profits. This is just incidental to the matter in agreement... because despite plaintiff’s deceit, respondent would have still entered into the contract. [Woodhouse vs. Halili, 1953]

Exceptions: Common Carriers Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, 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

Requisites for Fraud to Vitiate a Contract: (1) It must have been employed by one contracting party upon the other; 189

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Test of Negligence Did the defendant in doing the alleged negligent act use the reasonable care and caution, which an ordinary and prudent person would have used in the same situation? If not, then he is guilty of negligence. [Mandarin Villa Inc. vs. CA, 1996]

of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. Hotel and Inn-keepers Art. 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

Kinds of Civil Negligence Culpa Contractual Negligence is merely incidental in the performance of an obligation. There is always a preexisting contractual relation. The source of obligation of defendant to pay damages is the breach or non-fulfillment of the contract. Proof of the existence of the contract and of its breach or nonfulfillment is sufficient prima facie to warrant recovery. Proof of diligence in the selection and supervision of the employees is NOT available as defense.

Art. 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel. Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him.

Culpa Aquiliana Negligence substantive independent.

is and

There may or may not be a pre-existing contractual obligation. The source of obligation is the defendant’s negligence itself. The negligence of the defendant must be proved.

Proof of diligence in the selection and supervision of the employee is a defense.

Extent of Damages to be Awarded [Art. 2201] Good Faith Bad Faith Obligor is liable for Obligor shall be those that are the responsible for all natural and damages which may probable be reasonably consequences of the attributed to the breach of the non-performance of obligation, and the obligation. which the parties have foreseen or Any waiver or could have renunciation made reasonably foreseen in the anticipation of at the time the such liability is null obligation was and void. constituted.

Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel.

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(1) expressly specified by law [Arts. 552 (2); 1942, 2147, 2148, 2159] (2) liability specified by stipulation (3) the nature of the obligations requires assumption of risk [Art. 1174] (4) debtor is guilty of concurrent or contributory negligence (5) debtor has promised to deliver the same thing to two or more persons who do not have the same interest [Art. 1165 par. 3] (6) the thing is lost due to the obligor’s fraud, negligence, delay or contravention of the tenor of the obligation [Art. 1170] (7) the obligation to deliver a specific thing arises from a crime [Art. 1268] (8) the object is a generic thing, i.e. the genus never perishes Note: ‘Genus nunquam perit’ only pertains to physical perishing. The genus may still perish legally. [Labitag notes]

C.5. CONTRAVENTION OF THE TENOR OF THE OBLIGATION This refers to a violation of the terms and conditions stipulated in the obligation, which must not be due to a fortuitous event or force majeure. [De Leon] “In any manner contravenes the tenor” means any illicit act, which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance. [Tolentino]

D. LEGAL EXCUSE FOR BREACH: FORTUITOUS EVENT OR ACTS OF THE CREDITOR Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.

Requisites of Exemption Based on Force Majeure (1) The event must be independent of the debtor’s will (fraud or negligence). (2) The event must be unforeseeable or inevitable. (3) The event renders it impossible for debtor to fulfill his obligation in a normal manner. (4) The debtor must be free from any negligence or participation in the aggravation of the injury to the creditor [Tolentino, 1987; De Leon, 2003] (5) It must be the sole cause, not merely a proximate cause.

Fortuitous Event - a happening independent of the will of the debtor and which makes the normal fulfillment of the obligation impossible. [De Leon] (1) Act of God: An accident, due directly or exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. (2) Act of Man: Force majeure is a superior or irresistible force, which is essentially an act of man; includes unavoidable accidents, even if there has been an intervention of human element, provided that no fault or negligence can be imputed to the debtor.

Act of Creditor: The debtor is also released from liability when the non-performance of the obligation is due to the act of the creditor himself. [Tolentino]

Liability in case of Fortuitous Event No person shall be responsible for fortuitous events, UNLESS:

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E. REMEDIES AVAILABLE IN CASE OF BREACH

declaration of rescission, such declaration will produce legal effect.

E.1. SPECIFIC PERFORMANCE

The party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. [UP v Delos Angeles, 1970]

The creditor has a right to compel the debtor to perform the prestation.

E.2. SUBSTITUTED PERFORMANCE A third person may perform another’s obligation to deliver a generic thing or an obligation to do, unless it is a purely personal act, at the expense of the debtor.

E.3. RESCISSION (RESOLUTION RECIPROCAL OBLIGATIONS)

IN

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

Under Art 1191, the right to rescind an obligation is predicated on the violation of the reciprocity between parties, brought about by a breach of faith by one of them. Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation. [Del Castillo Vda de Mistica v Naguiat, 2003; Cannu v Galang, 2005]

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfilment, if the latter should become impossible.

Distinguished from Rescission under Art. 1380 Rescission / Resolution [Art. 1191] Based on nonperformance or nonfulfillment of obligation. Action is instituted only by the injured party.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

Applies only to reciprocal obligations where one party is guilty of nonfulfillment

Rescission – the unmaking of a contract, or its undoing from the beginning, and not merely its termination [Pryce Corp v Pagcor, 2005]

In some cases, court may grant a term for performance.

Rescission may take place extrajudicially, by declaration of the injured party. But if the debtor impugns the declaration of rescission, it shall be subject to judicial determination. If the debtor does not oppose the extrajudicial

Non-performance by the other party is important.

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Rescission [Art. 1380] Based on lesion or fraud upon creditors. Action is instituted by either party or by a third person. Applies to either unilateral or reciprocal obligations even when the contract has been fully fulfilled Court cannot grant a period or term within which one must comply. Non-performance by the other party is immaterial.

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Distinguished from Termination [Pryce Corp v PAGCOR, 2005] Rescission Termination May be effected: May be effected by (a) by both parties by mutual agreement or mutual agreement, or by one party (b) unilaterally by one exercising one of its of them declaring a remedies as a rescission without the consequence of the consent of the other if default of the other a legally sufficient ground exists or if a decree of rescission is applied for before the courts Requires mutual The parties are not restitution to restore restored to their the parties to their original situation; original situation prior to termination, parties are obliged to comply with their contractual obligations

The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person. [Art.1177] In order to satisfy their claims against the debtor, creditors have the ff. successive rights: (1) To levy by attachment and execution upon all the property of the debtor, except those exempt from execution; (2) To exercise all the rights and actions of the debtor, except such are inherently personal to him; and (3) To ask for the rescission of the contracts made by the debtor in fraud of their rights. Requisites (1) The person to whom the right of action pertains must be indebted to the creditor (2) The debt is due and demandable (3) The creditor must be prejudiced by the failure of the debtor to collect his debts due him from third persons, either through malice or negligence (4) The debtors assets are insufficient ( debtor is insolvent) (5) The right of action is not purely personal to the debtor Previous approval of the court is not necessary to exercise the accion subrogatoria.

Effect of Rescission under Art 1191: Extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect. Both parties must surrender what they have respectively received and return each other as far as practicable to their original situation. [Tolentino]

E.4. DAMAGES, IN ANY EVENT Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

E.5. SUBSIDIARY CREDITORS

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(b) Accion Pauliana Rescission, which involves the right of the creditor to attack or impugn by means of rescissory action any act of the debtor which is in fraud and to the prejudice of his rights as creditor.

OF

(a) Accion Subrogatoria Right of the creditor to exercise all of the rights and bring all the actions which his debtor may have against third persons.

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Creditors may also impugn the acts which the debtor may have done to defraud them. [Art. 1177]

No period prescription

Requisites [Cheng v CA, 2001] (1) There is a credit in favour of the plaintiff prior to the alienation by the debtor (2) The debtor has performed a subsequent contract conveying patrimonial benefit to third person/s. (3) The debtor’s acts are fraudulent to the prejudice of the creditor. (4) The creditor has no other legal remedy to satisfy his claim (5) The third person who received the property is an accomplice to the fraud.

Accion Pauliana

Not necessary that creditor’s claim is prior to the acquisition of the right by the debtorI.

Credit must exist before the fraudulent act [Tolentino]

No need for fraudulent intent

for

rescinded is onerous Prescribes in 4 years from the discovery of the fraud

(c) Other Specific Remedies Accion Directa Subsidiary liability of sublessee to the lessor for rent due from the lessee Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor. Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place.

An accion pauliana thus presupposes the following: 1) A judgment; 2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment, and 3) the failure of the sheriff to enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the property of the debtor. The date of the decision of the trial court is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor. [Cheng v CA, 2001] Accion Subrogatoria

CIVIL LAW

Vendor has right of action against possessor whose right is derived from the vendee Art. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. Laborer/materialsman has right of action against owner of piece of work up to the amount owed by the latter to the contractor Art. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials: (1) Payments made by the owner to the contractor before they are due; (2) Renunciation by the contractor of

Note: Commentators have conflicting views on WoN new debts contracted by the debtor fall under the scope of accion pauliana. Fraudulent intent is required if the contract

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any amount due him from the owner.

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Its effectivity or extinguishment does not depend upon the fulfillment or non-fulfillment of a condition or upon the expiration of a term or period. A pure obligation is IMMEDIATELY DEMANDABLE.

This article is subject to the provisions of special laws. (1597a) Article 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is understood that in case of disagreement the question shall be subject to expert judgment.

B. CONDITIONAL OBLIGATIONS

If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud or manifest error.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

Principal has right of action against substitute of agent in cases when the agent is liable for acts of appointed substitute

A condition is a future and uncertain event. This includes acquisition of proof/knowledge of a past event unknown to the parties.

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution.

Kinds of conditions 1) As to effect on the obligation a. Suspensive b. Resolutory 2) As to cause/ origin a. Potestative b. Casual c. Mixed

Petitioner cannot invoke the credit of a different creditor to justify the rescission of the subject deed of donation, because the only creditor who may benefit from the rescission is the creditor who brought the action; those who are strangers to the action cannot benefit from its effects. (Siguan vs. Lim, 1999)

III. KINDS OF OBLIGATIONS

(1) As to effect (a) Suspensive – Obligation shall only be effective upon the fulfillment of the condition [1181]. The obligee acquires a mere hope or expectancy, protected by law, upon the constitution of the obligation.

CIVIL

A. PURE OBLIGATIONS Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. II.

Before Fulfillment

After Fulfillment

The demandability and acquisition/ effectivity of the rights arisingIII.from the obligation is suspended.

The obligation arises or becomes effective. The obligor can be compelled to comply with what is incumbent upon him.

The creditor may bring the appropriate actions for the preservation of his right. Anything paid by mistake may be

Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.

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recovered [Art 1188]. However, this excludes fruits and interests.

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Effects of the Happening of Suspensive Conditions

Doctrine of Constructive Fulfillment of Suspensive Conditions Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Suspensive condition deemed fulfilled when: (1) Obligor intends to prevent obligee from complying with the condition (2) Obligor actually prevents obligee from complying with the condition Doctrine does not apply to: (1) Resolutory conditions (2) External contingency that is lawfully within the control of the obligor [Taylor v Uy Tieng, 1922] (3) Obligor, in preventing the fulfilment of the condition, acts pursuant to a right

To Give

To Do/Not To Do

If reciprocal, the fruits and interests shall be deemed to have been mutually compensated a matter of justice and convenience [Art. 1187, par. 1] If unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstance it should be inferred that the intention of the persons constituting the same was different. [Art. 1187 par 1]

In obligations to do or not to do, the court shall determine the retroactive effect of the condition that has been complied with [Art. 1187, par. 2] The power of the court includes the determination of whether or not there will be any retroactive effect. This rule shall likewise apply in obligations with a resolutory condition [Art. 1190 par. 3]

(b) Resolutory – The obligation is demandable at once, without prejudice to the effects of the happening of the event (1179 par 2). The rights are immediately vested to the creditor but always subject to the threat or danger of extinction by the happening of the resolutory condition [Tolentino].

Principle of Retroactivity in Suspensive Conditions Art. 1187, par 1. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, 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 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 was different. Rationale: Obligation is constituted when its essential elements concur. The condition imposed is only an accidental element. This applies to consensual contracts only. This does not apply to real contracts which can only be perfected by delivery.

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Before Fulfillment

After Fulfillment

Preservation of creditor’s rights [Art. 1188, par. 1] also applies to obligations with a resolutory condition.

Whatever may have been paid or delivered by one or both of the parties upon the constitution of the obligation shall have to be returned upon the fulfillment of the condition (Art. 1190 par 1). There is no return to the status quo. However, when the condition is not fulfilled, rights are consolidated and they become absolute in character.

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(2) As to Cause/Origin a. Potestative – The fulfilment of the condition depends on the sole act or decision of a party. b. Casual – The fulfilment of the condition depends upon chance or upon the will of a third person. (1182) c. Mixed – The fulfilment of the condition depends partly upon the will of a party to the contract and partly upon chance and/or will of a third person. Exclusively upon the Creditor’s Will Exclusively upon the Debtor’s Will in case of a Suspensive Condition (Art. 1182)

Exclusively upon the Debtor’s Will in case of a Resolutory Condition (Art. 1179, par. 2)

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and the price thereof remitted to the islands. There were still other conditions that had to concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions set by the intestate. [Hermosa vs. Longara, 1953] Loss, Deterioration, or Improvement of a Specific Thing Before Fulfillment of Suspensive Condition (Art. 1189) or of Resolutory Condition in Obligations to Do or Not to Do [Art. 1190 par 3]

Condition and obligation are valid.

Art. 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

Condition and obligation are void because to allow such condition would be equivalent to sanctioning obligations which are illusory. It also constitutes a direct contravention of the principle of mutuality of contracts. There is nothing to demand until the debtor wishes to. Condition and obligation are valid because in such situation, the position of the debtor is exactly the same as the position of the creditor when the condition is suspensive. It does not render the obligation illusory.

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.

Defendant executed an endorsement saying that she’ll pay her debt if the house in which she lives is sold. Such condition depended upon her exclusive will; thus, it is void. [Osmeña vs. Rama, 1909] The condition that payment should be made by Hermosa as soon as he receives funds from the sale of his property in Spain is a mixed condition. The condition implies that the obligor already decided to sell the house and all that was needed to make the obligation demandable is that the sale be consummated

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Positive and Negative Conditions Positive [Art. 1184] Negative [Art. 1185[ The condition that The condition that some event happen at some event will not a determinate time happen at a shall extinguish the determinate time obligation shall render the (a) as soon as the obligation effective from the moment time expires or (b) if it has become (a) the time indicated has elapsed, or indubitable that the event will not (b) if it has become evident that the take place. event cannot occur.

Art. 1190, par 3. As for the obligations to do and not to do, the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. Without Debtor’s Fault/Act IV.

VI.

VIII.

With Debtor’s Fault/Act

Loss is Obligation is converted into one of indemnity for damages. Deterioration Impairment to be VII. borne Creditor may choose by the creditor. between bringing an action for rescission of the obligation OR bringing an action for specific performance, with damages in either case. Improvement Improvement atIX. the Improvement by the debtor’s expense, the thing’s nature or by time debtor shall ONLY have shall inure to the benefit usufructuary rights. of the creditor. Obligation extinguished.

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V.

Where no date of fulfilment is stipulated, condition must be fulfilled within a reasonable time or time probably contemplated according to the nature of the obligation [Art. 1185, par 2].

C. OBLIGATIONS WITH A PERIOD OR TERM Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.

Upon the happening of the resolutory condition, the rules of Article 1189 shall be applied to the party who is bound to return (i.e. the creditor in the original obligation).

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.

Impossible Conditions Art. 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.

A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section.

The condition not to do an impossible thing shall be considered as not having been agreed upon.

Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.

In testaments (Art. 873) and donations (Art. 727), an unlawful or impossible condition does not annul the transaction. The condition is merely deemed not written.

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The period must be: future, certain, and possible.[Tolentino]

This is in contrast to payment by mistake of the obligor before the occurrence of the suspensive condition, where fruits and interests may no longer be recovered.

A fortuitous event does not interrupt the running of the period. It only relieves the contracting parties from the fulfillment of their respective obligations during the period.

Loss, Deterioration, or Improvement of the Thing Before Period Expires Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed.

Term/Period and Condition Distinguished

X.

XIII.

XV.

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Term/Period

Condition

Interval of time which XI. is future and certain Must necessarily XII. come, although it may not be known when No effect on existence XIV. of the obligation, only its demandability or performance No retroactive XVI. effect unless there is an agreement to the contrary

Fact or event which is future and uncertain May or may not happen

When it is left exclusively XVIII. to the will of the debtor, the existence of the obligation is not affected

When it is leftXIX. exclusively to the will of the debtor, the very existence of the obligation is affected

Benefit of the Period Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other.

Gives rise to an obligation or extinguishes one already existing Has retroactive effect

Period for the benefit of either creditor or debtor Creditor

XVII.

Kinds of Period [Art 1193] (1) Ex die – period with a suspensive effect. Obligation becomes demandable after the lapse of the period. (2) In diem – period with a resolutory effect. Obligation becomes demandable at once but is extinguished after the lapse of the period.

Creditor may demand XX. the fulfillment or performance of the obligation at any time but the obligor cannot compel him to accept payment before the expiration of the period.

Debtor Debtor may oppose any premature demand on the part of the obligee for the performance of the obligation, or if he so desires, he may renounce the benefit of the period by performing his obligation in advance.

If the period is for the benefit of the debtor alone, he shall lose every right to make use of it— (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a

Effect of Advance Payment or Delivery Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests.

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(4)

(5) (6) (7)

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fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; When the debtor attempts to abscond [Art. 1198] When required by law or stipulation; If parties stipulated an acceleration clause [Tolentino]

CIVIL LAW (c) If the debtor binds himself when his means permit him to do so.

Art. 1197 does not apply to contract of services and to pure obligations. The court, however, to prevent unreasonable interpretations of the immediate demandability of pure obligations, may fix a reasonable time in which the debtor may pay [Tolentino]

The obligation immediately becomes due and demandable even if the period has not yet expired. The obligation becomes a pure one. [Tolentino]

The only action that can be maintained by the creditor under Art. 1197 is the action to ask the courts to fix the term within which the debtor must comply with his obligation. The fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith, and such period has arrived.

When Courts May Fix Period Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.

Art. 1197 applies to a situation in which the parties intended a period. [Where] no period was intended by the parties… Their mere failure to fix the duration of their agreement does not necessarily justify or authorize the courts to do so. Based on the reasons [herein], the agreement subsisted as long as the parents and the children mutually benefited from the arrangement. Effectively, there is a resolutory condition in such agreement. When a change in the condition occurs, the agreement may be deemed terminated. [pMacasaet v Macasaet, 2004]

The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them. General Rule: The court is not authorized to fix a period for the parties [De Leon] Exceptions: If the Court determines that one of the 3 circumstances are present, it must decide the period “probably contemplated by the parties” [Araneta v. Phil. Sugar Estates, 1967] (a) obligation does not fix a period, but from its nature and circumstances, it can be inferred that a period wasXXI. XXIII. intended (b) the period is void, such as when it depends upon the will of the debtor

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D. ALTERNATIVE OR FACULTATIVE OBLIGATIONS Alternative and Distinguished

Facultative

Conditions

Alternative Obligations

Facultative Obligations

Several objects are due. XXII. May be complied with XXIV. by delivery of one of the objects or by performance of one of

Only one object is due. May be complied with by the delivery of another object or by the performance of another

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Choice may pertain XXVII. to debtor, creditor, or third person.

XXVI. XXVIII. Loss/impossibility XXXI. of all object/prestation due to fortuitous event shall extinguish the obligation. XXIX. XXX. The loss/impossibility of one of the things does not extinguish the obligation. XXXII. Culpable loss of any XXXIII. of the objects alternatively due before the choice is made may give rise to liability on the part of the debtor.

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categorically and unequivocally makes his or her choice known. The choice of the debtor must also be communicated to the creditor who must receive notice of it since: The object of this notice is to give the creditor . . . opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court. [Arco Pulp and Paper Co., Inc. v Lim, 2014]

prestation in substitution of that which is due. Choice pertains only to the debtor. Loss/impossibility of the object/prestation due to fortuitous event is sufficient to extinguish the obligation.

Culpable loss of the object which the debtor may deliver in substitution before the substitution is effected does not give rise to any liability on the part of the debtor.

The effect of the notice is to limit the obligation to the object or prestation selected. Notice of selection or choice may be in any form provided it is sufficient to make the other party know that the selection has been made. It can be: (1) oral (2) in writing (3) tacit (4) any other equivocal means

Alternative obligations: Several prestations are due but the performance of one is sufficient. [De Leon]

Choice of the debtor when communicated to the creditor does not require the latter’s concurrence.

Right of Choice [Art. 1200] Belongs to the debtor, UNLESS— (1) it is expressly granted to the creditor (2) it is expressly granted to a third person

In a joint obligation w/ various debtors and creditors, the consent of all is necessary to make the selection effective. If the obligation is solidary, and there is no stipulation to the contrary, the choice by one will be binding personally upon him but not as to the others [Tolentino].

Limitations to the right of choice (1) impossible prestations (2) unlawful prestations (3) those which could not have been the object of the obligation When choice shall produce effect Choice shall produce no effect except from the time it has been communicated. [Art. 1201]

If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. [Art 1203]

In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient, determined by the choice of the debtor who generally has the right of election." The right of election is extinguished when the party who may exercise that option

If the debtor does not select at the time when performance should be effected, the choice can be made for him by the creditor by

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applying Art. 1167 in obligations to do [Tolentino].

the price/value of the thing lost with right to damages.

Instances when obligation is converted into a simple obligation (1) The person with the right of choice has communicated his choice [Arts. 1201, 1205 par 1] (2) Only one prestation is practicable [Art. 1202]

CIVIL LAW the price/value of the thing lost with right to damages.

Facultative obligations: Only one prestation is agreed upon, but the obligor may render another in substitution. [Art. 1206]

Loss of Substitute in Facultative Obligations [Art. 1206]

Loss of Specific Things or Impossibility of Performance of Alternative Art. 1204: Debtor’s Choice

Before Substitution is Made If due to bad faith or fraud of obligor: obligor is liable.

Fortuitous Event

After Substitution is Made The loss or deterioration of the substitute on account of the obligor’s delay, negligence, or fraud, renders the obligor liable because once the substitution is made, the obligation is converted into a simple one with the substituted thing as the object of the obligation.

Debtor’s Fault All Lost Debtor is released from Creditor shall have a the obligation. right to indemnity forXXXIV. damages based on theXXXV. value of the last thingXXXVI. which disappeared or service which become If due to the negligence impossible. of the obligor: obligor is Some not liable. Debtor to deliver that Debtor to deliver that XXXVII. which he shall choose which the creditor shall from among the choose from among the remainder. remainder without damages. One Remains Debtor to deliver that Debtor to deliver that E. DIVISIBLE AND which remains. which remains.

OBLIGATIONS

Art. 1205: Creditor’s Choice Fortuitous Event

INDIVISIBLE

Divisible Obligations Ones which are susceptible to partial performance, that is, the debtor can legally perform the obligation by parts and the creditor cannot demand a single performance of the entire obligation [Tolentino]

Debtor’s Fault

All Lost Debtor is released from Creditor may claim the the obligation. price/value of any of them with indemnity for damages. Some Debtor to deliver that Creditor may claim any which he shall choose of those subsisting from among the without a right to remainder. damages OR price/value of the thing lost with right to damages. One Remains Creditor may claim the Creditor may claim the remaining thing without remaining thing without a right to damages OR a right to damages OR

Indivisible Obligations Ones which cannot be validly performed in parts [Tolentino] Rules (1) Divisibility/indivisibility refers to the performance of the prestation and not to the thing which is the object thereof. The

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(2)

(3)

(4)

(5)

(6)

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thing may be divisible, yet the obligation may be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible [Art.1225, par. 2]. Even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. When there is plurality of debtors and creditors, the effect of divisibility/indivisibility of the obligation depend upon whether the obligation is joint or solidary. A joint indivisible obligation gives rise to indemnity for damages from the time any one of the debtors does not comply with his undertaking [Art. 1224].

CIVIL LAW c) By death of creditor or the debtor (division among heirs of the deceased)

F. OBLIGATIONS WITH A PENAL CLAUSE Penal Clause: An accessory undertaking to assume greater liability in case of breach. It is attached to an obligation in order to ensure performance. The enforcement of the penalty can be demanded by the creditor only when the non-performance is due to the fault or fraud of the debtor. If the principal obligation is void, the penal clause shall also be void. However, the nullity of the penal clause does not carry with it the nullity of the principal obligation [Art.1230]. Purposes of Penalty (1) Funcioncoercitiva de garantia - to insure the performance of the obligation. (2) Funcionliquidatoria - to liquidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (compensatory). (3) Funcionrestrictamente penal - to punish the obligor in case of breach of the principal obligation (punitive).

Effect Creditor cannot be compelled to receive partially the prestation in which the obligation consists; neither may the debtor be required to make the partial payment [Art. 1248], UNLESS: (1) The obligation expressly stipulates the contrary. (2) The different prestations constituting the objects of the obligation are subject to different terms and conditions. (3) The obligation is in part liquidated and in part unliquidated.

Characteristics of Penalty (1) The penalty shall substitute the indemnity for damages and payment of interest in case of non-compliance [Art. 1226], UNLESS: a. There is a stipulation to the contrary b. The obligor refuses to pay the penalty c. The obligor is guilty of fraud (2) Debtor cannot exempt himself from the performance of the principal obligation by paying the stipulated penalty unless this right has been expressly reserved for him [Art. 1227].

Cessation of Indivisibility a) By conversion of the obligation into an obligation to pay damages b) By novation of the obligation

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(3) Creditor cannot demand the fulfillment of the principal obligation and demanding the satisfaction of the penalty at the same time unless the right has been clearly granted to him [Art. 1227]. Tacit or implied grant is admissible. a. If the creditor has chosen fulfillment of the principal obligation and the performance thereof becomes impossible without his fault, he may still demand the satisfaction of the penalty. b. If there was fault on the part of the debtor, creditor may demand not only the satisfaction of the penalty but also the payment of damages. c. If the creditor chooses to demand the satisfaction of the penalty, he cannot afterwards demand the fulfillment of the obligation.

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When Penalty may be Reduced [Art. 1229]: (1) If the principal obligation has been partly complied with. (2) If the principal obligation has been irregularly complied with. (3) If the penalty is iniquitous or unconscionable even if there has been no performance. The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factor as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. [Ligutan v CA, 2002; Florentino v Supervalue, 2007]

Proof of Actual Damage Art. 1228: That proof of actual damages is not necessary is applicable only to the general rule stated in Art. 1226, but not to the exceptions. The penalty is exactly identical with what is known as “liquidated damages” in Art. 2226.

IV. JOINT AND SOLIDARY OBLIGATIONS

In cases where there has been partial or irregular compliance, as in this case, there will be no substantial difference between a penalty and liquidated damages insofar as legal results are concerned... There is no justification for the Civil Code to make an apparent distinction between a penalty and liquidated damages because the settled rule is that there is no difference between penalty and liquidated damages insofar as legal results are concerned and either may be recovered without the necessity of proving actual damages and both may be reduced when proper. [Filinvest v CA, 2005]

A. JOINT OBLIGATIONS The whole obligation, whether capable of division into equal parts or not, is to be paid or performed by several debtors and/or demanded by several creditors. Presumption of Joint Obligation An obligation is presumed joint if there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors in one and the same obligation [Art. 1207] Exceptions: (1) When the obligation expressly states that there is solidarity

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(2) When the law requires solidarity, i.e. quasi-delicts (3) When the nature of the obligation requires solidarity (4) When a charge or condition imposed upon heirs or legatees, and the testament expressly makes the charge or condition in solidum (5) When the solidary responsibility is imputed by a final judgment upon several defendants

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creditors nor interrupt the prescription as to other debtors. (3) Vices of each obligation arising from the personal defect of a particular debtor or creditor do not affect the obligation or right of the others. (4) Insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a creditor to demand anything from his co-debtors. (5) Defense of res judicata is not extended from one debtor to another.

Presumption of Divisibility in Joint Obligations (Joint Divisible Obligations) Credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another. [Art.1208]

Joint Indivisible Obligations Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share.

Joint divisible obligation - One where a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which, each of the creditors has a right to demand, and each of the debtors is bound to render compliance with his proportionate part of the prestation which constitute the object of the obligation (obligacion mancomunada).

When Indivisible [Art. 1225] (1) Obligations to give definite things (2) Obligations not susceptible of partial performance (3) Indivisibility is provided by law or intended by the parties, even though object or service may be physically divisible (4) In obligations not to do, when character of prestation requires indivisibility

Joint creditor cannot act in representation of the others, neither can a joint debtor be compelled to answer for the liability of others.

Plurality of Creditors—If one or some of the creditors demands the prestation, the debtor may legally refuse to deliver to them. He can insist that all the creditors together receive the thing, and if any of them refuses to join the others, the debtor may deposit the thing in court by way of consignation [Tolentino]

Principal Effects of Joint Liability (1) Demand by one creditor upon the debtor, produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made, but not with respect to others. (2) Interruption of prescription by the judicial demand of one creditor upon a debtor does not benefit the other

Plurality of Debtors—If there are two or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all

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the debtors, although each for his own share and for the enforcement of the obligation.

Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. [Art. 1211]

Failure of one debtor to perform in a joint indivisible obligation gives rise to indemnity for damages Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. Joint Divisible Obligations In case of breach of obligation by one of the debtors, damages due must be borne by him alone.

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In a “joint” obligation, each obligor answers only for a part of the whole liability; in a “solidary” or “joint and several” obligation, the relationship between the active and the passive subjects is so close that each of them must comply with or demand the fulfillment of the whole obligation. The fact that the liability sought against the CCC is for specific performance and tort, while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability for tortuous acts alleged in the counterclaims. [Lafarge Cement v Continental Cement Corp, 2004]

Joint Indivisible Obligations In case of breach where one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. Thus, the action must be converted into one for indemnity for damages.

Distinguished from Indivisibility Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. Solidarity Refers to the legal tie (vinculum juris), and consequently to the subjects or parties of the obligation More than one creditor or more than debtor (plurality of subjects) Each creditor may demand the entire prestation and each debtor is bound to pay the entire prestation Effect of breach: Solidarity remains

Joint Indivisible Obligations and Prescription The act of a joint creditor which would ordinarily interrupt the period of prescription would not have an effect on prescription because the indivisible character of the obligation requires collective action of the creditors.

B. SOLIDARY OBLIGATIONS An obligation where there is concurrence of several creditors, or of several debtors, or of several creditors and several debtors, by virtue of which, each of the creditors has the right to demand, and each of the debtors is bound to render, entire compliance with the prestation which constitutes the object of the obligation (obligacion solidaria).

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Indivisibility Refers to the prestation that is not capable of partial performance Exists even if there is only one creditor and/or one debtor Each creditor cannot demand more than his share and each debtor is not bound to pay more than his share Effect of breach: Obligation is converted to indemnity for damages

UP LAW BOC All debtors are liable for breach committed by a codebtor All debtors are proportionately liable for insolvency of one debtor

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Active Solidary Obligation Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him.

Only the debtors guilty of breach of obligation is liable for damages Other debtors are not liable if one debtor is insolvent

A relationship of mutual agency is created among co-creditors. But once one creditor makes a demand for payment, the tacit representation by the other creditors is considered revoked.

Kinds of Solidary Obligations As to Source (1) Legal – imposed by law (2) Conventional – agreed upon by parties (3) Real – imposed by the nature of the obligation

The creditor who may have executed any novation, compensation, confusion, or remission of the debt, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. [Art. 1215, par 2]

As to Parties Bound (1) Active (solidarity among creditors) – Each creditor has the authority to claim and enforce the rights of all, with the resulting obligation of paying everyone of what belongs to him. (2) Passive (solidarity among debtors) – Each debtor can be made to answer for the others, with the right on the part of the debtor-payor to recover from the others their respective shares. (3) Mixed (solidarity among creditors and debtors) – Solidarity is not destroyed by the fact that the obligation of each debtor is subject to different conditions or periods. The creditor can commence an action against anyone of the debtors for the compliance with the entire obligation minus the portion or share which corresponds to the debtor affected by the condition or period.

A solidary creditor cannot assign his rights without the consent of the others [Art. 1213]. Such an assignment produces no effect whatsoever [Tolentino]. Passive Solidary Obligation Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

As to Uniformity (1) Uniform – Parties are bound by the same stipulation (2) Non-uniform – Parties are bound by different conditions or terms

When one of the solidary debtors cannot,

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because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his codebtors, in proportion to the debt of each.

A creditor’s right to proceed against the surety exists independently of his right to proceed against the principal

Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible.

The solidary debtor who made the payment shall have the right to claim from his co-debtors the share which corresponds to them with interest, UNLESS barred by prescription or illegality [Art. 1218].

Art 2047 specifically calls for the application of the provisions on solidary obligations to suretyship contracts. In particular, Art 1217 recognizes the right of reimbursement from a co-debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (i.e., the surety). In contrast, Art 1218 is definitive on when reimbursement is unavailing, such that only those payments made after the obligation has prescribed or became illegal shall not entitle a solidary debtor to reimbursement. [Diamond Builders v Country Bankers, 2007]

A relationship of mutual guaranty is created among co-debtors. The interruption of prescription as to one debtor affects all the others; but the renunciation by one debtor of prescription already had does not prejudice the others.

Defenses inherent in an obligation include non-existence of the obligation because of absolute simulation or illicit object, nullity due to defect in capacity or consent of all debtors, unenforceability, non-performance of suspension condition or non-arrival of period, extinguishment of the obligation, res judicata, and prescription.

Defenses Available to a Solidary Debtor [Art. 1222] (1) Those derived from the nature of the obligation (2) Those personal to him (3) Those pertaining to his own share (4) Those personally belonging to other codebtors but only as regards that part of the debt for which the latter are responsible. Demand Upon a Solidary Debtor The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others so long as the debt has not been fully collected [Art. 1216]. The creditor may proceed against any one of the solidary debtors or all simultaneously [Art. 1216].

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Personal defenses such as minority, insanity, fraud, violence, or intimidation will serve as a complete exemption of the defendant debtor from liability to the creditor.

Payment by a Debtor Full payment made by one of the solidary debtors extinguishes the obligation [Art. 1217].

Debtors obligated themselves solidarily, so creditor can bring its action against any of them. Remission of any part of the debt, made by the creditor in favor of one of the solidary debtors, inures to the benefit of the rest of them. [Inchausti vs. Yulo, 1914]

If two or more solidary debtors offer to pay, the creditor may choose which offer to accept [Art. 1217].

Loss of the thing or impossibility of performance of the passive/mixed solidary obligation [Art. 1221]

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Without The obligation shall be fault of the extinguished. debtors All debtors shall be responsible With fault to the creditor, for the price and of any of the payment of damages and interest, without prejudice to the debtors their action against the guilty or negligent debtor. Through a All debtors shall be responsible fortuitous to the creditor, for the price and event after the payment of damages and one interest, without prejudice to incurred in their action against the guilty or delay negligent debtor.

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Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. Each one of the solidary creditors may do whatever may be useful or beneficial to the others, but not anything which may be prejudicial to the latter. Where the creditor in a solidary obligation has, by a subsequent instrument, covenanted with some of the solidary debtors different periods of payment and different conditions, the solidarity stipulated in the original contract is not destroyed [Inchausti v Yulo, 1914]

Effects of Prejudicial and Beneficial Acts Art. 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter.

As far as the debtors are concerned, a prejudicial act performed by a solidary creditor is binding. As between the solidary creditors, the creditor who performed such act shall incur the obligation of indemnifying the others for damages.

If the judgment in an action brought by a solidary creditor against a solidary debtor is adverse to the former, such judgment may be set-up against the other co-creditors In subsequent actions, except if it is founded on a cause personal to the plaintiff in the first action [Tolentino].

V. EXTINGUISHMENT OF OBLIGATIONS

Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of article 1219.

Art. 1231. Obligations are extinguished: (1) By payment or performance; (2) By the loss of the thing due; (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.

The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. Art. 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected.

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By whom Payor must have free disposal of the thing due and capacity to alienate it. [Art. 1239]

A. PAYMENT OR PERFORMANCE Payment (1) The delivery of money OR (2) The performance of an obligation [Art.1232] Object of Payment Principle of Integrity of Payment Art. 1233. 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.

(1) The debtor or his duly authorized agent (2) The debtor’s heir or successor in interest (3) Any person interested in the fulfillment of the obligation (such as co-debtor, guarantor) whether the debtor consents to it or not, and even without debtor’s knowledge [Art 1302]. This includes payment by a joint debtor [Monte de Piedad v Fernando Rodrigo, 1936] but not a solidary co-debtor. (4) A third person not interested in the obligation; but the creditor is not bound to accept payment by him, unless there is a stipulation to the contrary [Art 1236].

Article 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due. In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. (1166a)

Payment by a third person Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Exceptions to Art. 1244: (1) If the obligation is facultative (2) If the creditor agrees (dation in payment)

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments. However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter.

Articles 1236 and 1237 merely lay down a presumption. However, by virtue of the parties’ freedom to contract, the parties could stipulate otherwise. But such mutual agreement, being an exception to presumed course of events as laid down by Articles 1236 and 1237, must be adequately proven [Carandang v de Guzman, 2006].

Art. 1235. 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.

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Reimbursement & Subrogation Distinguished Reimbursement Subrogation Personal action to Includes recover amount paid reimbursement, but also the exercise of other rights attached to the original obligation (e.g. guaranties, securities)

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(2) If the creditor ratifies the payment to the third person; (3) If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment. [Art. 1241] Place of Payment (1) In the place designated in the obligation. (2) In the absence of stipulation— a. If obligation is to deliver a determinate thing: wherever the thing might be at the moment the obligation was constituted. b. In any other case: Domicile of debtor [Art. 1251]

Art. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor's consent. But the payment is in any case valid as to the creditor who has accepted it. To whom (1) The person in whose favor the obligation has been constituted; or (2) His successor in interest; or (3) Any person authorized to receive it [Art. 1240]

Time of Payment Upon demand, except(1) When time is of the essence (2) When the debtor loses the benefit of the period (3) When the obligation is reciprocal

Payment to a person who is incapacitated to administer his property shall be valid: (1) if he has kept the thing delivered, OR (2) insofar as the payment has been beneficial to him. [Art. 1241 par 1]

Form of Payment Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

Payment made in good faith to any person in possession of the credit shall release the debtor. [Art. 1242]

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. [Art. 1243] Payment to a third person [Art. 1241 par 2] Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor.

In the meantime, the action derived from the original obligation shall be held in the abeyance. Extraordinary inflation or deflation Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the

That payment has redounded to the benefit of the credit must be proved, except: (1) If after the payment, the third person acquires the creditor's rights;

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(5) If debt produces interest, the payment is not to be applied to the principal unless the interests are covered. (6) When no application can be inferred from the circumstances of payment, it is applied: (a) to the most onerous debt of the debtor; or (b) if debts due are of the same nature and burden, to all the debts in proportion (7) Rules of application of payment may not be invoked by a surety or solidary guarantor.

obligation shall be the basis of payment, unless there is an agreement to the contrary. For extraordinary inflation (or deflation) to affect an obligation, the following requisites must be proven: (1) an official declaration of extraordinary inflation or deflation from the BSP (2) obligation was contractual in nature; and (3) parties expressly agreed to consider the effects of the extraordinary inflation or deflation [Equitable PCI Bank v Ng Sheung, December 19 2007]

Rules on application of payment cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular. There must be full and faithful compliance with the terms of the contract. [Reparations Commission vs. Universal Deep Sea Fishing Corp, 1978]

A.1 APPLICATION OF PAYMENTS Designation of the debt to which should be applied a payment made by a debtor who owes several debts to the same creditor. Requisites: (1) There is a plurality of debts (2) Debts are of the same kind (3) Debts are owed to the same creditor and by the same debtor (4) All debts must be due, UNLESS parties so stipulate, or when application is made by the party for whose benefit the term has been constituted (5) Payment made is not sufficient to cover all debts [Art. 1252]

The debtor’s right to apply payment can be waived and even granted to the creditor if the debtor so agrees (Premiere Development v Central Surety, 2009).

A.2. DATION IN PAYMENT Delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation (dacionenpago).

Rules on Application (1) Preferential right of debtor - debtor has the right to select which of his debts he is paying. (2) The debtor makes the designation at the time he makes the payment. (3) If not, the creditor makes the application, by so stating in the receipt that he issues, unless there is cause for invalidating the contract. (4) If neither the creditor nor debtor exercises the right to apply, or if the application is not valid, the application is made by operation of law.

Requisites: (1) Existence of a money obligation (2) Alienation to the creditor of a property by the debtor with the creditor’s consent (3) Satisfaction of the money obligation Dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement – express or implied, or by their silence – consider the thing as equivalent to the obligation, in which case the obligation is

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totally extinguished [Tan Shuy v Spouses Maulawin, 2012].

A.3. TENDER OF CONSIGNATION

A.3. PAYMENT BY CESSION

Tender of payment: Manifestation made by the debtor to the creditor of his desire to comply with his obligation, with offer of immediate performance. (1) Preparatory act to consignation (2) Extrajudicial in character

Special form of payment where the debtor assigns/abandons ALL his property for the benefit of his creditors in order that from the proceeds thereof, the latter may obtain payment of their credits. Requisites: (1) There is a plurality of debts (2) There is a plurality of creditors (3) Partial or relative insolvency of debtor (4) Acceptance of the cession by the creditors [Art. 1255]

PAYMENT

AND

Consignation: Deposit of the object of obligation in a competent court in accordance with the rules prescribed by law whenever the creditor unjustly refuses payment or because of some circumstances which render direct payment to the creditor impossible or inadvisable. (1) Principal act which constitutes a form of payment (2) Judicial in character

Debtor is released only for the net proceeds unless there is a stipulation to the contrary. Cession and Distinguished Cession Dacion en pago Plurality of creditors One creditor Debtor must be Debtor not partially or relatively necessarily in state insolvent of financial difficulty Universality of Thing delivered is property is ceded equivalent of performance Merely releases Extinguishes debtor for the net obligation to the proceeds of things extent of the value ceded or assigned, of the thing unless there is delivered, as agreed contrary intention upon, proved or implied from the conduct of the creditor Involves all Does not involve all properties of debtor properties of debtor Creditor does not Creditor becomes become owner of the owner ceded property

Requisites of consignation (1) There is a debt due (2) Consignation is made because of some legal cause a. There was tender of payment and creditor refuses without just cause to accept it b. Instances when consignation alone would suffice as provided under Art. 1256 (3) Previous notice of consignation was given to those persons interested in the performance of the obligation (4) Amount or thing due was placed at the disposal of the court (5) After the consignation has been made, the persons interested were notified thereof When Tender and Refusal Not Required [Art. 1256] (1) Creditor is absent or unknown, or does not appear at the place of payment.

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(2) Creditor is incapacitated to receive the thing due at the time of payment. (3) Without just cause, creditor refuses to give receipt. (4) Two or more persons claim the same right to collect. (5) Title of the obligation has been lost.

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consigned be awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing debtor’s obligation [Pabugais v Sahijwani, 2004]. Effects of Consignation If accepted by the creditor or declared properly made by the Court: (1) Debtor is released in same manner as if he had performed the obligation at the time of consignation (2) Accrual of interest is suspended from the moment of consignation. (3) Deterioration or loss of the thing or amount consigned, occurring without the fault of debtor, must be borne by creditor from the moment of deposit Any increment or increase in the value of the thing after consignation inures to the benefit of the creditor

What constitutes valid consignation In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfilment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. (Art. 1257) How consignation is made Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.

Unless there is an unjust refusal by a creditor to accept payment from a debtor, Article 1256 cannot apply. The possession of the property by the petitioners being by mere tolerance as they failed to establish the existence of any contractual relations between them and the respondent, the bank deposit made by the petitioners intended as consignation has no legal effect [Llobrera v Fernandez, May 2, 2006].

The consignation having been made, the interested parties shall also be notified thereof. Who bears the expenses The expenses of consignation, when properly made, shall be charged against the creditor. [Art. 1259]

Effects of Withdrawal by Debtor [Arts. 12601261] (1) Before approval of the court - Obligation remains in force. (2) After approval of the court or acceptance by the creditor, with the consent of the latter - Obligation remains in force, but guarantors and co-debtors are liberated. Preference of the creditor over the thing is lost. (3) After approval of the court or acceptance by the creditor, and without creditor’s consent - Obligation subsists, without

Withdrawal of Consigned Amount Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force [Art. 1260, par 2]. The amount consigned with the trial court can no longer be withdrawn by the debtor because creditor’s prayer in his answer that the amount

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change in the liability of guarantors and co-debtors, or the creditor’s right of preference.

(4) Fault or negligence concurs with the fortuitous event. (5) Loss occurs after delay. (6) Debtor has promised to deliver the same thing to two or more different parties. (7) Obligation arises from a criminal act. (8) Borrower in commodatum: saves his own things and not the thing of the creditor during a fortuitous event.

B. LOSS OF THE THING DUE OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE Loss A thing is lost when it perishes, goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered [Art. 1189, no. 2]

Loss of the thing when in possession of the debtor Loss was due to the debtor’s fault. Burden of explaining the loss of the thing falls upon him, UNLESS due to an earthquake, flood, storm, or other natural calamity [Art. 1265].

Effects of Loss [Arts. 1262-1263] Obligation to Deliver a Specific Thing XXXVIII. Obligation XL. is extinguished if the thing was destroyed without fault of the debtor and before he has incurred delay. XXXIX.

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Obligation to Deliver a Generic Thing Loss of a generic thing does not extinguish an obligation, EXCEPT in case of delimited generic things, where the kind or class is limited itself, and the whole class perishes.

In Reciprocal Obligations Extinguishment of the obligation due to loss of the thing or impossibility of performance affects both the creditor and debtor; the entire juridical relation is extinguished. Partial loss Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation.

An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor [Gaisano v Insurance Company, 2006].

Partial loss due to a fortuitous event does not extinguish the obligation. The thing due shall be delivered in its present condition, without any liability on the part of the debtor, UNLESS the obligation is extinguished when the part lost was of such extent as to make the thing useless.

Actions Against Third Persons Article 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. (1186) Other cases where loss is attributed to debtor (1) Law provides that the debtor shall be liable even if the loss is due to fortuitous events [Arts. 1942, 1979, 2147, 2159]. (2) Obligor is made liable by express stipulation. (3) Nature of the obligation requires an assumption of risk.

Impossibility of Performance [Arts. 1266-1267] When prestation becomes legally or physically impossible (by fortuitous event or force majeure), the debtor is released.

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Impossibility must have occurred without fault of debtor, and after the obligation has been constituted. Subjective impossibility Where there is no physical or legal loss, but the thing belongs to another, the performance by the debtor becomes impossible. The debtor must indemnify the creditor for damages.

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If the renunciation is not gratuitous, the nature of the act changes and it may be: (1) dation in payment – when the creditor receives a thing different from that stipulated; (2) novation – when the object or principal conditions of the obligation have changed; (3) compromise – when the matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives.

Partial Impossibility Courts shall determine whether it is so important as to extinguish the obligation. (1) If debtor has performed part of the obligation when impossibility occurred, creditor must pay the part done as long as he benefits from it. (2) If debtor received full payment from creditor, he must return excess amount corresponding to part which was impossible to perform.

Although the debtor must accept the remission, nothing prevents the creditor from making a unilateral declaration of his right, abandoning and thereby extinguishing his credit, as expressly allowed by Art 6, CC. Kinds of Condonation: A. As to extent 1. Total – extinguishes the entire obligation. 2. Partial – refers to only a particular aspect of the obligation, e.g. to the amount of indebtedness or to an accessory obligation only.

Doctrine of Unforeseen Events Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of all the parties, the obligor may also be released therefrom, in whole or in part.

B. As to Form Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation.

C. CONDONATION Condonation or Remission of the Debt An act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the obligation. The obligation is extinguished either in whole or in such part of the same to which remission refers.

1.

Requisites: (1) Debt must be existing and demandable. (2) Renunciation must be gratuitous; without any consideration. (3) Debtor must accept the remission. [Art. 1270]

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Express Condonation Made formally; in accordance with forms of ordinary donations. (Art. 1270) An express remission must be accepted in order to be effective. When the debt refers to movable or personal property, Art 748 will govern;

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if it refers to immovable or real property, Art 749 applies. 2. Implied Condonation Inferred from the acts of the parties.

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(1) In general Art. 1275. The obligation is extinguished from the time the characters of the debtor and creditor are merged in the same person.

Presumptions of Condonation: (1) Whenever the private document in which the debt is found is in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. [Art. 1272] (2) Delivery of a private document evidencing credit made voluntarily by the creditor to the debtor implies the renunciation of the action of creditor against the latter. [Art. 1272] (3) Accessory obligation of pledge has been remitted when thing after its delivery is found in the possession of the debtor or third person. [Art. 1274]

(2) In case of joint or solidary obligations Confusion in Confusion in Joint Obligation Solidary Obligation Extinguishes the Extinguishes the share of the person in entire obligation, but whom the two the other debtors may characters concur (Art be liable for 1277) reimbursement if payment was made prior to remission. Obligation is not extinguished when confusion takes place in the person of subsidiary debtor (e.g. guarantor), but merger in the person of the principal debtor shall benefit the former. Note: Where, however, the mortgagee acquires ownership of the entire mortgaged property, the mortgage is extinguished; but this does not necessarily mean the extinguishment of the obligation secured thereby, which may become an unsecured obligation.

Effect Art. 1273. Renunciation of the principal debt shall extinguish the accessory obligations, but remission of the latter leaves the principal obligation in force.

E. COMPENSATION D. CONFUSION OR MERGER OF RIGHTS

Compensation: Offsetting of two obligations which are reciprocally extinguished if they are of the same value, or extinguished to the concurrent amount if of different values.

Confusion: The meeting in one person of the qualities of creditor and debtor of the same obligation.

Requisites [Art. 1279] (1) Each obligor is bound principally, and at the same time a principal creditor of the other (2) Both debts must consist in a sum of money, or if the things due are FUNGIBLE, of the same kind & quality Note: The term ‘consumable’ is erroneously used in Art 1279. The appropriate term is ‘fungible’. (3) Both debts are due

Requisites (1) It should take place between principal debtor and creditor. (Art 1276) (2) The very same obligation must be involved; (3) The confusion must be total, i.e. as regards the whole obligation. Effects

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(4) Debts are liquidated and demandable (5) There must be no retention or controversy over either of the debts, commenced by third persons and communicated in due time to the debtor (6) Compensation is not prohibited by law

Compensation Capacity to dispose and receive the thing is unnecessary since compensation operates by law May be partial

To warrant the application of set off under Article 1278 of the Civil Code, the debtor’s admission of his obligation must be clear and categorical and not one which merely arise by inference or implication from the customary execution of official documents in assuming the responsibilities of a predecessor [Bangko Sentral v COA, 2006].

(1) Legal Compensation – takes place by operation of law from the moment all requisites are present. Since it takes place ipso jure, when used as a defense, it retroacts to the date when all its requisites are fulfilled. Art. 1290. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

Compensation Distinguished from Other Modes of Extinguishment Confusion

There are two persons who are mutually debtors and creditors of each other in two separate obligations, each arising from the same cause.

There is only one person whom the characters of the creditor and debtor meet.

total

As to cause (1) Legal (2) Voluntary (3) Judicial (4) Facultative

Debtor claiming its benefits must prove compensation; once proven, effects retroact from the moment when the requisites concurred.

Involves only obligation.

Must be performance

Kinds of Compensation As to extent (1) Total – when two debts are of the same amount (Art. 1281) (2) Partial

Effects rise from the moment all the requisites concur.

There must always be two obligations.

Payment Requires capacity to dispose of the thing paid and capacity to receive

Compensation Counterclaim Takes place by Must be pleaded to be operation of law effectual

Effects (1) Both debts are extinguished to the concurrent amount, even though the creditors and debtors are not aware of the compensation. (2) Accessory obligations are also extinguished.

Compensation

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one

Legal compensation may apply to: i. Awards of attorney’s fees, against the litigant and not his lawyer [Gan Tion v CA, 1969] ii. Bank deposits, against the accounts of a depositor whose checks were dishonoured [BPI v CA, 1996]

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Note: While a bank generally has a right of set-off over deposits for the payment of any withdrawals on the part of a creditor, the question of whether the remedy is properly exercised is a separate matter and depends on the bank’s role as the depository bank and as collecting agent for the check. The depositary bank must have acted with the highest degree of care, otherwise it may not exercise such right of setoff. [Associated Bank v Tan, 2004]

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Art. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof. (4) Facultative Compensation - When it can be claimed by one of the parties who, however, has the right to object to it. - Compensation which can only be set up at the option of a creditor, when legal compensation cannot take place because some legal requisites in favor of the creditor are lacking. Creditor may renounce his right to compensation, and he himself may set it up. As opposed to conventional compensation, facultative compensation is unilateral and does not depend upon the agreement of the parties.

Respondent owed petitioner P566,000. Later on, respondent sold a car to petitioner for P500,000. The claim of respondent that there could be no legal compensation as one of the obligations consists of delivery of a car and not a sum of money must fail. As legal compensation takes place ipso jure, and retroacts to the date when its requisites are fulfilled, legal compensation has already taken place at the time of the sale [Trinidad v Acapulco, 2006].

Obligations which cannot be compensated [Arts. 1287-1288] (1) Contracts of depositum (2) Contracts of commodatum (3) Future support due by gratuitous title (4) Civil liability arising from a penal offense (5) Obligations due to the government (6) Damage caused to the partnership by a partner

(2) Voluntary Compensation – takes place when parties who are mutually creditors and debtors of each other agree to compensate their respective obligations even though one of the requisites of compensation may be lacking

Right of a Guarantor A guarantor may set up compensation as regards what the creditor may owe the principal debtor. [Art. 1280]

Art. 1282. The parties may agree upon the compensation of debts which are not yet due.

Effect of Assignment of Rights by the Creditor to a Third Person [Art. 1285] Debtor cannot set up against assignee compensation With pertaining to him against debtor’s assignor UNLESS he reserved consent such right at the time he gave his consent With Debtor may set up debtor’s compensation of debts previous knowledge to the assignment but not of

The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits [United Planters v CA, 2009]. (3) Judicial Compensation – takes place by judicial decree

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subsequent ones

stipulated.

Debtor may set up Without compensation of all credits debtor’s prior and also later to the knowledge assignment until he had knowledge of the assignment

F. NOVATION Novation Extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor. Unlike other modes of extinguishment, it is a juridical act of dual function—it extinguishes an obligation, and at the same time, it creates a new one in lieu of the old. It operates as a relative, not an absolute, extinction.

Old obligation is extinguished and replaced by the new one

the former relations shall be extinguished in any event [Art. 1297] 1. New obligation void: No novation 2. New obligation voidable: Novation is effective

Original or new obligation with suspensive or resolutory condition Art. 1299. If original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated. Compatible Conditions Incompatible Conditions (a) Fulfillment of both (a) Original obligation is conditions: new extinguished, while obligation becomes new obligation exists demandable (b) Fulfillment of (b) Demandability shall condition concerning be subject to the original fulfillment/ obligation: old nonfulfillment of the obligation is revived; condition affecting it new obligation loses force (c) Fulfillment of condition concerning the new obligation: no novation; requisite of a previous valid and effective obligation lacking

Effect If Original Obligation is Void Novation is void if the original obligation was void, except when annulment may

be claimed only by the debtor, or when ratification validates acts that are voidable [Art. 1298] 1. Original obligation is void: No novation 2. Original obligation voidable: Effective if contract is ratified before novation.

Accessory obligations are also extinguished, but may subsist only insofar as they may benefit third persons who did not give their consent to the novation OR those who may be affected, upon agreement between the parties.

Requisites (1) A previous valid obligation (2) Agreement of all the parties to the new obligation (3) Animus novandi or intent to novate (4) Substantial difference between old and new obligations and, consequently, extinguishment of the old obligation (5) Validity of the new obligation

In General

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If New Obligation is Void New obligation is void, the old obligation subsists, unless the parties intended that

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OBLIGATIONS retained, unless waived by the debtor.

Kinds of Novation As to form (1) Express – declared in an unequivocal terms (2) Implied – the old and new obligations are on every point incompatible with each other

As to essence or object (1) Objective/ Real (2) Subjective/ Personal a. Substitution of debtors i. Expromision ii. Delegacion b. Subrogation of a third person to the rights of the creditor i. Conventional ii. Legal

Novation is not presumed In the absence of an unequivocal declaration of extinguishment of the pre-existing obligation, only proof of incompatibility between the old and new obligation would warrant a novation by implication. [California Bus Line vs. State Investment, 2003]

(1) Objective Novation a. Change of the subject matter b. Change of cause or consideration c. Change of the principal conditions or terms

Test of Incompatibility Whether or not the old and new obligation can stand together, each one having an independent existence. No incompatibility exists when they can stand together. Hence, there is no novation. Incompatibility exists when they cannot stand together. Hence, there is novation.

(2) Subjective Novation a. Substitution of debtors Expromision Initiative for change does not emanate from the debtor, and may even be made without his knowledge.

Delegacion Debtor (delegante) offers or initiates the change, and the creditor (delegatorio) accepts a third person (delegado) as consenting to the substitution. Requisites (1) Consent of the Consent of old debtor, creditor and the new new debtor, and debtor creditor (2) Knowledge or XLII. consent of the old debtor is not required

For there to be implied novation, the changes must be essential, i.e. referring to the object, cause, or principal conditions of the obligation. As to effect (1) Total (2) Partial Total (1) Transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or third persons. (2) Obligation is not extinguished, even if the intention is to pay it. (3) Defenses against the old creditor are

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Partial A creditor, to whom partial payment has been made, may exercise his right for the remainder, and shall be preferred to the person subrogated in his place in virtue of the partial payment. XLI.

Effects (1) Old debtor is released (1) Insolvency of the (2) Insolvency of the new new debtor revives debtor does not the obligation of the revive the old old debtor if it was obligation in case the anterior and public, old debtor did not and known to the old agree to expromision debtor. (3) If with knowledge (2) New debtor can and consent of old demand

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debtor, new debtor can demand reimbursement of the entire amount paid and with subrogation of creditor’s rights. (4) If without knowledge of the old debtor, new debtor can demand reimbursement only up to the extent that the latter has been benefited without subrogation of creditor’s rights.

reimbursement of the entire amount he has paid from the original debtor. He may compel creditor to subrogate him to all of his rights. XLIII.

Extinguishes an obligation and gives rise to a new one. Defects/vices in the old obligation are cured.

Refers to the same right which passes from one person to another, without modifying or extinguishing the obligation. Defects/vices in the old obligation are not cured.

ii. Legal Subrogation – takes place by operation of law Legal subrogation is not presumed, except in the following circumstances: (1) When creditor pays another creditor who is preferred, even without the debtor’s knowledge (2) When a third person not interested in the obligation pays with the express or tacit approval of the debtor (3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share (Art. 1302)

For subjective novation, it is insufficient that the juridical relation between the parties to the original contract is extended to a third person. If the old debtor is not released, no novation occurs and the third person who has assumed the debtor’s obligation becomes merely a codebtor or surety or co-surety. [Conchinyan, Jr. v. R&B Surety and Insurance Company, 1987] An accessory surety may not be released if he expressly waives his discharge from the obligation in case of change or novation in the original agreement [Molino v Security Diners International Corp, 2001]. b. 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 a conventional subrogation. [Art. 1303] i. Conventional Subrogation – takes place by agreement of parties Difference between Conventional Subrogation and Assignment of Credit [Licaros v Gatmaitan, 2001] Conventional subrogation Debtor’s consent is necessary.

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Assignment of credit Debtor’s consent is not required.

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I. GENERAL PROVISIONS

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inequitable, the court shall decide what is equitable under the circumstances.

A.2. AUTONOMY Contract)

Contract - A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service [Article 1305]

(also

Freedom

to

Art. 1306. The 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.

A. PRINCIPAL CHARACTERISTICS OF CONTRACTS (MARCO)

Gateway v Land Bank, 2003: Contracting parties may establish any agreement, term, and condition they may deem advisable, provided they are not contrary to law, morals or public policy. The right to enter into lawful contracts constitutes one of the liberties guaranteed by the Constitution. It cannot be struck down or arbitrarily interfered with without violating the freedom to enter into lawful contracts.

A. 1. MUTUALITY Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. General rule: Any contract which appears to be heavily weighed in favor of one of the parties or is left solely to the will of one of the parties is void [Floirendo v Metrobank, 2007]. Exception: The legality of contracts which is left to the will of either of the parties may be upheld if there was a finding of the presence of essential equality of the parties to the contracts, thus preventing the perpetration of injustice on the weaker party [GF Equity v Valenzona, 2005]

It is necessary for the existence of a contract that two distinct parties enter into it (autocontracts).  The existence of a contract is not determined by the number of persons who intervene in it, but by the number of parties; not by the number of individual wills but by the number of declarations of will.  As long as there are two distinct patrimonies, even if they are represented by the same person, the contract will be valid; e.g. an agent representing both the buyer and the seller.

A contract may expressly confer upon one party the right to cancel the contract because the exercise of that right is a fulfillment of the provisions of the contract itself [Taylor v Uy Tieng Pao, 1922] The determination of the performance may be left to a third party as long as: (1) The decision has been made known to both contracting parties [Article 1309] (2) The determination is not evidently inequitable [Article 1310]. If it is

Special disqualifications in freedom to contract Article 87, Family Code: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the

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spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. Article 1490, Civil Code: The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Article 191. Article 1491, Civil Code: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any

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litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law. Article 1782, Civil Code: Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership Limitations to stipulations/what not to stipulate: 1. Contrary to Law Pactum commisorium – automatic foreclosure Article 2088, Civil Code: The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. Pactum leonina – one party bears the lion’s share of the risk Article 1799, Civil Code: A stipulation which excludes one or more partners from any share in the profits or losses is void. Pactum de non alienundo – a stipulation not to alienate Article 2130, Civil Code: A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. 2. Contrary to morals 3.Contrary to good customs 4. Contrary to public order 5. Contrary to public policy Public policy is the principle under which freedom of contract or private dealing is restricted by law for the good of the public. In determining whether a contract is contrary to public policy, the nature of the subject matter determines the source from which such question is to be solved [Ferrazzinni v Gsell, 1916] A contract which is neither prohibited by law nor condemned by judicial decision, nor contrary to public morals, contravenes no

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He communicated his acceptance to the obligor before its revocation (by the original parties) ii. The contracting parties must have clearly and deliberately conferred a favor upon the third person (A mere incidental benefit or interest of a person is not sufficient). iii. The stipulation favoring the third person is only a part of the contract iv. No relation of agency exists between any of the parties and the third person favored

public policy. In the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property [Gabriel v Monte de Piedad, 1941]

Florentino v Encarnacion, (1977): i. Contracts to perform personal acts which cannot be as well performed by others are discharged by the death of the promissor. Conversely, where the service or act is of such a character that it may as well be performed by another, or where the contract, by its terms, shows that performance by others was contemplated, death does not terminate the contract or excuse nonperformance. ii. In this case the stipulation is a stipulation pour autrui because the true intent of the parties is to confer a direct and material benefit upon a third party.

A.3. RELATIVITY Article 1311, para.1. Contracts take effect only between parties, their assigns and heirs, EXCEPT in case where the rights and obligations arising from the contract are not transmissible by their (1) nature, (2) by stipulation, or (3) by provision of law. The heir is not liable beyond the value of the property he received from the decedent Article 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified expressly or impliedly by the person on whose behalf it has been executed, before it is revoked by the other contracting party

Accion directa –the creditor is authorized by the statute to sue on his debtor’s contract (J.B.L Reyes) e.g. Lessor v Sublessee [Article 1651, 1652] Laborers of Contractor v Owner of the work (Article 1729) 2. Third Person in Possession of Object of Contract [Article 1312] 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.

Exceptions to Relativity (Contracts may bind and affect strangers in the ff. cases): 1. Stipulations Pour Autrui [Article 1311, par.2] If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment, provided:

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A.4. CONSENSUAL

3. Fraud of Creditors by Contracting Parties [Article 1313] “Creditors are protected in cases of contracts intended to defraud them.”

Article 1315. 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 al consequences which according to their nature may be keeping in good faith, usage, and law.

Creditors of the contracting parties may rescind contracts intended to defraud them although they did not intervene therein (J.B.L. Reyes).

Exceptions: Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation [Article 1316]

4. Tortious Interference [Article 1314] Any third person who induces another to violate his contract shall be liable for damages to the other contracting party (even though the third person is not bound by the stipulations).

A.5. OBLIGATORY FORCE Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Requisites: i. Existence of a valid contract ii. Knowledge of the third person of the existence of the contract iii. Interference by third person without legal justification or excuse

Article 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them

Daywalt v Corp. de PP. Agustinos Recoletos (1919): The liability of the third person in good faith cannot exceed the liability of the party to the contract in whose behalf the third person intermeddles.

Article 1315. 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 keeping in good faith, usage, and law

Lagon v CA (2005): (1) The word "induce" refers to situations where a person causes another to choose one course of conduct by persuasion or intimidation. (2) Knowledge alone is not sufficient to make a third person liable for tortuous interference. To sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely impious reasons to injure the plaintiff.

B. ELEMENTS OF CONTRACTS 1) Essential – those without which there is no contract Consensual (ordinary) Essential Elements Additional Elements

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Solemn (formal)

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c. Gratuitous – where no correlative prestation is received by one party (6) To purpose a. Transfer of ownership, e.g. sale b. Conveyance of Use, e.g. commodatum c. Rendition of Service, e.g. agency (7) To time of fulfillment a. Executed – where the obligations are fulfilled at the time the contract is entered into b. Executory – where fulfillment of obligations does not take place at the time the contract is made (8) To risk a. Commutative – fulfillment is predetermined in advance b. Aleatory – fulfillment is dependent upon chance (9) To the nature of the vinculum produced a. Unilateral – only one party is bound by the prestation; e.g. commodatum b. Bilateral (synallagmatic)- both parties are bound by reciprocal prestations, e.g. sale  All contracts are bilateral in the consent, but not all are bilateral in effects. (10) To their designation/name a. Nominate – where the law gives the contract a special designation or particular name; e.g. deposit b. Innominate – where the contract has no special name (i) Do ut des (I give so that you may give) (ii) Do ut facias (I give so that you may do) (iii) Facio ut facias (I do so that you may do) (iv) Facio ut des (I do so that you may give) Article 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this Book, by the rules governing the most

2) Natural – those which are derived from the nature of the contract and ordinarily accompany the sane; they are presumed to exist unless the contrary is stipulated 3) Accidental – those which exist only if stipulated

C. CLASSIFICATION OF CONTRACTS (1) To their subject matter a. Things, e.g. sale, deposit b. Services, e.g. agency (2) To formation (CRS) a. Consensual – consent is sufficient to perfect the contract [Art. 1315] b. Real – delivery, actual or constructive, is required in addition to consent [Art. 1316] c. Solemn or formal – where special formalities are required for perfection [Art. 1356] (3) To relation to other contracts (PAP) a. Principal – may exist alone; e.g. lease b. Accessory – depends on another contract for its existence, e.g. guaranty c. Preparatory – a preliminary step towards the celebration of a subsequent contract; e.g. agency (4) To form a. Common or informal – may be entered into in whatever form as long as there is consent, object and cause b. Special or formal – required by law to be in certain specified form (5) To cause/by equivalence of prestations (ORG) a. Onerous – there is an exchange of correlative values b. Remuneratory – where the outstanding prestation is premised upon services or benefits already received

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A contract is perfected by mere consent. From the moment of a meeting of the offer and the acceptance upon the object and the cause that would constitute the contract, consent arises. However, “the offer must be certain”and “the acceptance seasonable and absolute; if qualified, the acceptance would merely constitute a counteroffer. [Insular Life v. Asset Builders Corp., 2004]

analogous nominate contracts, and by the customs of the place

D. STAGES OF A CONTRACT (PrePerCon) (1) Preparation (conception or “generation”) – when negotiations are in progress (2) Perfection (or birth) – when the parties come to an agreement (3) Consummation (or death) - when the contract is fully executed

The offer must be certain and the acceptance absolute. [Art. 1319] Offer A unilateral proposition which one party makes to the other for the celebration of the contract [Tolentino]

II. Essential Requisites There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. [Art. 1318, NCC]

Requisites of an Offer: (1) Definite (2) Intentional (3) Complete Invitation to make offers (advertisements) (1) Business advertisements of things for sale are NOT definite offers, just invitations to make an offer, UNLESS the contrary appears (Art. 1325). (2) Advertisements for bidders are invitations to make proposals, the advertiser is NOT bound to accept the lowest or highest bid; UNLESS the contrary appears. The bidder is the offeror (Art. 1326).

Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject matter, and cause of the obligation established. [Francisco v. Pastor Herrera, 2002]

A. CONSENT The meeting of the minds of the parties on the subject matter and cause of the contract. Requisites (1) It must be manifested by the concurrence of the offer and acceptance [Arts. 13191326]. (2) The contracting parties must possess the necessary legal capacity [Arts. 1327-1329]. (3) It must be intelligent, free, spontaneous, and real (not vitiated) [Arts. 1330-1346]

e.g. The Terms and Conditions of the Bidding disseminated by PUREFOODS constitutes the "advertisement" to bid on the project. The bid proposals or quotations submitted by the prospective suppliers including respondent FEMSCO, are the offers. The reply of petitioner Purefoods constitutes the acceptance or rejection of the respective offers. [Jardine Davies v. CA, 2000]

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(3) Statements of intention: no contract results even if accepted.

offer annuls the latter and frees the offeror. [Tolentino]

In a letter informing another that the sender was “in a position and is willing to entertain” the purchase of a yacht under some terms, the word “entertain” applied to an act does not mean the resolution to perform said act, but simply a position to deliberate for deciding to perform or not to perform said act. It was merely a position to deliberate whether or not he would purchase the yacht and invitation to a proposal being made to him, which might be accepted by him or not. [Rosenstock v. Burke, 1924]

Requisites of acceptance: (1) Unqualified and unconditional, i.e. it must conform with all the terms of the offer, otherwise it is a counter-offer [Art. 1319] (2) Communicated to the offeror and learned by him [Art. 1319] If made through an agent, the offer is accepted from the time the acceptance is communicated to such agent. [Art. 1322] (3) May be express/implied, but is not presumed

Offer terminates upon— (1) Rejection by the offeree (2) Incapacity (death, civil interdiction, insanity, or insolvency) of the offeror or offeree before acceptance is conveyed [Art. 1323] (3) Counter-offer (4) Lapse of the time stated in the offer without acceptance being conveyed (5) Revocation of the offer before learning of acceptance (6) Supervening illegality before acceptance (J.B.L. Reyes)

Acceptance must be absolute, unconditional, and without variance of any sort from the offer. It must also be made known to the offeror. An acceptance not made in the manner prescribed is not effective but constitutes a counter-offer. [Malbarosa v. CA, 2003] Contracts are perfected by mere consent 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 the consequences which, according to their nature, may be in keeping with good faith, usage and law. [Art. 1315]

Acceptance To produce a contract, the acceptance must not qualify the terms of the offer. There is no acceptance sufficient to produce consent, when a condition in the offer is removed, or a pure offer is accepted with a condition, or when a term is established, or changed, in the acceptance, or when a simple obligation is converted by the acceptance into an alternative one; in other words, when something is desired which is not exactly what is proposed in the offer. It is necessary that the acceptance be unequivocal and unconditional, and the acceptance and the proposition shall be without any variation whatsoever; and any modification or variation from the terms of the

Exceptions: (1) Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation [Art. 1316] (2) Formal contracts, where the law requires that a contract be in some form or be proved in a certain way; the intent of the parties have to be accompanied by the requisite formality [Art. 1356]

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Cognition Theory Acceptance made by a letter or telegram does not bind the offeror except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. [Art. 1319, 2nd par.]

Code. By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit. (Francisco v. Pastor Herrera, 2000) Persons incapacitated to give consent [Art. 1327] (MID) (1) Minors, except— a. For necessaries [Art.1427] b. Where the minor actively misrepresents his age (estoppel)

Option Contract A preparatory contract in which one party grants to the other, for a fixed period, the option to decide whether or not to enter into a principal contract [Art. 1324] With consideration

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Mercado v. Espiritu (1917): Minors were held in estoppel through active misrepresentation. Bambalan v. Maramba (1928): There is no estoppel if the minority was known by the other party. (2) Insane or demented persons, UNLESS they contract during a lucid interval. [Art. 1328] (3) Deaf-mutes who do not know how to read AND write. Persons disqualified to contract (1) Those under civil interdiction for transactions inter vivos [RPC Art. 34] (2) Undischarged insolvents [Sec. 24, Insolvency Law] (3) Husband and wife cannot donate to each other [Art. 123, FC], nor sell to each other if the marriage is under the regime of Absolute Community of Property [Art.1490] (4) The ff. cannot purchase [Art. 1491]: Prohibited Party Subject Guardian Property of the ward Agent Property of the Principal

Without consideration

Offeror cannot Offeror may withdraw unilaterally withdraw by communicating his offer. withdrawal to the offeree before acceptance. Art. 1324 provides the general rule regarding offer and acceptance: when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration. If option is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of the period agreed upon. However, Art. 1479 modifies the general rule, which applies to "a promise to buy and sell" specifically. This rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. The option can still be withdrawn, even if accepted, if the same is not supported by any consideration. [Tuazon v. Del Rosario-Suarez, 2010]

Executors and Administrators Public Officers

Capacity to Contract There are two types of void contracts: (1) those where one of the essential requisites of a valid contract as provided for by Article 1318 of the Civil Code is totally wanting; and (2) those declared to be so under Article 1409 of the Civil

Justices, judges, prosecutors, clerks of court, lawyers

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Incapacity to Give Consent vs. Disqualification to Contract Incapacity to Give Disqualification to Consent Contract Restrains the exercise Restrains the very of the right to contract right itself Based upon subjective Based upon public circumstances of policy and morality certain persons Voidable Void

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To invalidate consent, the error must be excusable. It must be real error, and not one that could have been avoided by the party alleging it. The error must arise from facts unknown to him. He cannot allege an error which refers to a fact known to him, or which he should have known by ordinary diligent examination of the facts. An error so patent and obvious that nobody could have made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one who made it in order to annul his contract. A mistake that is caused by manifest negligence cannot invalidate a juridical act. [Tolentino]

Consent Requisites of Consent: (1) intelligent (2) free (3) spontaneous (4) real

Requisites: a. The error must be substantial regarding: a. The object of the contract (error in re) which may be: i. Mistake as to the identity of the thing (error in corpore) ii. Mistake as to the substance of the thing (error in substantia) iii. Mistake as to the conditions of the thing provided, or iv. Mistake as to the quantity of the thing (error in quantitate) b. The error must be excusable c. The error must be a mistake of fact and not of law.

Vices of Consent A contract where consent is given through a. Mistake b. Violence c. Intimidation d. Undue influence e. Fraud is voidable. [Art. 1330]

Mistake Inadvertent and excusable disregard of a circumstance material to the contract [J.B.L. Reyes]

Mistake which vitiates consent is an error of fact, and not an error of law. Ignorance of the law excuses no one from compliance therewith [Art. 3]; but the modern tendency is to allow an excusable mistake of law to be invoked as vitiating consent. [Tolentino]

In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. [Art.1331] There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. [Art. 1333]

See also Art. 526, on Possession: Mistake upon a doubtful or difficult question of law may be the basis of good faith.

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Ignorantia Facti Excusat vs. Ignorantia Legis Neminem Excusat Mistake of Fact Mistake of Law One or both One or both parties contracting parties arrive at an erroneous believe that a fact conclusion on the exists when in reality interpretation of a it does not, or vice question of law or its versa legal effects Vitiates consent Does not vitiate consent except when it involves mutual error as to the effect of an agreement when the real purpose is frustrated.

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imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind. [Art. 1335] The conveyance of several properties by the wife to her husband’s creditors, though reluctant, is still consent. She assented to the requirements of the defendants in order that the civil and criminal actions against them would be dropped. A contract is valid even though one of the parties entered into it against his wishes and desires, or even against his better judgment. [Martinez vs HSBC, 1910]

Note: The obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. [Art. 1332]

Violence  Serious or irresistible force used to extort consent [Art. 1335] Requisites: (1) One party is compelled to give his consent by a reasonable and wellgrounded fear of an evil; (2) The evil must be imminent and grave; (3) The evil must be upon his person or property, spouse, descendants or ascendants; (4) The evil must be unjust.

Art. 1332… altered the old rule that said that a person who affixes his signature to a document is bound thereby. This was necessitated by the fact that there continues to be a number of people without good education; and that the documents [in question] have been written in English or Spanish. The provision was intended to protect a party to a contract disadvantaged by illiteracy, ignorance, mental weakness, or some other handicap. If fraud is alleged, person enforcing the contract must show that the terms thereof have been fully explained to the former; and if a party pleads that he signed without knowing its contents, burden shifts to other party to show that the former fully understood the contents. [Leonardo v. CA, 2004]

If a contract is signed merely because of “fear of displeasing persons to whom obedience and respect are due”, the contract is still valid, for by itself, reverential fear is not wrong. [PARAS, Civil Code] Violence Physical compulsion External or prevents the will to manifest itself

Intimidation One of the contracting parties is compelled by a reasonable and well-grounded fear of an

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Note: Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. [Art. 1336]

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have been employed by both contracting parties. [Art. 1344] Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.

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. Requisites: (1) Improper advantage (2) Power over the will of another (3) Deprivation of the latter’s will of a reasonable freedom of choice

Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge.

Circumstances to consider: a. Relationship of the parties (family, spiritual, confidential etc.) b. That the person unduly influenced was suffering from infirmity (mental weakness, ignorance etc.) [Art.1337] Note: By analogy, undue influence employed by a third person may annul the contract.

Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.

Test of Undue Influence: Whether or not the influence exerted has so overpowered or subjugates the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own. [CosoFernandez Deza, 1921]

Dolo Causante vs. Dolo Incidente Dolo Causante Dolo Incidente Refers to those Refers to those deceptions or deceptions or misrepresentations of misrepresentations a serious character which are not serious employed by one in character and party and without without which the which the other party other party would would not have have still entered into entered into the the contract contract Renders the contract Renders the party voidable liable for damages

In the absence of a confidential or fiduciary relationship between the parties, the law does not presume that one person exercised undue influence upon the other. [Loyola v. CA, 2000] Fraud When, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. [Art. 1338]

Dolo incidente, or incidental fraud, which is referred to in Article 1344, are those which are not serious in character and without which the

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other party would still have entered into the contract. Dolo causante determines or is the essential cause of the consent, while dolo incidente refers only to some particular or accident of the obligation. The effects of dolo causante are the nullity of the contract and the indemnification of damages, while dolo incidente obliges the person employing it to pay damages. [Tankeh v. DBP, 2013]

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subsequent acts of the parties. [Spouses Lopez v. Spouses Lopez, 2009] Requisites (DAP): (1) A deliberate Declaration contrary to the will of the parties; (2) Agreement of the parties to the apparently valid act, and (3) The Purpose is to deceive or to hide from third persons although it is not necessary that the purpose be illicit or for purposes of fraud

Fraud to vitiate consent must fulfill two conditions: (1) The fraud must be dolo causante or it must be fraud in obtaining the consent of the party. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case should be considered, taking into account the personal conditions of the victim. (2) The fraud must be proven by clear and convincing evidence and not merely by a preponderance thereof. [ECE Realty v. Mandap, 2014]

Absolute Simulation (Simulados) No real transaction is intended. Fictitious contract. Void. (Because there is an absolute lack of declaration of will)

Relative Simulation (Disimulados) Real transaction is hidden. Disguised contract. Bound as to hidden agreement, so long as it does not prejudice a third person and is not contrary to law, morals, good customs, public order or public policy. The characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. Lacking, therefore, in a fictitious and simulated contract is consent which is essential to a valid and enforceable contract. [Manila Banking v. Silverio, 2005]

Note: However, fraud in its general sense (false representation of a fact) coming about in the consummation stage of the sale, as opposed to the negotiation and perfection stages, entitles the aggrieved party to the rescission of the sales contract. [Spouses Tongson v. Emergency Pawnshop, 2010] Simulation of Contracts Takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. It may be absolute or relative [Arts. 1345-1346]

If the parties [merely] state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the

The primary consideration in determining the true nature of a contract is the intention of the parties. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and

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content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. [Valerio v. Refresca, 2006]

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Exceptions to the Exception a. In case of marriage settlements under Art. 130, NCC b. In case of partition of properties inter vivos by the deceased under Art. 1080, NCC [JLT Agro v. Balansag, 2005)] (4) Impossible things or services (5) Objects which are indeterminable as to their kind, the genus should be expressed

With respect to a third person acting in good faith, the apparent contract must be considered as the true contract. The declaration that the constract is simulated does not prejudice him. Note: Relative simulation is presumed by law in case of Art. 1602 (Contracts presumed to be Equitable Mortgages)

In order that a thing, right, or service may be the object of a contract, it should be in existence at the moment of the celebration of the contract, or at least, it can exist subsequently or in the future.

E. OBJECT OF CONTRACTS The subject matter; the thing, right or service which is the subject matter of the obligation arising from the contract. [Tolentino]

A FUTURE THING may be the object of a contract. Such contract may be interpreted as a: a) Conditional contract, where its efficacy should depend upon the future existence of the thing. b) Aleatory contract, where one of the contracting parties assumes the risk that the thing will never come into existence, e.g. insurance.

Requisites (1) Within the commerce of men [Art. 1347] (2) Not legally or physically impossible [Art.1348] (3) In existence or capable of coming into existence [See Arts. 1461, 1493, 1495] (4) Determinate or determinable, without the need of a new contract between the parties [Arts. 1349, 1460, par.2]

In case of doubt about the nature of the contract, it must be deemed conditional as doubt shall be resolved in favor of greatest reciprocity of interests.

All things or services may be the object of contracts, EXCEPT: (1) Things which are outside the commerce of men (2) Intransmissible rights (3) Future inheritance except in cases authorized by law Requisites: a. The succession has not yet been opened; b. The object of the contract forms part of the inheritance; and c. The promissor has an expectancy of a right which is purely hereditary in nature

F. CAUSE OF CONTRACTS The essential and impelling reason why a party assumes an obligation (Manresa). Motive, on the other hand, is the particular reason for a contracting party which does not affect the other.

Requisites (ELT) (1) Exists at the time of the contract is entered into [Arts. 1352, 1409, par. 3]

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(2) Lawful (ibid). (3) True or real [Art.1353]

Contracts

Beneficence

Moral Obligation as a Cause In Villaroel v. Estrada (1940), where a moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time the contract is entered into, it constitutes a sufficient cause or consideration to support a contract (natural obligation).

As to the Thing Prestation or promise The thing or service of a thing or service by itself the other As to Contracting Parties Different with respect May be the same for to each part both parties

BUT, In Fisher v. Robb (1939), if the moral obligation arises wholly from ethical considerations, it cannot constitute a sufficient cause to support an onerous contract, as when the promise is made on the erroneous belief that one was morally responsible for the failure of an enterprise (moral obligation).

Distinguished from Motive Cause Motive Proximate reason for Remote reason for the contract contract Objective or juridical Psychological and reason purely personal reason Always the same for Differs for each each contracting contracting party party Illegality affects Illegality does not existence or validity of affect existence or the contract validity of contract

Effect of Lack of Cause, Unlawful Cause, False Cause and Lesion (Arts. 1352 – 1355) Cause Effect Lack of Cause – If there is no cause absence or total whatsoever, contract is lack of cause VOID; a fictitious sale is VOID.

Motive becomes cause when it predetermines the purpose of the contract.

NOTE: Cause must exist at the time of the perfection of the contract; it need not exist later. Contrary to law, If cause is unlawful, morals, good transaction is VOID. customs, public policy and public If parts of a contract are order (unlawful illegal but the rest are

Cause in contracts [Art. 1350] Remuneratory

Contracts

The The service or Mere undertaking benefit which is liberality of or the remunerated the promise of benefactor the thing or service by the other party

Cause vs. Object Cause Object As to Remuneration The service or benefit The thing which is which is remunerated given in remuneration As to Donation The liberality of the The thing which is donor or benefactor given or donated

Onerous

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Pure

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CONTRACTS supported by lawful cause, claimant of such has the burden of showing proof; otherwise, the whole contract is VOID.

GENERAL RULE: Article 1356, par. 1. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present  “Spiritual System” of the Spanish Code: The law looks more on the spirit rather than the form of contracts

Contract with illegal cause may still produce effect in certain cases where parties are not of equal guilt: (1) innocent party can’t be compelled to perform his obligation and he may recover what has already been given; (2) if both parties are guilty, neither can sue the other, the law leaving them as they are (in pari delicto). Falsity of cause – Contract with a false cause is stated cause is merely but is untrue revocable/voidable.

EXCEPTION: (1) When the law requires that a contract be in some form in order that it may be valid or enforceable [Art. 1356, par. 2] (2) When the law requires that a contract be proved in a certain way to be enforceable Statute of Frauds) [Art. 1356, par. 2] (3) When the law requires contract to be in some form for convenience [Art. 1357 and 1358]

A. KINDS OF REQUIRED BY LAW

FORMALITIES

A.1. FOR THE VALIDITY OF CONTRACTS (AD ESENTIA / AD SOLIMNITATEM/ SOLEMN CONTRACTS)

Parties are given a chance to show that a cause really exists, and that said cause is true and lawful. Lesion or inadequacy of cause – cause is not proportionate to object

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Formal or Solemn Contract Donations of Immovables Donations of Movables

Special Form Required by Law Must be in a public instrument [Art. 749] Must be in a written contract if the donation exceeds P500 [Art. 748] Partnerships where Must be in public real property is instrument; otherwise contributed the contract of partnership is void [Art. 1771, 1773] Contracts of The principal loan and antichresis the interest, if any, must be specified in writing; otherwise, the

Inadequacy of cause shall not invalidate the contract except when: (1) there is fraud, mistake, undue influence (2) when parties intended a donation

Note: Inadequacy of cause may be a badge of fraud.

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Agency to sell real property or any interest therein

Stipulation to pay interest on loans, interest for the use of money Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence

CONTRACTS contract of antichresis is void [Art. 2134] Authority of the agent must be in writing; otherwise, the sale is null and void [Art. 1874] Must be expressly made in writing [Art. 1956]

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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: a. An agreement that by its terms is not to be performed within a year from the making thereof; b. A special promise to answer for the debt, default, or miscarriage of another; c. An agreement made in consideration of marriage, other than a mutual promise to marry; d. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; e. An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; f. A representation as to the credit of a third person. 3. Those where both parties are incapable of giving consent to a contract.

Must be (1) in writing, signed by the shipper or owner; (2) supported by a valuable consideration; and (3) reasonable, just, and not contrary to public policy [Art. 1744] Chattel mortgage Must be recorded in Chattel Mortgage Register [Art. 2140] Transfer of large Requires transfer of cattle the certificate of registration [Rev. Adm. Code, Sec. 523]

A.2. FOR THE PURPOSE OF PROVING THE EXISTENCE OF THE CONTRACT (AD PROBATIONEM/ STATUTE OF FRAUDS) Art. 1403, Civil Code. The following contracts are unenforceable, unless they are ratified: 1. Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; 2. Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and



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This article speaks of contracts that cannot be proved except by written note or memorandum, unless the party charged waives the objection [Rule 123, Sec. 21, Rules of Court]

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Registration of the instrument only adversely affects third parties [Fule v Court of Appeals, 1998].

This article applies to executory contracts only [Almirol v Monserrat, 1925]

An oral promise to reduce to writing an agreement that is within the Statute of Frauds is itself unenforceable [J.B.L. Reyes]

Before the contracting parties may be compelled to execute the needed form, the contract should be: 1) Perfected or valid 2) Enforceable under the Statute of Frauds

A.3. FOR THE EFFECTIVITY OF THE CONTRACT AGAINST THIRD PERSONS Art. 1357, Civil Code. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

Enumerated contracts in Art. 1358 are valid even when not reduced into writing, although parties may have recourse under Art. 1357 to compel execution of the writing, except in the following cases: 1) Solemn Contracts (action under Art. 1357 is not available at all) 2) Real Contracts (action under Art. 1357 is available if there is consent, subject matter, cause, and delivery) 3) Contracts under the Statutes of Fraud (remedy under Art. 1357 is applicable only if the defense of the Statute is waived expressly or impliedly by the party charged

Art. 1358, Civil Code. The following must appear in a public document: Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405.





The recourse under Article 1357 does NOT impose an obligation but a privilege on both parties Action under this Article 1357 may be exercised simultaneously with (i.e. need not be separate nor need it precede) the action to enforce the contract, although questions of form must be decided first.

IV. REFORMATION OF INSTRUMENTS

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Reformation – remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed [J.B.L. Reyes]

terms of their agreement. equity of reformation is ordinarily limited to written agreements, and its purpose is to establish and perpetuate the true agreement;

Rationale: It would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties [J.B.L. Reyes]

intended to declare the inefficiency which the contract already carries in itself and to render the contract inefficacious

[Multi-Ventures Capital Management Corporation v Stalwart, 2007] (1) The presumption is that an instrument sets out the true agreement of the parties and that it was executed for valuable consideration. Thus, when there is some error or mistake in the contract, the onus probandi is upon the party who insists that the contract should be reformed. (2) While intentions involve a state of mind, subsequent and contemporaneous acts of the parties as well as the evidentiary facts as proved and admitted can be reflective of one’s intention. (3) Expediency and convenience, which was the purpose of the execution of “purchase and sale agreement”, is not a ground for reformation of instrument.

REQUISITES [Art. 1359]: a. There must be a meeting of the minds of the contracting parties b. Their true intention is not expressed in the instrument; c. Such failure to express their true intention is due to mistake, fraud, inequitable conduct, or accident; and d. There is clear and convincing proof of mistake, fraud, inequitable conduct, or accident If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract [Art. 1359, par.2] Veluz v Veluz (1968): The action for reformation of instrument should not be confused with the action for annulment of contract. Reformation of Instrument Presupposes a valid, existing contract, in which there had been a meeting of the minds of the parties but the instrument drawn up and signed by them does not correctly express the

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[Rosello-Bentir v Leanda, 2000] (1) The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by court decree made legally effective. (2) The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.

Annulment Presupposes a defective contract in which the minds of the parties did not meet, or the consent of one was vitiated.

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A.1. MISTAKE

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Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

The mistake should be of fact generally, and not of law [BPI v Fidelity and Surety Co., 1927] i. Mutual Art. 1361. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed.

A.4. ACCIDENT [ART. 1364] Art. 1364. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties, the courts may order that the instrument be reformed.  No fraud exists in the sense that neither of the parties took part therein.

ii. Unilateral Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

A.5. SEVERE PACTO DE RETRO RELATIVE SIMULATION

/

Art. 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper.

Art. 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed.

B. WHO MAY ASK REFORMATION [ART. 1368]

A.2. FRAUD

FOR

1.

Either party of his successors in interest, if the mistake was mutual; otherwise, 2. Upon petition of the injured party, or his heirs and assigns

i. Active Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument

C. CASES WHERE REFORMATION IS NOT PROPER 1.

Simple donations inter vivos—wherein no condition is imposed—because donation is an act of liberality [Art. 725] and cannot be compelled); 2. Wills—no reformation before the testator dies because the making of a will is strictly personal [Art. 784], a free act [Art. 839], and essentially revocable [Art. 828]; 3. When the real agreement is void— because there is nothing to reform

ii. Passive (concealment) [Art. 1363] Art. 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed.

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Implied Ratification/Estoppel: the party who has brought an action to enforce the

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instrument cannot subsequently ask for its reformation [Art. 1367]

V. INTERPRETATION OF CONTRACTS

CARDINAL TEST: Intention of the parties, to be derived from the terms of the contract.

one party and to the detriment of the other, or by construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not.

Bautista v CA (2000): (1) Where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. (2) Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of

Borromeo v Reyes (1972): While ordinarily the literal sense of the words employed is to be followed, such is not the case where they "appear to be contrary to the evident intention of the contracting parties." Intention shall prevail. Kasilag v Rodriguez (1939): Another fundamental rule in the interpretation of contracts is that the terms, clauses and

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conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract. A lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the same time and for the same consideration. EXCEPTION: (1) Where the statute expressly or by necessary implication declares the entire contract void (2) Where the terms, clauses, and conditions, by an established connection or by manifest intention of the parties, is inseparable from the principal obligation, and is a condition, juridically speaking, of that the nullity of which it would also occasion [Manresa]

Doubts where it cannot be known what may have been the intention or will of the parties, the contract shall be null and void.

A. RULES ON DOUBTS [ART. 1378] Principal Objects

Gratuitous Contracts

Onerous Contracts

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Absolutely impossible to settle doubts by the rules and only refer to incidental circumstances the doubt shall be settled in favor of the greatest reciprocity of interests.

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VI. DEFECTIVE CONTRACTS

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must be known or coud have been known at the time of making of the contract. [Tolentino] Characteristics of Rescissible Contracts: (1) The defect consists in injury or damage either to one of the contracting parties or to third persons; (2) Before rescission, they are valid, and therefore, legally effective; (3) They can be attacked directly only and not collaterally; (4) They can be attacked only by a contracting party or a third person who is injured or defrauded; and (5) They are susceptible of convalidation only by prescription and not ratification

A. RESCISSIBLE CONTRACTS Contracts which are valid until rescinded. All essential requisites of a contract exist but there is injury or damage to one of the parties or to third persons – external or extrinsic defect consisting of an economic damage or lesion. (Paras) Rescission Process designated to render inefficacious a contract validly entered into and normally binding, by reason of external conditions, causing an economic prejudice to a party or to his creditors (Scaevola).

Distinguished from Rescission/Resolution under Art. 1191 [Congregation of the Religious Virgin Mary vs. Orola, 2008] Art. 1191 – Rescission Art. 1381 – Rescission by or Resolution for reason of lesion Breach of Stipulation Applies only to Applies whether reciprocal obligations are obligations, such reciprocal or unilateral that a party’s breach and whether the thereof partakes of a contract has been fully tacit resolutory fulfilled condition which entitles the injured party to rescission. Predicated on Predicated on injury to breach of faith. economic interests of the party plaintiff/lesion. HOWEVER, not all economic prejudices are recognized by law. Principal action that Subsidiary action. is retaliatory in character.

Remedy granted by law to the contracting parties and to third persons in order to secure reparation for damages caused them by a contract, even if the contract is valid, by means of the restoration of things to their condition prior to the celebration of said contract (Manresa) Relief to protect one of the parties or a third person from all injury and damages which the contract may cause, to protect some preferential right [Aquino v. Tañedo, 1919] Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. [Tolentino] Lesion The injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. To give rise to rescission, the lesion

The

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damages for the subordinated to the breach is purely existence of an secondary. economic prejudice. Hence, where the defendant makes good the damages caused, the action cannot be maintained or continued. Mutual restitution when declared proper as between the parties involved Constitutes Constitutes abrogation termination of the of the contract from obligation and the beginning and to release of the parties restore the parties to from further their relative positions obligations from as if no contract has each other been made Declares the contract void at its inception and puts an end to it as though it never was May be demanded May be demanded by only by a party to the a third party prejudiced contract in the contract May be denied by Extension of time does court when there is not affect the right to sufficient reason to ask for rescission justify the extension of time Non-performance is Various reasons of the only ground for equity are grounds for the right to rescission rescission

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of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission. Requisites before a Contract Entered Into in Behalf of Wards or Absentees May Be Rescinded on the Ground of Lesion: (1) Contract was entered into by a guardian in behalf of his ward or by a legal representative in behalf of an absentee [Arts. 1381, Nos. 1 and 2] Note: A guardian is authorized only to manage the estate of the ward; should he dispose a portion thereof without authority from the court by way of a contract, the same is unenforceable under Art. 1403(1), irrespective of whether there is lesion or not. (2) It was entered into without judicial approval [Art. 1386] (3) Ward or absentee suffered lesion of more than one-fourth of the value of the property which is the object of the contract. [Art. 1381, Nos. 1 and 2] (4) There is no other legal means of obtaining reparation for the lesion. [Art. 1383] Note for Art. 1381 (4): Any disposition of the thing subject of litigation or any act which tends to render inutile the court’s impending disposition in such case without the

Requisites of a Valid Rescission [Art. 1381-1383, 1385, 1389] Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation

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knowledge and approval of the litigants or of the court, is unmistakably and irrefutably indicative of bad faith. However, even without knowledge or approval from the court, the conveyance of a property subject of litigation may still be valid but is susceptible for rescission under Art. 1381(4). A definitive judicial determination with respect to the thing subject of litigation is not a condition sine qua non before the rescissory action contemplated under Article 1381(4) of the Civil Code may be instituted. The primordial purpose of Article 1381(4) of the Civil Code is to secure the possible effectivity of the impending judgment by a court with respect to the thing subject of litigation. [Ada v. Baylon, 2012]

execution which cannot exist when the debt is not yet demandable at the time the rescissory action is brought. [Tolentino]

(5) Person bringing the action must be able to return whatever he may be obliged to restore. [Art. 1385(1)] (6) Object of the contract must not be legally in the possession of a third person who did not act in bad faith [Art. 1385(2)]

Conflict between Arts. 1382 and 1198 if the obligation is subject to suspensive period is more apparent than real Payment made by an insolvent is rescissible. (Art. 1382), but a debtor can be compelled to pay by the creditor even before the expiration of the period since by his insolvency he has already lost his right to the benefit of such period. [Art. Art. 1198(1)]

Note: Even secured creditors are entitled to accion pauliana. Art. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. Requisites Before Payment made by Insolvent Can Be Rescinded: (1) It was made in a state of insolvency; (2) Obligation must have been one which debtor could not be compelled to pay at the time such payment was effected.

Requisites before a Contract Entered Into in Fraud of Creditors May Be Rescinded: (1) There is a credit existing prior to the celebration of the contract; (2) There is fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking rescission; (3) Creditor cannot in any legal manner collect his credit; and (4) Object of the contract must not be legally in the possession of a third person who did not act in bad faith.

The conflict can be resolved by considering the priority of dates between the two debts. If the obligation with a period became due before the obligation to the creditor seeking the rescission became due, then the latter cannot rescind the payment even if such payment was effected before the expiration of the period; but if the obligation with a period became due after the obligation to the creditor seeking rescission became due, then the latter can rescind the payment. [Manresa]

Accion Pauliana The action to rescind contracts in fraud of creditors. Consequently, accion pauliana presupposes a judgment and unsatisfied

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Effects of Rescission It creates an obligation to return the things which were the object of the contract, together with their fruits, and the price with its interests.

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persons who did not act in bad faith. Otherwise, damages may be demanded from the person causing the loss. (Art. 1385) Prescribes in 10 years Prescribes in 4 years [Lalicon v. National Housing Authority, 2011]

However, if the object of the contract is in the possession of third persons in good faith, rescission cannot take place and indemnity for damages may be demanded from the person causing the loss [Art. 1385]

For persons under guardianship and for absentees, the period of four years shall not begin until the termination of the former's incapacity, or until the domicile of the latter is known. [Art. 1389]

See Table, Rescission by Reason of Lesion Distinguished from Rescission/Resolution under Art. 1191 Rescission Art. 1191

Art. 1381

Do all creditors benefit from the rescission of the contract? As a rule, the rescission should benefit only the creditor who obtained the rescission, because the rescission is to repair the injury caused to him by the fraudulent alienation. If a balance is left after satisfying the claim of the creditor who brough the action, other creditors who are qualified to bring an accion pauliana should be given the benefit of rescission, instead of requiring them to bring other rescissory actions. However, creditors who only became such after the fraudulent alienation, cannot benefit from the rescission.

Rescission in Rescission by Reason Reciprocal of Lesion Obligations (Resolution) A resolutory condition The action is based on is implied upon a party’s breach of breach of one party. obligation and cannot be instituted except when the party suffering damage has no other legal means to obtain reparation. [Art. 1383] Grants the injured Creates the obligation party the option to to return the things pursue, either a which were the object rescission or specific of the contract, performance of the together with their obligation, with fruits, and the price payment of damages with its interests in either case This can only be carried out when he who demands rescission can return what he is obliged to restore, also when there are none endangered third

Presumption of Fraud When alienation of property presumed in fraud of creditors: a. Alienation by gratuitous title if the debtor has not reserved sufficient property to pay all of his debts contracted before alienation [Art. 1387(1), NCC] b. Alienation by onerous title if made by a debtor against whom some judgment has been rendered in any instance or some writ of attachment has been issued [Art. 1387(2), NCC] See also: Badges of Fraud

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The test as to whether or not a conveyance is fraudulent is if it prejudices the rights of the creditors. [Tolentino]

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Note: Art. 1390 refers to a “proper action in court”. The validity of a voidable contract may only be attacked either by way of a direct action or by way of defense via a counterclaim, and not a special or affirmative defense. [Jurado]

A conveyance leaving no property for other creditors to attach is an evidence of fraud. Citing Oria v McMicking (1912), the following are Badges of Fraud: 1) Consideration is fictitious or inadequate; 2) Transfer was made while suit had begun or pending; 3) Sale was upon credit by insolvent debtor; 4) There was large indebtedness or complete insolvency; 5) Transfer consisted of all or nearly all property especially when insolvent or greatly; 6) The transfer was made between father and son when other above circumstances present; and 7) There was failure of vendee to take exclusive possession of all property embarrassed financially. [China Banking v. CA, March 7, 2000]

Voidable/ Annullable Contracts: (1) Those where one of the contracting parties is incapable of giving consent to a contract, and (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud Characteristics of Voidable Contracts: (1) Its defect consists of the vitiation of consent of one of the contracting parties; (2) It is binding until it is annulled; (3) It is susceptible of convalidation by ratification or prescriotion; amd (4) Its defect or voidable character cannot be invoked by third persons Note: Failure of an heir to obtain authority from his co-heirs does not result in his incapacity to give consent so as to render the contract voidable, but rather, renders the contract valid but unenforceable against Conrado’s co-heirs for having been entered into without their authority. [Heirs of Ureta, Sr. v. Heirs of Ureta, September 14, 2011]

B. VOIDABLE CONTRACTS Contracts which are valid until annulled, unless ratified. Defect is more or less intrinsic, as in the case of vitiated consent. [Paras] Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.

Rescission and Annulment Distinguished Rescission Nullity Merely produces the Declares the inefficacy inefficacy of the which the contract contract, which did already carries in itself not essentially exist in the contract Needs ratification to Requires an act of be effective ratification to be cured Private interest Direct influence of the alone governs. public interest is involved.

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benefited by the thing or price received by him (Art. 1399)

Based on a vice of the contract which invalidates it

Art. 1399 cannot be applied to those cases where the incapacitated person can still return the thing which he has received.

A sanction The law predominates Can be demanded only by parties to the contract

Effects of Failure to Make Restitution (Arts. 1400-1402) Three Ways or Modes of Convalidating a Voidable Contract [Jurado] (1) By prescription of the action for annulment [Art.1391] (2) By ratification or confirmation [Art. 13921396] (3) By loss of the thing which is the object of the contract through the fraud or fault of the person who is entitled to institute the action for the annulment [Art.1401]

Who may institute action for annulment General Rule: Action for annulment may be instituted by all who are thereby obliged principally or subsidiarily. Requisites: i. Plaintiff must have interest in the contract; ii. The victim and not the party responsible for the vice or defect must assert the same Exception: If a third person is prejudiced in his rights with respect to one of the contracting parties and can show detriment which would postitively result to him from the contract in which he has no intervention. (Teves v. People’s Homesite & housing Corp., 1968)

Prescription of the Action for Annulment The action for annulment shall be brought within four years— (1) From the time the defect of the content ceases, in cases of intimidation, violence or undue influence (2) From the time of discovery of the fraud or mistake (3) From the time guardianship ceases, in actions referring to contracts entered into by minors or incapacitated persons

Effects of Annulment If contract has not yet been consummated – parties shall be released from the obligations arising therefrom. If contract has already been consummated The contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law. (Art. 1398-1402)

Constructive Notice Discovery or fraud must be reckoned 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, 1977]

Obligation of Mutual Restitution When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been

Ratification The act or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity [Arts. 1392-1396] May be

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(1) EXPRESS or (2) TACIT – When the person who has the right to invoke it, with the knowledge of the reason which renders the contract voidable and such reason having ceased, executes an act implying an intention to waive his right [Art. 1393]

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KINDS OF UNENFORCEABLE CONTRACTS 1. Unauthorized contracts – those entered into by one who has no authority or legal representation, or who has acted beyond his powers [Art. 1403, par.1] 2. Those which did not comply with the Statute of Frauds [Art. 1403, par.2] 3. Those where both parties are incapable of giving consent to a contract [Art. 1403, par.3] Contract Contracts Contract entered covered by where into Statute of both without Frauds parties are authority incapable of giving consent Effect on No effect unless ratified. Cannot be enforced by a proper action in court the Contract Not by Not by How to Not by direct direct direct assail action. action. action. As a As a As a defense, defense, defense, by motion by motion by motion to dismiss to dismiss to dismiss the on the the complaint ground complaint on the that the on the ground contract is ground that the unenforce that the contract is able; contract is unenforce Objection unenforce able to the able presentati on of oral evidence to prove an oral contract [see Art. 1405] Who can By person By party By party whose against against assail

Requisites of Ratification (1) Contract is tainted with a vice susceptible of being cured; (2) Confirmation is effected by the person who is entitled to do so under the law; (3) It is effected with knowledge of the vice or defect of the contract; (4) Cause of the nullity or defect have already disappeared. The right to ratify may be transmitted to the heirs of the party entitled to such right. It may likewise be exercised by the guardian of the incapacitated person having such right. [Art. 1394] Ratification does not require the conformity of the contracting party who has no right to bring an action for annulment. [Art. 1385] Effect of Ratification It extinguishes the action for annulment of a voidable contract. [Art. 1392] It cleanses the contract from all its defects from the moment it was constituted [Art. 1396]

C. UNENFORCEABLE CONTRACT Unenforceable Contract – contracts that by reason of statutory defects do not confer any action to enforce the same until and unless they are ratified in the manner prescribed by law [J.B.L. Reyes] CHARACTERISTICS: 1. Cannot be enforced by a proper action in court 2. Susceptible of ratification 3. Cannot be assailed by third persons [Art. 1408]

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cannot be assailed by third persons( Art. 1408)

When How to Cure Defect

name the contract was entered into / by owner of property

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(3) Applies only to executory contracts, not partially or completely executed (consummated) contracts. (4) The Statute of Frauds is exclusive that is, it applies only to the agreements or contracts enumerated therein [Quintos v Morata, 1930] (5) The Statute of Frauds is a personal defense, that is, a contract infringing it cannot be assailed by third persons [Art. 1408] (6) Contracts infringing the Statute of Frauds are not void, they are merely unenforceable [Art. 1403]

whom the contract is being enforced; or his privies

whom the contract is being enforced; or his privies; or parents or guardians, as it is a personal defense When a party asks the court to enforce the contract Ratificatio Ratificatio ratificatio n by n by party n of party person against against whose whom the whom the name the contract is contract is contract being being was enforced enforced; entered failure to or his into object to privies; or the parents or presentati guardians on of oral evidence The to prove an ratificatio oral n by one contract or party by the converts acceptanc the e of contract benefits into a under the voidable contract contract [Art. 1405] [Art. 1407]

EXCEPTIONS TO APPLICATION OF STATUTE OF FRAUD (1) The Statute of Frauds cannot apply if the action is neither for damages because of the violation of an agreement nor for the specific performance of said agreement (2) The Statute of Frauds does not determine the credibility or weight of evidence. It merely concerns itself with the admissibility thereof. (3) The Statute of Frauds does not apply if it is claimed that the contract does not express the true agreement of the parties. As long as the true or real agreement is not covered by the Statute of Frauds, it is provable by oral evidence [Cayuga v Santos] Swedish Match v CA (2004): (1) The Statute of Frauds simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing. (2) For a note or memorandum to satisfy the Statute, it: (a) Must be complete in itself and cannot rest partly in writing and partly in parol.

GENERAL RULES OF APPLICATION OF STATUTE OF FRAUDS (1) The Statute of Frauds is a Rule of Exclusion, i.e. oral evidence might be relevant to the agreements enumerated therein and might therefore be admissible were it not for the fact that the law excludes said oral evidence. (2) The defense of the Statute of Frauds may be waived [Art. 1405] 252

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(b) Must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification. (c) Must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence

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fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Asia Productions v Pano (1992): The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged.

Characteristics of Void Contracts : (1) It does not produce any legal effect; (2) It is not susceptible of ratification; (3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced; (4) The action or defense for the declaration of their inexistence or nullity is imprescriptible; [Art. 1410] Note: This provision does not apply to wills. [Gallanosa v. Arcangel, June 21, 1978] and (5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected. [Art. 1421] Note: Article 1421 is subject to exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article 1177 of said Code, exercise the rights and actions of the latter, except only those which are inherent in his person, including therefore, his right to the annulment of said contract, even though such creditors are not affected by the same, except indirectly, in the manner indicated in said legal provision.

Limketkai Sons Milling, Inc. v CA (1995): Even if parol evidence was initially inadmissible, the same became competent and admissible because of the cross-examination, which elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds.

D. VOID OR INEXISTENT CONTRACTS Contracts which have no effect at all and cannot be ratified or validated [Paras] Those which, because of certain defects, generally produce no effect at all. They are considered as inexistent from its inception or from the very beginning [De Leon] Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or

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[Pascual v. Secretary of Public Works, December 29, 1960]

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The law prohibits the spouses from selling property to each other, subject to certain exceptions. [Art. 1490] Similarly, donations between spouses during marriage are prohibited. The prohibitions apply to common law relations. [Ching v. Goyanko, November 10, 2006]

A contract which is the direct result of a previous illegal contract is also void and inexistent. [Art. 1421] Void v. Inexistent Contracts Void Inexistent Those where all the Those where one or requisites of a some or all of the contract are present requisites essential for but the cause, object the validity of a or purpose is contract are absolutely contrary to law, lacking morals, good customes, public order or public policy, or the contract itself is prohibited or declared void by law Principle of pari Principle of pari delicto delicto is applicable is inapplicable May produce legal Cannot produce any effects effect Covers Art. 1409 nos. Covers Art. 1409 nos. 2 1, 3, 4, 5, 6 and 7 and 3

(See: Pactum commissorium, Pactum de non alienado, Pactum leonina) In contracts with separate provisions, the invalidity of one does not automatically render the other invalid. Art. 1420 of the New Civil Code holds that "In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." Contrary to the suppositions of petitioners, the invalid stipulation is independent from the rest of the terms of the agreement and can easily be separated therefrom without doing violence to the manifest intention of the parties. This being so, the legal terms of the contract can be enforced. [Spouses Litonjua v. L & R Corporation, March 27, 2000] The Principle of In Pari Delicto When the defect of a void contract consists in the illegality of the cause or object of the contract and both parties are at fault or in pari delicto, the law refuses them any remedy and leaves them where they are. [Arts. 1411-1419]

Classification of Void Contracts [Paras] (1) INEXISTENT CONTRACTS: like those where essential formalities are not complied with  Example: A donation of land in a private instrument  Consequence: This produces no effect whatsoever. (2) ILLEGAL OR ILLICIT CONTRACTS:  Example: A donation made because of an immoral condition, such as illicit sexual intercourse  Consequence: In some way, the donation produces some effect in that that he who gave the donation cannot get back what he has given.

If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense... [Art. 1412] The elements of Art. 1411 are that the nullity proceeds from an illegal cause or object, and that that the act of executing the contract constitutes a criminal offense. Illegality of object or cause gives rise to the in pari delicto doctrine. [Ramirez v. Ramirez, March 17, 2006] Exceptions to the Principle of In Pari Delicto:

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(1) Payment of usurious interest [Art. 1413] (2) 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 third person [Art. 1414] [See: Hulst v. PR Builders Inc., September 3, 2007] (3) Payment of money or delivery of property made by an incapacitated person [Art. 1415] (4) Agreement or contract not illegal per se but merely prohibited by law, and the prohibition is designed for the plaintiff’s protection [Art. 1416] Note: When the assailed contracts are void ab initio, Art. 1416 cannot be applied, as in the case of aliens purchasing property despite knowing fully well the constitutional prohibition against foreigners owning land in the Philippines at the time of purchase. [Frenzel v. Catito, July 11, 2003] (5) Payment of any amount in excess of the maximum price of any article or commodity fixed by law (Art. 1417) (6) Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law (Art. 1418) (7) Contract whereby a laborer accepts a wage lower than the minimum wage fixed by law (Art. 1419) (8) In case of divisible contracts, the legal terms may be enforced separately from the illegal terms (Art. 1420); and (9) One who lost in gambling because of fraudulent schemes practiced on him. He is allowed to recover his losses (Art. 315(3)(b) even if gambling is prohibited)

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contract is allowed only when the following requisites are met: (1) the contract is not illegal per se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3) if public policy is enhanced thereby. [Acabal v. Acabal, March 31, 2005] See also: Arts. 1345 and 1346 Non-Existing Cause or Object [Paras] Art. 1409(3) speaks of contracts “whose object or cause did not exist at the time of the transaction.” This is not exactly correct because there can be valid contracts involving future property; example, sale of future or after-acquired property. Thus, Justice J. B. L. Reyes notes: “did not exist at the time of the transaction” should be “could not come into existence because the object may legally be a future thing.”

VII. NATURAL OBLIGATIONS NATURAL OBLIGATIONS Those based on equity and natural law, which do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, authorize the retention of what has been delivered or rendered by reason thereof [Art. 1423] Note: The binding tie is the conscience of man In order that there may be a natural obligation there must exist a juridical tie which is not prohibited by law and which in itself could give a cause of action but because of some special circumstances is actually without legal sanction or means of enforcing compliance by intervention of courts. [Tolentino]

The principle of in pari delicto admits of an exception under Art. 1416 of the Civil Code Under this article, recovery for what has been paid or delivered pursuant to an inexistent

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Four Types of Obligations in Juridical Science (1) Moral Obligations – duties of conscience completely outside the field of law (2) Natural Obligations – duties not sanctioned by any action but have a relative judicial effect (3) Civil Obligations – juridical obligations that are in conformity with positive law but are contrary to juridical principles and susceptible of being annulled; enforceable by action (4) Mixed Obligations – full juridical effect; falls under civil obligations

protect. Within the domain of Within the domain of law morals The promise made by an organizer of a dog racing course to a stockholder to return to him certain amounts paid by the latter in satisfaction of his subscription upon the belief of said organizer that he was morally responsible because of the failure of the enterprise, is not the consideration required by Art. 1261 of the Civil Code as an essential element for the legal existence of an onerous contract which would bind the promissor to comply with his promise. The promise was prompted by a feeling of pity and is, therefore, purely moral and as such, not demandable in law but only in conscience, over which human judges have no consideration. [Fisher v. Robb, November 2, 1939]

Two Conditions Necessary for Natural Obligations: (1) That there be a juridical tie between two persons; and (2) That this tie is not given effect by law

Natural Obligations As to Not by court enforceability actions, but by good conscience of debtor As to basis Equity and natural justice

Natural Obligations There is a juridical tie between the parties which is not enforceable by court action. Voluntary fulfillment of such produces legal effects which the court will recognize and

Conversion to Civil Obligations General Rule: Partial payment of a natural obligation does not make it civil; the part paid cannot be recovered but the payment of the balance cannot be enforced.  applicable only to natural obligations because of prescription or lack of formalities (nullity due to form e.g. Art. 1430) and not to natural obligation subject to ratification or confirmation Note: Payment by mistake is not voluntary and may be recovered. Payment is voluntary when the debtor knew that the obligation is a natural one. The debtor, however, has the burden of proving the mistake. (1) By novation (2) By ratification or confirmation

Civil Obligations Court action or the coercive power of public authority Positive law [Art. 1157]

Moral Obligations No juridical whatsoever.

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tie

Examples: Article 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered.

Voluntary fulfillment of such does not produce any legal effect which the court will recognize and protect.

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Note: In Art. 1247, it is not the voluntary payment that prevents recovery, but the consumption or spending of the thing or money in good faith.

Article 1425. When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot recover what he has paid. Article 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned. Article 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith. (1160A) Article 1428. When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. Article 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by the payer. Article 1430. When a will is declared void because it has not been executed in accordance with the formalities required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable.

VIII. ESTOPPEL DEFINITION 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 [Art. 1431]

KINDS OF ESTOPPEL (1) Estoppel in pais or by conduct [Art. 1433] a. Estoppel by silence [Art. 1437] b. Estoppel by acceptance of benefits (2) Technical Estoppels a. Estoppel by Deed – a party to a deed is precluded from asserting as against the other party, material fact asserted therein; (Art. 1433) and b. Estoppel by Record – a party is precluded from denying the truth of matters set forth in a record whether judicial or legislative (3) Estoppel by Judgment – a party to a case is precluded from denying the facts adjudicated by a court of competent jurisdiction (4) Estoppel by laches Note: Estoppel is effective only as between the parties thereto or their successors-in-interest. Note: The government is not estopped by mistake or error on the part of its officials or agents. In Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. CA (1976), the sale executed by the City of Manila to Manila Lodge was certainly a contract prohibited by law, and that estoppel cannot be urged even if the City of Manila accepted the benefits of such

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contract of sale and the Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly.

Applies in law Cannot be availed of unless it is specifically pleaded as an affirmative allegation Based on a fixed time

LACHES OR “STATE DEMANDS” 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 a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

Statutory

Applies in equity Being a defense in equity, it need not be specifically pleaded

Not based on a fixed time

IX. TRUSTS Trusts – a fiduciary relationship with respect to property, subjecting the person holding the same to the obligation of dealing with the property for the benefit of another person [J.B.L. Reyes]

Elements (1) Conduct on the 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 compaint seeks a remedy; (2) Delay in asserting the complainant’s rights, the complainant having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to institute a suit; (3) Lack of knowledge or notice on the part of the defendant that the complaint would assert the right on which he bases his suit; and (4) Injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred [Miguel v. Catalino, November 29, 1968] Prescription Concerned with the fact of delay Question or matter of time

CIVIL LAW

Characteristics of Trust: 1. It is a relationship 2. The relationship is of fiduciary character 3. The relationship is with respect to property, not one involving merely personal duties 4. It involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another 5. It arises as a result of a manifestation of intention to create the relationship Trust Stipulation pour autrui Refers to a specific Involves any property stipulation in favor of a third person Trust Condition Performance of trust Performance or is enforceable accomplishment is not enforceable

Laches Concerned with the effect of delay Question of inequity of permitting the claim to be enforced Not statutory

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Proof Required: 1. No express trusts concerning an immovable or any interest therein may be proved by parol evidence [Art. 1443]. o Trusts over real property are unenforceable unless in writing, although writing is not required for validity, only for proof. 2. Where the trust is over personal property, an oral trust is sufficient between the parties. 3. But to bind third persons the trust must be in a public instrument [Art. 1358(1) and (3)]

Trust

Guardianship or Executorship Trustees has legal Guardians or Executors title to the property do not have legal title but mere actual possession and limited powers over the property

A. GOVERNING RULES Art. 1442. The principles of the general law of trusts insofar as they are not in conflict with this Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.

Form of Express Trusts Art. 1444. No particular words are required for the creation of an express trust, it being sufficient that trust is clearly intended

B. PARTIES [ART. 1440] 1.

Trustor – the person who establishes the trust 2. Trustee – one in whom the confidence is reposed as regards property for the benefit of another person 3. Beneficiary or cestui que trust – person for whose benefit the trust has been created

Want of Trustee Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust To permit the trust to fail for want of trustee is to defeat the intention of the trustor in creating the trust.

C. KINDS OF TRUST C.1. EXPRESS TRUST Created by the intention of the trustor or of the parties [Art. 1441]

Acceptance by beneficiary Acceptance by beneficiary is necessary [Art. 1446]. It may be: 1. Express 2. Implied  Acceptance by the beneficiary is not subject to the formal rules of donations [Cristobal v Gomez, 1927] 3. Presumed – if the trust imposes no onerous condition upon the beneficiary

Elements: 1. Competent trustor or settlor 2. Trustee 3. Ascertainable trust res / Trust property 4. Sufficiently certain beneficiaries Trust is created: 1. By declaration of the trustor or settlor that he holds property in trust 2. By conveyance to the trustee: a. Inter vivos, or b. By testament

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Termination of Express Trusts 1. Revocation or modification by the trustor under a reserved power 2. Rescission 3. Expiration of the period or happening of the resolutory condition 4. Accomplishment of the purpose or its becoming impossible or illegal 5. Dissolution by the Court if continuation will defeat the purpose of the trust 6. Dissolution by the consent of all the beneficiaries and/or the settlor 7. Merger

CIVIL LAW intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance [Salao v Salao, 1976]

Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof. Art. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner. Art. 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated.

C.2. IMPLIED TRUST Come into being by operation of law [Art. 1441]. The essential idea involves a certain antagonism between the cestui que trust and the trustee even where the 7trust has not arisen out of fraud or an immoral transaction [J.B.L. Reyes] Proof required Art. 1457. An implied trust may be proved by oral evidence A trust must be proven by clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations [De Leon vs. Molo-Peckson, 1962] Where a trust is to be established by oral proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged beneficiary with as much certainty as if a document proving the trust were shown [Suarez v Tirambulo, 1933]

Constructive Trusts - a trust not created by any words, either expressly or impliedly evincing a direct intension to create a trust, but by the construction of equity in order to satisfy the demands of justice [Salao v Salao, 1976]

Examples of Implied Trusts 1. Resulting Trusts - a trust raised by implication of law and presumed to have been contemplated by the parties, the

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Art. 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it’s is paid. The latter may redeem the property and compel a conveyance thereof to him. Art. 1454. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong. Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Express trust is a "continuing and subsisting" trust, not subject to the statute of limitations, at least, until repudiated, in which event the period of prescription begins to run only from the time of the repudiation. [Tamayo v Callejo, 1972] In constructive trusts, the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust. [Fabian v Fabian, 1968]

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I. Definition and Essential Requisites

CIVIL LAW Exceptions to consent being a requisite: (1) Expropriation, (2) Ordinary Execution Sale, (3) Judicial Foreclosure Sale, and (4) Extra-Judicial Foreclosure Sale

A.DEFINITION OF SALES

Special Case: If sale involves the conjugal property of spouses, consent must be given by both.

By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

ii. Determinate subject matter  Must be determinate or capable of being determinate  Must be licit and within the commerce of man

A contract of sale may be absolute or conditional. [Art. 1458, CC] The essence of a contract of sale is the transfer of ownership or that the recipient has the ability to alienate the thing transferred to him.

iii. Price certain in money or its equivalent (cause/consideration)  Must be real, certain, and pecuniary

B. ESSENTIAL REQUISITES OF A CONTRACT OF SALE

B.2. NON-ESSENTIAL ELEMENTS OF A CONTRACT OF SALE (1) Natural – those deemed to exist in certain contracts in the absence of any contrary stipulations. (Ex. Warranty against eviction, hidden defects)

B.1. ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE [Coronel vs CA, 1996; De Leon] i. Consent or meeting of the minds to transfer ownership in exchange for the price

(2) Accidental – those which may be present or absent depending on the stipulations of the parties. (Ex. Conditions, interest, penalty)

Being a consensual contract, the 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. [Art. 1475]

C. STAGES OF CONTRACT OF SALE PHASES OF A SALE CONTRACT [De Leon] (1) Preparation, conception, negotiation, or generation stage – from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected (2) Perfection or “birth” of the contract – upon the concurrence of the essential elements of the sale; and (3) Consummation or “death” of the contract – begins when the parties perform their

Requisites: (1) Legal Capacity (2) Offer and acceptance, and (3) No vitiation of consent A person is not incompetent to contract merely because of advanced years or by reason of physical infirmities.

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respective undertakings under the contract of sale, culminating in the extinguishment thereof.

CIVIL LAW (3) Principal – can stand on its own and does not depend on another contract for validity, as contrasted from an accessory contract. (4) Onerous – imposes valuable consideration as prestation, as distinguished from a gratuitous contract. Consequence: all doubts in construing an onerous contract shall be resolved in that which gives greater reciprocity of interests. [Art. 1378] (5) Commutative – because a thing for value is exchanged for equal value, as contrasted from an aleatory contract. Test: As long as the party believes in all honesty that he is receiving equal for what he gave up for, then commutative character is complied with. (6) Nominate – given a particular name by law

D. OBLIGATIONS CREATED Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. 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 the delivery. (1) Specific or Determinate Thing – capable of particular designation, e.g. this car, the car with plate no. XNY 200

E.1. SALE IS TITLE AND NOT MODE Delivery or Tradition is the mode to transfer ownership and possession to the buyer.

(2) Generic or Indeterminate Thing – refers only to a class, to a genus, and cannot be pointed out with particularity, e.g. a car (genus nunquam perit)

When a contract of sale is perfected, the seller is merely obligated to transfer ownership and to deliver the property. Transfer of ownership is effected only upon delivery.

NATURE OF OBLIGATIONS CREATED PER DEFINITION IN ART.1458

Sale is merely title that creates the obligation on the part of the seller to transfer ownership and deliver possession, but on its own, sale is not a mode that transfers ownership. [Equatorial Realty Dev. v. Mayfair Theater, 2001]

[Villanueva] (1) For the SELLER: To transfer ownership and to deliver possession of the subject matter (2) For the BUYER: To pay the price

F. SALE DISTINGUISHED OTHER CONTRACTS

E. CHARACTERISTICS OF A CONTRACT OF SALE

FROM

DONATION Sale

(1) Consensual – perfected by mere consent and without any further acts. (2) Bilateral and Reciprocal – imposes correlative obligations on both parties to the relationship. Consequently, power to rescind is implied.

Onerous Perfected consent

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by

mere Must comply with the formalities required by law. [Art 745, CC]

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When the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation or some other contract. [Art.1471, CC]

The fact that the object were made by the seller only when customers placed their orders, does not alter the nature of the contract of sale, for it only accepted such orders as called for the employment of such materials as it ordinarily manufactured or was in a position habitually to manufacture such. [Celestino Co & Co vs. Collector, 1956:]

F.1. BARTER Sale

Barter

Consideration is price Consideration in money or its another thing equivalent

is

When each product or system executed is always UNIQUE and could not mass-produce the product because of its very nature, such is a contract for a piece of work.[Commissioner vs. Engineering Equipment and Supply Co., 1975]

Barter is a contract where one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing [Art.1638, CC]

F.3. DACION EN PAGO Sale

If consideration consists partly in money and partly in another thing, the intention of the parties determines whether the contract is one of sale or barter.

Pre-existing debt Extinguishes the obligation (mode of payment) Price is more freely Price is value of the agreed upon, fixed by thing given the parties Buyer has to pay the Payment is received price by the debtor before contract is perfected

If the local currency is exchanged with other denominations of local currency also, there is barter.

There is a novation of the contract of loan into a contract of sale when the creditor agrees to accept a thing in payment of the debt. Hence, if the thing given in payment turns out to belong to another, the creditor’s remedy should be governed by the law on sales, not loan. [Baviera]

F.2. CONTRACT FOR A PIECE OF WORK

Goods are manufactured or procured in the ordinary course of business For the general market, whether on hand or not Governed by Statute of Frauds

Contract for a Piece of Work Goods are manufactured for customer upon his special order For a customer

Dacion en pago

No pre-existing debt Creates an obligation

If manifest intention is not clear: Barter when the value of thing is more than the amount of money or its equivalent; otherwise, sale. [Art.1468]

Sale

CIVIL LAW

Bilateral promise to buy and sell [Asked in 80, 91] A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. [Art 479, CC]

specific

Not within Statute of Frauds

Like a sale, the thing must be determinate and the price, certain.

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F.4. CONTRACT OF SALE/CONTRACT TO SELL Contract of Sale

Contract to sell

Ownership is transferred upon delivery Non-payment is a resolutory condition

Ownership is only transferred upon full payment of price Full payment is a positive suspensive condition, hence nonpayment would not give rise to the obligation to transfer ownership

Conditional Contract of Sale Sale is already perfected A subsequent buyer is presumed to be a buyer in bad faith Sale

CIVIL LAW

Permanent Temporary Seller must be owner Lessor neet not be at time of delivery owner

G. KINDS OF CONTRACT OF SALE (1) Absolute – when sale is not subject to any condition and the title immediately passes to the purchaser upon delivery (2) Conditional – ownership of the object remains with the vendor until fulfillment of the condition/s

II. Parties to a Contract of Sale

Contract to sell No perfected sale yet

All persons who have capacity to enter into obligations may enter into a contract of sale [Art 1489, CC]

A subsequent buyer is presumed to be a buyer in good faith Agency to sell

A. KINDS OF INCAPACITY

the Agent receives good as goods of the principal Agent delivers the Buyer pays the price price which he got from his principal Buyer cannot return Agent can’t return the object sold as a the goods general rule

(1) Absolute incapacity – when persons cannot bind themselves at all (2) Relative incapacity – only with regard to certain persons and certain class of property (3) Specific incapacity/Special disqualifications

Seller warrants the Agent makes no thing sold warranty Not unilaterally Essentially revocable revocable

(MIND-CI) [ART. 1327, CC] (1) Minors (2) Insane or Demented (3) Deaf-mutes who do not know how to write (4) Civil Interdiction (5) Judicially-declared Incompetents (Art. 39) (a) Prodigal (b) Imbeciles (c) Absence & presumption of death

Buyer receives goods as owner

Sale

A.1. ABSOLUTE INCAPACITY [ARTS. 1327, 1397, 139]

Lease

Ownership transferred No transfer by delivery ownership

of

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CIVIL LAW (3) Trusteeship [Art. 39]

(d) Persons not of unsound mind but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property without outside aid (Easy prey for deceit and exploitation)

A.3. SPECIAL DISQUALIFICATIONS [ARTS. 1491-1492] (AGE-PLJ) The sale entered into by agents, guardians, and executors and adminsitrators shall be voidable because it affects only private interests.

A.2. RELATIVE INCAPACITY: MARRIED PERSONS

The sale entered into by public officers, lawyers, justices and judges, and others specially disqualified by law shall be void because it affects the public interest.

(1) Husband and wife [Art. 1490] General Rule: Cannot sell property to each other Exceptions: (a) Separation of property in marriage settlement, OR (b) Judicial separation of property.

(1) Agents - Cannot purchase or acquire property whose administration or sale was entrusted to them Exception: Principal gives consent.

Although certain transfers from husband to wife or vice versa are prohibited, such prohibition can be taken advantage of only to persons who bear such relation to parties making transfer with their rights or interest. Unless such a relationship appears, the transfer cannot be attacked. [Cook v. McMicking, 1914]

Requisites: (a) Property is owned by the principal of the agent (b) Administration/sale of the property is entrusted to the agent (c) Consent of the principal is not given (2) Guardian - Cannot purchase property of person under his guardianship

Sale by husband in favor of a concubine after he had abandoned his family and left conjugal home where his wife and children lived and from whence they derived their support, is void. [Ching v. Goyanko, Jr., 2006]

Guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement or neglect his ward’s interest. [Phil Trust Co v Roldan, 1956]

Similarly, donations are prohibited. This is so because if such transfers are allowed during marriage, then the same would destroy the system of conjugal partnership, a basic policy in civil law.

Relation so intimate, dependence so great, and influence so great, that every transaction entered into while the relationship exists is suspicious and presumptively fraudulent. [De Leon]

(2) Alienage[Art. 39] General Rule: Aliens are disqualified from purchasing or acquiring real property. Exception: If acquisition is through hereditary succession

Requisites: (a) Property must be owned by the ward (b) Ward must be under the guardianship of the guardian

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CIVIL LAW loyalty and disinterestedness. [Valencia v Cabanting, 1991]

Art. 1491(2) in relation to Art. 1409 does not apply where the sale was under a special power attached to the real estate mortgage, pursuant law. Under Act No. 3135, a mortgagee-creditor is allowed, as an exception, to participate in the bidding under the same condition as any other bidder.[Fiestan v. CA, 1990]

Prohibition is definite and permanent and cannot be cured by ratification. [Rubias v Batiller, 1973] Exceptions: An assignment to a lawyer by his client of an interest in the property does not violate Art 1491, where: (a) A judgment has been rendered and has become final; and (b) In case of contingency fee arrangements: the interest of the lawyer may be annotated as an adverse claim on the property awarded to his client [Director of Lands v Ababa, 1979]

(3) Executors and Administrators - Cannot acquire or purchase property of estate under their administration Does not apply to purchase of hereditary rights, as these are not under their administration The prohibition on executors and administrators does not apply if the principal consents to the sale.[Distajo v. CA, 2000]

Contract stipulating a contingent fee is not prohibited because payment of such fee is not made during pendency of litigation but only after judgment. A lawyer may have lien over funds and property of client and may apply as may be necessary to satisfy his lawful fees and disbursements. As long as the lawyer does not exert undue influence, and that no fraud is committed, or no imposition applied, or that compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and enforceable. Also, a reading of contract is 40% of the value of properties.[Fabillo v. IAC, 1991]

(4) Public Officers and Employees - Cannot acquire or purchase property of State/any of its subdivisions, GOCC or administration, the administration of which was entrusted to them. Includes judges and government experts who, in any manner whatsoever take part in the sale. Requisites: (a) Properties must belong to the State, any of its subdivisions, or of any GOCC (b) Administration of these properties are entrusted to the public officers/officials

(6) Justices, Judges, prosecuting attorneys, clerks and other officers and employees connected with the administration of justice Cannot acquire or purchase property or rights in litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise their respective functions.

(5) Lawyers - Cannot acquire or purchase property or rights in litigation in which they take part by virtue of their profession

Rationale: to prevent fraud and to surround their profession with prestige.

Lawyers may have undue influence over client; greed may get the better of the sentiments of

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Prohibition applies only on sales or assignment during the pendency of litigation involving the property. [Macariola v Asuncion, 1963]

BUT if already sold to a third person who relied on the title of his immediate seller, reconveyance to the seller spouse is no longer available [Cruz v CA, 1997]

(7) Others specially disqualified by law (a) Unpaid sellers with goods in transit from buying the goods (b) Officer conducting the execution sale of deputies

B.3. SPECIFIC INCAPACITY/ SPECIAL DISQUALIFICATIONS Contracts expressly prohibited by law are void and cannot be ratified. Neither can the right to set-up the defense of illegality be waived. [Art. 1409 (7)]

Art 1492: The prohibitions in the two preceding articles (Arts. 1490, 1491) are applicable to sales in legal redemption, compromises and renunciations.

Sales entered into by guardians, administrators, and agents (specific incapacities) in violation of Art. 1491 may be ratified by means of and in the form of a new contract when the cause of nullity has ceased to exist. Ratification is valid only from date of execution of the new contract and does not retroact.

B. EFFECTS OF INCAPACITY B.1. ABSOLUTE INCAPACITY (1) (2)

CIVIL LAW

If both parties are incapacitated: UNENFORCABLE [Art. 1403 (3)] If only 1 party is incapacitated: VOIDABLE

If necessaries are sold and delivered to an incapacitated person: pay a reasonable price therefor. [Art 1489]

Those entered into by public officers/employees, justices and judges, and lawyers in violation of Art. 1491 are inexistent and void from the beginning. [Rubias v Batiller, 1973]

“Necessaries” – those which are indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation. [Art 194, Family Code]

III. Subject Matter A. REQUISITES OF A VALID SUBJECT MATTER

B.2. RELATIVE INCAPACITY Sale between spouses is VOID. Rationale: (1) To protect 3rd persons who may have contracted with the spouse (2) To avoid undue advantage of the dominant spouse over the weaker spouse. (3) To avoid circumvention of the prohibition against donations between spouses. [Medina v CIR, 1961]

[ARTS. 1459-1465] For Rights: (1) Transmisible or personal (2) Licit For Things: (1) Licit (2) Existing, Future, Contingent (3) Determinate or determinable

Such prohibition shall likewise apply to common law spouses. [Calimlim-Canulas v Fortun, 1984]

A.1. MUST BE LICIT [Art. 1459] The thing is licit when— 269

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SALES

CIVIL LAW (3) Sale of animals if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor [Art 1575] (4) Sale of land in violation of Cosntitutional prohibition against the transfer of lands to aliens. [Art XII of Constitution] When the subject matter is illicit, the contract of sale is void [Art. 1409 (7)]

A.2. EXISTING, FUTURE, CONTINGENT The goods which form the subject of a contract of sale may either be— (1) Existing goods owned or possessed by the seller; (2) Goods to be manufactured, raised, OR acquired by the seller – “FUTURE GOODS”; [Art 1462, CC] 1. It is valid only as an executory contract to be fulfilled by acquisition and delivery of goods specified. (3) Things having POTENTIAL existence may be the object of a contract of sale. [Art 1461, CC] 2. The thing sold must be specific and identified, and owned by the vendor at that time. Sale of MERE hope or Sale of VAIN hope or expectancy expectancy Valid BUT subject to Void condition that the thing will come into Example: Sale of a existence falsified raffle ticket which will never win. Example: “Next catch” of a fisherman.

ii. Examples of illicit sale (1) Sale of future inheritance is void[Art. 1347] The rights to succession are transmitted from the moment of the death of the decedent [Art. 777, CC]. Thus, one cannot sell or promise to sell what he expects to inherit from a living person. [Rivero v. Serrano, 1950] (2) Sale of animals suffering from contagious diseases [Art 1575]

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Valid Sale of a thing not yet in existence but will exist Upon the failure of the

Void Sale of the hope itself that a thing will come into existence Where it is agreed

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condition, the contract that buyer will pay becomes ineffective the price even if the thing does not come into existence Future thing is certain Not certain that the as to itself, but thing itself will exist incertain as to quantity and quality Deals with a future Thing which exists or thing is present – the hope or expectancy In case of doubt, the presumption is in favor of emptio rei speratae since it is more in keeping with the commutative character of the contract.

If later on it was discovered that the mass of fungible goods contain less than what was agreed upon, the buyer becomes owner of whole mass and seller must make up for the difference.[De Leon]

(4) Sale of SPECIFIC THINGS

A thing is DETERMINATE when it is particularly designated or physically segregated from all others of the same class. [Art 1460]

A Co-owner cannot sell more than his share [Yturralde v CA, 1972] (d) Sale of things subject to reolutory condition [Art 1465] Examples: Things acquired under legal or conventional right of redemption; or subject to reserva troncal; pacto de retro sale

DETERMINATE OR DETERMINABLE

(a) Sale of things in litigation [Art 1381(4)]

A thing is DETERMINABLE when it is capable of being made determinate at the time the contract was entered into without the necessity of a new or further agreement between the parties. [Art 1460]

Sale of things under litigation entered into by defendant, without the approval of the litigants or the court is rescissible. [Art 1381 (4)] NO RESCISSION where the thing is legally in the possession of 3rd persons who did not act in bad faith [Art 1385 (2)]

Art. 1165 of NCC: If the obligation to deliver is a determinate thing, the creditor has the right to compel specific performance and to recover damages for breach of the obligation. [Jurado]

(b) Sale of an undivided interest in a thing [Art 1463]

Failure to state the exact location of the land does not make the subject matter indeterminate, so long as it can be located.[Camacho v CA, 2007]

LEGAL EFFECT: Make the buyer a co-owner in the thing sold: (i) acquire full ownership of his part (ii) may sell his part even without conent of other co-owners

The fact that the exact area of the land specified in the contract of sale is subject to the result of a survey does not render the subject matter indeterminate.[Heirs of Juan San Andres v. Rodriguez, 2000]

(c) Sale of undivided share of a specific mass [Art 1464] The sale of an undivided share in a specific mass of fungible goods makes the buyer a coowner of the entire mass in proportion to the amount he bought. 271

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IV. Obligations of the Seller

Exception: When he has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make further inquiry

A. OBLIGATIONS OF THE VENDOR IN GENERAL

(4) Order of courts; Statutory Sale In execution sale, the buyer merely steps into the shoes of the judgment debtor [Rule 39, sec. 33, ROC]

(1) To transfer ownership of the thing[Art. 1495] (2) To deliver the thing, with its accessions and accessories, if any[Arts 1164, 1166] (3) To warrant against eviction and against hidden defects[Arts 1545-1581] (4) To take care of the thing, pending delivery, with proper diligence[Art 1163] (5) To pay for the expenses of the deed of sale[Art1487]

(5) When goods are purchased in Merchant’s store, Fair, or Market [Art 1505] The policy of the law has always been that where the rights and interest of the vendor clash with that of an innocent buyer for value, the latter must be protected. [Sun Brothers and Co. vs. Velasco, 1958]

B. WHEN SELLER IS NOT THE OWNER

C. SALE BY PERSON HAVING A VOIDABLE TITLE (1) True owner may recover the thing when the ff. requisites concur: (a) Subject matter is movable (b) Owner has either lost the thing or has been unlawfully deprived. [Art 559] (2) Reimbursement is necessary before owner can recover when: (a) Buyer acted in good faith (b) Acquired at a public auction [Art 559] (3) Recovery no longer possible when: (a) Buyer in good faith (b)Acquired it at a merchant’s store, fair or market. [Art 1506]

General Rule: Ownership is not acquired by the buyer. One cannot give what one does not have. [Art 1505] Exceptions: (1) Seller has a right to transfer ownership Seller need not be the owner of the thing at the time of perfection of the contract. It is sufficient that seller has a right to transfer ownership thereof at the time it is delivered. [Art. 1459] One who sells something he does not own yet is bound by the sale when he acquires the thing later. [Bucton vs Gabar, 1974]

V. Price A. MEANING OF PRICE

(2) Estoppel: Owner is, by his conduct, precluded from denying the seller’s authority to sell. [Art. 1434]

(Arts. 1469-1474) Price signifies 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 buyer and agreed to by him [Inchausti v. Cromwell, 1911]

(3) Registered land bought in good faith General rule: Buyer need not go beyond the Torrens Title

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CIVIL LAW General Rule: Price fixed by 3rd persons designated by the parties is binding upon them

B. REQUISITES FOR A VALID PRICE (Ce-MoRe) (1) Certain or ascertainable at the time of perfection (2) In Money or its equivalent (a) Example of “equivalent”: Letters of credit (b) If price is partly in money and partly in another thing: Determine manifest intention of the parties to see whether it was barter or sale. [Art 1468] (c) If intention does not clearly appear, it shall be considered a barter if the value of the thing exceed the amount of money or its equivalent. [Art 1468] (3) Real When buyer has an intention to pay and the seller has an expectation to receive the price (a) If simulated: Sale is VOID; BUT act may be shown to have been a donation or some other act or contract. [Art 1471] (b) An admission of non-payment of any centavo in exchange of a property in a contract of sale renders the sale VOID. [Labagala vs. Santiago, 2001] (c) If Price is false – when the real consideration is not the price stated in the contract: (i) Sale is void (ii) UNLESSproved to be founded on another true and lawful price [Art 1353]

Exceptions: (a) If unable or unwilling: Sale is inefficacious UNLESS parties subsequently agree about the price. (b) If in bad faith/by mistake: Courts may fix price (but mere error in judgment cannot serve as basis for impugning price fixed) (c) If 3rd person is prevented from fixing price by fault of seller or buyer: Innocent party may avail of remedies (rescission or fulfillment of obligation, with damages) (d) If 3rd person disregards specific instructions/data/procedure, thereby fixing an arbitrary price (3) The price is made in reference to another thing, or when the price fixed is the price of the commodity on a definite day, or in a particular exchange or market, OR when the amount fixed is above or below the price on such day, exchange or market. [Art 1472] When the price is not certain, the contract is without effect and no obligation arises from it. Exception: When the thing is already delivered, the buyer must apy a reasonable price therefor. This exception only arises when the means contemplated by the parties for fixing the price have become ineffectual.

D. INADEQUACY OF PRICE

C. HOW PRICE IS DETERMINED/ CERTAIN

(ARTS. 1355, 1470)

(1) Fixed by agreement of the parties (a) Fixing of price cannot be left to the discretion of one of the parties (b) BUT if such is accepted by the other, sale is perfected. [Art 1473]

General Rule: Does not affect a contract of sale’s validity. [Art. 1470] The stipulation in a contract of sale which states that the consideration is “Php1 and other valuable considerations” does not make the contract void. Gross inadequacy of price does not affect the contract of sale except that

(2) Determination is left to the judgment of a specified person

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it may indicate a defect in consent. [Bagnas v. C.A., 1989]

CIVIL LAW shares. [Philippine Free Press vs. CA, 2005] Generally, the reasonable price is the market price at the time and place fixed by the contract or by law for delivery of goods.

Exceptions: (1) In Voluntary sales (a) Where low price indicates a vice of consent, sale may be annulled. (b) Where price is so low to be shocking to the conscience (fraud, mistake, undue influence), then sale may be set aside. (c) Where price is simulated such as when the real intention was a donation or some other contract. (d) Where the parties did not intend to be bound at all, sale is void.

F. FALSE PRICE VS SIMULATED PRICE (1) False Price – there is a true price but it was not written down in the contract. Parties intended to be bound. (2) Simulated Price (a) Absolute - When the parties never intended to be bound at all. Thus, void! Parties may recover from each other what they may have given under the contract. (b) Relative - When parties conceal their true agreement. When it does not prejudice 3rd persons and is not intended for any purpose contrary to law, morals, public policy, etc., it binds the parties to their real agreement.

(2) In Involuntary sales A judicial or execution sale is one made by a court with respect to the property of a debtor for the satisfaction of his indebtedness. (a) Where price is so low to be shocking to the conscience, such that a reasonable mind would not be likely to consent to it, then judicial sale will be set aside. (b) If in event of a resale, a better price can be obtained.

Effect of simulated price: (1) If price is simulated when vendor intended to transfer thing gratuitously, the sale is void, but the contract shall be valid as a donation. (2) If contract is not a donation or any other act transferring ownership because parties did not intend to be bound, it is void.

(3) Rescissible contracts of sale Inadequacy of price is a ground for rescission of conventional sale under Art 1381 (a-b)

E. WHEN NO PRICE AGREED

Disagreement on the manner of payment is tantamount to a failure to agree on the price. [Toyota Shaw vs. CA, 1995]

(ART. 1474) (1) Sale is inefficacious [Art. 1474] (2) But if the thing or part thereof has been delivered and appropriated by the buyer, he must pay a reasonable price therefor. (a) What is a reasonable price is a question of fact dependent on the circumstances of each particular case. [Art 1474] (b) The reasonableness of a price may be determined on the basis of a company’s balance sheet showing the book value or fair market value of its

G. EARNEST MONEY VS. OPTION MONEY [ART. 1482] Earnest Money: paid in advance of the purchase price agreed upon by the parties in a contract of sale, given by the buyer to the seller, to bind the latter to the bargain.

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VI. Formation of Contract of Sale

Earnest Money Part of purchase price [Art 1482]

A. PREPARATORY

Given only when there is already a sale When given, the buyer is bound to pay the balance

[ART. 1479] (1) Offer [Art. 1475] In General: (a) The contract of sale is perfected at the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price. [Art. 1475, par.1] (b) From that moment, the parties may reciprocally demand performance, subject to the provisions of law governing the form of contracts. [Art. 1475, par. 2] (c) A private instrument signed by the defendant reciting that he bought from the plaintiff a property at a specific address for a specific price to be paid as soon as a bill of sale is signed is not a mere draft but a perfected agreement and hence, obligatory, even if there was no statement as to area or price per meter. [Goyena v. Tambunting, 1902]

Buyer manifests his earnest desire to buy the property

Non-payment of Price Failure of buyer to pay the price Contract is not void but gives rise to a right to demand fulfillment or cancellation of the obligation

General Rule: Offer may be withdrawn at any time without even communicating such withdrawal to the interested buyer.

There can be sale even when no price is agreed upon. When the price cannot be determined in accordance with Arts 1469-1473, the contract is inefficious. Exception: when the thing or part thereof has been delivered to and appropriated by the buyer, in which case the buyer has to pay a reasonable price therefor.

Exception: When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal. [Art 1324, CC] Exception to the exception: Cannot be withdrawn within a certain period if offer is founded upon a consideration. [Art 1324 and 1479, CC]

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Form and Type (a) Offer must be certain as to the object and price [Art. 1319] (b) Business advertisements of things for sale are not offers but mere invitations to make an offer Exception: If otherwise provided [Art. 1325] (c) Advertisements for bidders are simply invitations to make proposals. Advertiser is not bound to accept the highest or lowest bid. Exception: Unless the contrary appears [Art. 1326]

CIVIL LAW of the goods delivered. [National Grains Authority v. IAC, 1989] For price, fixing cannot be left to only one party, but price fixed by one and accepted, leads to a perfected sale. For consent, offer without acceptance means there is no contract. The decision to accept proposal must be communicated to the bidder. But a binding contract may exist between parties whose minds are set, although there are no signatures anywhere, as acceptance may be expressed ir implied, recognizing existence of contract of sale. [Robern Development Corporation v. People’s Landless Association, 2013]

Fixing terms of offer: The person making the offer may fix time, place, and manner of acceptance [Art. 1321]

Receipt of installment payments is not proof of acceptance. Except where formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of accepting party that clearly manifest a present intention to accept offer to buy or sell.[Heirs of Ignacio v. Home Bankers Savings and Trust Company, 2013]

When effective: From the time acceptance is communicated to him or his agent. [Art. 1322] When ineffective: Offer becomes ineffective upon death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed [Art 1323] (2) Acceptance (a) The acceptance must be absolute. (b) The acceptance must be plain and unconditional. (c) To bind the offeror, the offeree must comply with the conditions of the offer. Where the acceptance was not in accordance with the terms and conditions of the offer, the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer.

An acceptance may contain a request for certain changes in the terms of the offer and yet still be a binding acceptance (but the requests should be mere suggestions only, not counter-offers), so long as clear that meaning of acceptance is positively and unequivocally to accept offer, whether such request is granted or not, a contract is formed. [Villonco Realty Company v. Bormaheco, Inc., 1975]

Acceptance of payment is an indication of consent The acceptance referred to which determines consent is the acceptance of the offer, and not

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(3) Option Contract [Arts. 1479, 1324] (a) Definition (i) An accepted unilateral promise to buy or sell supported by a consideration distinct from the price [Art 1479] (ii) An option contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise or certain specified property, if he chooses, at any time within the agreed period, at a fixed price. [De la Cavada vs. Diaz, 1918] (iii) An option is not of itself a purchase, but merely secures the privilege to buy. (iv) A consideration for an optional contract is just as important as the consideration for any other kind of contract. If there was no consideration for the option, then it cannot be enforced any more than any other contract where no consideration exists. [Baviera]

CIVIL LAW (c) Sale vs. Option Contract Sale Option Contract Bilateral

Sale of property

Unilateral: gives a right to buy or to sell, but imposes no obligation on the part of the optionholder, aside from the consideration for the offer Sale of right to purchase

(4) Right of First Refusal As to enforceability If the right to the first offer is embodied in the contract, it should be executed according to the terms stipulated. The right should be enforced according to the law on contracts and not on the panoramic and indefinite rule on human relations. This juridical relation is not amorphous nor is it merely preparatory. [Equatorial Realty Development vs. Mayfair, 1996] When the grantee fails to exercise the right Only after the grantee fails to exercise its right of 1st priority under the same terms and conditions within the period agreed upon, could the grantor validly offer to sell the property to a 3rd person under the same terms as offered to the grantee. [Paranaque Kings vs. CA, 1997]

(b) Elements of an Option Contract (i) Consent (ii) Subject matter: an option right or accepted unilateral offer to buy, or an option right or accepted unilateral offer to sell a determinate object for a price certain, including the mannerof payment thereof (iii) Prestation: a consideration separate and distinct from the purchase price for the option given

As to the effects of the violation of the right (a) A sale made in violation of a right of first refusal is valid but rescissible, and may be the subject ofan action for specific performance. [Rosencor Devt. Corp. Vs. Inquing, 2001] (b) However, before the sale to the 3rd person may be rescinded, he must have been actually or constructively

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aware of the right of 1st refusal at the time he bought it. (c) The sanction for the enforcement of the right of first refusal against third persons is based on Art. 19 of NCC, as no real right was created on the property. Difference from Sale Sale

CIVIL LAW (2) It is the proof of all the essential elements of the contract of sale, and not the mere giving of earnest money, which establishes the existence of a perfected sale. [Platinum Plans Phils. vs. Cucueco, 2006] Effect of Perfection From the moment of the perfection of the contract of sale, the parties may reciprocally demand performance, subject to the provisions of the Statute of Frauds. [Art 1475]

Right of 1st Refusal

Bilateral Unilateral Price and other terms Price and other terms of payment are certain are yet to be agreed upon The thing to be sold must be determinate

Perfection of Sale by Auction [Art 1476] (1) Contract is perfected when the auctioneer accepts the bid by the fall of the hammer or gavel or in any other customary manner. (2) If auction is announced to be “without reserve,” goods cannot be withdrawn from the sale after the bid is made. (3) By taking part in the auction and offering bidding, the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice. (4) Puffing/by-bidding is illegal – means employed by owner to increase the price of the bids; illegal.

Distinction from Option Contract Option Contract Right of 1st Refusal Separate No need for a consideration is separate necessary consideration Grantee has the right No right to buy or to buy or sell sell, only a right to match the 1st offer to buy should the grantor decide to sell

C. CONSUMMATION

(5) Mutual Promise to Buy and Sell [Art. 1479] A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

When parties fulfill their obligations.

FORMALITIES OF THE CONTRACT [Art. 1403 (d) (e)] General rule: No form required as to validity provided all the essengtial requisites are present.

The promise made by one party is the consideration for the promise made by the other. [Baviera]

B. PERFECTION

The sale may be [Art.1483, CC]: (1) Written (2) Oral (3) Partly written and partly oral (4) Inferred from the conduct of the parties

[Arts. 1475, 1319, 1325, 1326] When Perfected (1) Contract of sale is a consensual contract, hence perfected at the moment of the meeting of the minds of the parties as to the object of the contract and the price. [Art 1475]

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Exceptions: (1) For enforceability: Statute of Frauds [Art,1403 (2)] (a) Contract or some memorandum thereof must be in writing and subscribed by the party or his agent, otherwise contract is unenforceable; unless ratified by failure to object to oral evidence or acceptance of benefits under the contract (b) Statute of Frauds covers: (i) Sale of personal property at price not less than 500 pesos (ii) Sale not to be performed within 1 year (iii) Sale of real property or an interest therein [Art 1358] (c) Applies only to executory contracts, not to contracts either totally or partially performed. [Iñigo v. Estate of Maloto, 1967] (d) Purpose: to prevent fraud or perjury in the enforcement of obligations (e) Ratified when defense fails to object to the introduction of parol evidence, or ask questions on cross-examination

CIVIL LAW Continued possession of the object of an oral contract has been held to constitute partial performance, where accompanied by other acts which characterize the continued possession and refer to the contract of sale. A tender of payment, declined by the vendor, has been said to be equivalent to actual payment, for purposes of determining if there has been partial performance. [Ortega v. Leonardo, 1958] (2) Sale of realty by an agent Agent’s authority must be in writing, otherwise the sale is void [Art.1874] (3) Sale of large cattle To be valid, transfer of large cattle must be registered with the municipal treasurer [Sec. 529, Revised Administrative Code] (4) For public convenience: In a public document – to compel third parties [Art 1358] (a) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; (b) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (c) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; (d) The cession of actions or rights proceeding from an act appearing in a public document. (e) All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405.

The acceptance of a definite agreement on the manner of payment of the price is essential determining consent.[Limketkai Sons Milling, Inc. v. CA, 1996] Sale is consensual, and thus binding when there is meeting of minds as to price. Such sale is valid despite manner of payment, or even breach as to such manner of payment. If real price is not stated in the contract, then the remedy would be reformation of the contract. Payment has no effect on the validity of the sale, for payment merely goes into the performance of the contract. Failure to pay consideration is not lack thereof.[Spouses Buenaventura v. CA, 2003]

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CIVIL LAW Intention to transfer ownership (1) All forms of delivery shall be coupled with intention of delivering the thing sold. (2) Seller must be owner or authorized by owner of the thing sold

VII. Transfer of Ownership OBLIGATIONS OF THE VENDOR: (1) To transfer ownership of the thing (2) To deliver the thing, with its accessions and accessories, if any (3) To warrant against eviction and against hidden defects (4) To take care of the thing, pending delivery, with proper diligence (5) To pay for the expenses of the deed of sale

When right to transfer ownership must exist: At the time of delivery and not at the time of perfection of contract of sale.

B. CONCEPT OF DELIVERY B.1. REQUISITES (1) Identity – between what must be delivered and what is actually delivered (2) Integrity – in a condition suitable for enjoyment (3) Intentional

A. MANNER OF TRANSFER [ARTS. 1477, 1496-150] General Rule: Ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof [Art 1477]

B.2. WHAT TO DELIVER (1) Thing sold [Art. 1495] (2) Fruits [Art. 1164 & 1537] – belong to the vendee from day of perfection. (3) Accessions and accessories [Art. 1166 & 1537] – in the same condition they were in on day of perfection (a) Improvements by seller at his expense grants him a usufructuary right [Art 1138, 1189] (b) No indemnification (c) But he may remove it to the extent that there is no damage [Art. 1538]

Obligation to transfer ownership and to deliver is implied in every contract of sale [Arts. 14581459] Transfer of ownership requires delivery [Art. 1495] Exceptions (1) Contrary stipulation (2) Contract to sell (3) Contract of insurance (4) Sale on acceptance/Trial (5) When seller is not the owner or has voidable title

B.3. WHERE TO DELIVER (1) A hierarchy is followed: (a) Stipulation (b) Usage of trade (c) Seller’s place of business (office) (d) Seller’s residence

A.1. GENERAL CONCEPTS Transfer of ownership is effected even if the purchase has been made on credit.

(2) In case of specific goods, which the parties knew to be at some other place when the contract was perfected, that place is the place of delivery

Payment of the purchase price is not essential to transfer of ownership as long as the property sold was delivered.

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(3) If goods are at the time of sale are possessed by a third person, then there is no delivery until he acknowledges to the buyer that he holds the goods for the buyer.

(b) Buyer does any other act adopting the transaction (i.e. sale to a third person) (c) Retains the goods without giving notice of rejection after the time fixed has expired; if no time has been fixed, after the expiration of a reasonable time [Art 1502]

B.4. WHEN TO DELIVER Absent a stipulation as to time, delivery must be made within a reasonable time; demand or tender of delivery shall be made at a reasonable hour.

Loss or destruction of the property prior to return falls upon the buyer and makes him responsible for the purchase price. Sale on Approval vs Sale on Return Sale on Approval Sale on Return

Hour of delivery: usually during business hours

C. WHEN DELIVERY DOES NOT TRANSFER TITLE

Ownership does not Ownership passes pass upon delivery upon delivery, but buyer may revest ownership in the seller by returning or tendering the goods within the time fixed in the contract Depends on the Depends on the will character or quality of of the buyer goods Subject to a Subject to a suspensive condition resolutory condition Risk of loss remains Risk of loss remains with the seller with the buyer

(1) Sale on Approval or Trial General Rule: Title remains with the seller. Buyer has option to purchase goods if proven satisfactory, the approval of the buyer being a condition precedent. (Same exceptions with sale on return) The relationship between seller and buyer, if no absolute sale yet, is that of a bailor and bailee If there is no time for approval specified but with period for trial, then approval shall be made within a reasonable period after the trial period expires.

Express Reservation If it was stipulated that ownership in the thing shall not pass to the purchaser until he has fully paid the price then ownership remains with seller even when delivery is made [Art 1478]

(2) Sale on Return or Satisfaction General Rule: Title remains with the seller when parties agree that buyer shall temporarily take the goods into his possession to see if they are satisfactory to him (return if unsatisfactory) Exceptions: (a) Buyer signifies his approval acceptance to the seller

CIVIL LAW

Implied Reservation The following are instances when there is an implied reservation of ownership: (a) Goods are shipped, but by the bill of lading goods are deliverable to the seller or his agent, or to the order of the seller or his agent

or

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(b) Bill of lading is retained by the seller or his agent. (c) When the seller of the goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer, and the latter does not honor the bill of exchange by returning the bill of lading to the seller.

CIVIL LAW In execution sale, the buyer merely steps into the shoes of the judgment debtor [Rule 39, sec. 33, ROC] (e) When goods are purchased in Merchant’s store, Fair, or Market [Art 1505] The policy of the law has always been that where the rights and interest of the vendor clash with that of an innocent buyer for value, the latter must be protected. [Sun Brothers and Co. vs. Velasco, 1958]

(3) When Sale Not Valid i.e. When the thing sold is a public property (4) When Seller is Not the Owner

(5) Sale by Person Having a Voidable Title (a) True owner may recover the thing when the ff. requisites concur: (i) Subject matter is movable (ii) Owner has either lost the thing or has been unlawfully deprived. [Art 559] (b) Reimbursement is necessary before owner can recover when: (i) Buyer acted in good faith (ii) Acquired at a public auction [Art 559] (c) Recovery no longer possible when: (i) Buyer in good faith (ii) Acquired it at a merchant’s store, fair or market. [Art 1506]

General Rule: Ownership is not acquired by the buyer. One cannot give what one does not have. [Art 1505] Exceptions: (a) Seller has a Right to transfer ownership (i) Seller need not be the owner of the thing at the time of perfection of the contract. It is sufficient that seller has a right to transfer ownership thereof at the time it is delivered. [Art. 1459] (ii) One who sells something he does not own yet is bound by the sale when he acquires the thing later [Bucton vs Gabar, 1974]

D. KINDS OF DELIVERY

(b) Estoppel: Owner is, by his conduct, precluded from denying the seller’s authority to sell. [Art. 1434]

D.1.ACTUAL DELIVERY

(c) Registered land bought in good faith

(1) When deemed made: when the thing sold is placed in the control and possession of the vendee [Art. 1497]

General rule: Buyer need not go beyond the Torrens title

(2) Not always essential to passing of title [Art. 1475]

Exception: When he has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make further inquiry

(3) Parties may agree when and on what conditions the ownership shall pass to the buyer [E.g.: Art 1478 where ownership will only pass after full payment of the price]

(d) Order of courts; Statutory Sale

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D.2. CONSTRUCTIVE DELIVERY

CIVIL LAW has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. [Villamor v. Mangaoil, 2012]

i. Execution of public instrument [Art 1498, par. 1] General Rule: produces the same legal effects of actual delivery.

ii. Symbolic Delivery Delivery of keys of the place or depositary where the movable is stored or kept. [Art 1498]

Exceptions: (a) The intention of the parties is otherwise. (b) At the time of execution, the subject matter was not subject to the control of the seller which must subsist for a reasonable length of time after execution. [Pasagui v Villablanca, 1975]

Unless otherwise agreed, when symbolic delivery has been made, the seller is not obliged to remove tenants to place the buyer in actual possession of the property as he has already complied with his obligation to transfer ownership of and deliver the thing sold. [Power Commercial and Industrial Corp. v. CA, 1997; Sabio v. The International Corporate Bank, Inc., 2001]

“Control” over thing sold must be such that seller is capable of physically transferring it to buyer.

(a) Tradition Longa Manu (Long Hand) Delivery of thing by mere agreement.

Although parties may stipulate that the execution of a public instrument is equivalent to delivery, this legal fiction holds true only when there is no impediment that may prevent the passing of the property from the vendor to the vendee. [Vda. de Sarmiento v. Lesaca, 1960]

Example: Seller points to the property without actually transferring physical possession thereof. When an employer assigned all its rights and title to all surplus property salvaged by the contractor, tradition longa manu takes place. Delivery is upon the moment a thing is salvaged. [Board of Liquidators v. Floro, 1960]

If, notwithstanding execution of the instrument, the buyer cannot enjoy material tenancy and make use of the object himself or through another in his name, there is no delivery. [Power Commercial v. CA, 1997]

(b) Tradition Brevi Manu (Short Hand) MOVABLE is delivered when the buyer had the thing already in his possession before the sale took place, not as owner but as lessee, borrower, or depositary.

Execution of a public instrument gives rise only to a prima facie presumption of delivery, negated by failure of the buyer to take actual possession of land sold. A person who does not have actual possession cannot transfer constructive possession by execution and delivery of public instrument. [Spouses Santiago v. Villamor, 2012]

(c) Tradition Constitutum Possessorium Seller continues to be in possession of the property sold, by virtue of a lease contract agreement with the vendee.

There is symbolic delivery, unless from the express terms of the instrument, or by clear inference therefrom, that the same was not the intention of the parties, e.g. where the vendor

(d) Delivery to a Common Carrier General Rule: Delivery to the courier or carrier is tantamount to delivery to buyer, whether

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carrier is named by buyer or not. The buyer assumes the risk of loss.

CIVIL LAW Ownership shall be transferred to the person who may have first taken possession in good faith.

Exceptions i. Seller reserved title by the form of the bill of lading, with intent to remain the owner, not merely for the purpose of securing payment, OR ii. Contrary intention appears in the contract (i.e. seller is required to deliver goods to buyer at the point of destination) iii. F.O.B. (Free on Board or Freight on Board) - When seller bears the expenses of transportation up to the F.O.B. point. iv. C.I.F. (Cost, Insurance, Freight) - Price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the point of destination. v. F.A.S. (Free Alongside) -Seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named port.

(2) Sale of Immovables (a) Ownership belongs to the person who: (i) In good faith first recorded the sale in the Registry of Property; OR (ii) If there is no inscription of sale on the title, ownership passes to the person who in good faith was first in possession; OR (iii) In the absence thereof, to the person who presents the oldest title, PROVIDED there is good faith. Possession - refers to any of the modes of possession in Articles 1497-1501 Oldest Title – any public document showing acquisition of the land in good faith. To constitute “title,” the transmission of ownership must appear in a public document [Art. 1358 (1)]

E. DOUBLE SALES

Examples: Deed of Sale, Deed of Donation, Deed of Trust

[ART. 1544] General Rule: Prior tempore, potior jure (“he who is first in time is preferred in right”) applies.

(b) Registration includes any entry made in the Primary Entry Book of the registry, including both registration in its ordinary and strict sense and cancellation, annotation, and even marginal notes. [Cheng v. Genato, 1998]

Requisites [Cheng v Genato, 1998]: (1) 2 or more valid sales; (2) Same subject matter; (3) 2 or more buyers with conflicting interests over the rightful ownership of the thing sold; (4) Same seller

Pencilled entries on the title are not considered registration. [AFPMBAI v. Court of Appeals, 1999] (3) Second Sale Made by Virtue of Execution and Attachment Art. 1544 does NOT apply in cases where the first sale of an unregistered immovable occurred prior to an execution sale and the second sale occurred by virtue of an execution

E.1. RULES GOVERNING SALE OF MOVABLES, IMMOVABLES AND UNREGISTERED LANDS (1) Sale of Movables 284

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sale. This is because a buyer of unregistered land at an execution sale only steps into the shoes of the judgment debtor (the person who sold the property prior to the execution sale). The second buyer merely acquires the latter's interest in the property sold as of the time the property was levied upon. [Carumba v. CA, 1970] (a) Unregistered by both buyers: the first sale is preferred (b) Registered by both buyers: the second sale is preferred (c) If the first buyer did not register but the second buyer registered property, then the first buyer is preferred.

One who buys the property of another, without notice that some other person has a right to or interest in such property, and who pays a full and fair price for the sale, at the time of the purchase or before he has notice of the claim/interest of some other person in the property. [Agricultural and Home Extension Development Group v CA, 1992] General Rule: As a rule, he who asserts the status of a purchaser in good faith and for value has the burden of proving such assertion. This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith, i.e., that everyone is presumed to act in good faith [Mathay v CA, 1998]

(4) Sale of Unregistered Land (a) Instrument or deeds establishing, transmitting, acknowledging, modifying or extinguishing rights with respect to lands not registered under the Land Registration Act or the Spanish Mortgage Law, are required to be registered in the Registry of Property to prejudice 3rd persons, although such registration is understood to be “w/o prejudice to a 3rd party with a better right”. [PD 1528 Sec 113] (b) Art. 1544 applies to unregistered land subject to a conventional sale (because of Art. 1358) but NOT to unregistered land subject to judicial sale. (c) Unregistered by both buyers, the first buyer is preferred. (d) If first buyer did not register but second buyer registered property, second buyer is preferred.

F. PROPERTY DECREE

CIVIL LAW

When buyer is presumed to be in bad faith: (a) Annotation of adverse claim: Places any subsequent buyer of the registered land in bad faith. [Balatbat v CA, 1996] (b) Annotation of Lis Pendens: Buyer cannot be considered an innocent purchaser for value where it ignored the lis pendens on the title. (c) A purchaser of a parcel of land cannot close his eyes to facts which should put a reasonable man upon his guard, such as when the property subject of the purchase is in the possession of persons other than the seller. A buyer who could not have failed to know or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. [Heirs of Ramon Durano v Uy, 2010] Lis Pendens

REGISTRATION

May be cancelled even before the action is finally terminated for causes which may not be attributable to the claimant

(1) Requisites for Registration of Deed of Sale in Good Faith Purchaser in Good Faith 285

Annotation of Adverse Claim May be cancelled only in one instance, i.e., after the claim is adjudged invalid or unmeritorious by the Court

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Partial Loss (Or loss which results in Total Loss substantial change in character) Contract is ineffective Buyer may withdraw because the object did from the contract not exist at the time of OR the transaction. Buy the remainder at a proportionate price

Both protect the interest of a claimant by cautioning other persons that said property is subject to a claim. The two are not contradictory or repugnant to one another; nor does the existence of one automatically nullify the other, and if any of the registrations should be considered unnecessary or superfluous, it would be the notice of lis pendens [A. Doronila Resources Development Inc v CA, 1988]

D. AFTER PERFECTION BUT BEFORE DELIVERY

(2) Accompanied by vendors duplicate certificate of title, payment of capital gains tax, and documentary tax registration fees

D.1.LOSS General Rule: Stipulations in the contract will govern.

Must be accompanied by: (a) Vendor’s duplicate certificate of title (b) Payment of capital gains tax – 6% of the selling price or zonal value, whichever is higher (c) Documentary tax registration fees – 1.5% of the selling price or zonal value, whichever is higher

In the absence of stipulation, there are two conflicting views: (1) Res perit creditori or the buyer bears the risk of loss. This is an exception to the rule of res perit domino. Basis: Art 1504 only covers goods. Pursuant to Article 1262, if the thing is destroyed without the fault of the debtor/seller, the obligation to pay shall subsist.

VIII. Risk of Loss A. GENERAL RULE [ARTS. 1263, 1189] Res perit domino: Owner bears risk of loss Basis: Ownership is not transferred until delivery.

B. PRIOR CONTRACT

TO

PERFECTION

CIVIL LAW

(2) Res perit domino or the seller bears the risk of loss. Basis: The rule on loss is different from the rule on deterioration for the loss would be for the account of the seller, while the deterioration would be for the account of the buyer.

OF

Seller bears risk of loss and deterioration.

C. AT TIME OF PERFECTION

In reciprocal obligations, the extinguishment of the obligation due to loss of the thing extinguishes the entire juridical relation.

[ARTS. 1493 AND 1494] Seller bears risk of loss and deterioration.

D.2. DETERIORATION [ART 1189] Impairment is borne by the buyer if the thing deteriorates without the fault of the seller. 286

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CIVIL LAW therein without having to effect actual delivery thereof [Villanueva] (3) The custody of a negotiable warehouse receipts issued to the order of the owner, or to bearer, is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner. [Siy Cong Bieng vs. HSBC, 56 Phil 598]

If it deteriorates through the fault of the debtor, the creditor may choose between rescission of obligation and fulfillment, either case with indemnity for damages.

E. AFTER DELIVERY Buyer bears risk of loss and deterioration. Exceptions [Art 1504 (1) and (2)] (1) Where delivery has been made either to the buyer or to the bailee for the buyer, but ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract; and (2) Where actual delivery has been delayed through the fault of either the buyer or seller, the goods are at the risk of the party in fault.

C. NEGOTIABLE DOCUMENTS OF TITLE 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 [Art. 1508] Terms of the Document

How negotiated

Goods are deliverable By delivery of the to bearer document to another

IX. Documents of Title

Endorsed in blank by the person to whose order the goods were supposed to be delivered Goods are deliverable By indorsement of to the order of a such person [Art. specified person 1509, CC]

A. DEFINITION [Art. 1636] A document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document. [Art. 1636]

C.1. WHO MAY NEGOTIATE IT? [Art.1512] (1) Owner (2) Person to whom the possession or custody of the document has beenentrusted by the owner (a) If bailee undertakes to deliver the goods to such person (b) If document is in such form that it may be negotiated by delivery

Examples: bill of lading, quedan, warehouse receipts, trust receipts, dock warrant

B. PURPOSE OF DOCUMENTS OF TITLE (1) As evidence of possession or control of goods described therein (2) As a medium of transferring title and possession over the goods described

A person to whom a document has been negotiated acquires:

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(1) Title of person negotiating the document, over goods covered by document (2) Title of depositor/owner over such goods (3) Direct obligation of bailee/carrier to hold possession of goods for him

Negotiation [Art. 1508]

E. WARRANTIES OF SELLER OF DOCUMENTS OF TITLE

Goods described in a non-negotiable document of title are deliverable only to a specified person.

[ART. 1516] A person who negotiates a document of title warrants that: (1) Genuineness of document (2) Legal right to negotiate or transfer (3) No knowledge of fact which would impair the validity or worth of the document (4) Right to transfer the title to the goods and merchantability or fitness for a particular purpose, whenever such warranties would have been implied

Carrier will not deliver the goods to any holder of the document or to whom such document may have been endorsed by the consignee. Must present the deed of sale or donation in his favor. A person to whom a document has been negotiated acquires (1) Title to goods as against the transferor (2) Right to notify the bailee of the transfer thereof (3) Right, thereafter, to acquire the obligation of the to hold goods for him

He does not warrant that: (1) Common carrier will fulfill its obligation to deliver the goods (2) Previous endorsers will fulfill their obligation [Art. 1516-1517]

“Negotiation” [negotiable document of title] vs. “Transfer” [non-negotiable document of title] Negotiation [Art. 1508] Transfer

In

a

Transfer

document of title, the than his transferor buyer may acquire a better title than his transferor.

D. NON-NEGOTIABLE DOCUMENTS OF TITLE

Delivery of a negotiable document of title to another if by the terms thereof, the goods are deliverable to bearer, or when the document was endorsed in blank by the person to whose order the goods are deliverable.

CIVIL LAW

Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, unless: (1) Document is first surrendered to the carrier; or (2) Impounded by the court; or (3) Its negotiation is enjoined. [Art. 1519-1520]

The assignment of rights of the consignee of a nonnegotiable document of title to another; or

F. RULES ON LEVY/GARNISHMENT OF GOODS

Document of title was ordered sold or assigned, without indorsement.

[ARTS. 1514, 1519, 1520] Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, unless:

Transferee does not negotiable acquire a better title

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(1) Document is first surrendered to the carrier; or (2) Impounded by the court; or (3) Its negotiation is enjoined. [Art. 1519-1520]

CIVIL LAW (2) The consignor or agent who had paid the price or is responsible for the price (3) Any other person who is in the position of a seller (i.e. buyer who paid the price and had a right to return the goods). [Baviera]

The levy of an attachment of execution upon the goods by a creditor of the transferor, may defeat the title of the transferee and the right to acquire the obligation of such bailee, when:

B. REMEDIES OF UNPAID SELLER JUDICIAL REMEDIES OF AN UNPAID SELLER (1) Action for the price or specific performance [Art. 1595] Instances: (a) The goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay the price (b) Price is payable on a certain day and the buyer wrongfully neglects or refuses to pay the price, irrespective of delivery of the goods or transfer of title, or (c) When the goods cannot readily be resold for a reasonable price, and the buyer wrongfully refuses to accept the goods even before ownership passed, if NCC1596, paragraph 4 is inapplicable. (d) Seller was notified by the buyer of his repudiation of the contract after the seller has completed the manufacture of the goods or had procured the goods to be delivered and the goods could not readily be resold for a reasonable price

(1) It was done prior to the notification to such bailee by the transferor of a nonnegotiable document of title or (2) By a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. [Art 1514 (3rd par)] A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts in regard to property which cannot be readily attached or levied by ordinary legal process [Art 1520]

X. Remedies of an Unpaid Seller A. DEFINITION OF UNPAID SELLER [ART. 1525] A seller is considered to be an unpaid seller if the whole price has not been paid or tendered, or when check received as a conditional payment was dishonored by non-payment or insolvency of the buyer [Baviera]

Buyer can set up the defense that seller at any time before judgment could not or did not intend to deliver the goods.

An seller is unpaid within such definition whether or not title has been passed. Partial payment of the price does not extinguish the unpaid seller’s lien. [De Leon]

Unless the contrary appears, payment and delivery are presumed to be concurrent acts, and the obligation of each party to perform the contract is dependent upon the simultaneous performance by the other party

Term also includes: (1) The agent of the seller to whom the bill of lading was endorsed,

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If ownership has not yet passed to the buyer, the seller cannot maintain an action for the price, unless it involves (b) or (c).

CIVIL LAW The unpaid seller’s right to rescind for nonperformance is not absolute. Exceptions: (a) 3rd persons possessing the objects of the contract to whom no bad faith is imputable (b) Casual breach

Title to goods passes from the moment the goods are placed at the buyer’s disposal when refusal to accept is without just cause.

The seller cannot unilaterally and extrajudicially rescind a contract absent express stipulation to do so, except as provided in Art. 1597.

(2)Action for damages for non-acceptance, if buyer wrongfully neglects or refuses to accept and pay for the goods (Art. 1596)

(4) Special rule for sale of movables by installments – Recto Law [Arts. 1484, 1485]

Measure of damages: Estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach. Not only actual damages, but also unrealized profits. It is the difference between the contract price and the market or current price. [De Leon]

Applies in cases of: (a) Sale of movables in installment The rule is intended to apply to sales of movables, the price of which is payable in two or more installments, but not to straight-term sales where the price is payable in full, after making a down payment because the law aims to protect improvident buyers who may be tempted to buy beyond their means. [Levy Hermanos vs. Gervacio, 1939] (b) Lease of personal property with option to buy (i) When lessor has deprived the lessee of the possession or enjoyment of the thing (Ex.: When lessor files a complaint for replevin against lessee) (ii) Also applies when seller assigns his credit to someone else

(a) Where there is available market for goods: Difference between the contract price and the market price at the time the goods ought to have been accepted or if no time was fixed, at the time of refusal to accept (b) If the resale was made with diligence: resale price is evidence of market value, taking into account whether or not the goods could be readily sold (c) Where labor/expense was necessary for seller to fulfill his obligation: Labor performed and expenses made by seller before receiving notice of buyer’s repudiation or countermand (d) Profit that the seller would have made if sale had been fully performed

C. ALTERNATIVE REMEDIES OF THE UNPAID SELLER UNDER RECTO LAW

(3) Rescission by giving the buyer notice of the election to rescind [Art. 1597]

(a) Specific Performance (b) Cancellation of sale: If vendee fails to pay 2 or more installments When the seller cancels the sale by repossessing the property sold, he is barred from exacting payment for its price.

Under this rule, rescission would bar an action on the contract because it means cancellation of the contractual obligations between the parties. [Baviera]

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(c) Foreclosure of Chattel Mortgage: If vendee fails to pay 2 or more installments (i) If seller chooses this remedy, he shall have no further action to recover any unpaid balance, and any stipulation to the contrary shall be void (ii) What Art 1484 (3) prohibits is “further action against the purchaser to recover any unpaid balance of the price;” and although this Court has construed the word “action” to mean “any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy,” there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250 of Sapinoso was a voluntary act on his part and did not result from a “further action” instituted by Northern Motors. [Motors vs. Sapinoso, 1970] (iii) The purpose of the law is to remedy the abuses committed in foreclosure of chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. [Bachrach Motor Co., Inc. v. Millan, 1935]

CIVIL LAW (iv)

Remedies are ALTERNATIVE, not cumulative, i.e. exercise of one bars exercise of the others. [Nonato vs. IAC, 1985]

Where the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded. [Borbon II v. Servicewide, 1996]

XI. Performance Contract

of

A. DELIVERY OF THING SOLD (1) Sale of movables [Arts. 1522, 1537, 1480] (a) When Quantity less than expected (i) Buyer may reject all (ii) Buyer accepts with knowledge of seller’s inability to deliver the rest – buyer pays at contract price (iii) Buyer has used or disposed prior to knowing seller’s inability to deliver the rest – buyer pays fair value (b) Quantity more than expected (i) If divisible, buyer may reject excess (ii) If indivisible, buyer may reject all If the buyer accepts all goods delivered, he makes himself liable for the price of all of them. (c) Quality different or different goods (i) If divisible, buyer may accept the goods compliant with contract and reject those that are not

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(ii) If indivisible, buyer may reject all [Art. 1522] (d) Sale of specific mass of goods In the sale of fungibles where the measure or weight has not been agreed upon nor is there a fixed rate based upon a measurement, the subject matter of the sale is a determinate object – the specific mass; seller is merely required to deliver such mass even if actual quantity falls short of parties’ estimate [Art. 1480] (e) Delivery by installments (i) By default, buyer is not bound to accept delivery of goods by installments (ii) In a contract of delivery by installment to be paid by installment as well, delay or breach may not necessarily mean breach of the entire contract; depending on the circumstances, breach may be severable and the aggrieved party is entitled to damages and not rescission. [Art. 1583]

CIVIL LAW

(b) Sale for a lump sum (i) Follows the same rule as the sale of a specific mass which is explained above (ii) There is no change in price even if area or number turns out to be greater or lesser than that stated [Art. 1542] (iii) Exception: when the excess or deficiency is no longer reasonable [Asian v Jalandoni, 1923] (iv) Exception to the exception: when buyer expressly assumes risk on actual area of the land. [Garcia v Veloso, 1941] (v) If the price per unit or measure is not provided for in the contract, then the rules of lump sum sale should prevail. [Sta. Ana v Hernandez, 1966] If sale for lump sum, the cause of the contract is the thing sold, independent of number/measure. The law presumes that the purchaser had in mind a determinate price for real estate and the ascertained area and quality. The purchaser intended to buy thing in entirety, not just any unit of measure or number. [De Leon]

(2) Sale of immovables [Arts. 1539, 1543] (a) Sale at a fixed rate per unit of measure (i) Seller bound to deliver entire land, i.e., the entire area stated in the contract (ii) If the area is less than that stated, buyer may rescind or demand a proportionate reduction in price (iii) If a part of the land is not of the quality stated in the contract, buyer may rescind or demand a proportionate reduction in price (iv) Buyer may only avail of rescission if the area deficiency is 10% or more of total area or if the inferior value of the part of the land exceeds 10% of the price agreed upon. [Art. 1539] (v) If the area turns out to be greater than that stated, buyer may accept area included and reject the excess or accept all and pay a proportionate increase in price [Art. 1540]

When there is conflict between the area stipulated in the contract, the area included within the stipulated boundaries prevails, provided such boundaries are certain, and no alteration thereof has been proven. (3) Inspections and Acceptance Inspections Right of Inspection - The buyer has reasonable opportunity to examine the goods upon delivery. If there is a stipulation that delivery is preconditioned on payment, then buyer has no right of inspection until he has paid. [Art.1584] Exception: in case such right of inspection is permitted by agreement or usage of trade.

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Acceptance (a) Form Express: buyer intimates acceptance Implied: (i) Goods are delivered to the buyer and he does any act in relation to the goods delivered that is inconsistent with the ownership of the seller. (ii) After the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he has rejected them. [Art.1585]

CIVIL LAW (b) He has reasonable grounds to fear such disturbance by a vindicatory action or a foreclosure of mortgage Exceptions: Buyer cannot suspend payment when: (a) Seller gives security for the return of the price in a proper case (b) It has been stipulated that, notwithstanding any such contingency, the buyer shall be bound to pay [Art. 1590] (i) Suspension may continue until the seller has caused the disturbance or danger to cease (ii) However, a mere act of trespass shall not authorize the suspension of the payment. [Art.1590]

(b) Effect of Refusal to Accept If buyer refuses to accept goods, having the right to do so, he is not bound to return them to the seller, it being sufficient that he notifies the seller of his refusal to accept (i) If he voluntarily constitutes himself a depositary of the goods, he shall be liable as such. [Art.1587] (ii) Unjust refusal to accept still results to transfer of ownership. In such case, title to the goods passes to the buyer from the moment they are placed at his disposal, except if ownership has been reserved by the seller [Art.1588]

(3) Sale of real property (a) In the sale of immovable property, buyer may pay even beyond the expiration of the period agreed upon, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act, despite a stipulation providing for ipso jure rescission [Art.1592] (b) Mere failure to fulfill the contract does not ipso facto entitle the offended party to rescind. A judicial or notarial act is necessary before rescission can take place, whether or not automatic rescission has been stipulated. A letter informing the buyer of automatic rescission is not demand if such letter is not notarized. [De Leon] (c) After demand, court may not grant him a new term [Heirs of Escanlar, et.al. v. CA, 1997] (d) R.A. 6552 (Maceda Law) applies to sale or financing of real estate on installment [Rillo v. Court of Appeals,1997]

B. PAYMENT OF PRICE [Art. 1582] (1) Payment of interest: Buyer is liable for interest when: (SFD) (a) Interest is stipulated; (b) Thing sold produces fruits or income; (c) Buyer is in default - interest accrues from the time of judicial or extrajudicial demand for payment (2) Suspension of payments: Buyer may suspend payment when: (a) His ownership or possession of the thing is disturbed; OR

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(i) Buyer is awarded a grace period of 1 month per year of installments paid or 60 days, whichever is higher, within which he may pay without additional interest May be used once every 5 years of the life of the contract or any of its extensions

CIVIL LAW Not every false representation voids the contract, only those matters substantially affecting the buyer’s interest, not matters of opinion, judgment, probability, or expectation. When the buyer undertakes his own investigation, and the seller does nothing to prevent it from being as full as the buyer chooses, the buyer cannot afterwards allege misrepresentations. [Songco v. Sellner, 1917]

(ii) If contract is to be cancelled, seller must first: (1) Give a 30-day notice of cancellation, and (2) Refund cash surrender value to buyer; (3) CSV is equivalent to 50% of total payments made including deposits, options and downpayments plus 5% for every year in excess of 5 years of the life of the contract or any of its extensions.

Condition vs. Warranty Condition

Warranty

Pertains to and affects Goes into the the existence of the performance of an obligation obligation and may, in itself, be an obligation Non-happening does Non-fulfillment not amount to breach constitutes breach of of contract contract Must be stipulated Stipulation or operation of law May attach either to Always relates to the the seller’s duty to subject matter or the deliver thing or some seller’s obligations as other circumstance to the subject matter

Cancellation of the contract under Section 4 of R.A. 6552 as a two-step process. First, the seller should extend the buyer a grace period of at least 60 days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective 30 days from the buyer‘s receipt thereof. [Jestra Development v. Pacifico, 2007]

If seller has promised that the condition should happen or be performed, the buyer may treat the nonperformance of the condition as a breach of warranty. [Art.1545]

A. EXPRESS WARRANTIES For there to be express warranty, the following requisites must concur: (APIR) (1) An affirmation of fact or any promise relating to the thing sold; (2) The natural tendency of such affirmation or promise is to induce the buyer to buy; (3) The buyer buys the thing relying thereon. [Art. 1546] (4) Made before the sale not upon delivery or any other point

XII. Warranties A statement or representation made by the seller contemporaneously and as 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 ensure that certain facts are or shall be as he then represents.

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An express warranty can be made by and also be binding on the seller even in the sale of a second hand article. [Moles v. IAC, 1989]

Express Warranty

False Representation on allege false representation. [Phil Mftg Co. v Go Jucco, 1926]

Express Warranty vs. Dealer’s or Trader’s Talk Dealer’s or Trader’s Express Warranty Talk What is specifically Affirmation of the represented as true in value of the thing or said document cannot statement of the be considered as mere seller’s opinion only dealer's talk. [Moles v. is not a warranty IAC, 1989] unless: The seller made it as an expert; It was relied upon by the buyer. [Art.1546] Ordinarily, what does not appear on the face of the written instrument [Moles v. IAC, 1989]

Reason: buyer’s duty to inspect remains despite false representation by the seller; he has the duty to exercise due diligence.

B. IMPLIED WARRANTIES [ART. 1547] An implied warranty is derived by law by implication or inference from the nature of the transaction or relative situation, or circumstances of the parties, irrespective of any intention of the seller to create it.[De Leon]

Express Warranty vs. False Representation Express Warranty False Representation Concealment of facts does not necessarily amount to false representation

CIVIL LAW

(1) Implied Warranty of Title (2) Implied Warranty against Encumbrance/ Non-Apparent Servitudes (3) Implied Warranty against Hidden Defects [Art. 1547] (a) Implied warranty as to Merchantable Quality and Fitness of Goods (b) Implied warranty against Redhibitory Defect in the Sale of Animals [Art. 1572] (c) Quality and Fitness of Goods in Sale by Sample or Description (4) Other Warranties

When concealment of facts comes with an active misstatement of fact or a partial statement of fact such that withholding of that unsaid portion makes that which is stated absolutely false However, buyer who fails to inspect condition of property despite ample opportunity to do so when there is no opposition on the part of seller to inspect cannot later

B.1. IMPLIED WARRANTY OF TITLE (1) Implied warranty arises by operation of law and need not be stipulated in the contract of sale. (2) Warranty of Seller’s Right to Sell: Seller warrants his right to sell at the time the ownership is to pass. 295

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CIVIL LAW diminishes its fitness for such use to such an extent that had the buyer been aware thereof, he would not have bought it or would have paid a lower price; (2) The defect is not patent or visible; (3) The buyer is not an expert who, by reason of his trade or profession, should have known the defect (4) The seller is aware of the hidden fault or defect, OR even if he is not aware thereof, if there is no stipulation to the contrary [Arts.156, 1566]

Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law. [Art. 1547] (3) Warranty against Eviction: seller warrants that buyer, from the time ownership passes, shall have and enjoy legal and peaceful possession of the thing. Its requisites are: (a) Buyer is deprived of the whole or a part of the thing sold; (b) Eviction is by final judgment (c) Final judgment based on a right prior to the sale or an act imputable to the vendor (d) Seller is summoned and made codefendant in the suit for eviction at the instance of the buyer. [Power Commercial and Industrial Corp. v. CA, 1997]

The buyer must also give notice of such redhibitory defect within a reasonable time. The use contemplated must be that which is stipulated, and in absence of stipulation, that which is adopted to the nature of the thing, and to the business of the buyer.

B.4. IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF GOODS

B.2. IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT SERVITUDES

Warranty of merchantability is warranty that goods are reasonably fit for the general purpose for which the same are sold. Warranty of fitness is warranty that goods are suitable for the special purpose of the buyer which will not be satisfied by mere fitness for general purposes.

Requisites for breach: (1) Thing sold is an immovable (2) Burden or servitude encumbering the thing sold is: (a) Non-apparent to the naked eye (b) Not mentioned in the agreement (c) Of such nature that it must be presumed that the buyer would not have bought it had he been aware of it (d) Not recorded in the Registry of Property unless there is an express warranty that the thing is free from all burdens and encumbrances [Art.1560]

AGAINST

Merchantable Quality: (1) Where the goods are brought by description from a seller who deals in goods of that description [Art.1562] (2) In a sale by sample, if the seller is a dealer in goods of that kind and the defect is not apparent on reasonable examination of the sample [Art.1566]

Requisites for breach: (1) The defect renders the thing sold unfit for the use for which it was intended OR

In a sale by sample, there is implied warranty that goods are free from defects not apparent on reasonable examination of sample and

B.3. IMPLIED WARRANTY HIDDEN DEFECTS

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unmerchantable.

D. EFFECTS OF WAIVERS Only applicable to waiver of warranty against eviction; parties may increase or decrease warranty against eviction but the effect depends on good/bad faith of the seller: (1) Seller in bad faith and there is warranty against eviction – null and void (2) Buyer without knowledge of a particular risk and made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at the time of eviction) (3) Buyer with knowledge of risk of eviction assumed its consequences and made a waiver – vendor not liable (4) Waiver to a specific case of eviction – wipes out warranty as to that specific risk but not as to eviction caused by other reasons

Fitness for a particular purpose: Where the buyer expressly or impliedly makes known to the seller the particular purpose for which the goods are acquired AND it appears that the buyer relied on the seller’s skill or judgment [Art.1562(1)]

B.5. IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF ANIMALS [Art. 1572] Redhibitory defect – a hidden defect of animals of such nature that expert knowledge is not sufficient to discover it, even in a case where a professional inspection has been made No warranty in case of [Art. 1574] (1) Animals sold at fairs or public auctions (2) Livestock sold as condemned

One who purchases real estate with knowledge of defect or lack of title cannot claim he acquired title thereto in good faith, as against true owner of land or of interest therein. [J.M. Tuason v. CA, 1979]

The following sales are void [Art. 1575] (1) Sale of animals suffering from contagious diseases (2) Sale of animals unfit for the purpose for which they are acquired as stated in the contract

The same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor.

Veterinarian liable if he fails to discover or disclose the hidden defect through ignorance or bad faith [Art 1576] Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of sale. [Art 1578]

C. EFFECTS OF WARRANTIES (1) Natural tendency is to induce buyer to purchase the subject matter (2) Buyer purchases subject matter relying thereon (3) Seller liable for damages in case of breach

E. BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY 297

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[ART. 1599]

CIVIL LAW Total Eviction

Partial Eviction

Enforce liability for Enforce liability eviction (demand VICED) OR Demand from seller: Rescind (VICED) (a) If he would not (a) Value of thing sold have bought the thing at time of eviction sold without the part (b)Income or fruits, if lost; he has been ordered (b) BUT he must to deliver them to the return the thing party who won the without other eviction suit encumbrances than (c) Costs of eviction those which it had suit and in a proper when he acquired it case, suit against seller for warranty (d) Expenses of the contract, if buyer has paid them (e) Damages and interests, and ornamental expenses, IF sale was made in bad faith

(1) Express Warranty Prescriptive Period: Period specified in express warranty OR 4 years, if no period is specified (following the general rule on rescission of contracts) Remedies: (a) Accept goods + demand diminution/ extinction of price (b) Accept goods + damages (c) Refuse to accept goods + damages (d) Rescind (Refuse to accept or return or offer to return) + recover price paid Rescission not available when buyer: (a) Knew of breach of warranty when he accepted the goods without protest (b) Fails to notify the seller about election to rescind within a reasonable period of time (c) Fails to return or offer to return the goods to the seller in substantially a good condition as they were when delivered, unless deterioration was due to breach of warranty

Rules: (1) Buyer need not appeal from decision to hold seller liable for eviction (2) When adverse possession commenced before sale, but prescription period completed after transfer: seller is not liable (3) If property sold for nonpayment of taxes due and not made known to the buyer before the sale: seller liable (4) Judgment debtor also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment

Measure of damages: Difference between value of goods at the time of delivery and the value they would have had if they had answered to the warranty Effects of rescission: (a) Buyer no longer liable for price: Entitled to the return of any part of price paid, concurrently with or immediately after an offer to return the goods (b) If seller refuses to accept offer to return goods: buyer deemed as bailee for seller and has right of lien to secure payment of part of price paid

If there is waiver of warranty: (1) Seller acted in bad faith: Waiver is void, seller liable for eviction (2) Buyer made waiver without knowledge of risks of eviction: Seller liable only for the value of the thing sold at time of eviction

(2) Implied Warranty against Eviction [Arts. 1555, 1556] Total Eviction Partial Eviction

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(3) Buyer made waiver with knowledge of risks: Seller not liable; buyer assumed the consequences

only 3 months after. Within such time, the feeds could have been contaminated by other factors. [Nutrimix Feeds v. CA, 2004]

(3) Implied Warranty against Encumbrances [Art. 1560] (a) Rescission: Within 1 year from execution of deed of sale OR (b) Damages: Within 1 year from execution of deed of sale or discovery of the burden or servitude

One of the express warranties stipulated was that the stockholdings are on a clean balance sheet. An important sense of a deed of sale is the transfer of ownership over the subject properties to the buyer. The failure of the seller to effect a change in ownership of the subject properties amounts to a hidden defect. [PNB v. Mega Prime Realty and Holdings, 2008]

(4) Implied Warranty against Hidden Defects [Arts. 1567-1571] If thing is not lost: (a) Withdraw from contract (accion redhibitoria) + damages (b) Demand a proportionate reduction of the price (accion quanti minoris) + damages

(5) Implied Warranty against Redhibitory Defects of Animals Remedies (a) Withdraw from contract + damages (b) Demand a proportionate reduction of the price + damages If sale is rescinded: (a) Buyer must return animal in the condition in which it was sold and delivered (b) Buyer shall be liable for injury due to his negligence.

If thing is lost: Due to fortuitous event or fault of buyer If seller aware of Demand: defect, buyer may (a) Price paid minus demand: value of thing when it (a) Return of price was lost (b) Refund of (b) Damages, if seller expenses acted in bad faith (c) Damages If seller not aware of defect: Buyer may demand price and expenses BUT NOT damages Due to hidden fault

Prescriptive period: 40 days from delivery

F. WARRANTY IN CONSUMER GOODS

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OF

[RA 7394, Sec 68] If implied warranty accompanies express warranty, both will be of equal duration.

Prescriptive period: 6 months from delivery Nature of animal feeds makes it necessarily difficult for private respondent to prove the defect existing when the feeds were bought from petitioner. Facts allege that when feeds were delivered, rat poison was contained therein, but strange since the animals died

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(1) Demand repair within 30 days Extendible for causes beyond the control of the warrantor (2) Demand refund of price minus amount

(1) Retain the goods and recover damages OR (2) Reject the goods, cancel contract and recover from seller so much of the purchase

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Implied Warranty

directly attributable price as has been paid to the use of the + damages consumer prior to the discovery of the nonconformity

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer [Art 1527, par. 2]

XIII. Breach of Contract A. GENERAL REMEDIES [ART 1191]

When Unpaid Seller Loses His Lien [Art 1529] (1) Seller delivers goods to carrier or other bailee for transmission to the buyer without reserving ownership or right of possession (i.e. under a straight or nonnegotiable bill of lading) (2) Buyer or his agent lawfully obtains possession of goods (3) Seller waives the lien (a) But it is not lost with respect to the remainder of the goods when only partial delivery is made (unless such is symbolic delivery of the whole) (b) It is not lost by the mere fact that seller obtained a judgment for the price

The following remedies arise from the bilateral nature of the contract of sale: (1) Specific performance (2) Rescission General rule: Rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. [Song Fo & Co. vs. Hawaiian-Philippine Co., 1925] (3) Damages Prescriptive periods (1) 10 years if based on written contract (2) 6 years if based on oral contract

When Lien May Be Revived After Delivery (1) If the buyer refuses to receive the goods after the same are delivered to the carrier or other bailee on his behalf, though the seller has parted with both ownership and possession. Here, the seller may reclaim the goods and revest the lien.[Art 1531, par.1(2)]

B. REMEDIES OF THE SELLER [ARTS. 1636, 1594]

B.1. SALE OF MOVABLES Extrajudicial or Self-Help Remedies- No need to resort to the courts as long as possession of the goods has not yet passed to the buyer

(2) If the buyer returns the goods in wrongful repudiation of the sale, then the lien is revived.

i. Possessory Lien Over The Goods Right to retain possession of goods until payment or tender of the whole price, or unless he agrees to sell on credit [Arts. 1526-1529, 1503, 1535]

Possessory lien is lost after the seller loses possession but his lien as an unpaid seller remains. His preference can only be defeated by the government’s claim to the specific tax on the goods. [Arts 2241, 2247]

When available [Art 1527]

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CIVIL LAW (1) Buyer obtained delivery of the goods before they have reached their appointed destination (2) Goods have arrived at the appointed destination, and the carrier/bailee acknowledges to hold the goods on behalf of the buyer (3) Goods have arrived at the appointed destination, but carrier wrongfully refuses to deliver to buyer/his agent

ii. Right Of Stoppage In Transitu An extension of the lien for the price; entitles unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee [Arts. 1530-1532, 1535, 1636[2]] Requisites for the exercise of stoppage in transitu (1) The seller is unpaid (2) The buyer is insolvent (3) The goods are in transit (4) The seller either takes actual possession, or gives notice of claim to the carrier or other person possessing the goods (5) The seller must surrender the negotiable instrument or title, if any, issued by the carrier/bailee (6) The seller must bear the expenses of the delivery of the goods after exercise of such right.

How Right Is Exercised [Art 1532] (1) By obtaining actual possession of the goods (2) By giving notice of his claim to the carrier/other bailee who has possession of the goods (a) Carrier must redeliver goods to seller, or according to his instructions (b) Carrier not obliged to redeliver until the negotiable document of title, if any, has been surrendered for cancellation

When Goods Are In Transit [Art 1531, par. 1] (1) From the time of delivery to the carrier or other bailee by the seller, for the purpose of transmission to the buyer, until the buyer or his agent takes such delivery from the carrier. (2) Even when goods have reached their ultimate destination, if buyer rejects them and carrier retains possession

Effect When Buyer Has Sold the Goods [Art 1535] General Rule: Seller’s right to stoppage in transitu is not affected even if buyer has sold or disposed of the goods unless the seller has given his assent thereto. Exceptions: (1) When seller has given consent thereto (2) When a negotiable document of title has been issued for the goods to a purchaser for value in good faith

To terminate transit by delivery to a middleman, delivery must be to keep, not to transport. In case of misdelivery, the goods are still considered in transit, hence, the seller may still exercise his right pursuant to Article 1523.

iii. Special right of resale Available to unpaid seller who has a right of lien or who has stopped the goods in transitu [Art. 1533]

When Goods Are No Longer In Transit [Art 1531, par. 2]

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When available When the unpaid seller has either a right of lien or has stopped the goods in transitu and under any of the following conditions: (1) The goods are perishable in nature (2) The right to resell is expressly reserved in case the buyer should default (3) The buyer delays in paying the price for an unreasonable time

CIVIL LAW When the unpaid seller has either a right of lien or has stopped the goods in transitu and under any of the following conditions: (1) Seller expressly reserved his right to rescind in case buyer defaults (2) Buyer has been in default in payment for an unreasonable time Transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or some other overt act an intention to rescind.

The right to resell the goods is not mandatory, but permissive. How exercised (1) He must do so within a reasonable time and in such manner as to obtain the best price possible. (2) Resale is deemed to be a fair sale if it is undertaken in accordance with established business practices, with no attempt to take advantage of the original buyer. (3) Resale may be in a private or public sale, but seller cannot buy directly or indirectly. (4) For resale to be valid, buyer need not be notified of an intention to resell or the time and place of the resale.

Communication to buyer of rescission is not always necessary (it can be an overt act). But giving/failure to give notice is relevant in determining reasonableness of time given to the buyer to make good his obligation under contract. [De Leon] v. Whole Price not Paid When the whole of the price has notbeen paid or tendered; vi. Dishonor of Bill of Exchange or Negotiable Instrument When a bill of exchange or other negotiable instrument has been received as conditional payment and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.

Effects of Resale (1) Seller is no longer liable to the original buyer upon the contract of sale or for any profit made by the resale (2) Buyer at resale acquires good title as against the original owner (3) In case resale is at a loss, seller is entitled to recover the difference from the original buyer (4) Seller may recover damages from original buyer for breach of contract

C. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT – ARTS. 1484-1486 C.1. WHEN APPLICABLE (1) Sale of movables in installment

iv. Special right to rescind Return of the title over the undelivered goods to the seller, and right to recover damages for breach of contract [Art. 1534]

The rule is intended to apply to sales of movables, the price of which is payable in 2 or more installments, but not to straight-term sales where the price is payable in full, after making a down payment because the law aims to protect improvident buyers who may be

When available

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tempted to buy beyond their means. [Levy Hermanos vs. Gervacio, 1939]

chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. [Bachrach Motor Co., Inc. v. Millan, 1935]

(2) Lease of personal property with option to buy (a) When lessor has deprived the lessee of the possession or enjoyment of the thing (i.e. lessor files a complaint for replevin against lessee) (b) Also applies when seller assigns his credit to someone else

C.2. ALTERNATIVE REMEDIES

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EXCLUSIVE

D. SALE OF IMMOVABLES

The exercise of one remedy bars the exercise of the others.

D.1. RESCISSION FOR ANTICIPATORY BREACH

(1) Specific Performance General Rule: When the seller has chosen specific performance, he can no longer seek for rescission or foreclosure of the chattel mortgage Exception: If specific performance has become impossible, the seller may still choose rescission [Art 1191]

[Art. 1591] This is applicable to both cash sales and to sales in installments. Requisites (1) There is delivery of immovable property (2) Vendee has not yet paid the price; and (3) Vendor has reasonable ground to fear the loss of property and the loss of price If there is no such reasonable ground, Art 1191 applies (specific performance or rescission with damages).

(2) Cancellation of sale if vendee fails to pay 2 or more installments (a) When the seller cancels the sale by repossessing the property sold, he is barred from exacting payment for its price. (b) It can only be carried out when he who demands rescission can return whatever he may be obliged to restore [Art 1385]

Court has no discretion to compel the seller to wait for the expiration of the period to pay, or to grant the buyer more time to pay.

D.2. SPECIFIC PERFORMANCE + DAMAGES OR RESCISSION + DAMAGES [Art. 1191]

(3) Foreclosure of Chattel Mortgage if vendee fails to pay 2 or more installments (a) If seller chooses this remedy, he shall have no further action to recover any unpaid balance, and any stipulation to the contrary shall be void. (b) The purpose of the law is to remedy the abuses committed in foreclosure of

(1) Seller may choose between specific performance and rescission, with damages in either case. (2) Court has discretion, for a just cause, to give the buyer more time to pay even if the seller chooses rescission.

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(3) If seller chose specific performance, and such becomes impossible, he may still avail of rescission (4) If absolute sale, seller must make a demand for rescission (a) Judicially, OR (b) By a notarial act (5) Demand necessary even if automatic rescission is stipulated (a) Effect of lack of demand: Buyer can still pay (b) Effect of demand: Court may not grant buyer a new term

CIVIL LAW (4) Sale of lands payable in straight terms [RA 6552, Sec 3] Rights of the Buyer: The law imposes additional requirements on the part of the seller for a valid rescission (1) If buyer has paid at least 2 years of installments: (GRN) (a) Grace period of 1 month per year of installment payment made BUT the buyer may only avail of the grace period once every 5 years (b) Refund of Cash Surrender Value (CSV): 50% of total amount paid + 5% for every year after the first 5 years of installments BUT total CSV should not be greater than 90% of total amount paid (c) Notice of cancellation of demand for rescission by notarial act effective 30 days from the buyer’s receipt thereof and upon full payment of CSV

E. PD 957, SECTIONS 23 AND 24 Non-forfeiture of payments (1) No installment payment made by the buyer shall be forfeited in favor of the owner or developer of the condominium or subdivision project, after due notice, when the buyer desists from paying due to the failure of the developer or owner to develop the project according to the approved plans or within the time limit stated. (2) Buyer’s Remedy: At his option, he may reimburse the total amount paid including amortization interest with interest thereon at the legal rate (3) If the buyer fails to pay the installments for reasons other than the failure of the owner or developer to develop the project, his rights shall be governed by RA 6552.

(2) If buyer has paid less than 2 years of installments: (GN) (a) Grace period of at least 60 days (b) Notice of cancellation or demand for rescission by notarial act, effective 30 days upon receipt thereof (3) During the grace period, the buyer shall also have the right: (a) To sell or assign his rights, evidenced in a notarial instrument (b) To update his account (c) To pay in advance any installment, or the full unpaid balance of the price, without any interest

F. MACEDA LAW (RA 6552): SALE OF IMMOVABLES ON INSTALLMENT RA 6552 does NOT apply to: (1) Industrial lots (2) Commercial buildings (3) Sale to tenants under Agricultural Reform Code [RA 3844]

Down payments, deposits, or options on the contract shall be included in the total number of installments made.

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The seller may go to court for judicial rescission in lieu of a notarial act of rescission.

If thing deteriorates Without fault of seller

Cancellation pertains to extrajudicial cancellation. Absence of notice does not bar the filing of an action to cancel the contract.

NO BREACH. Rescission + damages Impairment shall be OR borne by buyer Specific performance + damages

A decision in an ejectment case can operate as notice of cancellation as required by RA6552. However, mere filing of an unlawful detainer suit by the seller does not operate as such notice. [De Leon]

(2) Remedy for breach of obligation to deliver Delivery of wrong quantity [Art. 1522] Goods are MORE Goods are LESS THAN THAN what was what was contracted contracted Reject the goods Reject the excess OR OR the whole, if Accept and pay indivisible (a) At contract rate if OR buyer accepts Accept the whole and knowing that seller pay at contract rate won’t perform in full (b) At fair value: If goods were used before knowing that seller won’t be able to perform in full

G. REMEDIES OF THE BUYER General rule: Courts will refuse to decree specific performance with respect to chattels because damages are a sufficient remedy Exception: Buyer is entitled to the specific thing which to him has special value and which he cannot readily obtain in the market OR where damages would not furnish a complete and adequate remedy [Baviera]

G.1. SALE OF MOVABLES

Buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency [Art 1464]

(1) Remedy for breach of obligation to preserve If thing is lost— Without fault of seller NO BREACH. Obligation is extinguished.

Through fault of seller

Through fault of seller / Through Fortuitous Event (if seller is liable) Damages

G.2. SALE OF IMMOVABLES [Art 1539 – 1543] (1) If at the rate of a certain price per unit of measure or number:

A thing is lost when it— (1) Perishes (2) Goes out of commerce (3) Disappears in such a way that its existence is unknown or it cannot be recovered

Less (in area or quality) than what was agreed upon: Proportional reduction of price

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XIV. Extinguishment of Sale

OR Accept the whole and Rescission, if: pay at contract rate (a) Lack in area is at least 1/10 of what is stated, or inferior value of thing sold exceeds 1/10 of price (b) Buyer would not have bought the property has he been aware of the inferior quality or smaller area

A. CAUSES [ARTS. 1600, 1231] Generally, extinguished by the same causes as all other obligations [Arts.1600, 1231] (P-PLAN-C3-R3) (1) Payment/performance (2) Prescription (3) Loss of thing due (4) Annulment (5) Novation (6) Condonation/remission (7) Confusion/merger (8) Compensation (9) Rescission (10) Resolutory condition fulfilled (11) Redemption (Conventional or Legal)

This rule also applies to judicial sales [Art. 1541] (2) If for a lump sum: Everything is within boundaries, even if Not everything is within less or more than the boundaries stated area No remedy Proportional reduction in price Where both the area OR and the boundaries Rescission of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. [Rudolf Lietz, Inc. v. CA, 2005]

B. CONVENTIONAL REDEMPTION [ART. 1601]

B.1. DEFINITION (1) Vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. [Art 1601,CC] (2) Available when the seller reserves the right to repurchase the thing sold in the same instrument of sale as one of the stipulations of the contract [Villarica v CA, 1968]

Prescriptive period: 6 months counted from date of delivery

B.2. PERIOD General Rule: Follow period stipulated in contract, but should not exceed 10 years. (1) If no period stipulated, then it shall be four years from the execution of the contract

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(2) But vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase

CIVIL LAW

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment for the full amount of the repurchase price. [BPI Family Savings Bank, Inc. v. Veloso, 2004]

B.3. BY WHOM EXERCISED (1) Vendor (2) His heirs, assigns or agents (3) Creditor, if he has exhausted the property of the vendor (4) Co-owners of an immovable, if they sold their interests to the same person, may only redeem their respective shares (a) Vendee cannot be compelled to agree to a partial redemption (b) If the co-owners sold their interest to the same person who previously bought the share of a co-owner subject to a right of redemption, then the latter may be compelled to redeem the whole property

Tender of payment is enough (consignation is not necessary), if made on time, as a basis for action against the buyer to compel him to resell. But that tender does not in itself relieve the buyer from his obligation to pay the price when redemption is allowed by the court. [Paez v. Magno, 1949]

B.6. EFFECT OF REDEMPTION (1) The seller shall receive the thing free from all charges or mortgages constituted by the buyer BUT he shall respect leases executed by the buyer in good faith and in accordance with local custom. (2) If there are growing fruits at the time of sale and at the time of redemption: no reimbursement or prorating if the buyer did not pay indemnity at the time of sale (3) If there were no growing fruits at the time of sale, but some exist at the time of redemption: fruits prorated (buyer entitled to part corresponding to time he possessed the land in the last year, counted from the anniversary of the date of sale)

B.4. FROM WHOM TO REDEEM (1) Vendee a retro (2) His heirs, assigns or agents (3) Subsequent purchaser of property, even if the right to redeem was not mentioned in the subsequent contract; except if registered land, where the right to redeem must be annotated on the title (4) If several heirs, then the right of redemption can be exercised against each heir for his share of the property

B.7. EFFECT OF NON-REDEMPTION Ownership is consolidated in the buyer BUT the consolidation shall not be recorded in the Registry of property without a judicial order, after the vendor has been duly heard.

B.5. HOW EXERCISED (1) By returning the ff. to the buyer: (PEN) (a) Price of the sale; (b) Expenses of the contract and other legitimate payments made by reason of the sale; (c) Necessary and useful expenses made on the thing sold (2) Complying with any other stipulation agreed upon, if any.

Stipulation that installments paid shall not be returned is valid insofar as the same may not be unconscionable under Art. 1486. Since the defendant admitted using the units, this means they did not pay the monthly

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installments, using units free to prejudice of petitioner. Under the circumstances, the treatment of the installment payments as rentals cannot be said to be unconscionable.[Delta Motor Sales v. Niu Kim Duan, 1992]

C. EQUITABLE MORTGAGE [ARTS. 1602-1604] Definition: An equitable mortgage is defined as one which, although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. [Molina v. CA, 2003]

B.7. RIGHT TO REDEEM VS. OPTION TO PURCHASE Right to Redeem

Option to Purchase

Not a separate contract but part of a main contract of sale, and cannot exist unless reserved at the time of the perfection of the main contract of sale Does not need its separate consideration to be valid and effective

Generally a principal contract and may be created independent of another contract

The maximum period for the exercise of the right to repurchase cannot exceed 10 years Requires in addition a tender of payment of the amount required by law, including consignment thereof if tender of payment cannot be made effectively on the buyer

The period of the option contract may be beyond the 10-year period

CIVIL LAW

The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not, there being no third parties involved. [Tan v. Valdehueza, 2003]

Must have a consideration separate and distinct from the purchase price to be valid and effective [Arts. 1324 and 1479]

A pactum commissorium is a stipulation enabling the mortgagee to acquire ownership of the mortgaged properties without need of foreclosure proceedings which is a nullity being contrary to the provisions of Article 2088 of the Civil Code. The inclusion of such stipulation in the deed shows the intention to mortgage rather than to sell. [Legaspi v. Spouses Ong, 2005] A pactum commissorium is contrary to the nature of a true pacto de retro sale since ownership of the property sold is immediately transferred to the vendee a retro upon execution of the sale, subject only to the repurchase of a vendor a retro within the stipulated period.

May be exercised by notice of its exercise to the offeror

C.1. PRESUMPTION THAT A CONTRACT IS AN EQUITABLE MORTGAGE (5P-R) [Art. 1602] (1) Price unusually inadequate; (2) Possession retained by the seller as lessee or otherwise;

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(3) Period of redemption extended (or granted anew) upon or after the expiration of the right to repurchase; (4) Part of the purchase price retained by the seller; (5) Payment of taxes on the thing sold borne by the seller; (6) Any other case where it may be fairly inferred that the Real intention of the parties is for the transaction to secure a debt or other obligation.

CIVIL LAW (2) If decreed to be an equitable mortgage: any money, fruits or other benefit to be received by the buyer as rent or otherwise considered as interest. (3) If decreed as a true sale with right to purchase: seller may redeem within 30 days from finality of judgment, even if the period for redemption has expired.

C.5. PERIOD OF REDEMPTION [ART. 1606] (a) No stipulation: 4 years from the date of contract (b) When there is agreement: Period not to exceed 10 years (c) General Rule: Period starts to run from the date of the execution of the contract (d) Exception: When the efficacy of the sale is subject to a suspensive condition, period should be counted not from the date appearing on the instrument, but from the date when the condition is fulfilled, marking the consummation of the sale [Tolentino citing Manresa].

The right of repurchase is not a right granted to the seller by the buyer in a subsequent instrument, but one reserved by the seller in the same instrument as the sale contract. Any right granted after the execution of the sale instrument is not a right to repurchase, but some other right like an option to buy. [Roberts v. Papio, 2007]

C.2. REQUISITES FOR PRESUMPTION OF AN EQUITABLE MORTGAGE [Molina v. CA, 2003] (1) That the parties entered into a contract denominated as a contract of sale, and (2) That their intention was to secure an existing debt by way of a mortgage.

Additional 30 days for Repurchase The last paragraph of Art. 1606 giving the vendor the right to repurchase within 30 days from the time of the rendition of final judgment applies only where the nature and the character of the transaction, whether as a pacto de retro or an equitable mortgage, was put in issue before the court [Gonzales v. De Leon, 4 SCRA 332]

In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage [Art. 1603]

C.3. RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE

When an unrecorded pacto de retro sale was construed as an equitable mortgage, the plaintiff had the right to enforce his lien in a separate proceeding notwithstanding the fact that he had failed to obtain judgment declaring him the sole and absolute owner of the land. [Heirs of Arches v. Diaz, 1973]

(1) Circumvention of usury law (2) Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage since remedy is foreclosure.

C.4. REMEDIES OF APPARENT VENDOR

Where the petition of the buyer in a pacto de retro sale is for a judicial orders pursuant Art.

(1) If the instrument does not reflect the true agreement: remedy is reformation

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CIVIL LAW

1607, so that there may be consolidation of ownership since there was failure to redeem during the redemption period, the right of action to foreclose or to collect the indebtedness arises from the court judgment declaring the contract an equitable mortgage.

under Arts. 546 and 547. Under Art. 1616, the seller a retro must pay for useful improvements introduced by the buyer a retro; otherwise, the latter may retain possession of the land until reimbursement is made. [Gargollo v. Duero, 1961]

C.6. EXERCISE OF THE RIGHT TO REDEEM

D. LEGAL REDEMPTION [ART. 1619]

[ART. 1616] The seller can avail himself of the right of repurchase by returning to the buyer: (a) the price of the sale (b) the expenses of the contract and any other legitimate payments made by reason of the sale (c) the necessary and useful expenses made on the thing sold [Art.1616].

D.1. DEFINITION (1) Right to be subrogated: (a) upon the same terms and conditions stipulated in the contract, (b) in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title [Art 1619, CC] (2) Applies to transfers of ownership by onerous title where subrogation is possible. Hence, it cannot apply to barter or to transfer by gratuitous title or hereditary succession. (3) Applies to sales with pacto de retro [Baviera citing MANRESA]

C.7. HOW REDEMPTION IS EXERCISED (a) The vendor de retro must complete the repurchase before the expiration of the redemption period [Panganiban v. Cuevas, 7 Phil 477]. (b) A sincere or genuine tender of payment is enough. The deposit of the amount of the repurchase money with the Clerk of Court was simply and additional security [Legazpi v. Court of Appeals, 1986] (c) When tender of payment cannot be validly made because the buyer cannot be located, it becomes imperative for the seller a retro to file a suit for consignation with the courts of the redemption price [Catangcatang v. Legayada, 1978]. (d) If the offer or tender of payment for repurchase is refused, it is not necessary for the vendor a retro to consign in court or make judicial deposit of the repurchase price [Rosales v. Reyes, 25 Phil 495].

D.2. MANNER (1) a formal offer to redeem or (2) filing of an action in court together with the consignation of the redemption price within the reglementary period

D.3. PERIOD TO REDEEM To whom granted Co-owner [Art 1620]

Period

30 days from notice (a) In writing Adjoining owner of (b) By the seller Rural Land [Art 1621] (c) Of the actual execution and delivery Adjoining owner of of the deed of sale urban land [Art. 1622] Actual knowledge of the sale is immaterial

The seller a retro is given no option to require the buyer a retro to remove the useful improvements on the land subject of the sale a retro, unlike that granted the owner of a land

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CIVIL LAW

Period

To whom granted

, absent any showing that the co-owner has been shown a copy of the deed of sale through a written communication. [Doromal v. CA, 1975]

3135. Sec. 6.] Debtor-mortgagor in case of judicial foreclosure of real estate mortgage IF the mortgagee is a bank or a banking institution. [The General Banking Law of 2000] Agricultural lessee w/o knowledge of sale of landholding [Agrarian Land Reform Code, Sec.12]

The law did not provide for a particular mode of written notice, thus any compliance with “written notice” should suffice, including the giving of a copy of the deed of sale. [[Cronejero v. CA, 1966]] Debtor in case a credit 30 days from the date or the assignee incorporeal right in demands payment litigation is sold from debtor [Art.1634] Taxpayer in case of 1 year from date of tax sale [Sec. 215, forfeiture NIRC] Judgment debtor, 1 year from the date of successor–inregistration of the interest, or creditor certificate of sale with subsequent lien, in case of execution sale [Rule 39, Sec.27, ROC] Debtor-mortgagor, 1 year from the date of successors-inthe sale interest, judicial/judgment creditor, any person having a lien on the property, in case of extrajudicial foreclosure of mortgage [Act No.

Period 90 days from finality of judgment

2 years from registration of sale

the the

The notice required in Art. 1623 must be given by the seller, because the seller is in a better position to identify who his co-owners are. Said provision is clear.[Francisco v. Boiser, 2000]

D.4. INSTANCES REDEMPTION

OF

LEGAL

i. Redemption by Co-owners [Art. 1621] A co-owner of a thing may exercise the right of redemption in case the shares of all the coowners or any of them are sold to a third person (a) “Third person” refers to all persons who are not heirs of the vendor, by will or intestate succession (b) The right is available not only to original co-owners, but to those who had later acquired the share of the co-owner (c) But the right of redemption may be exercised by a co-owner only when part of the community property is sold to a stranger. When the portion is sold to another co-owner, the right does not arise because a new participant is not added to

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the co-ownership [Fernandez v. Tarun, 2002] If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise the right, they may also do so in proportion to the share they may respectively have in the thing owned in common. Rationale: Public Policy, since co-ownership is a hindrance to the development and administration of the property. [Baviera] ii. Redemption by Adjoining Land-owners of rural land [Art. 1621] The ff. Requisites must concur: (a) A piece of rural land is alienated (b) Area does not exceed one hectare

CIVIL LAW

Right of Pre-emption

Right of Redemption

Owner of any adjoining land has a right of pre-emption at a reasonable price when: (a) Urban land is so small and so situated that a major portion of it cannot be used for any practical purpose w/in a reasonable time; (b) Was bought merely for speculation; (c) Was resold Arises before sale No rescission because no sale exists yet

If the resale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price Priority if 2 or more adjoining owners want to redeem: owner whose intended use of the land appears to be best justified

Arises after sale There can be rescission of the original sale The action is directed Action is directed against prospective against buyer seller

When not applicable: (a) The grantee does not own any rural land (b) Adjacent lands are separated by brooks, drains, roads and other apparent servitudes for the benefit of other estates

iv. Redemption of Credit Available when it is sold while in litigation (From the time the complaint is answered)

Order of preference if two or more wishes to exercise the right: (a) Owner with smaller land area (b) If same land area, then the one who first requested the redemption

NOT available when the assignment is in favor of: (a) Co-heir/co-owner of right assigned (b) Creditor in payment of his credit (c) Possessor of a tenement or piece of land which is subject to the right assigned

What constitutes “rural” or “urban” is to be determined from the character of the community or vicinity in which it is found, and NOT from the nature of the land itself nor the purpose to which it is devoted. [Ortega v. Orcine, 1971]

How exercised: reimburse the assignee for the: (a) Price paid (b) Judicial expenses incurred (c) Interest on the price from date of payment

iii. Redemption by adjoining land-owners of urban land (applies only to small portions of urban land) [Art. 1621]

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v. Under the Public Land Act Coverage: (a) Every conveyance of land acquired under a free patent or homestead (b) The ownership of the land must have been transferred to another. If the transaction is a mere promise to sell, there is no right yet to redeem (c) This refers to conveyances made after the prohibited 5 years from the issuance of the patent or grant

Who may redeem said debtor judgment or (d) Junior mortgage on the encumbrancer property subsequent to the judgment Period to redeem Extra judicial Execution If land is foreclosure sale mortgaged in within 1 year within 12 favor of a from the date months after bank of the sale the sale within 1 year after the sale (not available in case of a corporate mortgagor) Amount of redemption (a) Amount of the purchase (b) Interest at 1% per month from the time of the sale up to the time of redemption (c) Any assessment or taxes which the purchaser may have paid

Period: (a) Within 5 years from the date of conveyance (b) If pacto de retro sale, the period to redeem cannot be less than 5 years Who may redeem: (a) General Rule: Applicant, widow, or heirs (b) Exception: land is sold to another member of the family of the applicant, or his direct descendant or heir (c) From whom: Subsequent purchasers

vii. Under the Agrarian Land Reform Code Lessee’s right of pre-emption (1) The agricultural lessee shall have the preferential right to buy under the same reasonable terms and conditions, in case the lessor decides to hold the landholding (2) Conditions: (a) The landholding must be pre-empted by the DAR (b) When two or more lessees, each shall have preferential right only to the extent of the area cultivated by him (3) Period: 180 days from notice in writing

The right to redeem can be exercised against any subsequent purchaser even if the land is registered under the Torrens System becausethe fact that it was acquired through a homestead or free patent can be seen from the description of the property in the certificate of title. vi. Redemption in Foreclosure and Execution Sales Who may redeem In extra judicial foreclosure (a) Debtor (b) Successor in interest (c) Judicial or judgment creditor of

CIVIL LAW

Lessee’s right of redemption (a) Sec. 12 RA 3844: In case landholding is sold to 3rd person without the knowledge of the lessee, the latter shall have the right to redeem the same at a reasonable price and consideration (b) Period: within 180 days from notice in writing

In execution sales (a) Judgment debtor (b) Successor in interest (c) Creditor having a lien on the property sold by attachment,

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XV. The Law on Sale of Subdivision and Condominium (PD 957)

"Developer" shall mean the person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof. "Dealer" shall mean any person directly engaged as principal in the business of buying, selling or exchanging real estate whether on a full-time or part-time basis.

A. DEFINITIONS A.1. DEFINITION OF "SALE" OR "SELL" (a) include every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, including the building and other improvements thereof, if any, in a subdivision project or a condominium unit in a condominium project. (b) also include a contract to sell, a contract of purchase and sale, an exchange, an attempt to sell, an option of sale or purchase, a solicitation of a sale, or an offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise. (c) privilege given to a member of a cooperative, corporation, partnership, or any association and/or the issuance of a certificate or receipt evidencing or giving the right of participation in, or right to, any land in consideration of payment of the membership fee or dues, shall be deemed a sale within the meaning of this definition.

A.2. DEFINITION "PURCHASE"

OF

"BUY"

CIVIL LAW

"Broker" shall mean any person who, for commission or other compensation, undertakes to sell or negotiate the sale of a real estate belonging to another. "Salesman" shall refer to the person regularly employed by a broker to perform, for and in his behalf, any or all functions of a real estate broker.

B. REQUIREMENTS FOR OWNERS AND DEVELOPERS (1) Registration of projects (subdivision/condominium) with the NHA (2) Registration of the owner (3) License to sell of owner or dealer with performance bond [PB, exceptions in Section 7]

B.1. REGISTRATION [SECTION 4, PD 957]

OR

OF

PROJECTS

The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the National Housing Authority. The same procedure shall be followed in the case of a plan for a condominium project except that NHA also approves the building thereon in accordance with the National Building Code.

include any contract to buy, purchase, or otherwise acquire for a valuable consideration a subdivision lot, including the building and other improvements, if any, in a subdivision project or a condominium unit in a condominium project. "Owner" shall refer to the registered owner of the land subject of a subdivision or a condominium project.

B.2. REGISTRATION [SECTION 4, PD 957]

OF

OWNER

The owner or the real estate dealer interested in the sale of lots or units, respectively, in such

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subdivision project or condominium project shall register the project with the Authority by filing therewith a sworn registration statement.

CIVIL LAW executed in favor of the Republic of the Philippines and shall authorize the Authority to use the proceeds thereof for the purposes of its undertaking in case of forfeiture as provided in this Decree.

i. Publication and issuance of registration certificate [Section 4, PD 957] A notice of the filing of the registration statement at the expense of the applicantowner or dealer, in two newspapers general circulation, one published in English and another in Pilipino, once a week for two consecutive weeks. Notice shall state that subdivision lots or condominium units are open to inspection during business hours by interested parties. The project shall be deemed registered upon completion of the publication requirement. The fact of registration shall be evidenced by a registration certificate issued to the applicant-owner or dealer.

ii. When license to sell and performance bond not required [Section 7, PD 957] A license to sell and performance bond shall not be required in any of the following transactions: (a) Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs. (b) Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same lot. (c) Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary course of business when necessary to liquidate a bona fide debt.

B.3. LICENSE TO SELL [SECTION 5, PD 957] The registration certificate does NOT authorize the owner or dealer to sell any unit. They must first obtain a license to sell within two weeks from the registration of the project. The license to sell is issued upon examination of the registration statement filed by the owner or dealer showing that: (1) the owner or dealer is of good repute (2) that his business is financially stable (3) that the proposed sale of subdivision lots or condominium units to the public would not be fraudulent

iii. Grounds for suspension of license to sell [Section 8, PD 957] (a) misleading, incorrect, inadequate, or incomplete information in registration statement (b) fraud upon prospective buyers on the sale or offering for a sale Note: suspension is confidential unless orer of suspension has been violated. iv. Grounds for revocation of registration certificate and license to sell [Section 9, PD 957] (1) Insolvency of owner/dealer (2) Violation of owner of PD 957 or its IRR or any undertaking of his/its performance bond (3) Has been or is engaged or is about to engage in fraudulent transactions (4) Misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium

i. Performance bond [Section 6, PD 957] A license to sell can only be issued by the NHA if the owner or dealer files a performance bond guaranteeing the construction and maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems, and full development of the subdivision project or the condominium project and the compliance by the owner or dealer with the applicable laws and rules and regulations. The bond shall be

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project that has been distributed to prospective buyers (5) Bad business repute of owner/dealer (6) Does not conduct his business in accordance with law or sound business principles

CIVIL LAW (4) Has demonstrated his unworthiness to transact the business of dealer, broker, or salesman, as the case may be. The NHA may suspend the DBS' registration pending hearing of the case. The suspension or revocation of the registration of a dealer or broker (DB) shall carry with it all the suspension or revocation of the registration of all his salesmen (S).

C. REQUIREMENT FOR DEALERS, BROKERS, AND SALESMEN (DBS)

D. CHARACTERISTICS OF SALE OF A CONDOMINIUM OR SUBDIVISION UNIT AND SIMILAR CONTRACTS

C.1. REGISTRATION i. Dealers, brokers, and salesmen (DBS) must be registered (Section 11, PD 957) Requisites of registration: (1) Good reputation and compliance with NHA rules (2) Payment of prescribed fee (3) Filing of bond or other security (amount fixed by NHA) conditioned upon his faithful compliance with provisions of PD 957

(1) Contracts to sell, deeds of sale, and other similar instruments must be registered with the Register of Deeds (2) Mortgages on unit or lot by owner/developer needs prior written approval by NHA for the protection of buyers (3) Advertisements by owner of developer become part of sales warranties enforceable against owner or developer (4) No forfeiture of installments already paid by buyer if buyer stops paying because of failure by owner or developer to develop subdivision or condominium (5) Failure to pay installments governed by Maceda Law [RA 6552] (6) Title is issued to the buyer upon full payment (7) Realty tax is paid by owner or developer while not fully paid; but if the buyer occupies the unit/lot, the owner/developer may recover the taxes from the buyer (8) Owner or developer cannot demand any other charges allegedly for community benefit (may be done by homeowner's association)

When registration of DBS terminates (1) Termination of employment with dealer or broker (2) Expiration (31st day of Dec each year) Registration of DBS may be renewed not less than 30 nor more than 60 days before Jan 1 and by payment of fee. If renewal is not within said period, it shall be treated as an original application. ii. Revocation of registration as DBS [Section 12, PD 957] Grounds

(1) Has violated any provision of this Decree or any rule or regulation made hereunder; or (2) Has made a material false statement in his application for registration; or (3) Has been guilty of a fraudulent act in connection with any sale of a subdivision lot or condominium unit; or

D.1. REGISTRATION [SECTION 17, PD 957]

OF

SALE,

ETC

All contracts to sell, deeds of sale and other similar instruments relative to the sale or

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conveyance of the subdivision lots and condominium units, whether or not the purchase price is paid in full, shall be registered by the seller in the Office of the Register of Deeds of the province or city where the property is situated.

CIVIL LAW reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Section 23 does not require that a notice be given first by the buyer to the seller before a demand for refund can be made, as the notice and demand can be made in the same letter or communication. This is designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators.

D.2. MORTGAGES ON UNIT OR LOT BY OWNER OR DEVELOPER [SECTION 18, PD 957] (1) Need prior written approval of the NHA (2) Must show that proceeds of mortgage will be used for development of the condominium or subdivision (3) Value of each lot or unit determined by the buyer (if there is one) and the buyer shall be notified before release of loan (4) Buyer may pay directly to mortgagee

Section 23 vests upon the buyer to either demand reimbursement, or wait for further development.

D.5. FAILURE TO PAY INSTALLMENTS [SECTION 24, PD 957]

D.3. ADVERTISEMENTS BY THE OWNER OR DEVELOPER [SECTION 19, PD 957]

The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552 [Maceda Law].

(1) Must reflect real facts, must not mislead or deceive public (2) Owner or developer shall be liable for any misrepresentation as to facilities, etc. (3) Advertisements shall form part of the sales warranties enforceable against the owner or developer (4) Failure to comply with sales warranties is punishable under PD 957

D.6. ISSUANCE OF TITLE [SECTION 25, PD 957] The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.

D.4. NON-FORFEITURE OF PAYMENTS (SECTION 23, PD 957) No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be

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D.7. REALTY TAX [SECTION 26, PD 957]

CIVIL LAW interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.

Real estate tax and assessment on a lot or unit shall de paid by the owner or developer without recourse to the buyer for as long as the title has not passed the buyer; Provided, however, that if the buyer has actually taken possession of and occupied the lot or unit, he shall be liable to the owner or developer for such tax and assessment effective the year following such taking of possession and occupancy.

(1) separate interest in a unit in a residential, industrial or commercial building (2) undivided interest in the land on which the building is located and other common areas (a) common areas may not be partitioned even by judicial decree [Section 7] (3) title to land and common areas held by condominium corporation - owners of separate interest are automatically members/shareholders, exclusively.

D.7. NO OTHER CHARGES [SECTION 27, PD 957] No owner or developer shall levy upon any lot or buyer a fee for an alleged community benefit. Fees to finance services for common comfort, security and sanitation may be collected only by a properly organized homeowners association and only with the consent of a majority of the lot or unit buyers actually residing in the subdivision or condominium project.

A.1. OTHER DEFINITIONS Sec. 3. As used in this Act, unless the context otherwise requires: (1) "Condominium" means a condominium as defined in Section 2. (2) "Unit" means a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part or parts of floors) in a building or buildings and such accessories as may be appended thereto. (3) "Project" means the entire parcel of real property divided or to be divided in condominiums, including all structures thereon, (4) "Common areas" means the entire project excepting all units separately granted or held or reserved. (5) "To divide" real property means to divide the ownership thereof or other interest therein by conveying one or more condominiums therein but less than the whole thereof.

XVI. The Condominium Act (RA 4726) A. DEFINITION OF A CONDOMINIUM Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial 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 condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate

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B. TRANSFERS OR CONVEYANCES OF A UNIT OR AN APARTMENT, OFFICE OR STORE, OR OTHER SPACE THEREIN [SECTION 5, RA 4726]

CIVIL LAW

D. PARTITION BY SALE [SECTION 8] This is an action that may be brought by one or more persons owning condominiums in a condominium project for the partition of the project by the sale thereof. The effect is as if the owners of all the condominiums in such project were co-owners of the entire project in the same proportion as their interests as their interests in the common areas.

(1) Transfer or conveyance of a unit or a space therein includes the transfer or conveyance of the (a) undivided interests in common areas (b) membership or shareholding in the condominium corporation (2) Proviso: only Filipino citizens or corporations at least 60% of the capital stock are owned by Filipino citizens may be the transferee of common areas in cases where the common areas are owned by the owners of separate units as co-owners (not by condominium corporation) (3) Exception to proviso: hereditary succession.

A partition by sale can only be done upon showing any of the following: (1) That three years after damage or destruction to the project which renders material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction (2) That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration of the project (3) That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project (4) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof (5) That the conditions for such partition by sale set forth in the declaration of restrictions, duly registered in accordance

Shareholdings in a condominium corporation may be conveyed only in a proper case. Not every purchaser of a condominium unit is a shareholder of a condominium corporation. The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred the buyer of the unit. But ownership of a unit is an indispensable requisite to being a shareholder in the corporation. [Sunset View Condominium Corporation v. Campos (1981)]

C. RIGHTS OF A CONDOMINIUM UNIT OWNER (ASIDE FROM RIGHTS ARISING FROM OWNERSHIP) [SECTION 6] (1) Absolute right to sell or dispose of his condominium unless the master deed unless there is a right of first refusal in favor of condominium owners (2) Exclusive right to mortgage, pledge or encumber his condominium and to have the same appraised independently of the other condominiums but any obligation incurred by such condominium owner is personal to him 319

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with the terms of the Condominium Act, have been met

E. DECLARATION OF RESTRICTIONS BY OWNER OF PROJECT - PRECONDITION TO CONVEYANCE [SECTION 9]

(2)

(1) The owner must register with the Register of Deeds a declaration of restrictions before the conveyance of any condominium in the project (2) The restrictions constitute a lien upon each condominium in the project and shall insure to and bind all condominium owners in the project (3) The lien may be enforced by any condominium owner or by the management body of the project

(3) (4) (5) (6) (7) (8)

F. ASSESSMENT IN ACCORDANCE WITH DECLARATION OF RESTRICTIONS [SECTION 20] This is the "tax imposition power" of the condominium corporation. If unpaid, the management body may cause a notice of assessment to be registered with the Register of Deeds, which may be released only upon payment of the assessed fees. This lien is superior to all other subsequent liens except real property taxes liens and other liens provided for in the declaration of restrictions.

(b) Association of condominium owners (c) Board of governors elected by condominium owners (d) Management agent elected by the owners or by the board named in the declaration Provisions for voting majorities quorums, notices, meeting date, and other rules governing such body or bodies Powers of the management body Maintenance of insurance policies (fire, casualty, workmen's compensation, etc) Maintenance, utility, gardening and other services for the common areas Amendment of the restrictions Reasonable assessment to meet expenditures And many other provisions - the common thread is the management and maintenance of the common areas and the manner of exercise of the management body's powers

I. INVOLUNTARY DISSOLUTION OF THE CONDOMINIUM CORPORATION [SECTION 12] In case of involuntary dissolution, the common areas held by the corporation shall be transferred pro-indiviso and in proportion to their interest to the members/stockholders of the corporation, subject to the rights of creditors of the corporation. The common areas remain in undivided co-ownership.

G. HOW LIEN ENFORCED AFTER NONPAYMENT OF ASSESSED FEES [SECTION 20]

J.POWER OF ATTORNEY HELD BY CORPORATION IN CASE OF VOLUNTARY DISSOLUTION OF CONDOMINIUM CORPORATION [SECTION 15]

Judicial or extra-judicial foreclosure of real property mortgages, where the management body may bid unless disallowed by the declaration of restrictions.

The condominium corporation is deemed to hold a power of attorney from all members/stockholders to sell and dispose of their separate interests in the project. To liquidate, the condominium corporation will sell the entire project as if it owned the whole

H. CONTENTS OF A DECLARATION OF RESTRICTIONS [SECTION 9] (1) Provisions for the management of the project by any of the ff bodies: (a) Condominium corporation

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project itself, subject to the corporate and individual condominium creditors.

K. SALE, EXCHANGE, LEASE, OR DISPOSITION BY CORPORATION OF THE COMMON AREAS [SECTION 16] Generally not allowed unless authorized by affirmative vote of all of the stockholders/members.

L. STOCKHOLDER/MEMBER DEMANDING PAYMENT FOR SHARES OR INTEREST AKA APPRAISAL RIGHT [SECTION 17] By-laws of the condominium corporation shall provide that any shareholder/member demanding payment for his share or interest must also consent to sell his separate interest in the project to the corporation or any buyer of the corporation's choice.

M. REQUIREMENT FOR REGISTRATION OF CONVEYANCE WITH THE REGISTER OF DEEDS [SECTION 18] Certificate of the management body of the project that the conveyance is in accordance with the declaration of restrictions

N. REALTY TAX ON CONDOMINIUMS [SECTION 25] Each condominium separately owned shall be separately assessed, for purposes of real property taxation and other tax purposes to the owners thereof and the tax on each such condominium shall constitute a lien solely thereon.

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I. GENERAL PROVISIONS

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(2) Money debts of the decedent are not transmitted to the heirs nor paid by them. The estate pays them. [Balane, 2010] Rule on Transmission: General rule: All property rights which have accrued to the hereditary estate since the opening of succession are transmitted to the heirs

A. DEFINITION Succession - a 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, CC]

Exception: Property acquired after the making of a will shall not pass to the heirs unless it should expressly appear in the will that such was the intention of the testator. [Art. 793, CC]

Kinds of Succession (1) Testamentary – that which results from the designation of an heir, made in a will executed in the form prescribed by law. [Art. 779, CC] (2) Legal or Intestate – that which takes place by operation of law in the absence of a valid will. (3) Mixed – that which is effected partly by will and partly by operation of law. [Art. 780,

Rules on Opening of Succession: (1) The rights to succession are transmitted from the moment of the death of the decedent. [Art. 777, CC]

Inheritance includes: (1) All the property, rights and obligations of a person which are not extinguished by his death [Art. 776, CC] (2) Not only the property and the transmissible rights and obligations existing at the time of his death, but also those which have accrued thereto since the opening of the succession [Art. 781, CC]

Implications of this principle: (a) The law in effect at the time of death of the decedent governs the succession [Art. 2236, CC] (b) The heir becomes the owner of his share as well as all fruits which accrue after the death of the decedent. (c) Upon death of the decedent, heirs may immediately possess, administer and dispose of their shares in the estate (in the absence of existing debts/claims against the estate); (d) The possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of death of the decedent, in case the inheritance is accepted [Art. 533, CC] (e) Estate taxes accrue upon death of the decedent, even if the heirs come into possession only later.

What are transmitted? (1) Rights and obligations which are not strictly personal (intuit personae) [Balane, 2010]

(2) A person may be “presumed” dead for the purpose of opening his succession. In this case, succession is only of provisional character because there is always a chance

CC] (4) Compulsory – succession to the legitime and prevails over all other kinds of succession [Balane, 2010]

B. OBJECT OF SUCCESSION AND TRANSMISSION

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that the absentee may still be alive. [Arts. 390-391, CC].

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II.Testamentary Succession

C. SUBJECTS OF SUCCESSION

A. WILLS

Decedent – person whose property is transmitted through succession, whether or not he left a will. [Art. 775, CC]

A.1. IN GENERAL Will - an act whereby a person is permitted, with the formalities prescribed by law to control to a certain degree the disposition of his estate to take effect after his death. [Art. 783, CC]

Testator – a decedent who left a will [Art. 775, CC] Kinds of Successors (1) Heirs – those who are called to the whole or an aliquot portion of the inheritance either by will or by operation of law [Art. 782, CC] (2) Devisees – persons to whom gifts of real property are given by virtue of a will (3) Legatees – persons to whom gifts of personal property are given by virtue of a will

i. KINDS OF WILLS (5) Notarial – an ordinary or attested will, which must comply with the requirements of the law [Arts. 804-808, CC] (6) Holographic – a will entirely written, dated and signed by the hand of the testator [Art. 810, CC]

Note: The distinction is significant in case of preterition.

ii. CHARACTERISTICS OF WILLS (1) Purely personal – will-making is nondelegable  making of a will cannot be left in whole or in part of the discretion of a third person, or accomplished through the instrumentality of an agent or attorney [Art. 784, CC]  testator may not make a testamentary disposition in such manner that another person has to determine whether or not it is to be operative [Art. 787, CC]

Kinds of Heirs (1) Compulsory Heirs – those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law known as the legitime, of which they cannot be deprived by the testator, except by a valid disinheritance. They succeed regardless of a will. (2) Voluntary or Testamentary Heirs – 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. They succeed by reason of a will. (3) Legal or Intestate Heirs – 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, or when certain grounds are met

What cannot be delegated to 3rd persons

What may be entrusted to 3rd persons

(1) designation of (1) designation of heirs, devisees and person/institution legatees falling under a (2) duration/efficacy class specified by of designation testator (3) determination of (2) manner of

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iii. RULES OF CONSTRUCTION AND INTERPRETATION

distribution of property specified by testator [Art. 786, CC]

[Arts. 788-795] Main rule: All rules are designed to ascertain and give effect to the intention of the testator.

Note: testator must first specify the class and the amount of property for proper delegation

Rationale: Testamentary preferred to intestacy.

succession

is

(1) Different interpretations, in case of doubt, that which would make the will operative [Art. 788, CC] (2) Words to be taken in their ordinary and grammatical sense unless there is a clear intention to use them in another sense [Art. 790, CC] (3) Technical words are to be taken in their technical sense unless there is a contrary intention or when testator was unacquainted with such technical sense [Art. 790, CC] (4) Words must be of an interpretation to give effect to every expression. To make it operative rather than inoperative; that which will prevent intestacy [Art. 791, CC] (5) Invalidity of one of several dispositions does not result in invalidity of others unless the testator would not have made such dispositions if the first invalid disposition had not been made [Art. 792, CC] (6) Every devise and legacy shall convey all the interest unless it clearly appears the intention was to convey a less interest [Art. 794, CC] (7) Where there are ambiguities (i.e. imperfect description or no person or property exactly answers to the description, mistakes, omissions), intrinsic or extrinsic evidence may be used to ascertain the intention of the testator  Oral declarations of the testator as to his intention must be excluded. [Art 789, CC]

(2) Free and intelligent [Art. 839, CC] (3) Solemn and formal - if the form is defective, the will is void (4) Revocable and ambulatory – will can be revoked at any time before the testator’s death [Art. 828, CC] (5) Mortis causa - takes effect upon the testator’s death (6) Individual – prohibition against joint wills [Art. 818, CC] (7) Executed with animus testandi – intent to dispose of the property (8) Executed with testamentary capacity (9) Unilateral act - does not involve an exchange of values or depend on simultaneous offer and acceptance (10) Dispositive – disposes of property General rule: Wills contain disposition of the testator’s estate mortis causa. Exceptions: (non-dispositive wills)  will recognizing an illegitimate child  will disinheriting a compulsory heir (11) Statutory grant – permitted only by law, not a constitutional right As it is a statutory grant, a will must be made in accordance with the formalities prescribed by the law [Art. 783, CC; Balane (2004)]

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Kinds of Ambiguities Patent or Extrinsic Ambiguity

Requisites: He must not be expressly prohibited by law to make a will [Art. 796, CC]

Latent or Intrinsic Ambiguity

one which appears one which cannot be upon the face of the seen from the reading instrument of the will but which appears only upon consideration of extrinsic circumstances

(a) Age Requirement The testator must not be under 18 years of age [Art. 797, CC] “Year” shall be understood to be 12 calendar months [Sec. 31, Book 1, Admin Code]

There is no distinction between patent and latent ambiguities in so far as the admissibility of parol or extrinsic evidence to aid testamentary disposition is concerned.

(b) Soundness of Mind of the Testator The testator is of sound mind at the time of execution [Art. 798, CC] Sanity is negatively stated in Art. 799:  Not necessary that the testator be in full possession of reasoning faculties  Not necessary that the testator’s mind be wholly unbroken, unimpaired, unshattered by disease, injury or other cause [Art. 799, CC]

iv. GOVERNING LAWS, IN GENERAL Aspect of the Will Formal Validity

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Governing Law Law in force at the time the will was executed [Art. 795, CC]

To be of sound mind, the testator must know:  The nature of the estate to be disposed of;  The proper objects of his bounty;  The character of the testamentary act [Art. 799, CC]

Intrinsic Validity Law of decedent’s nationality at the time of his death [Arts. 16 and 2263, CC] Aspects of the Will Governed by the National Law of the Decedent (1) Order of succession; (2) Amount of successional rights; (3) Intrinsic validity of testamentary provisions; and (4) Capacity to succeed [Art. 16, CC]

General rule: Soundness of mind is presumed [Art. 800, CC] Exception: When the testator, one month or less before the execution of the will, was publicly known to be insane

A.2. TESTAMENTARY CAPACITY AND INTENT Testamentary capacity must exist at the time of the execution of the will

A.3. FORM

Supervening incapacity does not invalidate an effective will nor is the will of an incapable validated by a supervening of capacity [Art. 801, CC]

IN GENERAL [Art. 804, CC] (1) The will must be in writing (2) It must be in a language or dialect known to the testator

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CIVIL LAW country; or (4) Philippine Law [Art. 816, CC]

Applicable Laws as to Formal Validity  Formal validity is governed by the law in force at the time the will was executed [Art.

795, CC]

ATTESTED OR NOTARIAL WILLS

 As to the place, forms and solemnities of a will are governed by the law of the country in which the will was executed [Art. 17, CC]  Arts. 815-817 (summarized in the table below) provide for the various governing laws in these instances: (1) A will was made in a foreign country by a Filipino [Art. 815] (2) A will was made in a foreign country by an alien [Art. 816] (3) A will was made in the Philippines by an Alien [Art. 817]

Specific Requirements for Notarial Wills (1) Subscribed at the end (2) Attestation clause (3) Marginal signatures (4) Page numbers (5) Acknowledged by a notary public (6) Additional requirements for handicapped testators (7) Subscribed by 3 or more witnesses in the presence of the testator and of one another (1) Subscription: Subscribed to, at the end of the will [Art. 805, CC]  By the testator himself; or  By the testator’s name written by a representative in his presence and under his express direction.

Governing Law as to Place of Execution of Will Place of Testator Execution of Governing Law Will Philippines

Philippine Law [Art. 16, CC]

(2) Attestation: Attested and subscribed by 3 or more credible witnesses in the presence of the testator and of one another [Art. 805, CC]

Outside of (1) Law of the country Filipino the in which it is Philippines executed [Art. 17,CC]; or (2) Philippine Law [Art. 815, CC] Philippines

Alien

Attestation

Subscription

Mental act (act of the Mechanical act (act of senses) the hand)

(1) Philippine Law; or (2) Law of the country of which testator is a citizen or subject [Art. 817, CC]

Purpose is to render Purpose available proof during identification probate of will, not only of the authenticity of the will but also of its due execution

Outside of (1) Law of the place the where the will is Philippines executed [Art. 17, CC]; or (2) Law of the place where the testator resides; or (3) Law of the testator’s

of

The attestation clause shall state the following: (1) Number of pages; (2) The fact that the testator or his representative under his express

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direction signed the will and every page in the presence of instrumental witnesses (3) That the witnesses signed the will and all its pages in the presence of the testator and of one another.

CIVIL LAW testament, due to the simultaneous lifting of two pages in the course of signing, is not per se sufficient to justify denial of probate. [Icasiano v. Icasiano (1964)]

(4) Page Numberings: Numbered correlatively in letters placed on the upper part of each page (i.e. Page One of Five Pages). [Art. 805, CC]  Mandatory part: pagination by means of a conventional system  Directory part: pagination in letters on the upper part of each page [Balane (2010)]

The signatures of the witnesses must be at the bottom of the attestation clause [Cagro v. Cagro (1953)] The notary public cannot be counted as an attesting witness [Cruz v. Villasor (1973)] Test of presence: 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. [Jaboneta v. Gustilo (1906)]

(5) Acknowledged before a notary public by the testator and the witnesses [Art. 806, CC] Notary public cannot be considered a third witness. He cannot acknowledge before himself his having signed the will. To allow such would have the effect of having only two attesting witnesses to the will. [Cruz v. Villasor (1973)]

(3) Marginal Signatures General rule: Testator or his representative shall write his name, and the witnesses shall sign each and every page except the last page [Art. 805, CC]

The certification of acknowledgement need not be signed by the notary in the presence of the testator and the witnesses. [Javellana v. Ledesma (1955)]

Exceptions: (1) When the will consists of only one page (2) When the will consists of only two pages, the first of which contains all dispositions and is signed at the bottom by the testator and the witnesses, and the second page contains only the attestation clause duly signed at the bottom by the witnesses. [Abangan v. Abangan (1919)]

(6) Additional rules for handicapped testators: (a) Deaf Mute [Art. 807, CC]  Testator must personally read the will; or  Testator shall personally designate two persons to read the contents and communicate it to him in some practicable manner.

The use of thumbprint was allowed [Matias v. Salud (1957)]

(b) Blind [Art. 808, CC]  The will shall be read to the testator twice - By one of the subscribing witnesses and by the notary public acknowledging the will.

The inadvertent failure of one witness to affix his signature to one page of a

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Examples:  Whether all pages are consecutively numbered  Whether the signatures appear in each and every page  Whether the subscribing witnesses are three  Whether the will was notarized [Caneda v CA (1993)]

 A testator suffering from glaucoma is considered as legally blind [Garcia v. Vasquez (1970)] (7) Witnesses Qualifications [Art. 820, CC] (1) Of sound mind (2) Aged 18 years or over (3) Not blind, deaf or dumb (4) Able to read and write

Omissions which can be supplied by an examination of the will itself, without the need of resorting to extrinsic evidence, will not be fata and will not prevent allowance of the will.

Disqualifications [Art. 821, CC] (1) Person not domiciled in the Philippines (2) Those who have been convicted of falsification, perjury, or false testimony.

Omissions which cannot be supplied except by extrinsic evidence or evidence aliunde are fatal and would result in the invalidation of the will.

Rules on Interested Witness [Art. 823, CC] General Rule Exception Devises or legacies in favor of a spouse, parent or child who also attests to the will as a witness shall be void

CIVIL LAW

Example: Whether the testator signed in the presence of the witnesses, or the witnesses signed in the presence of the testator and of one another.

If there are three other competent witnesses, the device or legacy shall be valid and the interested witness shall be treated as a mere surplusage

HOLOGRAPHIC WILLS Requisites: (a) In writing [Art. 804, CC] (b) In a language known to the testator [Art. 804, CC] (c) Entirely written, dated and signed in the hand of the testator himself [Art. 810, CC]

Creditors are not incompetent to be witnesses [Art. 824, CC] Supervening incompetency shall not prevent the allowance of the will [Art. 822, CC]

Advantages

Disadvantages

 Simple and easy to  No guarantee as to make the capacity of the  Induces foreigners in testator this jurisdiction to  No protection set down their last against violence, wishes intimidation or undue influence  Guarantees the absolute secrecy of  May not faithfully the testamentary express the will of dispositions the testator due to faulty expressions  Can be easily

Substantial Compliance Rule (as to the form of the attestation clause) Substantial compliance rule applies only in cases when such defects and imperfections can be supplied by an examination of the will itself. There must be no bad faith, forgery, fraud, or undue and improper pressure and influence for substantial compliance to be allowed. [Art. 809, CC]

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Effect of insertion written by another person on the validity of a holographic will

and

When Made

Effect

After the execution, Insertion considered without consent of not written. Validity testator cannot be defeated by the malice or caprice of a third person

Witnesses Required for Probate [Art. 811, CC]  At least one witness who knows the handwriting and signature of the testator; explicitly declare that it is the testator’s  If contested – at least 3 of such witnesses  In the absence of a competent witness, expert testimony may be resorted to

After execution, with Will is valid, insertion consent is void After execution, Insertion becomes part validated by testator’s of the will. Entire will signature becomes void because it is not wholly written by the testator

General rule: The holographic will itself must be presented for probate [Gan v. Yap (1958)] Exception: If there is a photostatic copy or xerox copy of the holographic will, it may be presented for probate [Rodelas v. Aranza (1982)]

Contemporaneous to Will is void because it the execution of the is not written entirely will by the testator

Additional Dispositions In holographic wills, the dispositions of the testator written below his signature must be dated and signed by him in order to make them valid as testamentary dispositions [Art. 812, CC]

Joint Wills (1) A single testamentary instrument, (2) Which contains the wills of two or more persons, (3) Jointly executed by them, (4) Either for their reciprocal benefit or for the benefit of a third person.

When a number of dispositions appearing in a holographic will are signed without being dated, and the last disposition has a signature and date, such date validates the dispositions preceding it, whatever be the time of prior dispositions. [Art. 813, CC]

Mutual Wills (1) Executed pursuant to an agreement between two or more persons, (2) Jointly executed by them, (3) Either for their reciprocal benefit or for the benefit of a third person.

Insertion, Cancellation, Erasure or Alteration [Art. 814, CC] Testator must authenticate by his full signature.

Reciprocal Wills (1) Testators name each other as beneficiaries in their own wills, (2) Under similar testamentary plans

Full signature does not necessarily mean the testator’s full name; it rather means his usual and customary signature. [Balane (2010)]

Note: A will that is both joint and mutual is one executed jointly by two or more persons, the provisions of which are reciprocal and which shows on its face the devises are made in consideration of each other. Such is prohibited

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under Art. 819, CC. Prohibition is applicable only to joint wills executed by Filipinos, even if execution is made in a foreign country which allows joint wills.

CIVIL LAW revoking it, by the testator himself, or by some other person in his presence, and by his express direction.

The act contemplating revocation must be done at any time before the death of the testator. The right of revocation cannot be waived or restricted. [Art. 828, CC]

A.4. CODICILS Codicil (1) It is a supplement or addition to a will, (2) made after the execution of a will, (3) and annexed to be taken as a part of the will, (4) by which any disposition made in the original will is explained, added to, or altered. (5) in order that it may be effective, it shall be executed as in the case of a will. [Arts. 825-826, CC]

Law Governing Revocation [Art. 829, CC] Place of Testator’s Governing Law Revocation Domicile Philippines Philippines, or Philippine Law some other country

A.5. INCORPORATION BY REFERENCE Requisites [Art. 827, CC]

Outside the Philippines

(a) The document or paper referred to in the will must be in existence at the time of the execution of the will. (b) The will must clearly describe and identify the same, stating among other things the number of pages thereof. (c) It must be identified by clear and satisfactory proof as the document or paper referred to therein; and (d) 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.

Philippines

Philippine law

Foreign Country

(1) Law of the place where the will was made; or (2) Law of the place in which the testator had his domicile at the time of revocation

Doctrine of Dependent Relative Revocation

Molo v. Molo (1951) The rule that where the act of destruction is connected with the making of another will so as to fairly raise the inference that the testator meant the revocation of the old to depend upon the efficacy of the new disposition intended to be substituted, the revocation will be conditional and dependent upon the efficacy of the new disposition; and if for any reason, the new will intended to be made as a substitute is inoperative, the revocation fails and the original will remain in full force.

A.6. REVOCATION A will may be revoked by the testator at any time before his death [Art. 828, CC] Modes of Revocation [Art. 830, CC] (1) By implication of law; or (2) By the execution of a will, codicil or other writing executed as provided in the case of wills; or (3) By burning, tearing, canceling, or obliterating the will with the intention of

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equivalent to the non-fulfillment of a suspensive condition and hence prevents the revocation of the original will. Revocation vs. Nullity Revocation  By the act of the testator  Presupposes a valid act  Takes place during the lifetime of the testator  Testator cannot renounce the right to revoke

CIVIL LAW

operates to revoke the prior will immediately upon the execution of the will containing it. The revocation of the 2nd will does not revive the 1st will which has already become a nullity. Republication vs. Revival Revocation

Nullity  Proceeds from law  Inherent in the testament, be it an intrinsic or an extrinsic defect  Invoked after the testator’s death by his heirs  Nullity of a will can be disregarded by the heirs through voluntary compliance therewith

Nullity

 Takes place by an  Takes place by act of the testator operation of law  Corrects extrinsic  Restores a revoked and intrinsic defects will

A.8. ALLOWANCE AND DISALLOWANCE OF WILLS i. PROBATE REQUIREMENT No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court [Art. 838, CC]

A.7. REPUBLICATION AND REVIVAL The execution of a codicil referring to a previous will has the effect of republishing the will as modified by the codicil. [Art. 836, CC]

Probate – a proceeding in rem required to establish the validity of a will and in order to pass real or personal property [Art. 838, CC]

The testator cannot republish without reproducing in a subsequent will, the dispositions contained in a previous one which is void as to its form. [Art. 835, CC]

The testator himself may, during his lifetime petition the court having jurisdiction for the allowance of his will. [Art. 838, CC] Matters to be proved in probate (1) Identity – Whether the instrument which is offered for probate is the last will and testament of the decedent (2) Due Execution – Whether the will has been executed in accordance with the formalities prescribed by law (3) Capacity – Whether the testator had testamentary capacity at the time of execution of the will

Reproduction in the codicil is required only when the original will is void as to it form; in all other cases, reference to the original will suffices to republish it through the codicil. [Tolentino] 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, which can be revived only by another will or codicil. [Art. 837, CC]

Scope of probate proceedings [Art. 839, CC] General rule: The probate court cannot inquire into the intrinsic validity of testamentary

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provisions. Only the extrinsic validity of such wills may be examined.

testator or after his death, shall be conclusive as to due execution. [Art. 838, CC]

Exception: When practical considerations demand that the intrinsic validity of the will be resolved

The probate of a will by the probate court having jurisdiction thereof is usually considered as conclusive as to its due execution and validity, and is also conclusive that the testator was of sound and disposing mind at the time when he executed the will, and was not acting under duress, menace, fraud, or undue influence, and that the will is genuine and not a forgery. [Mercado v. Santos (1938)]

When the will is intrinsically void on its face (e.g., when there is clearly a preterition) such that to rule on its formal validity would be a futile exercise. [Acain v. Diongson (1987)] Claimants are all heirs and they consent, either expressly or impliedly, to the submission of the question of intrinsic validity to the court. [Valera v. Inserto (1987)]

ii. GROUNDS FOR DENYING PROBATE (1) If the signature of the testator was procured by fraud; (2) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or some other person; (3) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time affixing his signature thereto; (4) If the testator was insane or otherwise mentally incapable of making a will at the time of its execution; (5) If the formalities required by law have not been complied with; or (6) If it was executed through force or under duress, or the influence of fear, or threats. [Art. 839, CC]

Probate court may pass upon the title to a property, but such determination is provisional and not conclusive, and is subject to the final decision in a separate action to resolve title. [Pastor v.CA (1983)] Probate court may decide on the ownership of a property when the estate contains only one property to be adjudicated upon. [Portugal v. Portugal-Beltran (2005)] Revocation vs. Disallowance Revocation Disallowance Voluntary act of the Given testator decree

by

judicial

With or without cause Must always be for a legal cause

B. INSTITUTION OF HEIR

May be partial or total Always total, except when the ground of fraud or influence for example affects only certain portions of the will Effect of Final Decree of Probate, Res Judicata on Formal Validity Subject to the right of appeal, the allowance of the will, either during the lifetime of the

Institution of Heirs – an act by virtue of which the testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligation [Art. 840, CC] A will shall be valid even though it (1) should not contain an institution of an heir or

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(2) such institution should not comprise the entire estate or (3) the person so instituted should not accept the inheritance or be incapacitated to succeed.



If there is error in the name but identity can still be identified through other proof, institution is still valid.  If heir is unidentifiable, none is deemed instituted.

In such cases, the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs. [Art. 841, CC]

MANNER OF DISTRIBUTION  Heirs instituted without designation of shares shall inherit in equal parts [Art. 846]  If the institution pertains to some heirs individually and others collectively, the presumption is that all are individually instituted. [Art. 847]  If siblings are instituted (whether full or halfblood), the presumption is that the inheritance is to be distributed equally [Art. 848]. This is different from the rules of distribution in intestate succession.  If parents and children are instituted, they are presumed to have been instituted simultaneously and not successively. [Art. 849]

Extent of Grant [Art. 842, CC] Freedom of disposition depends upon the existence, kind and number of compulsory heirs.  No compulsory heirs – Testator has full power of disposition  One with compulsory heirs cannot disregard the rights of the latter; may only dispose of the free portion of his estate Effect of Predecease of Heir [Art. 856, CC] Any heir who dies before the testator or is incapacitated to succeed or renounces the inheritance transmits no rights of the testator to his own heirs. This is without prejudice to the rights of representation. [Tolentino]

Every disposition in favor of an unknown person shall be void, unless by some event or circumstance his identity becomes certain. A disposition in favor of a definite class or group of persons shall be valid. [Art. 845, CC]

MANNER OF INSTITUTION Rules on Identity of Heirs [Arts. 843-849, CC] The heir must be designated with sufficient clarity  If an unknown person is instituted, the disposition is void (unless by some event, the identity becomes certain)  If a definite class or group of persons is instituted, institution is valid.

INTENT OF THE TESTATOR False Cause [Art. 850, CC] The statement of a false cause for the institution of an heir shall be considered as not written unless it appears from the will that the testator would not have made such institution if he had known the falsity of such cause.

Austria v. Reyes (1973)

The heir shall be designated by name or surname.  If there are two or more persons with the same names, indicate some circumstance by which the heir may be known.  Even though the name may have been omitted but there can be no doubt as to who has been instituted, the institution is valid.

Falsity of stated cause for institution will set aside or annul the institution if the following are present: (1) The cause for the institution is stated in the will (2) The cause is shown to be false

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(3) It appears on the face of the will that the testator would not have made such institution if he had known the falsity of the cause.

CIVIL LAW

(3) The compulsory heir omitted must be of the direct line. (4) The omitted compulsory heir must be living at the time of the testator’s death or must at least have been conceived before the testator’s death.

Scope of Institution [Arts. 852-853, CC] (1) There are more than one instituted heir (2) The testator intended them to get the whole estate or the whole disposable portion (3) The testator has designated a definite portion for each heir (4) Under Art. 852: the total of all portions is less than the whole estate (or free portion)  Therefore, a proportionate increase is necessary  The difference cannot pass by intestacy because the intention of the testator is clear—to give the instituted heirs the entire amount (5) Under Art. 853: The total exceeds the whole estate (or free portion)  Therefore, a proportionate reduction must be made on the remaining part of the estate.

(a) Compulsory Heirs in the Direct Line A direct line is that constituted by the series of degrees among ascendants and descendants (ascending and descending). [Art. 964, par.2, CC] (b) Dispositions Less Than Legitime But No Preterition [Balane] If the heir in question is instituted in the will but the portion given to him by the will is less than his legitime – there is no preterition. [Reyes v. Barretto-Datu (1967)] If the heir is given a legacy or devise – there is no preterition. [Aznar v. Duncan (1966)] If the heir had received a donation inter vivos from the testator – the better view is that there is no preterition. The donation inter vivos is treated as an advance on the legitime under Articles 906, 909, 910 and 1062.

Preterition The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious.

The remedy, if the value of inheritance, legacy or devise, or donation inter vivos is only for completion of his legitime under Articles 906 and 907.

If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation. [Art. 854, CC]

(c) Distinguished from Disinheritance Preterition

Disinheritance

 Tacit deprivation of a  Express deprivation compulsory heir of of a compulsory heir his legitime of his legitime  May be voluntary but  Always voluntary the presumption of  For some legal

Concept [Art. 854, CC] (1) There must be a total omission of one, some or all of the heir/s from the inheritance. [Seangio v. Reyes (2006)] (2) The omission must be that of a compulsory heir. 335

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Kinds (1) Brief or Compendious (2) Reciprocal (3) Simple or Common (4) Fideicommissary

law is that it is cause involuntary  If the disinheritance  Law presumes there is valid, the has been merely compulsory heir oversight or mistake disinherited is on the part of the totally excluded testator from the  Since preterition inheritance. In case invalid annuls the of institution of heirs, disinheritance, the the omitted heir gets compulsory heir is not only his legitime merely restored to but also his share in his legitime the free portion not disposed of by way of legacies and devises

(1) Brief or Compendious [Art. 860, CC] Brief – Two or more persons were designated by the testator to substitute for only one heir Compendious – One person is designated to take the place of two or more heirs (2) Reciprocal [Art. 861, CC] If the heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or is incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there is more than one substitute, they shall have the same share in the substitution as the institution.

(d) Effects of Preterition [Art. 854, CC] (1) The institution of the heir is annulled. (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 effective, without prejudice to the right of representation.

Example (only 1 substitute): If two heirs are reciprocally substituted, then if one of them dies before the testator dies, renounces, or turns out to be incapacitated, the other will get his share, regardless of whether or not their shares are equal.

When there are no devises and legacies, preterition will result in the annulment of the will and give rise to intestate succession. [Neri v. Akutin (1941)]

C. SUBSTITUTION OF HEIRS

Example (more than 1 substitute): A is instituted to 1/3, B to 1/6, and C to ½. If C dies before the testator, renounces or turns out to be incapacitated, then the other two will get his shares in the same proportion as in the institution. A will get twice as much as B (because his share of 1/3 in the institution is twice the size of B’s share of 1/6)

Substitution - is the appointment of another heir, so that he may enter into the inheritance in default of the heir originally instituted. [Art. 857, CC] The substitute shall be subject to the same charges and conditions imposed upon the instituted heir, unless the testator has expressly provided the contrary, or the charges or conditions are personally applicable only to the heir instituted. [Art. 862, CC]

(3) Simple Substitution [Art. 859, CC]

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The testator may designate one or more persons to substitute the heir/s instituted in case the heirs should: (1) die before him (predecease), (2) should not wish to accept the inheritance (repudiation), or (3) should be incapacitated to accept the inheritance (incapacitated).

CIVIL LAW

Effects of predecease of the first heir/fiduciary or the second heir/fideicommissary Situation 1: If the first heir dies followed by the second heir, then the testator dies, who will inherit? The legal heirs. There is no fideicommissary substitution because first and second heirs are not living at the time of the testator’s death. [Art. 863, CC]

(4) Fideicommissary Substitution The testator institutes an heir with an obligation to preserve and to deliver to another the property so inherited. The heir instituted to such condition is called the First Heir or the Fiduciary Heir; the one to receive the property is the Fideicommissary or the Second Heir. [Art. 863, CC]

Situation 2: The testator dies first followed by the second heir. The first heir survived them but subsequently dies, who will inherit? The SH and his heirs under Art. 866, CC. This is because the SH passes his rights to his own heirs when he dies before FH. Situation 3: If the first heir dies, followed by the testator, then the second heir, who will inherit? No specific provision in law, but SH inherits because the T intended him to inherit.

Requisites: [Arts. 863-865, CC] (a) A Fiduciary or First Heir instituted is entrusted with the obligation to preserve and to transmit to a Fideicommissary Substitute or Second Heir the whole or part of the inheritance. (b) The substitution must not go beyond one degree from the heir originally instituted. (c) The Fiduciary Heir and the Fideicommissary are living at the time of the death of the testator. (d) The fideicommissary substitution must be expressly made. (e) The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime

D. TESTAMENTARY DISPOSITIONS WITH A CONDITION, A TERM, AND A MODE 3 Kinds of Testamentary Dispositions (1) Conditional [Art. 871, CC] (2) Dispositions with a term [Art. 885, CC] (3) Dispositions with a mode/modal dispositions [Art. 882, CC] CONDITIONAL DISPOSITIONS Basis of testator’s right to impose conditions, terms or modes: Testamentary freedom Prohibited conditions: (considered as not imposed) (1) Any charge, condition or substitution whatsoever upon the legitimes. [Art. 872] (2) Impossible and illegal conditions. [Art. 873] (3) Absolute condition not to contract a first marriage. [Art. 874]

In the absence of an obligation on the part of the first heir to preserve the property for the second heir, there is no fideicommissary substitution. [PCIB v. Escolin (1974)]

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(4) Absolute condition not to contract a subsequent marriage unless imposed on the widow or widower by the deceased spouse, or by the latter’s ascendants or descendants. [Art. 874] (5) Scriptura captatoria or legacy-hunting dispositions - dispositions made upon the condition that the heir shall make some provision in his will in favour of the testator or of any other person. [Art. 875]

Scriptura

Dispositions

captatoria/

CIVIL LAW partly on chance or the will of a third person. General rule: May be fulfilled at any time (before or after testator’s death), unless testator provides otherwise. Exception: If already fulfilled at the time of execution of will: (1) if testator unaware of the fact of fulfillment – deemed fulfilled (2) if testator aware:  can no longer be fulfilled again: deemed fulfilled  can be fulfilled again: must be fulfilled again.

Legacy-Hunting

Reasons for prohibition: (1) The captatoria converts the testamentary grants into contractual transactions; (2) It deprives the heirs of testamentary freedom; (3) It gives the testator the power to dispose mortis causa not only of his property but also of his heir’s.

Constructive Compliance:  if casual – not applicable  if mixed – applicable only if dependent partly on the will of a third party not interested. DISPOSITIONS WITH A TERM A term may either be suspensive or resolutory. (1) If the term is suspensive: Before the arrival of the term, the property should be delivered to the legal or intestate heirs.

Effect: Entire disposition is void Potestative, Casual and Mixed Conditions (1) Potestative Conditions General rule: Must be fulfilled as soon as the heir learns of the testator’s death

A caución muciana has to be posted by the heirs.

Exception: If the condition was already complied with at the time the heir learns of the testator’s death; or if the condition is of such a nature that it cannot be fulfilled again.

(2) If the term is resolutory: Before the arrival of the term, the property should be delivered to the instituted heir.

Constructive Compliance: deemed fulfilled

No caución muciana required as the heir has a right over the property during the period.

(2) Casual or mixed Casual condition – one whose fulfillment depends on chance or the will of a third person.

MODAL DISPOSITIONS Dispositions with an obligation imposed upon the heir, without suspending the effectivity of the institution, as a condition does

Mixed condition – one whose fulfillment depends partly on the will of the heir and

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Must be clearly imposed as an obligation in order to be considered as one. Mere preferences or wishes expressed by the testator are not modes.

(a) Legitimate Parents and Legitimate Ascendants, with respect to their Legitimate Children and Descendants. (They will inherit only in default of legitimate children and their descendants) (b) Illegitimate Parents with respect to their Illegitimate Children. (They will inherit only in default of the illegitimate and legitimate children and their respective descendants). Note that other illegitimate ascendants are not included. (3) Concurring: Those who succeed together with the primary or the secondary compulsory heirs: (a) Widow or Widower / Surviving Spouse (Legitimate) (b) Illegitimate Children and Illegitimate Descendants

A mode functions similarly to a resolutory condition. In modal institutions, the testator states (1) the object of the institution, (2) the purpose or application of the property left by the testator, or (3) the charge imposed by the testator upon the heir. [Rabadilla v. CA (2000)]

Caución Muciana A security to guarantee the return of the value of property, fruits, and interests, in case of contravention of condition, term or mode Instances when it is needed: (1) Suspensive term [Art. 885,CC] (2) Negative potestative condition - when the condition imposed upon the heir is negative, or consists in not doing or not giving something [Art. 879, CC] (3) Mode [Art. 882, par 2, CC]

E. LEGITIME It is that part of the testator’s property which he cannot dispose of because the law has reserved it for his compulsory heirs. [Art. 886, CC] COMPULSORY HEIRS COMBINATIONS

AND

CIVIL LAW

If the testator is a legitimate child:

If the testator is an illegitimate child:

(1) LC and descendants (2) In default of No. 1, LP and ascendants (3) SS (4) IC and descendants

(1) LC and descendants (2) ILC and descendants (3) In default of Nos. 1-2 ILP only (4) SS

Specific Rules on Legitimes (1) Direct Descending Line (a) Rule of Preference between lines [Arts. 978 and 985, CC]  Those in 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.  Rule of Proximity [Art. 926, CC]: The relative nearest in degree excludes the farther one

VARIOUS

Classes of Compulsory Heirs [Art. 887, CC] (1) Primary: Those who have precedence over and exclude other compulsory heirs:  Legitimate Children and Legitimate Descendants with respect to their Legitimate Parents and Ascendants (2) Secondary: Those who succeed only in the absence of the Primary compulsory heirs:

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(b) Right of representation ad infinitum in case of predecease, incapacity, or disinheritance [Arts. 972 and 992, CC]  For decedents who are Legitimate Children, only the Legitimate Descendants are entitled to right of representation.  For decedents who are Illegitimate Children, both the Legitimate and the Illegitimate Descendants can represent, only with respect to the decedent’s illegitimate parents. (c) If all the Legitimate Children repudiate their legitime, the next generation of Legitimate Descendants may succeed in their own right.

CIVIL LAW  The father and the mother shall inherit equally if both living. One parent succeeds to the entire estate of the child if the other parent is dead. [Art. 986, CC]  In default of the mother and the father, the ascendants nearest in degree will inherit. [Art. 987]  If there is more than one relative of the same degree but of different lines, one half will go to the paternal ascendants and the other half to the maternal ascendants. [Art. 987] (b) Rule of equal division  The relatives who are in the same degree shall inherit in equal shares. [Art. 987]

(2) Direct Ascending Line (a) Rule of division between lines

Summary of Legitimes of Compulsory Heirs Legend: LC – Legitimate Children SS – Surviving Spouse LP – Legitimate Parents ILP – Illegitimate Parents Surviving Relatives 1

LC alone

LC & Descendants

SS

ILC

1/2 of the estate in equal portions

2 1 LC, SS

1/2

1/4

3 LC, SS

1/2 in equal Same portion as 1LC portions

4 LC, ILC

1/2 in equal portions

5 1 LC, SS, ILC

1/2

1/2 share of 1 LC (for each ILC) 1/4 (preferred)

1/2 share of 1 LC (for each child) N.B. The share of the ILC may suffer reduction pro rata

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because spouse given preference 6 2 or more LC, 1/2 in equal Same as share of 1LC SS, ILC portions

is

1/2 share of 1 LC (for each child)

7 LP alone

1/2

8 LP, ILC

1/4 in equal portions 1/2

9 LP, SS

1/4

10 LP, SS, ILC

1/8

1/2 1/4

11 ILC alone

1/2

1/2 in equal portions

12 ILC, SS

1/3

13 SS alone

1/2

1/3 in equal portions

*SS alone where marriage is in articulo mortis and testator dies within 3 months from marriage – 1/3 But if they have been living together as husband and wife for more than 5 years – 1/2 14 ILP alone 15 ILP, SS

1/2 1/4

1/4

Steps in Determining the Legitime of Compulsory Heirs (1) Determine the gross value of the estate at the time of the death of the testator. (2) Determine all debts and charges which are chargeable against the estate. (3) Determine the net value of the estate by deducting all the debts and charges from the gross value of the estate. (4) Collate or add the value of all donations inter vivos to the net value of the estate. (5) Determine the amount of the legitime from the total thus found. (6) Impute the value of all donations inter vivos made to strangers against the

disposable free portion and restore it to the estate if the donation is inofficious. (7) Distribute the residue of the estate in accordance with the will of the testator. Remedy of a Compulsory Heir in case of Impairment of Legitime Extent and Nature of Remedy Impairment Total omission of a compulsory heir who is a direct descendant or ascendant (preterition)

Annulment of institution and reduction of legacies and devises [Art. 854, CC]

Testamentary Reduction of the dispositions impairing disposition insofar as

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Mediate Source; the one obligated to reserve the property (4) Reservatarios – within the 3rd degree of consanguinity from the Prepositus [Cabardo v. Villanueva (1922)] belonging to the line from which the property came

the they may be inofficious or excessive [Art. 907, CC]

Partial impairment

CIVIL LAW

Completion of the legitime [Art. 906, CC]

Impairment by Collation – reduction inofficious donations of donations [Arts. 771 and 911, CC]

Requisites for Reserva Troncal [Chua vs. CFI (1977)]: (a) That the property was acquired by a descendant (Prepositus) from an ascendant or from a brother or sister (Origin or Mediate Source) by gratuitous title, (b) That the Prepositus died without (legitimate*) issue, (c) That the property is inherited by another ascendant (Reservista) by operation of law, and (d) That there are relatives within the 3rd degree (Reservatarios) belonging to the line from which said property came.

RESERVA TRONCAL Art. 891, CC. The 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 such property as he may have acquired by operation of law for the benefit of relatives who are within the third degree and who belong to the line from which said property came. Concept of Reserva Troncal (1) A descendant (prepositus) inherits or acquires property from an ascendant or from a brother or sister (origin or mediate source) by gratuitous title (2) The same property is inherited by another ascendant (reservista) or is otherwise acquired by him by operation of law from the said descendant (prepositus) (3) The said ascendant (reservista) must reserve the property for the benefit of the relatives of the deceased descendant within the third civil degree and who belong to the line from which the said property came (reservatarios).

Only legitimate descendants will prevent the property from being inherited by the legitimate ascending line by operation of law [Balane] 3 transmissions involved: [Balane] (1) 1st transfer – by gratuitous title, from a person to his descendant, brother or sister (2) 2nd transfer – by operation of law, from the transferee in the 1st transfer to another ascendant. This creates the reserva. (3) 3rd transfer – from the transferee in the second transfer to the relatives JURIDICAL NATURE OF RIGHTS Nature of the reservista’s right: [Balane citing Edroso v. Sablan]  The reservista’s right over the reserved property is one of ownership  The right of ownership is subject to a resolutory condition, i.e. the existence of reservatarios at the time

Parties: [Balane] (1) Origin or Mediate Source – either an ascendant of any degree of ascent or a brother or sister of the Prepositus; responsible for the 1st transfer (2) Prepositus – the first transferee of the reserved property (3) Reservista – an ascendant of the Prepositus other than the Origin or

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 The right of ownership is alienable, but subject to the same resolutory condition.  The reservista’s right of ownership is registrable.

(6) Prescription, when the reservista holds the property adversely against the reservatarios, as free from reservation

Nature of reservatarios’ right: [Sienes v. Esparcia]  The reservatarios have a right of expectancy over the property.  The right is subject to a suspensive condition, i.e. the expectancy ripens into ownership if the reservatarios survive the reservistas.  The right is alienable but subject to the same suspensive condition.  The right is registrable.

Definition [Art. 915, CC] (1) It is the act by which the testator (2) For just cause (3) Deprives a compulsory heir of his right to the legitime.

F. DISINHERITANCE

Requisites of a Valid Disinheritance (a) Heir disinherited must be designated by name or in such a manner as to leave no room for doubt as to who is intended to be disinherited. (b) It must be for a cause designated by law. (c) It must be made in a valid will. (d) It must be made expressly, stating the cause in the will itself. (e) The cause must be certain and true, and must be proved by the interested heir if the person should deny it. (f) It must be unconditional. (g) It must be total.

Reserva Minima vs. Reserva Maxima (1) The prepositus acquired

property gratuitously from an ascendant, a brother or sister (2) In his will, he institutes as his heir his ascendant (who is also a compulsory heir) such that the ascendant receives half of the estate by operation of law as legitime and the other half by testamentary disposition

F.1. DISINHERITANCE OF CHILDREN AND DESCENDANTS [Art. 919, CC]

Two Views (1) Reserva Maxima: The entire property will be considered acquired as legitime and therefore wholly reservable (2) Reserva Minima: One half is reservable, the other half is not subject to reserva troncal [Tolentino, p. 284]

(1) When a child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (2) When a child or descendant 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; (3) When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator; (4) When a child or descendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made;

Extinguishment of the Reserva (1) Loss of the reservable property (2) Death of the reservista (3) Death of all the relatives within the third degree belonging to the line from which the property came (4) Renunciation by the reservatarios (5) Registration of the reservable property under the Torrens system as free

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(5) A refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant; (6) Maltreatment of the testator by word or deed, by the child or descendant; (7) When a child or descendant leads a dishonorable or disgraceful life; (8) Conviction of a crime which carries with it the penalty of civil interdiction.

causes the testator to make a will or to change one already made; (6) The loss of parental authority for causes specified in this Code; (7) The refusal to support the children or descendants without justifiable cause; (8) An attempt by one of the parents against the life of the other, unless there has been a reconciliation between them.

F.2. DISINHERITANCE OF PARENTS AND ASCENDANTS [Art. 920, CC]

F.3. DISINHERITANCE OF A SPOUSE [Art. 921, CC] (1) When the spouse has been convicted of an attempt against the life of the testator, his or her descendants, or ascendants; (2) When the spouse has accused the testator of a crime for which the law prescribes imprisonment of six years or more, and the accusation has been found to be false; (3) When the spouse by fraud, violence, intimidation, or undue influence cause the testator to make a will or to change one already made; (4) When the spouse has given cause for legal separation; (5) When the spouse has given grounds for the loss of parental authority; (6) Unjustifiable refusal to support the children or the other spouse.

(1) When the parents have abandoned their children or induced their daughters to live a corrupt or immoral life, or attempted against their virtue; (2) When the parent or ascendant has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (3) When the parent or ascendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found to be false; (4) When the parent or ascendant has been convicted of adultery or concubinage with the spouse of the testator; (5) When the parent or ascendant by fraud, violence, intimidation, or undue influence

Summary of Causes of Disinheritance CC 919 CC 920 Grounds for Disinheritance Children & Parents & Descendants Ascendants 1

CC 921 Spouse

CC 1032 Unworthiness

Guilty or Convicted of Attempt Against the Life of the Testator, Spouse, Ascendant or Descendant

✓

✓

✓

✓

2 Accused Testator or Decedent of Crime Punishable by Imprisonment of 6 years or more, and Found Groundless or False

✓

✓

✓

✓

3 Causes testator or decedent to Make a Will or Change one by Fraud, Violence,

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Intimidation, or Undue Influence

CIVIL LAW

✓

✓

✓

4 Unjustified Refusal to Support Testator

✓

✓

✓

5 Convicted of Adultery or Concubinage with Spouse of Testator or Decedent

✓

✓

✓

6 Maltreatment of testator by Word and Deed

✓

7 Leading a Dishonorable or Disgraceful Life

✓

8 Conviction of Crime which carries the penalty of Civil Interdiction

✓

9 Abandonment of Children or Inducing Children to Live Corrupt and Immoral Life or Against Attempted Virtue

✓

✓

10 Loss of Parental Authority

✓

11 Attempt by One Parent Against the Life of the Other Unless there is Reconciliation Between Parents

✓

12 Spouse Has Given Cause for Legal Separation

✓

✓

✓

✓

13 Failure to Report Violent Death of Decedent Within One Month Unless Authorities Have Already Taken Action

✓

14 Force, Violence, Intimidation, or Undue Influence to Prevent Another from Making a Will or Revoking One Already Made or Who Supplants or Alters the Latter’s Will

✓

15 Falsifies or Forges Supposed Will of Decedent

✓

Modes of Revocation of Disinheritance (1) Reconciliation [Art. 922, CC] (2) Subsequent institution of the disinherited heir (3) Nullity of the will which contains the disinheritance.

rules on disinheritance. Thus, reconciliation renders the disinheritance ineffective. Reconciliation [Art. 922, CC] Effect of Reconciliation between Offender and Offended Person: If no disinheritance has been made yet, the offended person will be deprived of his right to disinherit.

Note: The moment that testator uses one of the acts of unworthiness as a cause for disinheritance; he thereby submits it to the

If disinheritance has been effected, it will be rendered ineffectual.

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Persons Charged With the Duty to Give Legacies and Devises in a Will (1) Compulsory heir, provided, their legitimes are not impaired [Art. 925, CC] (2) Voluntary heir (3) Legatee or devisee can be charged with the duty of giving a sub-legacy or sub-devise but only to the extent of the value of the legacy or devise given him [Art. 925, CC] (4) The estate represented by the executor or administrator, if no one is charged with this duty to pay or deliver the legacy or devise in the will  If there is an administration proceeding, it constitutes a charge upon the estate.  If there is no administration proceeding, it is a charge upon the heirs.

Rights of descendants of person disinherited [Art. 923, CC] Disinheritance gives rise to the right of representation in favor of the children and descendants of the disinherited person with respect to his legitime. This is inconsistent with Art. 1033. In disinheritance, reconciliation is sufficient. It need not be in writing. In unworthiness, however, it needs to be in writing. [Balane] INEFFECTIVE DISINHERITANCE [Art. 918, CC] Instances of Ineffective disinheritance: (1) There is no specification of the cause. (2) The cause is not proved. (3) The cause is not among those specified in the provisions.

Validity and Effect of Legacy or Devise Legacy or devise of a thing belonging to another [Art. 930, CC]

Effect of Ineffective Disinheritance: if the disinheritance lacks one or other of the requisites mentioned in this article, the heir in question gets his legitime. [Balane] Ineffective Disinheritance

Testator erroneously believed Void that the property belonged to him The thing bequeathed Effective afterwards becomes his by whatever title

Preterition

Person disinherited Person omitted must may be any be a compulsory heir compulsory heir in the direct line

Legacy or devise of thing already belonging to the legatee or devisee The thing already belongs to Ineffective the legatee or devisee at the time of the execution of the will [Art. 932, CC]

Only annuls the Annuls the entire institution in so far as institution of heirs it prejudices the person disinherited

The thing is subject to an Valid only as to encumbrance or interest of the interest or another person [Art. 932, CC] encumbrance

G. LEGACIES AND DEVISES Legacy

Legatee or devisee Ineffective subsequently alienates the thing [Art. 933,CC]

Devise

A gift of personal A gift of real property property given in a will given in a will It is bequeathed

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After alienating the thing, the Ineffective legatee or devisee subsequently reacquires it

It is devised

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gratuitously [Art. 933, CC]

or estate

After alienating the thing, the Legatee or legatee or devisee acquires it devisee can by onerous title [Art. 933, CC] demand reimbursement from the heir Different Objects of Legacies and Devises [Art. 934-944, CC] Objects of Legacy or Devise

Effect

Thing pledged or mortgaged to  Estate is obliged to pay the debt secure a debt  Other charges pass to the legatee or devisee Credit or remission or release of  Effective only as regards the credit or debt existing at the time of the testator’s death a debt  Legacy lapses if the testator later brings action against the debtor  If generic, comprises all credits/debts existing at time of execution of will Thing pledged by debtor

Only the pledge is extinguished; the debt remains

To a creditor

Shall not be applied to his credit unless the testator so declares

Order of payment of a debt

 If testator does not really owe the debt, the disposition is void  If the order is to pay more than the debt, the excess is not due  This is without prejudice to the payment of natural obligations

Alternative legacies and devises  The choice is with the heir, or the executor or administrator  If the heir, legatee or devisee dies, the right passes to their heirs  Once made, the choice is irrevocable Legacy of generic personal  Legacy is valid even if there are no things of the same kind in the property or indeterminate real estate  Devise of indeterminate real property valid only if there are property immovable property of the same kind in the estate  The choice belongs to the heir, legatee or devisee or the executor or administrator Legacy of education

 Lasts until the legatee is of age or beyond the age of majority in order that he may finish some professional, vocational or general course provided he pursues his course diligently  If testator did not fix the amount, it is fixed in accordance with the social standing and circumstances of the legatee and the value of the estate

Legacy of support

 Lasts during lifetime of legatee  If the testator used to give the legatee a sum of money for support, give the same amount unless it is markedly disproportionate to the estate  If testator did not fix the amount, it is fixed in accordance with the social standing and circumstances of the legatee and the value of the estate

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Order of Payment in Case the Estate Is Not Sufficient to Cover All the Legacies and Devises Art. 911

Art. 950 Order of Preference

   

    

Legitime of compulsory heirs Donations inter vivos Preferential legacies or devises All other legacies or devises pro rata

Remuneratory legacy/devise Preferential legacy/devise Legacy for support Legacy for education Legacy/devise of specific, determinate thing which forms a part of the estate  All others pro rata Application

 When the reduction is necessary to preserve the legitime of compulsory heirs from impairment whether there are donations inter vivos or not; or  When, although, the legitime has been preserved by the testator himself there are donations inter vivos.

 When there are no compulsory heirs and the entire estate is distributed by the testator as legacies or devises; or  When there are compulsory heirs but their legitime has already been provided for by the testator and there are no donations inter vivos.

Art. 911, CC governs when there is a conflict Art. 950, CC governs when the question of between compulsory heirs and the devisees and reduction is exclusively among legatees and legatees. devisees themselves.

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Delivery of Legacy/Devise [Art. 951, CC] (1) The very thing bequeathed shall be delivered and not its value (2) With all its accessions and accessories (3) In the condition in which it may be upon the death of the testator (4) Legacies of money must be paid in cash

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Instances when Legal or Intestate Succession operates [Art. 960, CC] (1) If a person dies without a will, or with a void will, or one which has subsequently lost its validity (2) When the will does not institute an heir (3) Upon the expiration of term, or period of institution of heir [Balane, 426] (4) Upon fulfillment of a resolutory condition attached to the institution of heir, rendering the will ineffective [Balane, 426] (5) When the will does not dispose of all the property belonging to the testator. Legal succession shall take place only with respect to the property which the testator has not disposed (mixed succession) (6) If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled (7) If the heir dies before the testator (8) If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place (9) When the heir instituted is incapable of succeeding, except in cases provided in the Civil Code (10) Preterition – Intestacy may be total or partial depending on whether or not there are legacies or devises [Balane, 426]

Effect of ineffective legacies or devises [Art. 956, CC] In case of repudiation, revocation or incapacity of the legatee or devisee, the legacy or devise shall be merged with the mass of the hereditary estate, except in cases of substitution or accretion. Revocation of Legacies and Devises [Art. 957, CC] (1) Testator transforms the thing such that it does not retain its original form or denomination (2) Testator alienates the thing by any title or for any cause. Reacquisition of the thing by the testator does not make the legacy or devise valid, unless it is effected by right of repurchase. (3) Thing is totally lost during the lifetime or after the death of the testator (4) Other causes: nullity of will, noncompliance with suspensive condition, sale of the thing to pay the debts of the deceased during the settlement of his estate.

Note: In all cases where there has been an institution of heirs, follow the ISRAI order: (1) If the Institution fails, Substitution occurs. (2) If there is no substitute, the right of Representation applies in the direct descending line to the legitime if the vacancy is caused by predecease, incapacity, or disinheritance. (3) The right of Accretion applies to the free portion when the requisites in Art. 1016 are present. (4) If there is no substitute, and the right of Representation or Accretion are not

III. Legal or Intestate Succession A. GENERAL PROVISIONS Intestacy – that which takes place by operation of law in default of compulsory and testamentary succession. Not defined in the Civil Code.

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proper, the rules on Intestate succession shall apply.

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(b) Distinction between legitimate and illegitimate filiation. The ratio under present law is 2:1. [Art. 983, in relation to Art. 895 as amended by Art. 176, FC] (c) Rule of division by line in the ascending line [Art. 987 (2), CC] (d) Distinction between full-blood and half-blood relationship among brothers and sisters, as well as nephews and nieces. [Art. 1006 and 1008, CC] (e) Right of representation. (4) Rule of Barrier between the legitimate family and the illegitimate family (the ironcurtain rule) The illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa. [Art. 992, CC] (5) 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 double that of the half-blood. [Arts. 895 and 983, CC]

The Intestate or Legal Heirs: (1) Relatives (a) Legitimate ascendants (b) Illegitimate parents (c) Legitimate children (d) Illegitimate children (e) Surviving Spouse (f) Brothers, sisters, nephews and nieces (BSNN) (g) Other collateral relatives (2) Surviving spouse (3) State (through escheat proceedings) Intestate succession is based on the presumed will of the decedent. That is, to distribute the estate in accordance with the love and affection he has for his family, and in default of these persons, the presumed desire to promote charitable and humanitarian activities. [Balane] Fundamental Principles in Intestate Succession: (1) Rule of Preference between Lines  Those in the direct descending line shall exclude those in the direct ascending and collateral lines;  Those in the direct ascending line shall, in turn, exclude those in the collateral line. (2) Rule of Proximity  The relative nearest in degree excludes the farther one [Art. 962(1), CC], saving the right of representation when it properly takes place. (3) Rule of Equal Division  The relatives who are in the same degree shall inherit in equal shares. [Arts. 962(2), 987 and 1006, CC]

Note:  If one of the legitimate ascendants, illegitimate parents, legitimate children or illegitimate children survives, the brother, sisters, nephews, and nieces (BSNN) are excluded.  If one of the legitimate ascendants, illegitimate parents, legitimate children, illegitimate children or surviving spouse survives, the other collateral relatives and the state are excluded.  If any of the heirs concur in legitimes, then they also concur in intestacy.

A.1. RELATIONSHIP The number of generations determines the proximity of the relationship. Each generation forms one degree. [Art. 963, CC]

Exceptions: [Balane, 427-428] (a) Rule of preference between Lines

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A series of degrees forms a line. This line may either be direct or collateral. [Art. 964, CC]  A direct line is that constituted by the series of degrees among ascendants and descendants.  The direct line is either ascending (brings a person with those from whom he descends) and descending (connecting the head of the family with those who descend from him). [Art. 965, CC]  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.

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portion shall accrue to the others of the same degree. Exception: When the right of representation should take place. Note: This accretion in intestacy takes place in case of predecease, incapacity, or renunciation among heirs of the same degree. The relatives must be in the same relationship because of the Rule of Preference of Lines. Repudiation [Arts. 968-969, CC] There is no right of representation in repudiation. If the nearest relative/s repudiates the inheritance, those of the following degree shall inherit in their own right.

Note: It is important to distinguish between direct and collateral as the direct has preference over the collateral.

In case of repudiation by all in the same degree, the right of succession passes on the heirs in succeeding degrees: descending line first, ascending line next, and collateral line next. [Balane]

In a line, as many degrees are counted as there are generations. [Art. 966, CC] (1) In the direct line, ascent is made up to the common ancestor or progenitor. (2) In the collateral line, ascent is made to the common ancestor. Then descent to the person with whom the computation is to be made.

Adoption [Art. 189, FC] In adoption, the legal filiation is personal and exists only between the adopter and the adopted. The adopted is deemed a legitimate child of the adopter, but still remains as an intestate heir of his natural parents and other blood relatives. (Note, however, Section 16 of the Domestic Adoption Act [RA 8552], which provides that all legal ties between the biological parent(s) and the adoptee shall be severed and the same shall then be vested on the adopter(s).”

Note: Descending line is preferred over ascending. Blood relationship is either full or half-blood. [Art. 967, CC] Note: As among brothers and sisters and nephews and nieces, there is a 2:1 ratio for fullblood and half-blood relatives. Direct relatives are preferred. But this distinction does not apply with respect to other collateral relatives.

A.2. RIGHT OF REPRESENTATION Representation – right created by fiction of law, by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited [Art. 970, CC]

Incapacity [Art. 968, CC] General rule: If there are several relatives of the same degree, and one or some of them are unwilling or incapacitated to succeed, his

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Effect of Representation The representative heir acquires the rights which the person represented would have if he were living or if he could have inherited.

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and only if they concur with at least one uncle or aunt. In this case, they share in the inheritance per stirpes. If the children survive alone, they inherit in their own right and share in equal proportions or per capita. [Art. 975, CC]

When it occurs Representation is allowed with respect to inheritance conferred by law (legitime and intestate based on Art. 923)

Right of representation in the collateral line is only possible in intestate succession. It cannot take place in testamentary succession.

It occurs only in the following instances: (DIP) (1) Predecease of an heir (2) Incapacity or unworthiness (3) Disinheritance [Art. 923, CC]

Per stirpes  Inheritance per stirpes means that the representative/s shall receive only what the person represented would have received, if he were living or could inherit. [Art.975, CC]  If there are more than one representative in the same degree, then it shall be divided equally, without prejudice to the distinction between legitimate and illegitimate, if applicable.

There is no representation in testamentary succession. [Art. 856, CC] There is no representation in repudiation. A renouncer can represent, but cannot be represented. Rationale is found in Art. 971 which states that “The representative does not succeed the person represented but the one whom the person represented would have succeeded.”

The Double Heirship Test  In determining whether or not representation is proper, it is necessary that the representative must be a legal heir of both the person he is representing and the decedent. [Art. 973, CC]  But the representative need not be qualified to succeed the person represented. [Art. 971, CC] In the same manner, the person represented need not be qualified to succeed the decedent, as it is his disqualification which gives rise for representation to apply.  Legitimate children may not be represented by their illegitimate descendants (because of the bar in Art. 992). In contrast, illegitimate children may be represented by their legitimate and illegitimate descendants. [Art. 902]  Illustration: A has legitimate son J and illegitimate son K. J has an illegitimate son J-1 while K also has an illegitimate son K-1. K-1 may inherit from A by representation of

Representation in the Direct Descending Line Representation takes place ad infinitum in the direct descending line but never in the direct ascending line. [Art. 972, CC] General rule: Grandchildren inherit from the grandparents by right of representation, if proper. Exception: Whenever all the children repudiate, the grandchildren inherit in their own right because representation is not proper. [Art. 969, CC] Representation in Collateral Line In the collateral line, representation takes place only in favor of the children of the brothers or sisters (i.e., nephews and nieces) whether of the full or half-blood [Art. 972, CC]

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K (under Art. 902), but J-1 may not inherit from A (because of the barrier under Art. 992)

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the former in the inheritance of the parents or ascendants of the adopter. The adopted child is not related to the deceased in that case, because filiation created by fiction of law is exclusively between the adopter and the adopted. [Tolentino, 448-449]

Representation in Adoption  If the adopting parent should die before the adopted child, the latter cannot represent

B. ORDER OF INTESTATE SUCCESSION Decedent is a Legitimate Child 1

Decedent is an Illegitimate Child

Decedent is an Adopted Child

Legitimate children descendants (LCD)

or Legitimate children descendants (LCD)

or Legitimate children descendants (LCD)

or

2 Legitimate parents ascendants (LPA)

or Illegitimate children descendants (LPA)

or Illegitimate children descendants (ICD)

or

3 Illegitimate children descendants (ICD)

or Illegitimate parents (IP)

4 Surviving spouse (SS)

Surviving spouse (SS)

Legitimate or illegitimate parents, or legitimate ascendants, adoptive parents Surviving spouse (SS)

5 Brothers and sisters, nephews, Illegitimate brothers and Brothers and sisters, nephews, sisters, nephews, nieces nieces (BS/NN) nieces (BS/NN) (IBS/NN) 6 Legitimate collateral relatives State within the 5th degree (C5)

State

7 State Rules of Exclusion and Concurrence in Intestate Shares Intestate Heirs

Excluded By

Excludes

Concurs With

LC + LD

Ascendants, Collaterals No one and State

SS + ILC

ILC + D

ILP, Collaterals State

SS, LC, LP

LP + LA

Collaterals and State

LC

ILC + SS

ILP

Collaterals and State

LC and ILC

SS

SS

Collaterals other than No one siblings, nephews and nieces, State

Siblings, Nieces

and No one

Nephews, All other collaterals and LC, ILC, LP, ILP State

LC, ILC, Siblings, Nieces

LP, ILP, Nephews,

SS

Other collaterals within Collateral more remote LC, ILC, LP, ILP and SS in degree and State 5th degree

Collaterals in the same degree

State

No one

No one

Everyone

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Outline of Intestate Shares (1) Legitimate children only Divide entire estate equally among all legitimate children [Art. 979, CC]

Divide the entire estate equally but with the observance of the rule of division by line. [Art. 987, CC] (7) Legitimate parents and illegitimate children Legitimate parents get ½ of the estate, illegitimate children get the other ½. [Art. 991, CC]

Legitimate children include an adopted child. (2) Legitimate children and Illegitimate children Divide entire estate such that each illegitimate child gets ½ of what a legitimate child gets [Art. 983, CC and Art. 176, FC]

(8) Legitimate parents and surviving spouse Legitimate parents get ½ of the estate; The surviving spouse gets the other ½. [Art. 997, CC] (9) Legitimate parents, surviving spouse and illegitimate children Legitimate parents get ½ of the estate; surviving spouse and the illegitimate child each get ¼ each, the latter to share among themselves if more than one. [Art. 1000, CC]

Ensure that the legitime of the legitimate children are first satisfied. (3) Legitimate children and surviving spouse Divide entire estate equally between the legitimate children and the surviving spouse, the latter deemed as one child. The same rule holds where there is only one child.

(10) Illegitimate children only Divide the entire estate equally. [Art. 988, CC]

“Children” as used in Art. 996 is interpreted to include a situation where there is only one child.

(11) Illegitimate children and surviving spouse Illegitimate children get ½ of the estate; the surviving spouse gets the other ½. [Art. 998, CC]

(4) Legitimate children. Surviving spouse, and Illegitimate children Divide the entire estate such that the surviving spouse is deemed one legitimate child and each illegitimate child getting ½ of what the legitimate child gets. [Art. 996, CC and Art. 176, FC]

(12) Surviving spouse only Entire estate goes to the surviving spouse. [Art. 994/995, CC] (13) Surviving spouse and illegitimate parents Illegitimate parents get ½ and the spouse gets the other ½. [by analogy with Art. 997, CC]

Ensure that the legitime of the legitimate children and the spouse are first satisfied.

(14) Surviving spouse and legitimate brothers and sisters, nephews and nieces Surviving spouse gets ½ of the estate, while the rest gets the other ½ with the nephews and nieces inheriting by representation if proper. [Art. 1001]

(5) Legitimate parents only Divide the entire estate equally. [Art. 985, CC] (6) Legitimate parents)

ascendants

only

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(excluding

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CIVIL LAW Note: the nearer relative excludes the more remote relatives.

(15) Surviving spouse and illegitimate brothers and sisters, nephews and nieces Surviving spouse gets ½ of the estate while the rest gets the other ½ with the nephews and nieces inheriting by representation, if proper; Note that all the other relatives should be “illegitimate” because of the ironcurtain rule. [Art. 994, CC]

(22) State If there are no other intestate heirs, the State inherits the entire estate through escheat proceedings. [Art. 1011, CC]

IV. Provisions Common to Testate and Intestate Succession

(16) Illegitimate parents only Entire estate goes to the illegitimate parents. [Art. 993, CC] (17) Illegitimate parents and children of any kind (whether legitimate or illegitimate child) Illegitimate parents are excluded and do not inherit; For the rule on the respective shares of the children, see numbers 1, 2 or 10, whichever is applicable.

A. RIGHT OF ACCRETION Definition of Accretion [Art. 1015, CC] It is a right by virtue of which, when two or more persons are called to the same inheritance, devise or legacy, the part assigned to one who renounces or cannot receive his share or who died before the testator is added or incorporated to that of his co-heirs, co-devisees, or co-legatees.

(18) Legitimate brothers and sisters only Divide the entire estate such that full-blood brothers/sisters gets a share double the amount of a half-blood brother or sister. [Art. 1004 and 1006, CC]

Requisites: [Tolentino p. 497-499] (a) Unity of object and plurality of subjects (two or more persons are called to the same inheritance or same portion thereof) (b) Vacancy of share (one of the heirs dies before the testator, or renounces the inheritance, or is incapacitated)

(19) Legitimate brothers and sisters, nephews and nieces Divide the entire estate observing the 2 is to 1 ratio for full and half-blood relationships with respect to the brothers and sisters, with the nephews and nieces inheriting by representation, if proper. [Art. 1005 & 1008,

When does Accretion Occur? Accretion happens when there is repudiation, incapacity, or predecease of an heir. (RIP)

CC] (20) Nephews and nieces only Divide the entire estate per capita, observing the 2 is to 1 ratio. [Arts. 975 and 1008, CC]

It is the mechanism where the share of an heir is increased by vacant shares vacated by heirs who cannot inherit for various reasons. (Rationale: the decedent intended to give the property to nobody but the co-heirs.)

(21) Other collaterals [Arts. 1009 and 1010] Divide entire estate per capita. Collateral relatives must be with the 5th degree of consanguinity.

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There can only be accretion if there is an institution of heirs with respect to specific properties. [Art. 1016, CC]

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The heirs to whom the inheritance accrues shall succeed to all the rights and obligations which the heir who renounced or could not receive it would have had. [Art. 1020, CC]

Among compulsory heirs, there can only be accretion with respect to the free portion. There can be no accretion with respect to the legitimes. [Arts. 1021 and 1018, CC]

In testamentary succession, when the right of accretion does not take place, the vacant portion of the instituted heirs, if no substitute has been designated, shall pass to the legal heirs of the testator, who shall receive it with the same charges and obligations. [Art. 1022, CC]

The heirs to whom the portion goes by the right of accretion take it in the same proportion that they inherit. [Art. 1019, CC] Exceptions [Balane] (1) In testamentary succession, if the testator provides otherwise (2) If the obligation is purely personal, and hence intransmissible

Accretion shall also take place among devisees, legatees and usufructuaries under the same conditions established for heirs. [Art. 1023, CC]

Effect of Predecease, Incapacity, Disinheritance or Repudiation Cause of Vacancy

Testamentary Succession

Intestate Succession

Legitime

Free Portion

Predecease

Representation Intestate Succession

Accretion Intestate Succession

Representation Intestate Succession

Incapacity

Representation Intestate Succession

Accretion Intestate Succession

Representation Intestate Succession

Disinheritance

Representation Intestate Succession

-

-

Repudiation

Intestate Succession

Accretion Accretion PERSONS INCAPABLE OF SUCCEEDING [Arts. 1027, 739, 1032]

B. CAPACITY TO SUCCEED BY WILL OR INTESTACY

Based on undue influence or interest [Art. 1027, CC] (1) Priest who heard the last confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; (2) Individuals, associations and corporations not permitted by law to inherit; (3) Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the

Requisites for Capacity to Succeed by Will or by Intestacy: [Art. 1024 – 1025, CC] (a) The heir, legatee or devisee must be living or in existence at the moment the succession opens; [Art 1025] and (b) He must not be incapacitated or disqualified by law to succeed. [Art 1024, par.1]

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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; (4) Relatives of the priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; (5) Attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, spouse, parents, or children; (6) Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness.

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(4) 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; (5) Any person convicted of adultery or concubinage with the spouse of the testator; (6) Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; (7) 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; (8) Any person who falsifies or forges a supposed will of the decedent.

Based on morality or public policy [Arts. 739 and 1028, CC] (1) Those made in favor of a person with whom the testator was guilty of adultery or concubinage at the time of the making of the will. (2) Those made in consideration of a crime of which both the testator and the beneficiary have been found guilty. (3) Those made in favor of a public officer or his spouse, descendants and ascendants, by reason of his public office.

Pardon of Acts of Unworthiness

Based on acts of unworthiness [Art. 1032, CC] The following are incapable of succeeding by reason of unworthiness: (1) Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or attempted against their virtue; (2) Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (3) 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;

Express

Implied

Made by the execution of a document or any writing in which the decedent condones the cause of incapacity

Effected when the testator makes a will instituting the unworthy heir with knowledge of the cause of incapacity

Cannot be revoked

Revoked when the testator revokes the will or the institution

Unworthiness vs. Disinheritance

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Unworthiness

Disinheritance

Unworthiness renders a person incapable of succeeding to the succession, whether testate or intestate

Disinheritance is the act by which a testator, for just cause, deprives a compulsory heir of his right to the legitime [Art. 815, CC]

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(1) Express Acceptance – one made in a public or private document. [Art. 1049 par. 1] (2) Tacit Acceptance – one resulting from acts by which the intention to accept is necessarily implied or from acts which one would have no right to do except in the capacity of an heir. (3) Implied Acceptance - Within thirty days after the court has issued an order for the distribution of the estate in accordance with the Rules of Court, the heirs, devisees and legatees shall signify to the court having jurisdiction whether they accept or repudiate the inheritance; if they do not do so within that time, they are deemed to have accepted the inheritance. [Art 1057, CC]

Determination of Capacity [Tolentino p. 539] General Rule: At the death of the decedent [Art. 1034, CC] Exceptions: (1) Those falling under 2, 3, and 5 of Art. 1032 – when the final judgment is rendered (2) Those falling under 4 of Art. 1032 – when the month allowed for the report expired (3) If the institution is conditional – when the condition is complied with

C. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE Characteristics [Arts. 1041 – 1042, 1056, CC] (1) Acceptance and repudiation must be voluntary and free [Art. 1041, CC] (2) They are irrevocable except if there is vitiation of consent or an unknown will appears [Art. 1056, CC] (3) They have a retroactive effect [Art. 1042, CC]

An inheritance is deemed accepted: (a) If the heir sells, donates, or assigns his right to a stranger, or to his co-heirs, or to any of them – the heir must first accept the inheritance before he can dispose of it. (b) If the heir renounces the same, even though gratuitously, for the benefit of one or more of his co-heirs – this is actually a donation. The heir must first accept the inheritance before he can donate it. (c) If the heir renounces it for a price in favor of all his co-heirs indiscriminately – this is actually an onerous disposition. The heir must first accept the inheritance before he can dispose of it.

Requisites [Art. 1043, CC] (a) Certainty of death of the decedent (b) Certainty of the right to the inheritance Acceptance Involves the confirmation of transmission of successional rights

CIVIL LAW

Repudiation  Renders the transmission of successional rights ineffective  Equivalent to an act of disposition or alienation  Publicity requirement is necessary for the protection of other heirs and creditors

Note: But if the renunciation should be gratuitous, and in favor of all the co-heirs (to whom the portion renounced should devolve by accretion), the inheritance shall not be deemed as accepted. [Art. 1050] This is a true case of renunciation. Forms of Repudiation [Art. 1051, CC]

Forms of Acceptance [Arts. 1049 – 1050, CC]

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Rationale for collation: If donations inter vivos will not be collated, then the rule on legitimes shall be circumvented or disregarded.

(1) in In a public instrument acknowledged before a notary public; or (2) In an authentic document – equivalent of an indubitable writing or a writing whose authenticity is admitted or proved; or (3) By petition presented to the court having jurisdiction over the testamentary or intestate proceeding

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, i.e., not a compulsory heir). [Balane, p. 522] (3) Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious. (4) Restitution – returning or the act of payment of the excess to the mass of hereditary estate.

Heirs in Two Capacities [Art. 1055, CC] (1) If a person is called to the same inheritance as an heir by will and by law and he repudiates the inheritance in his capacity as a testamentary heir, he will be considered to have also repudiated the inheritance as a legal heir. (2) If he repudiates it as a legal heir, without knowledge of his being a testamentary heir, he may still accept it in the latter capacity.

D. COLLATION

Persons Obliged to Collate General rule: Compulsory heirs Exceptions: (1) When the testator should have so expressly provided [Art. 1062, CC] (2) When the compulsory heir should have repudiated his inheritance [Art. 1062, CC]

Concept of Collation 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 by donation or other gratuitous title but which the law considers as an advance from the inheritance. [Art. 1061, CC]

Grandchildren who survive with their uncles, aunts, or first cousins and inherit by right of representation [Art. 1064, CC]

It is the act by virtue of which, the compulsory heir who concurs with other compulsory heirs in the inheritance brings back to the common hereditary mass the property which they may have received from the testator so that a division may be effected according to law and the will of the testator.

Note: Grandchildren may inherit from their grandparents in their own right, i.e., as 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 this case, the grandchildren are not obliged to bring to collation what their parent has received gratuitously from their grandparent.

In reducing inofficious donations, the last to be donated should be the first to be reduced.

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Surviving spouse is not obliged to collate.

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(3) Neither shall donations to the spouse of the child be brought to collation; but if they have been given by the parent to the spouses jointly, the child shall be obliged to bring to collation one-half of the thing donated. [Art. 1066, CC]

What to Collate (1) Any property or right received by gratuitous title during the testator’s lifetime [Art. 1061, CC] (2) All that they may have received from the decedent during his lifetime. [Art. 1061, CC] (3) Expenses incurred by the parents in giving their children a professional, vocational or other career shall not be brought to collation unless the parents so provide, or unless they impair the legitime; but when their collation is required, the sum which the child would have spent if he had lived in the house and company of his parents shall be deducted therefrom. [Art. 1068, CC] (4) Any sums paid by a parent in satisfaction of the debts of his children, election expenses, fines, and similar expenses shall be brought to collation. [Art. 1069, CC]

Note: Parents are not obliged to bring to collation in the inheritance of their ascendants any property which may have been donated by the latter to their children. [Art. 1065, CC]

E. PARTITION AND DISTRIBUTION OF ESTATE E.1. IN GENERAL Separate, Divide, Assign. Partition is the separation, division and assignment of a thing held in common among those to whom it may belong. The thing itself or its value may be divided. [Art. 1079, CC]

Note: Only the value of the thing donated shall be brought to collation.

Owned in common. Before partition, the whole estate of the decedent is owned in common by the heirs. [Art. 1078, CC]

PROPERTIES NOT SUBJECT TO COLLATION

Thing or value may be divided. [Art. 1079]

Absolutely no collation Expenses for support, education (only elementary and secondary), medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment, or customary gifts [Art. 1067, CC]

Acts deemed partition. Every act which is intended to put an end to indivision among heirs and legatees or devisees is deemed a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction. [Art. 1082, CC]

Generally not imputable to legitime/ cannot be collated, subject to exceptions (1) Expenses incurred by parents in giving their children professional, vocational or other career unless the parents so provide, or unless they impair the legitime. [Art. 1067, CC] (2) Wedding gifts by parents and ascendants, consisting jewelry, clothing and outfit, except when they exceed 1/10 of the sum disposable by will. [Art. 1070, CC]

A void partition may be valid if: (1) The will was in fact a partition (2) The beneficiaries of the void will were legal heirs The titles of acquisition or ownership of each property shall be delivered to the co-heir to whom said property has been adjudicated. [Art. 1089, CC]

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Prohibition to Partition (1) The prohibition to partition for a period not exceeding 20 years can be imposed even on the legitime. (2) If the prohibition to the 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.

JUDICIAL vs. EXTRAJUDICIAL PARTITION Judicial – Partition done by Court pursuant to an Order of Distribution which may or may not be based on a project of partition. Extra-judicial – partition made by the decedent himself by an act inter vivos or by will or by a third person entrusted by the decedent or by the heirs themselves. [Paras]  Partition Inter Vivos: It is one that merely allocates specific items or pieces of property on the basis of the pro-indiviso shares fixed by law or given under the will to heirs or successors. [Art. 1080, CC]

Effects of Inclusion of Intruder in Partition [Art. 1108, CC] (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. The partition with respect to the mistaken heir is void. [Sempio-Dy]

Who May Effect Partition (1) The Decedent, during his lifetime by an act inter vivos or by will [Art.1080, CC] (2) The decedent’s heirs [Art.1083, CC] (3) A competent court [Art. 1083,CC] (4) A third person not an heir designated by the decedent [Art.1081, CC] Who Can Demand Partition (1) Compulsory heir (2) Voluntary heir upon fulfillment of condition if any [Art. 1084, CC] (3) Legatee or devisee (4) Any person who has acquired interest in the estate

Right of Redemption in Partition Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor [Art. 1088, CC]

When Partition Cannot Be Demanded (1) When expressly Prohibited by the testator for a period not exceeding 20 years [Art. 1083, CC] (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

Strangers – those who are not heirs on the succession.

E.2. EFFECTS OF PARTITION Effect A partition legally made confers upon each heir the exclusive ownership of the property adjudicated to him [Art. 1091, CC] Warranty 361

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After the partition has been made, the co-heirs shall be reciprocally bound to warrant the title to, and the quality of, each property adjudicated [Art. 1092, CC]

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The obligation of warranty among co-heirs shall cease in the following cases: (1) The testator himself has made the partition  Unless it appears, or it may be reasonably presumed, that his intention was otherwise, but the legitime shall always remain unimpaired. (2) When it has been so expressly stipulated in the agreement of partition  Unless there has been bad faith (3) When the eviction is due to a cause subsequent to the partition, or has been caused by the fault of the distributee of the property. [Art. 1096, CC]

The reciprocal obligation of warranty shall be proportionate to the respective hereditary shares of the co-heirs; If any one of them should be insolvent, the other co-heirs shall be liable for his part in the same proportion, deducting the part corresponding to the one who should be indemnified. Those who pay for the insolvent heir shall have a right of action against him for reimbursement, should his financial condition improve [Art. 1093, CC]

E.3. RESCISSION AND NULLIFICATION OF PARTITION Causes for Rescission or Annulment (1) A partition may be rescinded or annulled for the same causes as contracts. [Art. 1097, CC] (2) A partition, judicial or extra-judicial, may also be rescinded on account of lesion, when any one of the co-heirs received things whose value is less by at least onefourth, than the share to which he is entitled, considering the value of the things at the time they were adjudicated [Art. 1098, CC]  This article applies only to cases of partition among-coheirs  Lesion is the injury suffered in consequence of inequality of situation by one party who does not receive the full equivalent for what she gives in a sale or any commutative contract (3) The partition made by the testator cannot be impugned on the ground of lesion, except when the legitime of the compulsory heirs is thereby prejudiced, or when it appears or may be reasonably be presumed, that the intention of the testator was otherwise. [Art. 1099, CC]

An action to enforce the warranty among the co-heirs must be brought within ten years from the date the right of action accrues. [Art. 1094, CC] If a credit should be assigned as collectible, the co-heirs shall not be liable for the subsequent insolvency of the debtor of the estate, but only for his insolvency at the time the partition is made. [Art. 1095, CC] The warranty of the solvency of the debtor can only be enforced during the five years following the partition. Co-heirs do not warrant bad debts, if so known to, and accepted by the distributee. But if such debts are not assigned to a co-heir, and should be collected, in whole or in part, the amount collected shall be distributed proportionately among the heirs. [Art. 1095, CC] End of Warranty

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(4) Preterition of a compulsory heir in the partition [Art. 1104, CC]:  Partition shall not be rescinded unless bad faith or fraud on the part of other heirs is proved.  The culpable heirs shall share in the damages of the prejudiced compulsory heir proportionately. (5) A partition which includes a person believed to be an heir, but who is not, shall be void only with respect to such person. [Art. 1105, CC]

CIVIL LAW

Nullity – the act is supposed to never have existed Rescission – the act is valid at the origin though it afterwards became ineffective Important Periods in Partition Testator, if publicly known to 1 month or be insane, burden of proof is less before on the one claiming validity of making a will the will Maximum period testator can 20 years prohibit alienation of dispositions 5 years from To claim property escheated delivery to the to the State State To report knowledge of violent 1 month death of decedent lest he be considered unworthy 5 years from Action for declaration of the time incapacity & for recovery of disqualified the inheritance, devise or person took legacy possession 30 days from Must signify issuance of acceptance/repudiation order of otherwise, deemed accepted distribution 1 month form Right to repurchase hereditary written notice rights sold to a stranger by a of sale co-heir To enforce warranty of title/quality of property 10 years adjudicated to co-heir from the time right of action accrues To enforce warranty of 5 years from solvency of debtor of the partition estate at the time partition is made 4 years from Action for rescission of partition partition on account of lesion

The action for rescission on account of lesion shall prescribe after four years from the time the partition was made. [Art. 1100, CC] The heir who is sued shall have the option of indemnifying the plaintiff for the loss, or consenting to a new partition Indemnity may be made: (1) By payment in cash or (2) By the delivery of a thing of the same kind and quality as that awarded to the plaintiff. If a new partition is made, it shall affect neither those who have not been prejudiced nor those who have not received more than their just share [Art. 1101, CC] An heir who has alienated the whole or a considerable part of the real property adjudicated to him cannot maintain an action for rescission on the ground of lesion, but he shall have a right to be indemnified in cash [Art. 1102, CC] The omission of one or more objects or securities of the inheritance shall not cause the rescission of the partition on the ground of lesion, but the partition shall be completed by the distribution of the objects or securities which have been omitted. [Art. 1103, CC] Difference of Nullity from Rescission 363

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I. Definition of Agency

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or actions; and on the part of the agent there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. [Victorias Milling v. CA]

A. AS A TYPE OF CONTRACT Art 1868. By a contract of agency, 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.

A.3. BEING A CONTRACT, IT HAS COC (1) Consent But the legal relationship may still arise even without consent (2) Object: the performance of acts by the agent in representation of the principal (3) Cause: it is presumed to be for compensation

A.1. ELEMENTS (STATUTORY): (a) (b) (c)

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

B. AS A LEGAL RELATIONSHIP It is possible for an agency to arise even without a contract. In such cases, an agency is more properly described as a legal relationship.

A.2. ELEMENTS (JURISPRUDENTIAL) (a) (b) (c) (d)

There is consent, express or implied of the parties to establish the relationship The object is the execution of a juridical act in relation to a third person The agent acts as a representative and not for himself The agent acts within the scope of his authority

It is (a relationship) whereby one party, called the principal, authorizes another, called the agent, to act for and in his behalf in transactions with third persons. [Rallos v. Felix Go Chan]

Note: the first two elements reflect the elements given by 1868, while the last two elements merely limit the acts of the agent, i.e. violation of these elements does not mean that no agency was created.

C. EFFECTS OF AGENCY

There must be a showing of consent on the part of an alleged principal to allow an alleged agent to act on her behalf. [Bordador v. Luz]

C.2. EXTENSION (REPRODUCTION) OF THE PERSONALITY OF THE PRINCIPAL THROUGH THE AGENT

C.1. INTEGRATION (MERGER) OF THE PERSONALITY OF THE PRINCIPAL AND THE AGENT

Mere closeness of relationship is not tantamount to an agency relationship. [Apex v. Southeast Mindanao Mining]

C.3. CONSEQUENCES (1) Merger In an agency relationship, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. [Orient Air Services v. CA]

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II. Powers

(2) Agent is not a real party in interest The agent is not a party to the contract between the principal and the third person. He is not a real party in interest and cannot therefore sue in his own behalf on a contract for his principal, except if he is an assignee of such contract. [Uy and Roxas v. CA]

A. RIGHTS OF AGENTS A.1. COMPENSATION Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary.

(3) Imputed Knowledge Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. [Francisco v. GSIS]

The effect of this presumption is that an agent does not need to prove that the agency is for a fee, while the principal must prove that it is not if he contests it.

Art 1909. The agent is responsible not only for

fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.

The theory of imputed knowledge ascribes knowledge of the agent to the principal, not the other way around. [Sunace Internation v. NLRC]

Note that an agent is judged with less rigor when there is no compensation.

The general rule is that the principal is chargeable with and bound by the knowledge of or notice to his agent, received while the latter was acting as such. The well-established exception is where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. [Cosmic Lumber v. CA]

(1) Procuring Cause To be entitled to compensation, the agent’s services must be the procuring cause of the transaction, i.e., it must contribute towards bringing about such transaction. [Danon v. Brimo] On the other hand, brokers must only show that they “set the sale in motion” in order to be entitled to their commission. [Tan v. Gullas]

(4) Bad faith of the Agent is Bad faith of the Principal [Caram v. Laureta]

The agent is entitled to commission even if the (transaction) is consummated after the revocation of his authority, if the revocation was done in bad faith by the principal to avoid payment of commission. [Infante v. Cunanan]

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(2) Test

CIVIL LAW Power: The Agent may himself be the lender to his Principal.

Even if the agent is not the procuring cause of the transaction, he may still be awarded a sum of money if he is “somehow instrumental in bringing the parties together again and finally consummating the transaction.” [Prats v. CA]

(2) Lend Money To Conditions: (a) The agent is authorized to lend money at interest (b) The principal consents Power: The Agent may himself borrow the money at interest.

When there is a close, proximate and causal connection between the agent’s efforts and labor and the principal’s sale of his property, the agent is entitled to commission. [Manotok Brothers v. CA]

Note: The language of the provision is mandatory. The Agent cannot therefore lend the money to the Agency at a higher rate of interest or borrow from it without the Principal’s consent.

(3) Forfeiture of Right to Commission An agent who takes a secret profit without revealing the same to his principal is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury, or he obtained better results, or the agency is gratuitous, or that usage or custom allows it. The rule is to prevent the possibility of any wrong, not to remedy an actual damage. [Domingo v. Domingo]

A.3. APPOINT A SUBSTITUTE Art. 1892. The agent may appoint a substitute

if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void.

A.2. LEND MONEY TO / BORROW MONEY FROM THE AGENCY Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal.

Art. 1893. In the cases mentioned in Nos.1 and

2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution.

(1) Borrow Money From Conditions: (a) The agent is empowered to borrow money (b) The agent must borrow at the current rate of interest

(1) When Allowed: when the principal does not prohibit it. Presumption: the agent is authorized to appoint a substitute

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(2) Responsibility for the Substitute General Rule: If the Agent validly appoints a substitute, the Principal is liable for the Substitute’s acts

CIVIL LAW

The law on agency allows the appointment by an agent of a substitute in the absence of an express agreement to the contrary. (An agent’s act of entrusting jewelry to a substitute is therefore not an abuse of confidence such as to constitute estafa) [Serona v. People]

Exception: [1892] (a) If the agent appoints a substitute although he was not given the power to appoint one (b) If the agent was given the power to appoint a substitute, and the principal did not designate the person he can appoint, but he appoints someone who is notoriously incompetent or insolvent.

A.4. RETAIN IN PLEDGE THE OBJECTS OF AGENCY Art. 1914. The agent may retain in pledge the

things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.

Art 1912. The principal must advance to the

(3) Validity of the Substitute’s acts

agent, should the latter so request, the sums necessary for the execution of the agency.

If the principal prohibits the agent from appointing a substitute, then all the acts of the substitute are void.

Should the agent have advanced them, the principal must reimburse him therefore, even if the business or undertaking was not successful, provided the agent is free from fault.

What may a third person who has contracted with a prohibited Substitute do? (a) If the principal is aware that a Substitute is acting on his behalf without authority yet he fails to repudiate the substitute’s acts, then there may be implied agency (act will not be void) (b) If the principal was not aware of the acts, or that when he became aware he repudiates the acts, then the Agent may be held liable.

The reimbursement shall include interest on the sums advanced, from the day on which the advance was made.

Art. 1913. The principal must also indemnify

the agent for the damages which the execution of the agency may have caused the latter, without fault or negligence on his part. (1) Two scenarios under which the Agent may retain in pledge the objects of the agency: (a) if the agent advances funds for the execution of the agency, or (b) if the agent has suffered injury caused by the execution of the agency

(4) The Substitute is an Alternate, not a Delegate An agent cannot delegate to another the same agency. Potestas delegate non delegare potest. Re-delegation is detrimental to the principal as the second agent has no privity of contract with the principal... Article 1892 allows the agent to appoint a substitute (not a delegate). [Baltazar v. Ombudsman]

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for P5,000,000 to a third person, then that would be an advantageous act.

B. OBLIGATIONS OF AGENTS B.1. ACT WITHIN SCOPE OF AUTHORITY Art. 1881. The agent must act within the scope

But the principal may later contest whether such act is indeed advantageous to him.

(1) In General An agent can bind his principal if he acts within the scope of authority granted to him.

However, if a special power of attorney is required for the transaction, then the agent must obtain it. Advantageous and conducive acts do not apply if a SPOA is required. [c.f. Woodchild v. Roxas]

of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a)

Powers of attorney are generally construed strictly. The general rule is that the power of attorney must be pursued within legal strictures, and the agent can neither go beyond it; nor beside it. The act done must be legally identical with that authorized to be done. [Woodchild v. Roxas]

(4) Collateral Acts (The agent has the implied authority) to do all of the collateral acts which are the natural and ordinary incidents of the main act or business authorized. [Guinhawa v. People]

(2) Conducive Acts Acts “conducive to the accomplishment of the purpose of the agency” are deemed to be within the agent’s authority.

Art. 1900. So far as third persons are

(5) With Respect to Third Persons

concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. (n)

The power of attorney does not need to list everything the agent is allowed to do and the agent does not need to go to the principal for authorization for each new act he seeks to perform.

The Situation: the principal provided limitations to the authority of the agent orally or through a document other than the written power of attorney.

(3) Advantageous Acts

Art. 1882. The limits of the agent's authority

Rule: The third person can rely completely on the written power of attorney to determine whether the agent’s act is within the limits of his authority.

The agent may do acts more advantageous to the principal than what is indicated in the power of attorney. For example, if the agent was authorized to sell a car for P2,500,000 but was able to sell it

Exception: If the third person is aware of the secret understanding between the principal and the agent.

shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715)

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Art. 1885. In case a person declines an agency,

(6) Authority of Corporate Officers The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, bylaws, or relevant provisions of law. [San Juan v. CA]

he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (n)

Art. 1899. If a duly authorized agent acts in

A corporate officer intrusted with the general management and control of its business, has implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. As such officer, he may, without any special authority from the Board of Directors, perform all acts of an ordinary nature, which by usage or necessity are incident to his office... Where similar acts have been approved by the directors as a matter of general practice, custom and policy, the general manager may bind the company without formal authorization of the board of directors. [Board of Liquidators v. Kalaw]

accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n) If the Principal was aware of certain circumstances, and the agent simply followed the former’s instructions without being aware of those circumstances thereby causing injury to a third person, then the principal cannot blame the agent later on.

B.3. CARRY OUT THE AGENCY (1) In General

Art. 1884 par. 1 The agent is bound by his

WITH

acceptance to carry out the agency, and is liable for the damages which, through his nonperformance, the principal may suffer.

Art. 1887. In the execution of the agency, the

The agent is bound to carry out his duties as agent once he accepts the authorization granted by the principal. Else, he is liable for damages if the principal suffers injury.

B.2. ACT IN INSTRUCTIONS

ACCORDANCE

agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. (1719)

(2) Continuing Business

The agent must act within the specific limits of his authority (See B.1.) and perform the acts in the manner dictated by the principal.

Art. 1884 par. 2 He must also finish the

business already begun on the death of the principal, should delay entail any danger. (1718)

If the principal did not provide instructions as regards the manner, then the agent must do all that a good father of a family would do.

(3) In case of Withdrawal

Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (1737a)

What if a person refuses to be an agent but goods have already been forwarded to him?

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Note: Agency is a fiduciary relationship. A breach of that relationship will expose the agent to liability for damages.

Even if the agent withdraws, he must continue to act until the principal “has had reasonable opportunity to take the necessary steps to meet the situation.” The wording now is more forgiving for the agent because in the old Civil Code, the agent had to wait for the principal “is able to take the necessary measures to fill his place.” Now it’s sufficient that the principal had opportunity to appoint without actually doing so.

(2) Over Property Being Administered

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given;

(4) Agent not required to carry out

Art. 1888. An agent shall not carry out an

The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject matter of the agency, he is stopped from acquiring or asserting a titled adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. [Severino v. Severino]

agency if its execution would manifestly result in loss or damage to the principal. (n) Example: If the Agent is obliged to buy palay whose price suddenly spiked and, if bought, will lead to the principal’s ruin, then the agent may not carry out the agency.

B.4. ADVANCE FUNDS Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the principal is insolvent. (n)

(3) Double Sales

Conditions: (a) There is a stipulation stating that the agent shall advance the necessary funds, and (b) The principal must be solvent

regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. (n)

B.5. PREFER THE PRINCIPAL’S INTEREST OVER HIS OWN

Art. 1917. In the case referred to in the

Art. 1916. When two persons contract with

preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. (n)

(1) In General

Art. 1889. The agent shall be liable for

damages if, there being a conflict between his interests and those of the principal, he should prefer his own. (n)

Art. 1544. If the same thing should have been

sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it

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should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

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Art. 1891. Every agent is bound to render an

account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (1473)

Every stipulation exempting the agent from the obligation to render an account shall be void. (1720a) If an agent receives a secret gift from a client, he must report it and deliver it to the principal. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency. If he makes a secret profit, he is guilty of breach of his loyalty, and he forfeits his right to his commission. [Domingo v. Domingo]

The Situation: the principal and the agent each contracts with different people for the same thing, and the contracts are incompatible. Parsed: (1) General Rule: the contract “of a prior date” shall prevail IF (a) None of the buyers had obtained possession over the movable, or (b) None of the buyers had recorded, possessed or has title over the immovable BUT IF (a) The property is a movable, then the person who takes first possession in good faith (PGF) prevails (b) The property is immovable, then the person who first records it in good faith in the register of deeds prevails. If there is no record, the PGF prevails. If there is no PGF, then the person who has the oldest title. (record > PGF > title)

B.7. PAY INTEREST Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (1724a)

Note: The agent may only borrow funds from the agent if he has been authorized to lend money at interest [Art 1890]. If he does borrow, then he should pay interest for the amount he borrowed.

B.8. LIABLE FOR FRAUD/NEGLIGENCE

Liability (a) If the Agent was in good faith, then the principal is liable for damages to the third person whose contract won’t be honoured (b) If the Agent was in bad faith, then he is liable for damages to the third person and to the principal [see Art 1889]

Art. 1909. The agent is responsible not only for

fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. (1726) To whom should the fraud or negligence be directed? Art 1909 does not say. But it has been applied against an agent for negligence

B.6. RENDER ACCOUNT/DELIVER

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which caused damage against itself, thereby preventing it from recovering from the principal what it lost. [see Metrobank v. CA 1991]

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b. The agent exceeded the scope of his authority c. The agent undertook to secure the principal’s ratification, and d. The principal did not ratify the contract If the agent acts beyond the scope of his authority, the third person can recover from either the principal or the agent but not from both. [Eurotech v. Cuizon]

C. LIABILITY OF AGENTS C.1. WHEN SOLIDARY Art. 1894. The responsibility of two or more

agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723)

(2) Acts in His Own Name

Art. 1883. If an agent acts in his own name, the

(1) Each of the agents can be held solidarily liable for the non-fulfilment of the agency or for injuries caused by fault or negligence IF: (a) The principal simultaneously appoints more than one agent, and (b) There is an express stipulation that such agents are solidarily liable (2) Not solidarily liable IF The fellow agents acted beyond the scope of their authority.

principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. (1717)

C.2. WHEN PERSONAL (1) Expressly Bound or In Excess of Authority General Rule: the agent who transacts as an agent is not personally liable to the third person for the obligation entered into

This is called an “Agency with an undisclosed principal. If the agent enters contract without notice to the third party that he was acting as an agent, the agent is directly bound as a party to the contract, and the principal and the third person have no right of action against one another.

Exceptions: (a) When the agent expressly binds himself (b) When the agent exceeds the limits of his authority without giving the person he is transacting with sufficient notice of his powers [Art 1897]

What if the contract “involves things belonging to the principal?” Does the agent go away scot-free?

(c) When all of the ff are present: a. The person transacting with the agent is aware of the limits of the agent’s authority

The exception under Art 1883 “does not say that (a third party) does not have, and cannot bring an action against the agent also.” [Beaumont v. Prieto]

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III. Express vs Implied Agency

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Requisites: (a) The alleged principal should be aware of the acts of the alleged agent (b) The alleged principal has had reasonable opportunity under the circumstances to repudiate the acts of the alleged agent (c) A third party has transacted with the alleged agent without being made aware of the alleged agent’s lack of authority (d) There were no facts or circumstances which may raise any suspicion on the part of the third person that the agent was not authorized

A. EXPRESS Art. 1869. Agency may be express, or 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.

Agency may be oral, unless the law requires a specific form. (1710a)

Where no third party was prejudiced, and it was emphasized in no uncertain terms to the alleged agent that no agency exists (therefore both principal and agent knew that the agent had no authority) then Art 1869 has no room for operation. [Uniland Resources v. DBP]

The manner by which consent to establish the agency is manifested may be express or implied. It is express when the principal expressly authorizes the agent and the agent expressly accepts such authority.

B.2. ACTS OF THE AGENT Acceptance of the agent may be implied from (1) His acts which carry out the agency (2) His silence or inaction according to the circumstances

B. IMPLIED Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. (n)

Art. 1871. Between persons who are present,

the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. (n)

Articles 1869 and 1870 show that an agency relationship may be implied from the acts of the principal or those of the agent.

Art. 1872. Between persons who are absent,

the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) 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. (n)

B.1. ACTS OF THE PRINCIPAL The act of the principal which constitutes consent may be in the form of silence, lack of action, or failure to repudiate the agency knowing that another person is acting on his behalf without authority. [See Art 1869]

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A.1. TWO MODES

(1) Difference: Under Art 1871, the agent impliedly accepts the agency in the presence of the principal. Under Art 1872, they are both “absent,” i.e. they are not within the presence of each other. Generally, there is no implied acceptance except for the 2 cases.

(1) Specific Information If a person specially informs another that he has given a power of attorney to a third person, then that third person becomes his agent with respect to the person who received the special information.

(2) 1871 Conditions (a) The principal delivers his power of attorney to the agent (b) The agent receives it without any objection, and (c) The agent must be aware of the contents of the document containing the powers of attorney Only then will the agent be deemed to have impliedly accepted.

(2) Public Advertisement If a person states by public advertisement that he has given a power of attorney to a third person, then that third person becomes his agent with respect to any person.

A.2. HOW RESCINDED Art. 1873 par.2. The power shall continue to be

(3) Art 1872 Conditions General Rule: there is no implied acceptance from the silence of the agent if the principal and the agent are not within each other’s presence.

in full force until the notice is rescinded in the same manner in which it was given. (n)

Note: This is agency by estoppel and not implied agency because no acceptance by the agent is required.

Exceptions: (a) The principal transmits the power of attorney (b) The principal entrusts the power of attorney by letter or telegram, and the power of attorney pertains to a business that the agent is habit

B. BASED ON JURISPRUDENCE By remaining silent and thereby clothing the alleged agent with authority, the alleged principal is barred from questioning the alleged agent’s authority. [Pahud v. CA, applying estoppel in general]

IV. Agency by Estoppel

B.1. REQUISITES

A. BASED ON STATUTE

The requisites for agency by estoppel to exist are: (a) The principal manifested a representation of the agent’s authority or knowingly allowed the agent to assume such authority (b) The third person, in good faith, relied upon such representation

Art. 1873 par.1. If a person specially informs

another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person.

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(c) Relying upon such representation, such third person has changed his position to his detriment.

CIVIL LAW

To be a General Agent, it is sufficient that the listed authorized transactions apparently cover all that is required to run the business of the principal. It is not necessary that the power granted actually says “all the business of the principal.” [Dominion Insurance v. CA]

Agency by estoppel is similar to the doctrine of apparent authority. It requires proof of reliance upon the representation and that the representation predated the action which relied on the representation. [Litonjua v. Eternit]

B. SPECIAL AGENCY If the agent handles only specific aspects of the principal’s business and not all of it, the he is a special agent. [See Art 1876]

With respect to hospitals in relation to physicians who are independent contractors, there are only two requisites [Nogales v. Capitol Medical]: (a) (Representation) The hospital acted in a manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital (b) (Reliance) The plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence

General Agency

Special Agency

The Agent handles all The Agent only of the business of the handles specific principal. aspects of the business.

VI. Agency Couched In General Terms (ACGT) This refers to a type of authority granted to the agent, not to the scope.

V. General vs. Special Agency

If the power granted refers to acts of administration, then the agency is properly called an ACGT.

A. GENERAL AGENCY Art. 1876. An agency is either general or

General Agency

ACGT

The former comprises all the business of the principal. The latter, one or more specific transactions. (1712)

This refers to the scope of the agency, i.e. it comprises all of the business.

This refers to the type of authority granted, i.e. only acts of administration.

special.

Whether an agency is general or special depends on the scope of the agency. If the agency comprises all the business of the principal, the agency is general. Else, it is special.

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VII. Agency Requiring Special Power of Attorney

CIVIL LAW

A Special Power of Attorney (SPOA) is not a document. Instead it pertains to the nature of the power granted to the agent. What matters is the specificity of the authority granted, not the name given to the instrument. If a power of attorney is denominated as a “general power of attorney” but it contains a specific power to sell, then there is no need to execute a separate SPOA to confer such power to sell. [Veloso v. CA]

A. IN GENERAL Like ACGT, this also refers to a type of authority granted to the agent, i.e. acts of strict dominion. Article 1878. Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) 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; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. (n)

The requirement of a SPOA refers to the nature of the authorization, not its form. A SPOA may be oral or written, but if it is oral, it must be duly established by evidence. [Lim Pin v. Liao Tan] Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (n)

Art. 1880. A special power to compromise does not authorize submission to arbitration. (1713a)

B. EFFECT OF ABSENCE OF SPECIFIC AUTHORITY B.1. IN GENERAL If an agent performs a transaction under Art 1878 without specific authority therefor, the transaction is unenforceable. However, the agent can still seek the principal’s ratification. [Dungo v. Lopena]

B.2. SALE OF LAND OR ANY INTEREST THEREIN Art. 1874. 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. (n)

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Elements: (a) Sale (b) Of land or any interest therein

(3) In case of certain necessity or emergency, an agency by necessity may arise. [De Leon]

Required: The authorization must be (a) Written, and (b) Specific

IX. Rights and Obligations of Principal

Only specific authorization is required: (a) If the contract is a sale of an immovable other than land (b) If the contract transmits ownership over an immovable other than land (c) If the contract transmits ownership over land thru a transaction other than a sale

A. OBLIGATIONS

B.3. EFFECT AUTHORIZATION

OF

A.1. COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. (1727)

SPECIFIC

Where an instrument specifies and defines powers and duties, all such powers and duties are limited and confined to those which are specified and defined, and all other powers and duties are excluded. [BPI v. De Coster]

VIII. Agency Operation of Law

If the agent acts within the scope of his authority, then the principal must comply. Otherwise, the principal is bound to comply only if he ratifies the agent’s act that was done beyond the scope of his authority.

By

(1) Acts Within the Scope of Authority (a) Those expressly specified in the power of attorney (b) Conducive acts (c) Advantageous acts (d) Collateral acts

Normally, an agency is established only if there is mutual intent on the part of the principal and agent to establish the agency. [Victorias Milling v. CA]

(2) Ratified Acts

An agency may be established by operation of law, however, in the following cases: (1) In a partnership, every partner is an agent of the partnership for the purpose of its business [Art. 1818]; (2) Agency by estoppel (both statutory and jurisprudential), where the principal’s actions would reasonably lead a third person to conclude that an agency exists;

Art. 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agent's acts. (n)

If the principal ratifies or signifies to ratify the act of the agent, then that effectively binds the third person to the unauthorized act of the agent. The principal, by implication, also

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Art. 1918. The principal is not liable for the

becomes bound to the act simply by signifying his willingness to ratify.

expenses incurred by the agent in the following cases: (1) 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; (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof;

By benefitting from the unauthorized act of an agent, the principal is said to have ratified the acts of the agent and is estopped from denying said authority. [Filipinas Life v. Pedroso] In some cases, the mere acceptance of benefits is not tantamount to ratification by the principal. The principal must have full knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent. If the material facts were suppressed or unknown, there can be no ratification. [Manila Memorial v. Linsangan] (3) When Estoppel Applies

(4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (n) General Rule: the principal must advance or reimburse (with interest) the sums necessary to execute the agency.

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. (n)

Exceptions: (1) Expenses incurred through acts which contravene the principal’s instructions, and the principal does not want to derive benefit therefrom (2) Expenses due to the fault of the agent (3) Expenses incurred by the agent with the knowledge that an unfavourable result would ensue, and the principal was unaware (4) If there is a stipulation that expenses would be borne by the agent or that he would be allowed only a certain sum

Even if there was no express authority, the principal is still solidarily liable because he allowed the agent to act as if he had authority. (This is not actually estoppel, but implied agency.)

A.2. ADVANCE OR REIMBURSE SUMS NECESSARY Article 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault.

A.3. INDEMNIFY THE AGENT FOR INJURY Art. 1913. The principal must also 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. (1729)

The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. (1728)

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The Situation: the agent suffers damage as a result of performing his duties as an agent, and such damage did not result from the agent’s fault or negligence

CIVIL LAW

the agent for all the consequences of the agency. (1731) If several principals appoint an agent for a common transaction, then they are all solidarily liable to the agent.

A.4. COMPENSATE THE AGENT

B.3. IF THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL

Art. 1875. Agency is presumed to be for a

compensation, unless there is proof to the contrary. (n)

Art. 1883. If an agent acts in his own name, the

principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

Steps to determine whether the agent is entitled to compensation: (1) Determine whether the person is an agent or a broker (2) If he is an agent, determine whether he is the procuring cause, i.e. if there is a close, proximate and causal relation between the agent’s efforts and the sale

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. (1717)

B. LIABILITY OF THE PRINCIPAL B.1. IN GENERAL The principal is bound and liable for the acts of the agent done within the scope of his authority (express, conducive, advantageous, and collateral acts), for unauthorized acts which the principal has ratified and for acts which is estopped from denying.

General Rule: If the agent acts in his own name, then the contract is between the agent and the third person. Neither the third person nor the principal has a right of action against the other. Except: If the contract involves things belonging to the principal, then the principal is also liable to the third party. (Agency with an Undisclosed Principal) It is not the case that the agent escapes liability by simply contracting things belonging to the principal.

B.2. BE SOLIDARILY LIABLE Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. (n)

There are two effects of the exception, according to jurisprudence: (1) Principal and third persons now have a right of action against each other. [Syjuco v. Syjuco] (2) The principal is not bound by the contract if the act is beyond the scope of the agent’s

If the principal allowed the agent to act as if he had full powers, then the principal is solidarily liable with the agent even he exceeds his authority.

Art. 1915. If two or more persons have

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authority. [PNB v. Agudelo] This operates as an exception to the exception.

CIVIL LAW

X. Irrevocable Agency

A mere statement in the power of attorney that it is coupled with an interest is not enough. The power of attorney must state what that interest is. [Del Rosario v. Abad]

Art. 1920. The principal may revoke the agency

Lim v. Saban enumerates certain rules with

at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. (1733a)

respect to an agency coupled with an interest: (1) It is one where there is mutual benefit on the part of the principal and agent, or the principal and third person (2) The agency coupled with an interest cannot be revoked for as long as the interest of the agent or third person exists (3) The agent’s interest must be “the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation.” (4) If the agent’s interest is limited to compensation, then it is not an agency coupled with an interest. [Lim v. Saban]

Art. 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. (n)

Art. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (n)

The agency coupled with an interest is irrevocable because ”the agency becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of the agent and third persons which are affected. [Republic v. Evangelista]

General Rule: The principal may revoke the agency at will and compel the agent to return the power of attorney Exception: An agency cannot be revoked if: (1) A bilateral contract depends upon it; or (2) It is the means of fulfilling an obligation already contracted; or (3) A partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable; (4) If it is an agency couple with an interest (a) If the agency was constituted in the common interest of the principal and of the agent, or (b) If the agency was constituted in the interest of a third person who has accepted the stipulation in his favour.

An agency coupled with an interest can still be revoked, but only for just cause, i.e. bad faith, breach of confidence, or betrayal of trust. [Coleongco v. Claparols]

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XI. Modes of Extinguishment

CIVIL LAW

The principal can revoke the agency even if the period fixed in the contract has not yet expired. [CMS Logging v. CA] The contract of agency can subsist only so long as the principal has confidence in his agent, because from the moment such confidence disappears, the principal has the perfect right to revoke the power. [Barreto v. Santa Maria]

A. IN GENERAL Art. 1919. Agency is extinguished:

(1) By its revocation; (2) By the withdrawal of the agent; (3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent; (4) By the dissolution of the firm or corporation which entrusted or accepted the agency; (5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted. (1732a)

Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. (n)

Qualifications: The right of the principal to terminate the authority of his agent is absolute and unrestricted, except that he is liable for damages in case: (1) He revokes the agency in bad faith [Danon v. Brimo (1921)]; or (2) He revokes the agency before the expiration of the period stipulated in the agency contract.

The provision enumerates only those which are peculiar to agency and is, therefore, not exclusive. Agency may also be extinguished by the modes of extinguishment of obligations in general [De Leon (2010)] The modes of extinguishment may be classified into three: (1) By agreement (Nos. 5 and 6); (2) By subsequent acts of the parties: (a) By the act of both parties or by mutual consent; or (b) By the unilateral act of one of them

Exception: Agency cannot be revoked if it is coupled with an interest, such that: (1) A bilateral contract depends upon it; (2) It is the means of fulfilling an obligation already contracted; or (3) A partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.

(Nos. 1 and 2); (3) By operation of law (Nos. 3 and 4).

B. REVOCATION B.1. IN GENERAL Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. (1733a)

General Rule: The principal may revoke the agency at will.

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B.2. WHEN REVOCATION IS BINDING ON THIRD PERSONS

AGENCY

NOT

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B.4. DIRECT MANAGEMENT BY THE PRINCIPAL

(1) When Notice is Required

Art. 1924. The agency is revoked if the principal

Art. 1921. If the agency has been entrusted for

directly manages the business entrusted to the agent, dealing directly with third persons. (n)

(2) When a Third Person in Good Faith Has No Knowledge of Revocation

If the principal believes that the agent is in breach of the contract and thereby decides to deal with the business directly, then the agency is said to be revoked. [CMS Logging v. CA] The mere act of direct management by the principal is not enough to revoked the agency.

the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (1734)

Art. 1922. If the agent had general powers,

B.5. SPECIAL AUTHORITY REVOKES THE GENERAL AUTHORITY WHERE A SPECIAL MATTER IS INVOLVED

revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. (n)

Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (n)

What does “agent with general powers” mean? Most likely, it is an agent authorized to transact with the general public in contradistinction to the agent who contracts with specified persons under Art. 1921.

Art. 1926 refers to a general agency (entirety of business) and special agency (only aspects of the business). If Agent 1 is given a general agency, and Agent 2 is later given a special agency, then Agent 1 can no longer perform the powers granted to Agent 2 under the special agency.

B.3. APPOINTMENT OF NEW AGENT Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. (1735a)

B.6. WHEN REVOKED

AGENCY

CANNOT

BE

Art. 1927. An agency cannot be revoked if a

Revocation takes effect when notice is given to the former agent, not when the new agent is appointed.

bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. (n)

Art. 1930. The agency shall remain in full force and effect even after the death of the principal,

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D.2. EXCEPTIONS

if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (n) Please refer to the Chapter Agency.

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1.

Agency Coupled with an Interest.

Art. 1930. The agency shall remain in full force

X. Irrevocable

and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (n)

C. WITHDRAWAL BY THE AGENT Art. 1928. The agent may withdraw from the

2. Contract between Agent without knowledge of Death and Third Person in Good Faith

agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (1736a)

Art. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. (1738)

General Rule: The agent may withdraw so long as he gives due notice to the principal. If the principal suffers damage because of the withdrawal, then the agent must indemnify him, except if the basis of his withdrawal is because continuing the performance of the agency is impossible without grave detriment to the agent.

3. Unfinished business

Art. 1884 par.2. He must also finish the

business already begun on the death of the principal, should delay entail any danger. (1718)

If the Agent files a complaint against his principal, then he is understood to have renounced the agency because hi act was more expressive than words and could not have caused any doubt. [Valera v. Veloso]

D.3.

DEATH OF AGENT

If the agent dies, his heirs must: (1) Notify the principal thereof; and (2) In the meantime adopt such measures as the circumstances may demand in the interest of the latter [Article 1932].

D. DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY

E. DISSOLUTION / ACCOMPLISHMENT / EXPIRATION

D.1. IN GENERAL By reason of the very nature of the relationship between the principal and agent, agency is extinguished by the death of the principal or the agent. Any act of an agent after the death of his principal is void ab initio unless the same falls under the exceptions provided for in the aforementioned Articles 1930 and 1931.

Art. 1919. Agency is extinguished:

xxx (4) By the dissolution of the firm or corporation which entrusted or accepted the agency; (5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted. (1732a)

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Accomplishment The fulfillment of the purpose for which agency was created ipso facto terminates agency even though it was expressly made irrevocable. If the purpose has not been accomplished, the agency continues indefinitely for as long as the intent to continue is manifested through words or actions of the parties. Dissolution The dissolution of a partnership or corporation which entrusted (principal) or accepted (agent) the agency extinguishes its juridical existence, except for the purpose of winding up its affairs. It is equivalent to death. Expiration (1) If created for fixed period, expiration of the period extinguishes agency even if the purpose was not accomplished. (2) If no time is specified, the courts may fix the period as under the circumstances have been probably contemplated by the parties [Art. 1197]. Otherwise, the agency terminates at the end of a reasonable period of time. Either party can terminate the relationship at will by giving notice to the other [De Leon (2010)]. The period contemplated may be implied from terms of agreement, purpose of agency, and the circumstances of the parties.

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THE FOLLOWING MAY BE SAFELY ERASED As a type of contract: a. Art 1868. i. A person binds himself to render some service or to do something ii. In representation or on behalf of another iii. With the consent or authority of the latter b. Being a contract, it has COC i. Consent But the legal relationship may still arise even without consent ii. Object: the performance of acts by the agent in representation of the principal iii. Cause: it is presumed to be for compensation

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ii. Mere closeness of relationship is not tantamount to an agency relationship. [Apex v. Southeast Mindanao Mining] iii. Without mutual intent, there is generally no agency. [Victorias Milling v. CA] 1. The principal must have the intention to appoint, thru his words or acts 2. The agent must have the intention to accept the appointment and to act upon it b. The object is the execution of a juridical act in relation to a third person i. Representation is the subject matter and basis of agency. ii. Even if the parties never intended for there to be an agency, but they later acted as if they were principal and agent, there is an agency. [Tuazon v. Heirs] c. The agent must act as a representative and not for himself i. If the agent acts for himself, it does not invalidate the contract of agency, but the agent will only be liable for breach of contract ii. Note: the agency relationship can be established even if the agent never acts as an agent d. The agent must act within the scope of his authority i. This is not a condition for the existence of the contract of agency, but only a consequence of the agency relationship ii. An agency may exist even if the agent acts beyond the scope of his authority (3) In reality, there are only two elements: consent to establish the agency + object

As a legal relationship (Common law or true agency) a. It is characterized by i. Fiduciary relationship An agency is a fiduciary relationship such that the agent is stopped from asserting a title adverse from the principal [Severino v. Severino] ii. Control Elements of Agency (1) Under the Civil Code (1868) a. A person must bind himself to render some service or to do something in representation or on behalf of another person b. It is with the consent or authority of the other person (2) By jurisprudence a. There must be consent to establish the relationship i. There must be a showing of consent on the part of an alleged principal to allow an alleged agent to act on her behalf. [Bordador v. Luz]

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Effects of Agency (1) Personality a. Integration i. The personality of the principal and the agent are merged. b. Extension i. The personality of the principal is reproduced thru the agent. (2) Authority to Act a. The agent becomes the principal by legal fiction, authorized to perform all acts which the principal would have him do. b. NA: personal acts (e.g. right to vote, make a will, take an oath) (3) The Agent is not a Real-Party-In-Interest a. The agent is only an extension of the principal’s personality i. 3rd party –(1)-- Agent –(2)— Principal 1. If there is a breach of contract (1), then only the 3rd party and the Principal may seek enforcement against one another. ii. Exception: If the agent is an assignee of the contract, then the agent may bring an action on a contract made for the principal iii. GR: The principal is the proper party to a case BUT the agent is not excuse from criminal liability [Ong v. CA] (4) Notice to the Agent is Notice to the Principal a. Otherwise known as “Imputed knowledge” [Sunace v. NLRC] b. But the reverse is not true (i.e. notice to the principal is not notice to the agent). c. Knowledge of facts by an officer or agent of a corporation in the course of his employment in relation to matters within the scope of his authority is notice to the corporation regardless

CIVIL LAW

whether such knowledge is communicated [Francisco v. GSIS] d. GR: The principal is chargeable with and bound by knowledge of or notice to the agent E: where the conduct and dealings of the agent are such as to raise a clear presumption that the agent will not communicate to the principal the facts, there is no imputed knowledge. (5) Bad faith on the part of the agent is bad faith on the part of the principal. [Caram v. Laureta]

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Nature of Agency: General and Special (1) General Agency a. To be a General Agent, it is sufficient that the listed authorized transactions apparently cover all that is required to run the business of the principal. It is not necessary that the power granted actually says “all the business of the principal.” [Dominion Insurance v. CA] b. General Agency refers to the scope of the business covered, not to the extent of discretion or responsibility given to the Agent (2) Agency Couched in General Terms a. A type of agency that only grants the agent power to perform acts of administration b. Test: if the nature of the business requires performance of certain acts repeatedly and without express authorization, then those are acts of administration (3) Specific Agency a. Refers to the scope of the agent’s authority b. The agency must comprise of one or more specific transactions, short of the entire business c. Cf. General Agency (4) Special Power of Attorney (SPA) a. It is not merely the name of a document but a description of the power granted to an agent b. Certain transactions require a SPA, and these transactions usually involve acts of strict dominion (i.e. acts of ownership) c. If the power is couched in general terms, then the agent may do only acts of administration; if the power is couched in specific terms then the agent is empowered to perform such specific act of strict dominion d. Effect of Lack of SPA

CIVIL LAW i. The transaction entered into by the agent is unenforceable 1. But the agent may still have the principal ratify it ii. If the principal is a corporation, then the specific authorization must come in the form of a Board resolution 1. Except to the extent that such power is given to the agent expressly or by reasonable implication from the circumstances [Vicente v Geraldes] iii. If the transaction is sale of a piece of land, then there must be a written and specific authorization to sell 1. Else, the sale is void

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PARTNERSHIP

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I. Contract of Partnership

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Article 1767. By the contract of partnership two

Generally, the Supreme Court has liberally construed the concept of the common fund.

or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (1665a)

Even if one of the parties argues that it did not bind itself to contribute, but did in fact contribute to the common fund, that lone is sufficient to constitute the common fund. [Philex Mining v CIR] (2) Intention to Divide Profits

A. DEFINITION

A.1. ELEMENTS (STATUTORY):

If the common fund’s work is “indispensable, beneficial and economically useful to the business” of the partners and the profit motive is the primordial reason to establish the partnership, even if there are no actual profits, then there is partnership. [AFISCO v CA]

(1) Two or more persons bind themselves to contribute money, property, or industry to a common fund, (2) with the intention of dividing the profits among themselves

A.2. ELEMENTS (JURISPRUDENCE) (1) There must be an agreement to contribute money, property or industry [Evangelista v CIR], or (2) The fact of contribution [AFISCO v CIR], and (3) There is the intention to divide profits [Evangelista v CIR], or (4) There is a joint interest in the profits [AFISCO v CIR]

B. ESSENTIAL FEATURES (1) There must be a valid contract; (2) The parties must have legal capacity; (3) There must be a mutual contribution of money, property, or industry to a common fund; (4) The object must be lawful; (5) The primary purpose must be to obtain profits and to divide the same among the parties; (6) The partnership has a juridical personality separate from individual partners [Article 1768].

The two sets of elements are generally the same: common fund + intention to divide profits. (1) Common Fund The Civil Code requires the parties “bind themselves to contribute” to a common fund. The partnership may therefore exist even before the common fund is created. The common fund may not even come from the partners themselves but may be borrowed from third persons. [Lim Tong Lim v Philippine Fishing Gear] The form of the common fund may not even be cash or property; it can be in the form of credit or industry.

B.1. LAWFUL PURPOSE Article 1770 (1). A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. If there is no lawful purpose, then the partnership agreement is void ab initio. Contracts whose purpose is contrary to law are void from the beginning. [Art1409 (1)].

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(3) Insane or demented persons; (4) Deaf-mutes who do not know how to write; (5) Incompetents who are under guardianship.

Article 1770 (2). 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.

Exceptions : The capacity of the following persons to enter into a contract of partnership, though capacitated to contract generally, are limited: (1) Those who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership [Article

Upon the dissolution of an unlawful partnership, the profits are simply confiscated by the State. The previous rule is to give such profits to a charitable institution.

1782]; (2) A corporation cannot enter into a partnership in the absence of express authorization by statute or charter.

Art 1770 (2) talks of “profits.” When it comes to the original contributions of the partners, the same must be reimbursed to them. [Arbes v Polistico]

Although a corporation cannot enter into a partnership contract, it may, however, engage in a joint venture with others [Aurbach vs.

B.2. COMMON BENEFIT Article 1770. A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners.

Sanitary Wares Manufacturing Corp] On the other hand, there is no prohibition against a partnership being a partner in another partnership [De Leon (2010)].

A partnership must be established for the common benefit of the partners. Is “common benefit” always pecuniary? Yes, based on Art 1799.

D. OBJECT D.1. OBJECT PARTNERSHIP

Article 1799. A stipulation which excludes one

OF

UNIVERSAL

A universal partnership may refer to: (1) All present property : (a) The partners contribute all the property which belongs to them to a common fund, with the intention of dividing the same among themselves, as well as the profits they may acquire therewith [Article 1778]. (b) The property contributed includes all those belonging to the partners at the time of the constitution of the partnership. (c) A stipulation for the common enjoyment of any other profits may also be made. However, the property which the partners may acquire subsequently by inheritance, legacy or donation cannot be included in such

or more partners from any share in the profits or losses is void.

B.3. JURIDICAL PERSONALITY Article 1768. 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. [n]

C. PARTIES General rule: Any person capacitated to contract may enter into a contract of partnership. The following persons cannot enter into a contract of partnership: (1) Those suffering from civil interdiction; (2) Minors;

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stipulation, except the fruits thereof

(b) Attached to such instrument must be an inventory, signed by the parties, of the property contributed [Articles 1771

[Article 1779]. (2) All the profits: (a) It comprises all that the partners may acquire by their industry or work during the existence of the partnership. (b) Only the usufruct over the property of the partners passes to the partnership [Article 1780].

and 1773]; (2) Where the capital is at least P3,000, in money or property: (a) The contract must appear in a public instrument; and (b) It must be recorded in the Office of the Securities and Exchange Commission (SEC).

When the articles of universal partnership do not specify its nature (all present property or all the profits), the partnership will be considered as one only of all the profits [Article

1781]. D.2. OBJECT PARTNERSHIP

OF

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As to the second, failure to comply with these requirements, however, does not affect the liability of the partnership and the partners to third persons [Articles 1768 and 1772].

PARTICULAR

F. DURATION

A particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation [Article 1783].

F.1. COMMENCEMENT Art 1784. A partnership begins from the moment of the execution of the contract, unless otherwise stipulated

D.3. EFFECT OF UNLAWFUL OBJECT If the partnership has an unlawful object or purpose: (1) The contract is void ab initio [Article

F.2. TERM As to period, a partnership may either be: (1) For a fixed term or particular undertaking; or (2) At will, the formation and dissolution of which depend on the mutual desire and consent of the parties. Any one of the partners may, at his sole pleasure, dictate the dissolution of the partnership, even in bad faith, subject to liability for damages

1409(1)]. (2) Once dissolved by judicial decree: (a) The profits shall be confiscated by favor of the State; (b) The instruments or tools and proceeds of the crime shall also be forfeited in favor of the State [Article 1770]. (3) The contributions of partners shall not be confiscated unless they are instruments or tools of the crime [De Leon (2010)].

[Ortega v. CA [(995)].

F.3. EXTENSION A partnership term may be extended by: (1) Express renewal; or (2) Implied renewal, when these requisites concur: (a) The partnership is for a fixed term or particular undertaking; (b) It is continued after the termination of the fixed term or particular

E. FORM General rule: The contract may be constituted in any form [Article 1771]. Exceptions: (1) Where immovable property or real rights are contributed: (a) The contract must appear in a public instrument; and

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(2) Partnership de facto is one which failed to so comply.

express

G.RULES TO DETERMINE EXISTENCE

H.2. AS TO ITS OBJECT:

When the intent of the parties is clear, such intent shall govern. When it does not clearly appear, the following rules apply: (1) Persons who are not partners to each other are not partners as to third persons, subject to the provisions on partnership by

(1) Universal partnership: (a) Of all present property; (b) Of profits; (2) Particular partnership.

H.3. AS TO ITS DURATION:

estoppel.

(1) For a fixed term or particular undertaking; (2) At will.

(2) Co-ownership or co-possession does not of itself establish a partnership, even when there is sharing of profits in the use of the property. (3) Sharing of gross returns does not of itself establish a partnership, even when the parties have joint or common interest in any property from which the returns are derived. (4) The receipt by a person of a share in the profits of a business is prima facie evidence that he is a partner.

H.4. AS TO THE LIABILITY OF THE PARTNERS: (1) General partnership, consisting of general partners only, who are liable pro rata for partnership obligations with all their after exhaustion of partnership assets; (2) Limited partnership, includes, aside from general partner/s, limited partners, who are not personally liable for partnership obligations.

As to the fourth, no such inference is drawn if the profits are received in payment: (1) As a debt by installments or otherwise; (2) As wages of an employee of rent to a landlord; (3) As an annuity to a widow or representative of a deceased partner; (4) As interest on a loan, though the amount of payment vary with the profits of the business; (5) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise [Article 1769].

H.5. AS TO ITS PUBLICITY:

H. KINDS OF PARTNERSHIPS

A profession has been defined as “a group of men pursuing a learned art as a common calling in the spirit of public service – no less a public service because it may incidentally be a means of livelihood” [In the Matter of the

(1) Secret partnership, where the existence of certain persons as partners is not made known by the partners; (2) Open or notorious partnership, the existence of which is made known to the public by the partners.

H.6. AS TO ITS PURPOSE: 1.

Commercial or trading partnership, for transaction of business; 2. Professional or non-trading partnership, for the exercise of profession.

H.1. AS TO THE LEGALITY OF ITS EXISTENCE: (1) Partnership de jure is one which has complied with all the requisites for its lawful establishment;

Petition for Authority to Continue Use of Firm name “Sycip, Salazar, etc.”/“Ozaeta, Romulo,

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etc.” (1979)]. A professional partnership is a particular partnership [Article 1783].

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(16) Incoming partner, who is about to be taken as a member into an existing partnership; (17) Retiring partner, who is withdrawing from the partnership.

I. KINDS OF PARTNERS (1) Capitalist partner, whose contribution is money or property; (2) Industrial partner, contribution is only his industry; (3) General partner, whose liability to third persons extends to his separate property; (4) Limited partner, whose liability to third persons is limited to his capital contribution; (5) Managing partner, who was designated to manage the affairs or business of the partnership; (6) Liquidating partner, who takes charge of the winding up of partnership affairs; (7) Partner by estoppel, who is not really a partner but is liable as such for the protection of innocent third persons; (8) Continuing partner, who continues the business after dissolution of the partnership by admission of a new partner, or retirement, death or expulsion of existing partners; (9) Surviving partner, who remains a partner after dissolution by death of any partner; (10) Subpartner, who is not a member of the partnership but contracts with a partner with regard to the share of the latter in the partnership; (11) Ostensible partner, who takes active part in the business of the partnership and is known by the public; (12) Secret partner, who takes active part in the business, but is unknown to the third persons as a partner; (13) Silent partner, who does not take active part in the business, but may be known to be a partner by third persons; (14) Dormant partner, who does not take active part in the business and is not known or held out as a partner; (15) Original partner, who has been a partner since the constitution of the partnership;

Industrial partner

Capitalist partner

Form of contribution Industry

Money or property

Share in profits Just and equitable share

According to agreement; if none, in proportion to contribution

Share in losses Exempted as to losses as between partners, but liable to third persons, without prejudice to reimbursement from capitalist partners

According to agreement; if none, in the same proportion as the agreed share in profits; if none, in proportion to contribution

Engagement in business Cannot engage in business for himself, unless the partnership expressly permits him to do so; should he do so without permission, the capitalist partners may: [1] exclude him from the firm; or [2] avail themselves of the benefits obtained in violation of the prohibition, with right to damages in either case [Article 1789]

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Cannot engage, for his own account, in the same kind of business as that of the partnership, unless there is a stipulation to the contrary; should he do so, he shall bring to the common fund any profits accruing to him from his transactions and shall personally bear all the losses

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J. PARTNERSHIP, DISTINGUISHED FROM OTHER CONTRACTS Partnership

Joint venture

Operates with firm name and legal personality

Operates without firm name and legal personality

Generally relates to a continuing business of various transactions of a certain kind

Usually limited to a single transaction

Corporations may not enter into a partnership

Corporations enter into ventures

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of a partner dissolves the partnership

of a co-owner does not dissolve the coownership

A partner cannot dispose of his interest, so as to make the assignee a partner, without consent of others

A co-owner can dispose of his share without consent of others

Partnership

Corporation

Has juridical personality separate and distinct from its individual members

may joint

Can only act through agents Composed of an aggregate of individuals Distributes its profits to those contributed capital to the business

Under Philippine law, a joint venture is a form of partnership and should thus be governed by the laws of partnership [Auerbach vs. Sanitary Wares Manufacturing Corp. [(989)].

who

Can only be organized where there is a law authorizing its organization Taxable as in a corporation

Partnership

Co-ownership

Generally created by either express or implied contract

Generally created by law and may exist even without a contract

Has a separate juridical personality

Has no separate juridical personality

Generally, the purpose is to obtain profits

The purpose is the common enjoyment of a thing or right

Duration has limitation

An agreement to keep a thing undivided for more than ten years is not allowed, but may be extended

no

There is mutual agency between partners

There is no mutual representation among co-owners

Death or incapacity

Death or incapacity

Created agreement

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by

Created by operation of law

Involves at least two persons

Except for corporation sole, requires at least five incorporators

Personality commences from the moment of execution of the contract

Personality commences from the issuance of certificate of incorporation

Can exercise any power authorized by partners

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When management is not agreed upon, every partner may act for the partnership

Management is vested in the board of directors or trustees

Partners are generally liable for partnership debts

Stockholders are liable only to the extent of their shares

A partner cannot dispose of his interest, so as to make the assignee a partner, without consent of others

A stockholder has the right to transfer his shares without consent of others

Duration has limitation

no

The term limit is 50 years, but may be extended

May be dissolved at any time by one or all of the partners

May only be dissolved with the consent of the state

Partnership

Conjugal partnership of gains

Created by voluntary agreement of two or more partners of either sex

Arises in case the spouses, of opposite sex, agree before marriage

Governed agreement

Governed by law

by

Has juridical personality

Has no juridical personality

Commencement date may be stipulated

Commencement is on the date of the celebration of the

CIVIL LAW marriage and any stipulation to the contrary is void

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Share in profits may be stipulated; otherwise, in proportion to contribution

Share in profits is equal

Management shared by all partners, unless otherwise agreed upon

Administration belongs to the spouses jointly, but decision of husband prevails in case of disagreement

Partner can dispose of interest even without consent of others

Spouse cannot dispose of interest during marriage, even with consent

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Partnership

Voluntary association

Has juridical personality

Has no juridical personality

Organized for profit

Not always organized for profit

Capital contributed

is

Capital is not contributed, although fees are collected from members

The partnership is primarily liable; the partners are liable only subsidiarily

The members are liable individually for debts which they authorized or ratified

Share in profits may be stipulated; otherwise, in proportion to contribution

Share in profits is equal

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(a) To warrant against eviction in the same manner as a vendor; and (b) To deliver to the partnership the fruits of the property promised to be contributed, from the time they should have been delivered, without need of demand [Article 1786]; (3) In case a sum of money is to be contributed, or in case he took any amount from the partnership coffers, to indemnify the partnership for: (a) Interest; and (b) Damages, from the time he should have complied with his obligation, or from the time he converted the amount to his own use, respectively [Article 1788].

I. AMOUNT OF CONTRIBUTION General rule: Partners are to contribute equal shares to the capital of the partnership. Exception: When there is an agreement to the contrary, the contribution shall follow such agreement [Article 1790].

II. Rights and Obligations of the Partnership

II. ADDITIONAL CAPITAL CONTRIBUTION Requisites: (1) There is an imminent loss of the business of the partnership; (2) The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business; (3) The capitalist partner refuses deliberately [not because of financial inability] to contribute an additional share to the capital; and (4) There is no agreement that even in case of imminent loss of the business, the partners are not obliged to contribute.

A. RIGHT TO CONTRIBUTION The partnership has a right to the contribution (or the partners are obliged to contribute). The money or property thus contributed, or their use or fruits, become the property of the partnership.

A.1. CONTRIBUTION OF MONEY OR PROPERTY With respect to contribution of property, a partner is obliged to: (1) To contribute, at the beginning of the partnership or at the stipulated time, the money, property or industry which he undertook to contribute; (2) In case a specific and determinate thing is to be contributed:

Any partner who refuses to contribute an additional share to the capital, except an industrial partner, to save the venture, shall be

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obliged to sell his interest to the other partners, unless there is an agreement to the contrary [Article 1791].

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(2) When the debtor declares, pursuant to Article 1252, at the time of making the payment, to which debt the sum must be applied, it shall be so applied [Article 1792].

A.2. CONTRIBUTION OF INDUSTRY An industrial partner is obliged to contribute his industry at the stipulated time.

C. RIGHT TO RETURN OF CREDIT RECEIVED

General rule: An industrial partner cannot engage in business for himself. Should he do so, the capitalist partners, as well as industrial partners [De Leon (2010)] may either: (1) Exclude him from the firm; or (2) Avail themselves of the benefit which he may have obtained.

A partner, authorized to manage or not, who already received, in whole or in part, his share of a partnership credit, is obliged to bring to the partnership capital what he received when: (1) The other partners have not collected their shares; and (2) The partnership debtor has become insolvent.

Exception: He may engage in business for himself when the partnership expressly permits him to do so [Article 1789].

This obligation exists even when he issued a receipt for his share only [Article 1793].

B. RIGHT TO APPLY PAYMENT RECEIVED TO PARTNERSHIP CREDIT

Ratio: In this case, the debt becomes a bad debt. It would be unfair for the partner who already collected not to share in the loss of the other partners.

General rule: A partner authorized to manage, who collects a demandable sum owed to him in his own name from a person who also owes the partnership a demandable sum, is obliged to apply the sum collected to both credits pro rata, even if he issued a receipt for his own credit only.

D. RIGHT DAMAGES

TO

INDEMNITY

FOR

Every partner is responsible to the partnership for damages suffered by it through his fault.

B.1. REQUISITES:

D.1. SET-OFF OF LIABILITY

(1) There exist at least two debts, one where the collecting partner is creditor, and the other, where the partnership is the creditor; (2) Both debts are demandable; and (3) The partner who collects is authorized to manage and actually manages the partnership.

General rule: The liability for damages cannot be set-off or compensated by profits or benefits which the partner may have earned for the partnership by his industry. Ratio: The partner has the obligation to secure the benefits for the partnership. As such, the requirement for compensation, that the partner be both a creditor and a debtor of the partnership at the same time, is not complied with [Article 1278; De Leon (2010)].

B.2. EXCEPTIONS: (1) In case the receipt was issued for the account of the partnership credit only, however, the sum shall be applied to the partnership credit alone. 398

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Exception : The court may equitably lessen the liability if, through his extraordinary efforts in other activities of the partnership, unusual profits were realized [Article 1794]. Note, however, that there is still no compensation in this case.

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partner having an associate is a managing partner [Article 1804]. This arrangement refers to a contract of subpartnership, which is a partnership within a partnership, distinct and separate from the main partnership. It is considered a modification of the original contract [De Leon (2010)].

D.2. SUIT FOR DAMAGES Before a partner may sue another for alleged fraudulent management and resultant damages, liquidation must first be effected to determine the extent of the damage. Without liquidation of partnership affairs, a partner cannot claim damages [Soncuya v. De Luna (1939)].

B. RIGHT TO INSPECT PARTNERSHIP BOOKS The partnership books shall be kept: (1) At a place agreed upon by the partners; (2) When there is no such agreement, at the principal place of business of the partnership.

E. RESPONSIBILITY TO PARTNERS In the absence of any stipulation to the contrary, every partner is an agent of the partnership for the purpose of its business. As such, it is responsible to every partner: (1) For amounts, and the corresponding interest from the time the expenses were made, which he may have disbursed on behalf of the partnership; (2) For obligations he may have contracted in good faith in the interest of the partnership business; and (3) For risks in consequence of the management of the partnership [Article

Every partner shall, at any reasonable hour, have access to and may inspect and copy any of them. Any reasonable hour means reasonable hours on business days throughout the year [Pardo v. Lumber Co. (1925)].

C. RIGHT TO A FORMAL ACCOUNT General rule: The right to a formal account of partnership affairs accrues only when the partnership is dissolved.

1796].

Exceptions: In the special and unusual cases mentioned in Article 1809, formal accounting may be demanded by any partner even before dissolution: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners; (2) If the right exists under the terms of any agreement; (3) If, without his consent, a partner has derived profits from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use of partnership property;

III. Rights and Obligations of Partners among Themselves A. RIGHT TO ASSOCIATE ANOTHER IN SHARE Every partner may associate another person with him in his share. The admission of the associate to the partnership, however, requires consent of all the other partners even if the

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(4) Whenever other circumstances render it just and reasonable [Article 1809].

F. RIGHTS IN SPECIFIC PROPERTY (1) The partners have equal rights to possess partnership property for partnership purposes. (2) For other purposes, the consent of his partners is necessary. (3) If the partner is excluded, he may ask for: (a) Formal accounting [Article 1809]; or (b) Dissolution by judicial decree [Article 1831]. (4) A partner’s right in such property is not assignable, except when all the partners assign their rights in the same property; (5) The right is not subject to attachment or execution, except on claim against the partnership. In case of such attachment, the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws. (6) The right is not subject to legal support under Article 291 [Article 1811].

D. PROPERTY RIGHTS OF PARTNERS D.1. IN GENERAL The property rights of a partner are: (1) Rights in specific partnership property; (2) Interest in the partnership; and (3) Right to participate in the management

[Article 1810].

D.2. PROPERTY DISTINGUISHED Partnership capital

AND

CAPITAL

Partnership property

With constant value

Value varies with market conditions

Includes only actually contributed and promised capital

Includes the contributions and property acquired by the partnership

E. OWNERSHIP PROPERTIES

OF

CIVIL LAW

CERTAIN

G. INTEREST IN THE PARTNERSHIP A partner’s interest in the partnership is his share of the profits and surplus [Article 1812].

(1) The ownership of property used by the partnership depends on the intention of the parties, which may be drawn from an express agreement or their conduct. (a) A partner may allow the property to be used by the partnership without transfer of ownership, contributing only the use or enjoyment thereof. (b) He may also hold title to partnership property, without acquiring ownership thereof [Article 1819]. (2) Property acquired by a partner with partnership funds is presumed to be partnership property. (3) The same presumption also arises when the property is indicated in the partnership books as partnership asset. (4) Other factors may be considered to determine ownership of the property.

G.1. ASSIGNMENT OF INTEREST Assignment by a partner of his whole interest in the partnership, of itself: (1) Does not dissolve the partnership; or (2) Does not entitle the assignee to: (a) Interfere in the management or administration of the partnership business or affairs; (b) Require information or account of partnership; or (c) Inspect the partnership books. It merely entitles the assignee to: (1) Receive the profits to which the assigning partner was entitled; (2) In case of fraud in management, avail himself of the usual remedies; 400

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(3) In case of dissolution: (a) Receive his assignor’s interest; and (b) Require an accounting from the date only of the last account agreed to by all the partners [Article 1813].

G.2. CHARGING OF INTEREST PERSONAL CREDITORS

CIVIL LAW

H.1. POWERS OF A MANAGING PARTNER General rule: The partner designated as manager in the articles may execute all acts of administration despite opposition by the other partners.

BY Exception: He cannot do so when he acts in bad faith.

General rule: Partnership creditors are preferred over the personal creditors of the partners as regards partnership property.

H.2. REVOCATION OF MANAGING PARTNER

POWER

OF

Exception: On due application by any judgment creditor of a partner, a competent court may: (1) Charge the interest of the partner for the satisfaction of the judgment debt; (2) Appoint a receiver of the share of the profits and of any other money due or to fall due to the partner; and (3) Make all other orders, directions, accounts and inquiries, which the debtor partner might have made, or which the circumstances may require.

The powers of the managing partner may be revoked: (1) If appointed in the articles of partnership, when: (a) There is just or lawful cause for revocation; and (b) The partners representing the controlling interest revoke such power. (2) If appointed after the constitution of the partnership, at any time and for any cause [Article 1800].

The interest charged may be redeemed before foreclosure or, in case of sale directed by the court, may be purchased without causing dissolution: (1) With separate property, by one or more of the partners; or (2) With partnership property, by one or more of the partners, will consent of all, except the debtor partner [Article 1814].

H.3. MANAGEMENT BY TWO OR MORE PARTNERS

H. RIGHT TO MANAGEMENT

PARTICIPATE

When there are two or more managing partners appointed, without specification of their duties or without a stipulation on how each one will act: (1) Each one may separately execute all acts of administration. (2) If any of them opposes the acts of the others, the decision of the majority prevails. (3) In case of a tie, the partners owning the controlling interest will decide [Article 1801].

IN

Management of the partnership is primarily governed by the agreement of the partners in the articles of partnership. It may be stipulated that the partnership will be managed by: (1) All the partners; or (2) A number of partners appointed as managers, which may be appointed: (a) In the articles of partnership; or (b) After constitution of the partnership.

Requisites: (1) Two or more partners have been appointed as managers; (2) There is no specification of their respective duties; and

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is evidence against the partnership [Article 1820]. (3) Notice to any partner of any matter relating to partnership affairs is notice to the partnership [Article 1821]. (4) Wrongful act or omission of any partner acting for partnership affairs makes the partnership liable [Article 1822]. (5) Partnership is bound to make good losses for wrongful acts or misapplications of partners [Article 1823].

(3) There is no stipulation that one of them shall not act without the consent of all the others.

H.4. STIPULATION OF UNANIMITY In case there is a stipulation that none of the managing partners shall act without the consent of others, the concurrence of all is necessary for the validity of the acts. The absence or disability of one cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership

I. RIGHT TO PROFITS OBLIGATION FOR LOSSES

[Article 1802].

H.5. MANAGEMENT WHEN MANNER NOT AGREED UPON

I.1. RULES FOR DISTRIBUTION PROFITS AND LOSSES

When there is no agreement as to the manner of management, the following rules apply: (1) All the partners are considered agents [mutual agency]. Whatever any one does alone binds the partnership, unless there is a timely opposition to the act, under Article 1801. (2) Any important alteration in the immovable property of the partnership, even if useful to the partnership, requires unanimity. If the alteration is necessary for the preservation of the property, however, consent of the others is not required [De Leon (2010)].

AND OF

The distribution of profits and losses shall be in accordance with the following rules: (1) They shall be distributed in conformity with the agreement. (2) If only the share in profits has been stipulated, the share in the losses shall be in the same proportion. (3) In the absence of any stipulation: (a) The share in the profits of the capitalist partners shall be in proportion to their contributions. (b) The losses shall be borne by the capitalist partners, also in proportion to the contributions. (c) The share of the industrial partners in the profits is that share as may be just and equitable. If he also contributed capital, he will receive a share of the profits in proportion to his contribution; and (d) The industrial partner, who did not contribute capital, is not liable for losses [Article 1797].

If the refusal is manifestly prejudicial to the partnership, court intervention may be sought [Article 1803].

H.6.

CIVIL LAW

MUTUAL AGENCY

In addition to the Article 1801, there is effectively a mutual agency in the following cases: (1) Partners can dispose of partnership property even when in partnership name [Article 1819]. (2) An admission or representation made by any partner concerning partnership affairs

I.2. EXCLUSION OF PARTNER FROM SHARE General rule: A stipulation excluding one or more partners from any share in the profits or losses is void [Article 1799].

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Exception: A stipulation exempting an industrial partner from losses is valid, since, if the partnership fails to realize profits, he can no longer withdraw his work or labor [De Leon (2010)].

CIVIL LAW

General rule: The partners may adopt any firm name desired.

Partners shall render on demand true and full information of all things affecting the partnership to: (1) Any partner; (2) The legal representative of any deceased partner; or (3) The legal representative of any partner under legal disability [Article 1806].

Exceptions: (1) They cannot use a name which is “identical or deceptively or confusingly similar to an existing or corporation [or partnership] or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws” [Section 18, Corporation Code]. (2) Use of names of deceased partner in law firms is “permissible provided that the firm indicates in all its communications that said partner is deceased” [Rule 3.02, Code of Professional Responsibility].

K. OBLIGATION TO ACCOUNT AND ACT AS TRUSTEE

B. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS

J. OBLIGATION INFORMATION

TO

RENDER

The partnership is primarily liable for contracts entered into: (1) In its name and for its account; (2) Under its signature; and (3) By a person authorized to act for it.

Every partner must (1) account to the partnership for any benefit and (2) hold as trustee for it any profits derived by him without the consent of the other partners: (1) From any transaction connected with the formation, conduct, or liquidation of the partnership; or (2) From any use by him of its property [Article 1807].

Upon exhaustion of its assets, all partners are liable pro rata with all their property. Any partner may enter into a separate obligation to perform a partnership contract [Article 1816].

IV. Obligations of Partnership / Partners to Third Persons

B.1. NATURE OF INDIVIDUAL LIABILITY I. SUBSIDIARY General rule: The partners are liable subsidiarily. It only arises upon exhaustion of partnership assets [Cia. Maritima v. Muñoz (1907)].

A. OBLIGATION TO OPERATE UNDER A FIRM NAME Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner [Article 1815].

Exceptions: (1) A third person who transacted with the partnership can hold the partners solidarily [rather than subsidiarily] liable for the whole obligation if the case falls under

Articles 1822 or 1823 [Muñasque v. CA 403

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(1985)]. The provisions refer to wrongful

General rule: Any act of a partner which is apparently for the carrying on of the usual business of the partnership binds the latter, including the execution of any instrument in the partnership name.

acts or omission and misapplication of money or property by a partner in the ordinary course of business. (2) A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission, except that his liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary [Article 1826]. In other words, he is not personally liable.

Exception: The partnership is not bound when the following concur: (1) The partner has in fact no authority to act; and (2) The person with whom he deals has knowledge of such fact [Article 1818 (1)].

C.2. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS General rule: Acts of a partner which is not

II. PRO RATA The partners are liable pro rata. This liability is not increased even when a partner: (1) Has left the country and the payment of his share of the liability cannot be enforced [Co-Pitco v. Yulo (1907)]; or (2) His liability is condoned by the creditor [Island Sales v. United Pioneers (1975)].

B.2. LIABILITY PARTNER

OF AN

CIVIL LAW

apparently for carrying on of the usual business does not bind the partnership. Exception: The partnership is bound if the other partners authorized him to do the act [Article 1818, 2nd par.].

C.3. ACTS OF STRICT DOMINION General rule: One or some of the partners have no authority to do the following acts of strict dominion: (1) Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership; (2) Dispose of the goodwill of the business; (3) Do any other act which makes it impossible to carry on the ordinary business of the partnership; (4) Confess a judgment; (5) Enter into a compromise concerning a partnership claim or liability; (6) Submit a partnership claim or liability to arbitration; (7) Renounce a claim of the partnership.

INDUSTRIAL

An industrial partner, who is not liable for losses, is not exempt from this liability. However, he can recover the amount he has paid from the capitalist partners, unless there is a stipulation to the contrary [Cia. Maritima v. Muñoz (1907)].

B.3. STIPULATION AGAINST INDIVIDUAL LIABILITY Any stipulation against this liability is: (1) Void against third persons; but (2) Valid among the partners [Article 1817].

C. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS

Exceptions: They may do so if: (1) Authorized by all the partners; or (2) The other partners have abandoned the business [Article 1818, 3rd par.].

C.1. ACTS APPARENTLY FOR THE CARRYING ON OF USUAL BUSINESS

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CIVIL LAW (b) Without knowledge that the act exceeded authority [Article 1819, 3rd par.].

C.4. ACTS IN CONTRAVENTION OF A RESTRICTION Any act of a partner in contravention of a restriction on authority does not bind the partnership to persons having knowledge of the restriction [Article 1818, 4th par.].

Where the title is in the name of one or more or all the partners, or in a third person in trust for the partnership a partner authorized to carry on the usual business may convey equitable title in the partnership name or in his own name [Article 1819, 4th par.]. Where the title is in the names of all the partners, a conveyance executed by all of them passes all the rights to the property [Article 1819, 5th par.].

D. CONVEYANCE OF PARTNERSHIP REAL PROPERTY D.1. TITLE IN PARTNERSHIP NAME Any partner may convey the real property in the name of the partnership. The partnership can recover it, except when: (1) The act of the partner binds the partnership, when he has authority to carry out the usual business of the partnership, under Article 1818, 1st par.; or (2) If not so authorized, the property has been conveyed by the grantee, or a person claiming under him, to a holder for value and without knowledge that the partner exceeded his authority [Article 1819, 1st par.].

E. LIABILITY OF THE PARTNERSHIP FOR ADMISSION BY A PARTNER An admission or representation by any partner may be used as evidence against the partnership when: (1) It concerns partnership affairs; (2) Such affairs are within the scope of his authority [Article 1820].

F. LIABILITY OF THE PARTNERSHIP FOR WRONGFUL ACTS OF A PARTNER

A partner authorized to carry out the usual business may convey, in his own name, the equitable interest of the partnership [Article 1819, 2nd par.].

The partnership is solidarily liable with the partner who causes loss or injury to any person not a partner, or incurs any penalty through any wrongful act or omission: (1) In the ordinary course of the business of the partnership; or (2) Not in such ordinary course of business, but with the authority of his co-partners [Article 1822].

D.2. TITLE IN THE NAME OF OTHER PERSONS Where the title is in the name of one or more but not all the partners, and the record does not disclose the right of the partnership: (1) The partners having title may convey title. (2) The partnership may recover it when the partners conveying title have no authority to carry on the usual business of the partnership, unless the purchaser or his assignee is: (a) A holder for value; and

G. LIABILITY OF THE PARTNERSHIP FOR MISAPPLICATION OF MONEY OR PROPERTY The partnership is liable for losses suffered by a third person whose money or property was: (1) Received by a partner:

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(a) Acting within the scope of his apparent authority; and (b) Misapplied it; (2) Received by the partnership: (a) In the course of its business; and (b) Misapplied by any partner while it is in the custody of the partnership [Article 1823].

II. PUBLIC REPRESENTATION If he has made such representation or consented to its being made in a public manner, whether the representation has or has not been [personally] made or communicated to such persons so giving credit by or with his knowledge, and: (1) Partnership liability results, he is liable as though he were an actual member of the partnership. (2) No partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation. (3) When there are no such other persons, he is separately liable [Article 1825, 1st par.].

H. LIABILITY OF THE OTHER PARTNERS UNDER ARTICLES 1822 AND 1823 All partners are solidarily liable with the partnership for its liabilities under Articles 1822 and 1823 [Article 1824]. This is without prejudice to the guilty partner being liable to the other partners. However, as far as third persons are concerned, the partnership is answerable [De Leon (2010)].

I. LIABILITY IN CASE PARTNERSHIP BY ESTOPPEL

I.3. EFFECT ON EXISTING PARTNERSHIP OR OTHER PERSONS NOT ACTUAL PARTNERS (1) When a person has been represented to be a partner (a) in an existing partnership, or (b) with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. (2) When all the members of the existing partnership consent to the representation, a partnership act or obligation results. (3) In all other cases, it is the joint act or obligation of the person acting and the persons consenting to the representation [Article 1825, 2nd par.].

OF

I.1. PARTNER BY ESTOPPEL A partner by estoppel is a person who, by words spoken or written or by conduct [1] represents himself as a partner or [2] consents to another representing him to anyone as a partner: (1) In an existing partnership; or (2) With one or more persons not actual partners [Article 1825, 1st par.].

I.2. LIABILITY OF A PARTNER ESTOPPEL I. PERSONAL REPRESENTATION

CIVIL LAW

BY

A partner by estoppel is liable to any such persons: (1) To whom such representation has been made; and (2) Who has, on the faith of such representation, given credit to the actual or apparent partnership [Article 1825, 1st par.].

I.4. NATURE OF LIABILITY Summarizing Article 1825, a partner by estoppel is liable in the following manner: (1) He is liable as though he were a partner when: (a) There is an existing partnership;

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(b) All the partners consented to the representation; and (c) A partnership liability results. (2) He is liable jointly and pro rata (as though he were a partner in fact) with those who consented to the representation when: (a) There is an existing partnership but not all the partners consented; or (b) There is no existing partnership and all those represented as partners consented to the representation. (3) He is liable separately when: (a) There is an existing partnership but none of the partners consented; or (b) There is no existing partnership and not all of those represented as partners consented to the representation.

J. LIABILITY PARTNER

OF

AN

CIVIL LAW

(2) Knowledge of the partner acting in the particular matter acquired while a partner; (3) Knowledge of the partner acting in the particular matter then present to his mind; or (4) Knowledge of any other partner who reasonably could and should have communicated it to the acting partner. These do not apply in case of fraud on the partnership committed by or with the consent of the partner [Article 1821].

V. Dissolution A. CONCEPTS Dissolution – the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business. It is different from the winding-up of the business [Article 1828]. It does not terminate the partnership, which continues until the winding up of partnership affairs is completed [Article 1829].

INCOMING

A person admitted as a partner is liable: (1) For obligations incurred subsequent to his admission as the other partners are liable; (2) For obligations incurred before his admission, but will be satisfied only out of the partnership property, unless otherwise stipulated that he fully assumes such obligations.

Winding up – the actual process of settling the partnership business or affairs after dissolution. It involves collection and distribution of partnership assets, payment of debts, and determination of the value of the interest of the partners in the partnership.

Ratio: (1) The new partner partakes of the benefits of the partnership property and an already established business. (2) He has every means of obtaining full knowledge of the debts of the partnership and remedies that amply protect his interest [De Leon (2010)].

Termination – the point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life [De Leon (2010)].

B. CAUSES OF DISSOLUTION B.1. WITHOUT AGREEMENT

VIOLATION

OF

THE

(1) By the termination of the definite term or particular undertaking specified in the agreement; (2) By the express will of any partner, who must act in good faith, when no definite term or particular is specified.

K. NOTICE TO OR KNOWLEDGE OF THE PARTNERSHIP The following operate as notice to or knowledge of the partnership: (1) Notice to any partner of any matter relating to partnership affairs;

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(3) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; (4) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners [Article 1830(1)].

(2) When a specific thing which a partner had promised to contribute, perishes before delivery, or by the loss of the thing, only the use or enjoyment of which has been contributed; the loss of a specific thing, however, does not dissolve the corporation after its ownership has already been transferred to the partnership; (3) By the death of any partner; (4) By the insolvency of any partner or of the partnership; (5) By the civil interdiction of any partner;

If, after the expiration of the definite term or particular undertaking, the partners continue the partnership without making a new agreement, the firm becomes a partnership at will [Article 1785].

B.4. BY DECREE OF COURT A partner may apply for dissolution in court when: (1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind; (2) A partner becomes in any other way incapable of performing his part of the partnership contract; (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; (5) The business of the partnership can only be carried on at a loss; (6) Other circumstances render a dissolution equitable.

Any one of the partners may, at his sole pleasure, dictate the dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages [Ortega v. CA (1995)].

B.2. IN CONTRAVENTION AGREEMENT

OF

CIVIL LAW

THE

Where circumstances do not permit dissolution under any other provision of Article 1830, it may also be dissolved by the express will of any partner at any time. Thus, even if there is a specified term, one partner can cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. If the cause is not justified or no cause was given, the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm [Rojas v. Maglana (1990)].

A person who acquires the interest of a partner may likewise apply: (1) After the termination of the specified term or particular undertaking; (2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued

B.3. BY OPERATION OF LAW (1) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership;

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B.5. OTHER CAUSES

(b) Completing transactions unfinished at dissolution. (2) He can also bind it by any transaction which would bind the partnership as if dissolution had not taken place, provided the other party to the transaction: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice thereof; or (b) Had not so extended credit but had known of the partnership prior to dissolution, and having no knowledge or notice of dissolution, the fact had not been advertised in a newspaper of general circulation in the place [or in each place if more than one] at which the partnership business was regularly carried on [Article 1834, 1st par.].

(1) When a new partner is admitted into an existing partnership; (2) When any partner retires; (3) When the other partners assign their rights to the sole remaining partner; (4) When all the partners assign their rights in the partnership property to third persons [Article 1840]. The statutory enumeration of the causes of dissolution is exclusive [De Leon (2010)].

C. EFFECTS OF DISSOLUTION C.1. ON AUTHORITY OF THE PARTNERS In general, upon dissolution, the authority of the partners to represent the partnership is confined only to acts necessary to: (1) Wind up partnership affairs; or (2) Complete transactions begun but not then finished [Article 1832, 1st. par.].

Note the character of the notice required: (1) As to persons who extended credit to the partnership prior to dissolution, notice must be actual. (2) As to persons who merely knew of the existence of the partnership, publication in a newspaper of general circulation in the place of business of the partnership is sufficient.

C.1.A. WITH RESPECT TO PARTNERS The authority of partners to act for the partnership is terminated, with respect to partners: (1) When the dissolution is not by the act, insolvency or death of a partner; or (2) When the dissolution is by such act, insolvency or death, when the partner acting for the partnership has knowledge or notice of the cause [Articles 1832 and 1833].

C.2. ON LIABILITY FOR TRANSACTIONS AFTER DISSOLUTION The liability of a partner, in general, is the same as in ordinary contracts (pro rata and subsidiary).

In other cases, each partner is still liable for his share in the liability created by the partner acting for the partnership [Article 1833].

C.1.B. WITH PERSONS

RESPECT

TO

CIVIL LAW

In the following cases, however, the liability shall be satisfied out of the partnership assets alone (i.e., there is no subsidiary liability): 1. When the partner had been, prior to the dissolution, unknown as a partner to the person with whom the contract is made; 2. When the partner had been, prior to the dissolution, so far unknown or inactive in partnership affairs that the business reputation of the partnership could not

THIRD

With respect to persons not partners: (1) After dissolution, a partner can bind the partnership by any act appropriate for: (a) Winding up partnership affairs; or

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be said to have been in any degree due to his connection with it [Article 1834].

CIVIL LAW for the partnership had knowledge or notice of the death or insolvency [Article 1833].

Any act of a partner after dissolution in no case binds the partnership in the following cases: (1) Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs; (2) Where the partner has become insolvent; (3) Or, where the partner has no authority to wind up partnership affairs, except by a transaction with one who: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of his want of authority; or (b) Had not extended credit to the partnership prior to dissolution, and, having no knowledge or notice of his want of authority, the fact of his want of authority has not been advertised [Article 1834].

C.4. ON EXISTING PARTNERS

LIABILITY

OF

General rule: Dissolution does not of itself discharge the existing liability of any partner. Exception: A partner may be relieved when there is an agreement to that effect between: (1) Himself; (2) The partnership creditor; and (3) The person or partnership continuing the business. Such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business. In case of dissolution by death, the individual property of a deceased partner is liable for obligations of the partnership incurred while he was a partner, after payment of his separate debts [Article 1835].

Article 1834 does not affect the liability under Article1825 of any person who, after dissolution, represents himself or consents to another representing him as a partner in a partnership engaged in carrying on business [Article 1834].

D. WINDING UP PARTNERS D.1. WHO MAY WIND UP The following partners have the right to wind up the partnership affairs: (1) Those designated in an agreement; (2) Those who have not wrongfully dissolved the partnership; or (3) The legal representative of the last surviving partner, who was not insolvent.

C.3. ON LIABILITY FOR CONTRACTS AFTER DISSOLUTION BY SPECIFIC CAUSES General rule: A contract entered into by a partner acting for the partnership after dissolution by act, death or insolvency of a partner binds the other partners.

Any partner or his legal representative or assignee may obtain winding up by the court, upon cause shown [Article 1836].

Exceptions: (1) The dissolution being by act of any partner, the partner acting for the partnership had knowledge of the dissolution; or (2) The dissolution being by death or insolvency of a partner, the partner acting

D.2. MANNER OF WINDING UP 1.

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2. Judicial, under the control and direction of the proper court.

(c) During the agreed term for the partnership.

The action for liquidation of the partnership is personal. The fact that sale of assets, including real property, is involved does not change its character, such sale being merely a necessary incident of the liquidation of the partnership, which should precede and/or is part of its process of dissolution [Claridades v. Mercader (1966)].

For the purpose of continuing the business, the said partners may possess the partnership property provided: (1) They secure the payment by bond approved by the court; or (2) They pay any partner who has caused the dissolution wrongfully the value of his interest in the partnership, less any damages recoverable, and indemnity against all present or future partnership liabilities [Article 1837(2)].

E. RIGHTS OF PARTNERS IN CASE OF DISSOLUTION E.1. DISSOLUTION WITHOUT VIOLATION OF THE AGREEMENT

II. PARTNER DISSOLUTION

Each partner may have: (1) The partnership property applied to discharge the partnership liabilities; and (2) The surplus applied in cash to the net amount owing to the respective partners.

WHO

CAUSED

THE

The partner who caused the dissolution wrongfully has the following rights: (1) If the business is not continued, all the rights Article 1837, 1st par., subject to liability for damages; (2) If the business is continued, the right, as against his co-partners and all claiming through them, to: (a) Ascertainment, without considering the value of the goodwill of the business, and payment to him in cash the value of his partnership interest, less any damage, or have the payment secured by a bond approved by the court; and (b) Be released from all existing liabilities of the partnership [Article 1837(3)].

This is a right as against his co-partners and all partners claiming through them in respect of their interests in the partnership. It cannot be availed if there is an agreement to the contrary [Article 1837 (1)].

E.2. DISSOLUTION IN CONTRAVENTION OF THE AGREEMENT I. PARTNER WHO DID NOT CAUSE THE DISSOLUTION The partners who did not cause the dissolution wrongfully has the following rights: (1) To demand the right under Article 1837, 1st par.; (2) To be indemnified for damages for breach of the agreement against the partner who caused the dissolution wrongfully [Article 1837(1)]; (3) To continue the business: (a) In the same name; (b) By themselves or jointly with others;

The goodwill of a business may be defined to be the advantage which it has from its establishment or from the patronage of its customers, over and above the mere value of its property and capital. The goodwill [which includes the firm name] is part of the partnership assets and may be subject of sale [De Leon (2010)].

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A partner, who is induced by fraud or misrepresentation to become such partner, may rescind the contract. Without prejudice to any other right, he is entitled: (1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him; (2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for any payments made by him in respect of the partnership liabilities; and (3) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership [Article 1838].

G. SETTLING OF BETWEEN PARTNERS

CIVIL LAW

(1) The contribution shall be in conformity with the agreement. (2) If only the share in profits has been stipulated, the contribution shall be in the same proportion. (3) In the absence of any stipulation, the contribution shall be in proportion to the capital contribution [Article 1797].

G.3. ENFORCEMENT OF CONTRIBUTION The following persons have the right to enforce the contributions: (1) An assignee for the benefit of creditors; (2) Any person appointed by the court; or (3) To the extent of the amount which he has paid in excess of his share of the partnership liability, any partner or his legal representative [Article 1839(5) and (6)]. The individual property of a deceased partner shall be liable for the contributions [Article 1839(7)].

ACCOUNTS

Subject to any agreement to the contrary, the following rules shall be observed in settling accounts between partners after dissolution.

G.4. ORDER ASSETS

OF

APPLICATION

OF

The partnership liabilities shall rank, in order of payment, as follows: (1) Those owing to creditors other than partners; (2) Those owing to partners other than for capital and profits; (3) Those owing to partners in respect of capital; (4) Those owing to partners in respect of profits [Article 1839(2).

G.1. COMPOSITION OF PARTNERSHIP ASSETS (1) The partnership property; and (2) The contributions of the partners necessary for the payment of all the liabilities [Article 1839(1)]. In accordance with the subsidiary liability of the partners, the partnership property shall be applied first to satisfy any liability of the partnership [Article 1839(3)].

G.5. DOCTRINE OF MARSHALING OF ASSETS When partnership property and the individual properties of the partners are in possession of a court for distribution: (1) Partnership creditors have priority on partnership property;

G.2. AMOUNT OF CONTRIBUTION FOR LIABILITIES The rules for distribution of losses shall determine the contributions of the partners [Article 1839(4)]. As such:

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(2) Separate creditors have priority on individual property, saving the rights of lien of secured creditors. (3) Anything left from either shall be applied to satisfy the other [Article 1839(8)].

(e) Expulsion of a partner, and the remaining partners continue the business, either alone or with others. (2) When the cause of dissolution is the retirement or death of any partner, and business is continued with the consent of the retired partner or the representative of the deceased partner, without assignment of their rights to partnership property. (3) When the cause of dissolution is the assignment by all the partners or their representatives of their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the partnership [Article 1840, 1st par.].

G.6. DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall rank in the following order: (1) Those owing to separate creditors; (2) Those owing to partnership creditors; (3) Those owing to partners by way of contribution [Article 1839(9)].

H. RIGHTS OF CREDITORS DISSOLVED PARTNERSHIP

CIVIL LAW

H.2. LIABILITY OF A NEW PARTNER

OF

The liability to the creditors of the dissolved partnership of a new partner in the partnership continuing the business shall be satisfied out of the partnership property alone. However, he may, through agreement, assume individual liability [Article 1840, 2nd par.].

H.1. AS CREDITORS OF THE NEW PARTNERSHIP In the following cases, creditors of the dissolved partnership are also creditors of the person or partnership continuing the business: (1) When the business is continued without liquidation, and the cause of dissolution is: (a) Admission of a new partner into the existing partnership; (b) Retirement or death of any partner, and his rights to partnership property are assigned to [1] two or more of the partners, or [2] one or more of the partners and one or more third persons; (c) Retirement of all but one partner, and their rights to partnership property are assigned to the remaining partner, who continues the business, either alone or with others; (d) Wrongful dissolution by any partner, and the remaining partners continue the business, either alone or with others;

H.3. PRIORITY OF CREDITORS DISSOLVED PARTNERSHIP

OF

Creditors of the dissolved partnership have prior right to any claim of the retired partner or the representative of the deceased partner against the person or partnership continuing the business [Article 1840, 3rd par.]. This is without prejudice to the right of creditors to set aside any assignment on the ground of fraud [Article 1840, 4th par.].

I. RIGHTS OF A RETIRED PARTNER OR A REPRESENTATIVE OF DECEASED PARTNER Unless otherwise agreed upon, when any partner retires or dies, and the business is continued without any settlement of accounts as between him or his estate and the person or partnership continuing the business, he or his

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legal representative, as against such person or partnership, subject to the prior rights of creditors of the dissolved partnership: (1) May have the value of his interest at the date of dissolution ascertained; and (2) Shall receive as an ordinary creditor: (a) An amount equal to the value of his interest in the dissolved partnership with interest; or (b) At his option or at the option of his legal representative, in lieu of interest, the profits attributable to the use of his right in the property of the dissolved partnership [Article 1841].

CIVIL LAW

(2) The business is controlled or managed by one or more general partners, who are personally liable to creditors [Articles 1848 and 1850]. (3) One or more limited partners contribute to the capital and share in the profits but do not manage the business and are not personally liable for partnership obligations beyond their capital contributions [Articles 1845, 1848 and 1856]. (4) Obligations or debts are paid out of the partnership assets and the individual property of the general partners [Article 1843]. (5) The limited partners may have their contributions back subject to conditions prescribed by law [Articles 1844 and 1957].

J. RIGHT TO AN ACCOUNT In the absence of any agreement to the contrary, the right to an account of his interest shall accrue to any partner, or his legal representative at the date of dissolution, as against: (1) The winding up partners; (2) The surviving partners; or (3) The person or partnership continuing the business [Article 1842].

A limited partnership has the following advantages: (1) For general partners, to secure capital from others while retaining control and supervision for the business; (2) For limited partners, to have a share in the profits without risk of personal liability.

VI. Limited Partnership

C. GENERAL AND LIMITED PARTNERS DISTINGUISHED

A. DEFINITION A limited partnership is: (1) A partnership; (2) Formed by two or more persons; (3) Having as members: (a) One or more general partners; and (b) One or more limited partners.

General partner

Limited partner

Extent of liability Personally, but subsidiarily, liable for obligations of the partnership

The limited partners as such shall not be bound by the obligations of the partnership [Article 1843].

Liable only to the extent of his capital contributions

Right to participate in management Unless otherwise agreed upon, all general partners have an equal right to manage the partnership

B. CHARACTERISTICS (1) A limited partnership is formed by compliance with the statutory requirements [Article 1844].

No right participate management

Nature of contribution

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Cash, property or industry

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Article 1844; and [2]

Cash or property only, not industry

file the certificate for record in the SEC

Proper party in proceedings by or against partnership Proper party

Composition

Not proper party, unless [1] he is also a general partner; or [2] where the object of the proceedings is to enforce his right against or liability to the partnership

Only partners

Must contain the word “Company” [SEC Memo Circ No. 14-00], except for professional partnerships

Name must not appear in the firm name

May or may not include the name of one or more of the partners

Prohibition to engage in other business Prohibited [subject to qualifications]

Not prohibited

Effect of retirement, death, insanity or insolvency Dissolves partnership

Does not dissolve partnership; rights transferred to executor or administrator for selling his estate

Articles1828-1842

Assignable

Must not include name of limited partners, unless: [1] it is also the surname of a general partner, or [2] prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared

Articles 1860-1863

E.1. GENERAL REQUIREMENTS Two or more persons desiring to form a limited partnership shall: (1) Sign and swear to a certificate stating the items in Article 1844; and (2) File for record the certificate in the SEC [Article 1844].

Limited partnership Creation

May be constituted in any form, subject to exceptions

Memo. Circ. No. 1400]

E. FORMATION

D. GENERAL AND LIMITED PARTNERSHIP DISTINGUISHED General partnership

Must include the word “Limited” [SEC

Rules governing dissolution

Assignability of interest Not assignable

One or more general, and one or more limited partners

Firm name

Firm name Name may appear in the firm name

general

Partners must: [1] sign and swear to a certificate in compliance with

A limited partnership is formed if there is substantial compliance in good faith with the

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requirements. When there is failure to substantially comply with the requirements: (1) In relation to third persons, the partnership is general, unless they recognized that the firm is a limited partnership; and (2) As between the partners, the partnership remains limited, since they are bound by their agreement [De Leon (2010)].

(2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation or amendment [Article 1847].

REQUISITES: (1) The partner knew the statement to be false: (a) At the time he signed the certificate; or (b) Subsequently, but having sufficient time to cancel or amend it, or file a petition for its cancellation or amendment, and he failed to do so; (2) The person seeking to enforce liability has relied upon the false statement in transacting business with the partnership; and (3) The person suffered loss as a result of reliance upon such false statement.

E.2. PURPOSE OF FILING The purpose of filing the certificate in the SEC is: (1) To give actual or constructive notice to potential creditors or persons dealing with the partnership; and (2) To acquaint them with its essential features, including the limited liability of limited partners [De Leon (2010)].

E.3. FIRM NAME General rule: The surname of a limited partner shall not appear in the partnership name.

E.5. GENERAL AND LIMITED PARTNER AT THE SAME TIME

Exceptions: (1) It is also the surname of a general partner; or (2) Prior to the time when the limited partner became such, the business had been carried on under a name in which his surname appeared.

A person may be a general and a limited partner in the same partnership at the same time. This fact must be stated in the certificate. A person who is a general, and also at the same time a limited partner, shall have all the rights and powers, and be subject to all the restrictions of a general partner, except that, in respect to his contribution as a limited partner, he shall have the rights against the other members which he would have had if he were not also a general partner [Article 1853].

A limited partner whose surname appears in a partnership name contrary to this prohibition is liable as a general partner to partnership creditors who extend credit without actual knowledge that he is not a general partner.

E.4. FALSE CERTIFICATE

STATEMENT

IN

CIVIL LAW

F. MANAGEMENT Only general partners have the right to manage the partnership. If a limited partner takes part in the control of the business, he becomes liable as a general partner [Article 1848].

THE

If the certificate contains a false statement, one who suffers loss by reliance thereon may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate; or

A general partner shall have the rights and powers and be subject to all restrictions and liabilities of a partner in a partnership without 416

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limited partners. Thus, he has general authority over the business. However, written consent or ratification by all limited partners is necessary to authorize the general partners to: (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 a judgment against the partnership; (4) Possess partnership property, or assign their rights in specific property, for other than a partnership purpose; (5) Admit a person as a general partner; (6) Admit a person as a limited partner, unless the right to do so is given in the certificate; (7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right so to do is given in the certificate

He holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned; and (2) Money or other property wrongfully paid or conveyed to him on account of his contribution [Article 1858, 2nd par.]. These liabilities can be waived or compromised only by the consent of all members. Such waiver or compromise, however, shall not affect the right to enforce said liabilities of a creditor: (1) Who extended credit; or (2) Whose claim arose, after the filing or before a cancellation or amendment of the certificate, to enforce such liabilities [Article 1858, 3rd par.]. Even after a limited partner has rightfully received the return in whole or in part of his capital contribution, he is still liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors: (1) Who extended credit; or (2) Whose claims arose before such return [Article 1858, 4th par.].

G. OBLIGATIONS OF A LIMITED PARTNER G.1. OBLIGATIONS CONTRIBUTION

RELATED

CIVIL LAW

TO

The contributions of a limited partner may be cash or other property, but not services [Article 1845]. A limited partner is liable for partnership obligations when he contributes services instead of only money or property to the partnership [De Leon (2010)].

A person who has contributed capital to a partnership, erroneously believing that he has become a limited partner, but his name appears in the certificate as a general partner or he is not designated as a limited partner, is not personally liable as a general partner by reason of his exercise of the rights of a limited partner, provided: (1) On ascertaining the mistake, he promptly renounces his interest in the profits of the business or other compensation by way of income [Article 1852];

A limited partner is liable to the partnership: (1) For the difference between his actual contribution and that stated in the certificate as having been made; and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate [Article 1858, 1st par.].

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(2) He does not participate in the management of the business [Article 1848]; and (3) His surname does not appear in the partnership name [Article 1846].

G.2. LIABILITY CREDITORS

TO

A limited partner shall have the same rights as a general partner to: (1) Require that the partnership books be kept at the principal place of business of the partnership; (2) To inspect and copy any of them at a reasonable hour; (3) To demand true and full information of all things affecting the partnership; (4) To demand a formal account of partnership affairs whenever circumstances render it just and reasonable; (5) To ask for dissolution and winding up by decree of court; (6) To receive a share of the profits or other compensation by way of income; and (7) To receive the return of his contribution provided the partnership assets are in excess of all its liabilities [Article 1851].

PARTNERSHIP

General rule: A limited partner is not liable as a general partner. His liability is limited to the extent of his contributions [Article 1843]. Exceptions: The limited partner is liable as a general partner when: (1) His surname appears in the partnership name, with certain exceptions [Article 1846, 2nd par.]. (2) He takes part in the control of the business [Article 1848].

G.3. LIABILITY CREDITORS

TO

CIVIL LAW

SEPARATE

H.2. RIGHT TO TRANSACT BUSINESS WITH THE PARTNERSHIP

On due application to a court of competent jurisdiction by any separate creditor of a limited partner, the court may: (1) Charge his interest with payment of the unsatisfied amount of such claim; (2) Appoint a receiver; and (3) Make all other orders, directions and inquiries which the circumstances of the case may require.

A limited partner may: (1) Loan money to the partnership; (2) Transact other business with the partnership; and (3) Receive a pro rata share of the partnership assets with general creditors if he is not also a general partner [Article 1854, 1st par.]. Limitations: A limited partner, with respect to his transactions with the partnership, cannot: (1) Receive or hold as collateral security any partnership property; or (2) Receive any payment, conveyance, or release from liability if it will prejudice the right of third persons [Article 1854, 1st par.].

The interest so charged may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property [Article 1862]. Note: In a general partnership, the interest may be redeemed with partnership property with the consent of all the partners whose interests are not charged [Article 1814].

Violation of the prohibition is considered a fraud on the creditors of the partnership [Article 1854, 2nd par.].

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H.3. RIGHT TO SHARE IN PROFITS General rule: A limited partner, irrespective of the nature of his contribution has only the right to demand and receive cash in return for his contribution.

A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate. This right is subject to the condition that partnership assets will still be in excess of partnership liabilities after such payment [Article 1856]. The partnership liabilities being referred to exclude the liabilities to the limited and general partners.

Exceptions: He may receive his contribution in a form other than cash when: (1) There is a statement in the certificate to the contrary; or (2) All the members of the partnership consent [Article 1857, 3rd par.].

Ratio: Otherwise, he will receive a share to the prejudice of third-party creditors.

H.4. RIGHT CONTRIBUTION

TO

RETURN

H.5. PREFERENCE PARTNERS

OF

OF

LIMITED

General rule: The limited partners stand on equal footing.

A limited partner may have his contributions withdrawn or reduced when: (1) All the liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them; (2) The consent of all members is had, unless the return may be demanded as a matter of right; and (3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction [Article 1857, 1st par.].

Exception: By an agreement of all the partners [general and limited] in the certificate, priority or preference may be given to some limited partners over others with respect to: (1) The return of contributions; (2) Their compensation by way of income; or (3) Any other matter [Article 1855].

H.6. RIGHT TO ASSIGN INTEREST The interest of a limited partner is assignable. The assignee may become: (1) A substituted limited partner; or (2) A mere assignee.

The return of his contributions may be demanded, as a matter of right [i.e., even when not all the other partners consent], when (1) and (2) above are complied with: (1) On the dissolution of the partnership; (2) Upon the arrival of the date specified in the certificate for the return; or (3) After the expiration of a 6-month notice in writing given by him to the other partners, if no time is fixed in the certificate for: (a) The return of the contribution; or (b) The dissolution of the partnership [Article 1857, 2nd par.].

A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership. He has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those liabilities which: (1) The assignee was ignorant of; and (2) Cannot be ascertained from the certificate [Article 1859, 2nd and 6th pars.i. An assignee is only entitled to receive the share of the profits or other compensation by way of

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income, or the return of contribution, to which the assignor would otherwise be entitled. He has no right: (1) To require any information or account of the partnership transactions; (2) To inspect the partnership books [Article 1859, 3rd par.].

CIVIL LAW

Upon the death of a limited partner, his executor or administrator shall have: (1) All the rights of a limited partner for the purpose of settling his estate; and (2) The power to constitute an assignee as a substituted limited partner, if the deceased was so empowered in the certificate.

An assignee has the right to become a substituted limited partner if: (1) All the partners consent thereto; or (2) The assignor, being empowered to do so by the certificate, gives him that right [Article 1859, 4th par.].

The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner [Article 1861].

J. SETTLEMENT OF ACCOUNTS J.1. ORDER OF PAYMENT

An assignee becomes a substituted limited partner when the certificate is appropriately amended [Article 1859, 5th par.].

(1)

H.7. RIGHT TO ASK FOR DISSOLUTION A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution; or (2) He has a right to contribution but his contribution is not paid because the partnership property is insufficient to pay its liabilities [Article 1857, 4th par.].

(2)

(3) (4)

I. DISSOLUTION A limited partnership is dissolved in much the same way and causes as an ordinary partnership [De Leon (2010)].

(5) (6)

General rule: The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the partnership.

In settling accounts after dissolution, the liabilities of the partnership shall be entitled to payment in the following order: Those to creditors, including limited partners except those on account of their contributions, in the order of priority as provided by law; Those to limited partners in respect to their share of the profits and other compensation by way of income in their contributions; Those to limited partners in respect to the capital of their contributions; Those to general partners other than for capital and profits; Those to general partners in respect to profits; Those to general partners in respect to capital [Article 1863, 1st par.].

Note: In settling accounts of a general partnership, those owing to partners in respect to capital enjoy preference over those in respect to profits.

Exception: It is not so dissolved when the business is continued by the remaining general partners: (1) Under a right to do so stated in the certificate; or (2) With the consent of all members [Article 1860].

J.2. SHARE ASSETS

IN

THE

PARTNERSHIP

The share of limited partners in respect to their claims for capital, profits, or for compensation

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K.3. REQUIREMENTS FOR AMENDMENT OR CANCELLATION

by way of income, is in proportion of their contribution, unless: (1) There is a statement in the certificate as to their share in the profits; or (2) There is a subsequent agreement fixing their share [Article 1863].

To amend or cancel a certificate: (1) The amendment or cancellation must be in writing; (2) It must be signed and sworn to by all the members including the new members, and the assigning limited partner in case of substitution or addition of a limited or general partner; and (3) The writing to amend (with the certificate, as amended) or to cancel must be filed for record in the SEC.

K. AMENDMENT OR CANCELLATION OF CERTIFICATE K.1. CANCELLATION OF CERTIFICATE The certificate shall be cancelled when: (1) The partnership is dissolved; or (2) All limited partners cease to be such limited partners.

When a person required to sign the writing, a person desiring the cancellation or amendment may petition the court to order cancellation or amendment. The court shall order the SEC to record the cancellation or amendment if it finds that the petitioner has a right to have the writing executed.

K.2. AMENDMENT OF CERTIFICATE A certificate shall be amended when: (1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner; (2) A person is substituted as a limited partner; (3) An additional limited partner is admitted; (4) A person is admitted as a general partner; (5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued; (6) There is a change in the character of the business of the partnership; (7) There is a false or erroneous statement in the certificate; (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution; (9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate; or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them [Article 1864].

From the moment the amended certificate/writing or a certified copy of a court order granting the petition for amendment has been filed, such amended certificate shall thereafter be the certificate of partnership [Article 1865].

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CREDIT TRANSACTIONS

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I. Loan

COMMODATUM VS. MUTUUM Commodatum

CONTRACTS OF LOAN

to

is the

Essentially gratuitous May be gratuitous or [Art.1933] onerous, i.e. with stipulated interest Borrower must return Borrower need only the same thing loaned pay an equal amount [Art.1933] of the same kind and quality [Art. 1953]

Contract to Loan

May involve real or Refers only to personal personal property property [Art.1937]

Real Contract; Consensual Contract: perfected, not by mere perfected by mere consent, but the consent. delivery of the contract. to

money or consumable

Ownership of the thing Ownership loaned is retained by transferred lender [Art.1933] borrower

CONTRACT OF LOAN VS. CONTRACT TO LOAN

Ownership of the thing Ownership loaned is retained by transferred lender [Art.1933] borrower

Mutuum

Ordinarily involves Involves something not other consumable* thing [Art.1936]

(1) Commodatum – a contract where one party delivers to another something not consumable so that the latter may use the same for a certain sum and return it. [Art. 1933] (2) Mutuum (Simple Loan) – a contract where one party delivers to another money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. [Art. 1933]

Contract of Loan

CIVIL LAW

Loan for use or Loan for consumption temporary possession [Art.1935]

is the

SIMPLE LOAN VS. BARTER In simple loan, the primary purpose of the contract is the permissive use of the money or consumable property. Ownership is transferred as a necessary consequence of the permissive use of the property loan In barter, the primary purpose of the contract is the transfer of ownership of a non-fungible property, and payment is made by giving some thing of the same kind, quantity and quality

Bailor may demand the return of the thing loaned before the expiration of the term in case of urgent need [Art.1946]

Lender may not demand its return before the lapse of the term agreed upon

Bailor suffers the loss of the subject matter since he is the owner [Art.1942; Art.1174]

Borrower suffers the loss even if caused exclusively by a fortuitous event and he is not, therefore, discharged from his duty to pay

Purely personal in Not purely personal in character [Art 1939] character

A. COMMODATUM Commodatum – an essentially gratuitous contract where one party delivers to another

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something not consumable so that the latter may use the same for a certain time and return it. [Art. 1933]

CIVIL LAW

(5) Obligation to pay for the ordinary expenses

for the use and preservation of the thing loaned. [Art. 1941] (6) Obligation to be solidarily liable when there are two or more bailees to whom a thing is loaned in the same contract. [Art. 1945]

A.1. KINDS OF COMMODATUM (1) Ordinary commodatum – the use of the thing by the bailee is for a certain period of time [Art. 1933] (2) Precarium – one where the bailor may demand the thing loaned at will; if any one of the following is present (a) The duration and purpose of the contract is not stipulated (b) The use of the thing is merely tolerated by the owner [Art. 1947]

A.4. OBLIGATIONS OF THE BAILOR (1) Obligation to refund the extraordinary expenses during the contract for the preservation of the thing loaned. [Art. 1949] (2) Obligation to bear equally the extraordinary expenses arising on the occasion of actual use of the thing by the bailee. [Art. 1949] Exception: Contrary stipulation (3) Obligation to pay damages to the bailee for hidden flaws known to the bailor. [Art. 1951]

A.2. PARTIES The Civil Code refers to the parties in a commodatum as the bailor (creditor) or bailee (debtor). Who may be a bailor in commodatum? Anyone. The bailor in commodatum need not be the owner of the thing loaned. [Art. 1938]

NOTE: Bailor has no right of abandonment; he cannot exempt himself from payment of expenses or damages to the bailee by abandoning the thing to the latter. [Art. 1952]

But the bailee himself may not lend nor lease the thing loaned to him to a third person. [Art. 1939 (2)]

A.5. LIABILITY FOR DETERIORATION General rule: the bailee is liable for the deterioration of the thing loaned.

A.3. OBLIGATIONS OF THE BAILEE (1) Obligation to take care of it with the proper diligence of a good father of a family. [Art. 1163] (2) Obligation to use the thing loaned only for the purpose for which it was loaned and not for any other purpose. [Art. 1935, 1939 [2], 1942 [1]] (3) Obligation to not lend the thing to a third person who is not a member of his household. [Art. 1942 [4]] (4) Obligation to return the thing upon the expiration of the period stipulated or after the accomplishment of the use for which it has been constituted. [Art. 1944, 1946]

Exception: when the deterioration of the thing is due only to the use thereof and without his fault. [Art. 1943]

A.6. RIGHT OF RETENTION General Rule: the Bailee has no right of retention of the thing loaned on the ground that the Bailor owes him something, even though it may be by reason of expenses. Exception: the Bailee has the right of retention for damages arising from hidden flaws. [Art. 1944]

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after judicial demand when there is no stipulation for payment of interest. [Art.2212]

B. MUTUUM Mutuum – a contract where one of the parties delivers to another money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid.

B.5. REQUISITES FOR INTEREST TO BE CHARGEABLE (1) Must be expressly stipulated [Art. 1956] Exceptions:

B.1. OBLIGATIONS OF THE BORROWER

(a) The debtor in delay is liable to pay legal interest (6% or 12% per annum) as indemnity for damages [Art.2209] (b) Interest accruing from unpaid interest – Interest demanded shall earn interest from the time it is judicially demanded [Art.2212] or where there is an express stipulation [Art.1959] (2) Agreement must be in writing [Art.1956] (3) Must be lawful

(1) Obligation to pay to the creditor an equal amount of the same kind and quality. [Art. 1953] (2) If stipulated, the borrower has the obligation to pay interest. [Art. 1956]

B.2. INTEREST AND SUSPENSION OF USURY LAW Interest – the compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or credits.

Rules for award of interest in the concept of actual and compensatory damages [Nacar v.

B.3. KINDS OF INTEREST

Gallery Frames, G.R. No. 189871 [2013] modifying Eastern Shipping Lines vs. CA, [1994] in light of BSP-MB Circular No. 799]

(1) Simple interest – Paid for the principal at a certain rate fixed or stipulated by the parties. (2) Compound Interest – that which is imposed upon interest due and unpaid. (3) Legal Interest – that which the law directs to be charged in the absence of any agreement as to the rate between the parties. (4) Lawful Interest – that which the laws allow or do not prohibit. (5) Unlawful or Usurious Interest – paid or stipulated to be paid beyond the maximum fixed by law. However, by virtue of CB Circular 905, usury has become “legally inexistent.”

(1) When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. (2) When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be

B.4. WHEN IS COMPOUND INTEREST ALLOWED? (1) When there is an express written stipulation to that effect [Art.1956] (2) Upon judicial demand. However, debtor is not liable to pay compound interest even

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established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially [Art. 1169, Civil Code], but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made [at which time the quantification of damages may be deemed to have been reasonably ascertained]. The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. (3) When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

CIVIL LAW

(a) A loan or forbearance of money (b) An understanding between parties that the loan shall and may be returned (c) An unlawful intent to take more than the legal rate for the use of money or its equivalent (d) The taking or agreeing to take for the use of the loan of something in excess of what is allowed by law. Note: A usurious loan transaction is not a complete nullity but defective only with respect to the agreed interest. [Carpo v. Chua, G.R. Nos. 150773 and 153599, September 30, 2005]

II. Deposit A 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. [Art. 1962]

OBJECT OF DEPOSIT Art. 1966 provides that only movable things may be the object of a deposit. However, Art. 2006 provides that movable as well as immovable property may be the object of sequestration or judicial deposit.

Forbearance – within the context of usury law, is a contractual obligation of lender or creditor to refrain, during given period of time, from requiring borrower or debtor to repay loan or debt then due and payable [Bataan Seedling v. Republic, 383 SCRA 590]

PRINCIPAL PURPOSE Safekeeping of the thing; if NOT, there is NO DEPOSIT but some other contract. [Art. 1962]

THE USURY LAW (Act No.2566) – an act fixing rates of interests upon loans and declaring the effect of receiving or taking usurious rates and for other purposes. [Arevalo v. Dimayuga, 1927]

CONSIDERATION A deposit is generally gratuitous, except: (1) If there is an agreement to the contrary (2) Unless the depositary is engaged in the business of storing goods [Art. 1965]

CB Circular No. 905 abolished interest rate ceilings. With the promulgation of such circular, usury has become “legally inexistent” as the parties can now legally agree on any interest that may be charged on the loan.

KINDS OF DEPOSIT (1) Extrajudicial (a) Voluntary – obligation arises as a consequence of contract

B.6. ELEMENTS OF USURY

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(b) Necessary – obligation arises as a consequence of law or quasi-contract (2) Judicial – obligation arises as a consequence of a law allowing the issuance of a judicial order constituting a deposit

CIVIL LAW

General rule: The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited [Art. 1993] Exceptions: (1) Depositor was not aware of the danger; (2) Depositor was not expected to know the dangerous character of the thing; (3) Depositor notified the depositary of such dangerous character; (4) Depositary was aware of the danger without advice from the depositor.

A. VOLUNTARY DEPOSIT Voluntary deposit – an agreement to constitute a deposit is binding, but the deposit itself is a real contract, as it is not perfected until the delivery of the thing. [Art. 1963]

B. NECESSARY DEPOSIT

HOW ENTERED INTO: Orally or in writing [Art. 1969]

Made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns [Arts.1996-2004] or by travelers with common carriers [Arts.17341735]

HOW PERFECTED: The deposit is perfected upon delivery, which is made by the will of the depositor. [Arts. 1963, 1968]

B.1. KINDS OF NECESSARY DEPOSIT

A deposit may be made by two or more persons (who believe that they are entitled to the thing deposited with a third person). Said person is to deliver the thing to the one to whom it belongs. [Art. 1968]

(1) It is made in compliance with a legal obligation, in which case it is governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit, e.g., Arts. 538, 586 and 2104 (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. In this case the deposit is governed by the rules on voluntary deposit and Art. 2168 (3) Made by passengers with common carriers. [Art.1754] (4) Made by travelers in hotels or inns. [Art. 1998]

A.1. EXTINGUISHMENT (1) Loss or destruction of thing deposited, or (2) In case of a gratuitous deposit, upon the death of either the depositor or depositary [Art. 1995]. The depositary is not obliged to continue with the contract of deposit (3) By other modes provided in the Civil Code, e.g. novation, merger, etc. [See Art.1231]

A.2. OBLIGATIONS OF DEPOSITOR (1) Depositor is obliged to reimburse the depositary for expenses incurred for preservation – if deposit is gratuitous. [Art.1992] (2) Depositor is obliged to pay losses incurred due to character of thing deposited. [Art. 1993]

B.2. DEPOSIT BY TRAVELERS IN HOTELS AND INNS Before keepers of hotels or inns may be held responsible as depositaries with regard to the effects of their guests, the following must concur:

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(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.

B.3. EXTENT ART.1998

OF

LIABILITY

CIVIL LAW

Regarding the legal deposit of a vehicle that was stolen while parked with Saisaki restaurant, “the depositary may not exempt itself from responsibility for loss or damage of the thing deposited with it, by exclusionary stipulation. Such stipulations are void for being contrary to law.” [Triple-V Food Services v.

UNDER

Filipino Merchants February 21, 2005]

(1) Those in hotel rooms which come under the term “baggage” or articles such as clothing as are ordinarily used by travelers (2) Include those lost or damaged in hotel annexes such as vehicles in the hotel’s garage.

Insurance

B.6. HOTEL-KEEPER’S RETENTION

Company,

RIGHT

TO

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— (1) lodging, and (2) supplies usually furnished to hotel guests [Art. 2004]

B.4. WHEN HOTEL-KEEPER LIABLE Regardless of the amount of care exercised the hotel-keeper is liable when— (1) The loss or injury to personal property is caused by his servants or employees as well as by strangers [Art. 2000]. (2) The loss is caused by the act of a thief or robber done without the use of arms and irresistible force. [Art. 2001]

The right of retention recognized in this article is in the nature of a pledge created by operation of law.

C. JUDICIAL DEPOSIT B.5. WHEN HOTEL-KEEPER NOT LIABLE

Takes place when an attachment or seizure of property in litigation is ordered [Arts. 20052009]

(1) The loss or injury is caused by force majeure, like flood, fire, [Art.2000] theft or robbery by a stranger—not the hotelkeeper’s servant or employee—with the use of firearms or irresistible force [Art.2001] Exception: Hotel-keeper is guilty of fault or negligence in failing to provide against the loss or injury from his cause. [Arts.1170 and 1174] (2) The loss is due to the acts of the guests, his family, servants, visitors [Art.2002] (3) The loss arises from the character of the things brought into the hotel [Ibid.]

C.1. NATURE AND PURPOSE It is auxiliary to a case pending in court. The purpose is to maintain the status quo during pendency of the litigation or to insure the right of the parties to the property in case of a favorable judgment.

C.2. DEPOSITARY OF SEQUESTERED PROPERTY A person is appointed by the court [Art. 2007] with the obligations— (1) To take care of the property with the diligence of a good father of the family. [Art. 2008] (2) To continue in his responsibility until the controversy which give rise thereto is

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. Such kind of stipulation shall be void. [Art. 2003]

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ended unless the court so orders. [Art. 2007]

Surety if the debtor does not A surety is usually bound with his principal by the same instrument, executed at the same time, and on the same consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to know every default of his principal.

C.3. APPLICABLE LAW Judicial deposit law is remedial or procedural. The Rules of Court shall govern matters not provided for in the Civil Code. [Art. 2009]

III. Guaranty Suretyship

CIVIL LAW

and

Guaranty – a contract whereby 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. [Art. 2047] While a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal cannot pay. [See benefit of excussion, Art. 2058] Suretyship – a relation which exists where one person [principal] has undertaken an obligation and another person (surety) is also under a direct and primary obligation or other duty to a third person (obligee), who is entitled to but one performance, and as between the two who are bound, the one rather than the other should perform.

A surety will not be discharged, either by the mere indulgence of the creditor to the principal, or by want of notice of the default of the principal, no matter how much he may be injured thereby A surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay

If a person binds himself solidarily with the principal debtor, the contract is called suretyship and the guarantor is called a surety. Guaranty distinguished from suretyship [Zobel, Inc. vs. CA, 1998] Surety Guaranty An accessory promise A collateral by which a person undertaking to pay binds himself for the debt of another in another already case the latter does bound, and agrees not pay the debt. with the creditor to satisfy the obligation

A. NATURE GUARANTY

Guaranty The contract of guaranty is the guarantor's own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often supported on a separate consideration from that supporting the contract of the principal. The original contract of his principal is not his contract, and he is not bound to take notice of its nonperformance A guarantor is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal A guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay

AND

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contrary

will of the principal debtor

On the cause of a guaranty contract A guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto.

However, as regards payment made by a third person— (1) If payment is 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) If payment is with knowledge or consent of the debtor: Subrogated to all the rights which the creditor had against the debtor

[Severino v. Severino, 1931] 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. 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.

The guaranty must be founded on a valid principal obligation [Art. 2052 (1)] Guaranty is an accessory contract: It is an indispensable condition for its existence that there must be a principal obligation. Hence, if the principal obligation is void, it is also void.

A guaranty need not be undertaken with the knowledge of the debtor [Art. 2050] Guaranty is unilateral. It exists for the benefit of the creditor and not for the benefit of the principal debtor

A guaranty may secure the performance of a voidable, unenforceable, and natural obligation [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.

Creditor has every right to take all possible measures to secure payment of his credit— guaranty can be constituted even against the

A guaranty may secure a future debt [Art. 2053] Continuing Guaranty

A married woman who is a guarantor binds only her separate property, generally [Art. 2049] Exceptions: (1) With her husband’s consent, bind 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.

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conditional obligation [Art. 2053] (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

(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.

A guarantor’s liability cannot exceed the principal obligation [Art. 2054] General rule: Guaranty is a subsidiary and accessory contract – guarantor cannot bind himself for more than the principal debtor and even 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.

Rationale: A contract of guaranty is subsidiary (1) To secure the payment of a loan at maturity – surety binds himself to guarantee the punctual payment of a loan at maturity and all other obligations of indebtedness which may become due or owing to the principal by the borrower. (2) To secure payment of any debt to be subsequently incurred – a guaranty shall be construed as continuing when by the terms thereof it is evident 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. (3) To secure existing unliquidated debts – refers to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown and not to debts not yet incurred and existing at that time. (4) The surety agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born; for example, those securing obligations subject to a condition precedent are valid and binding before the occurrence of the condition precedent.

Exceptions: (1) Interest, judicial costs, and attorney’s fees as part of damages may be recovered – creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate, judicial costs, and attorney’s fees when appropriate, even without stipulation and even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. Interest runs from:  Filing of the complaint (upon judicial demand); or  The time demand was made upon the surety until the principal obligation is fully paid (upon extra-judicial demand) Rationale: 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. (2) Penalty may be provided – a surety may be

A guaranty may secure the performance of a

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held liable for the penalty provided for in a bond for violation of the condition therein.

Liability arises only if principal debtor is held liable (1) In the absence of collusion, the surety is bound by a judgment against the principal even though he was not a party to the proceedings; (2) The creditor may sue, separately or together, the principal debtor and the surety; (3) 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 (4) 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.

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 The existence of a guaranty is 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. Rationale: (1) There be assurance that the guarantor had the true intention to bind himself; (2) To make certain that on making it, the guarantor proceeded with consciousness of what he was doing.

Note: A surety is not entitled to exhaustion The undertaking is to the creditor, not the debtor The surety makes no covenant or agreement with the principal that it will fulfill the obligation guaranteed for the benefit of the principal. 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; unless otherwise expressly provided.

Contract of guaranty is covered by the Statute of Frauds [See Art. 1403 (2) (b)] 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. However, it need not appear in a public document

B. NATURE SURETYSHIP

AND

EXTENT

CIVIL LAW

Prior demand by the creditor upon the principal is not required. The surety is not exonerated by neglect of the creditor to sue the principal. Strictissimi juris rule is applicable only to accommodation surety.

OF

Reason: An accommodation surety acts without motive of pecuniary gain and hence, should be protected against unjust pecuniary impoverishment by imposing on the principal,

Liability is contractual and accessory but direct. Liability is limited by the terms of the contract.

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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.

(a) If the guarantor has expressly renounced it. (b) If he has bound himself solidarily with the debtor. Here, the liability assumed is that of a surety. The 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 arises as the debtor cannot fulfill his obligation (d) When the 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, and to incur the delays and expenses incident thereto. Exception: When the debtor has left a manager or representative (e) If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation – If such judicial action including execution would not satisfy the obligation, 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.

Strictissimi juris rule is not applicable to compensated sureties Reasons: (1) Compensated corporate sureties are business associations 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. Such corporations are in fact insurers and in determining their rights and liabilities, the rules peculiar to suretyship do not apply. The stipulation in the indemnity agreement allowing the surety to recover even before it paid the creditor is enforceable. In accordance therewith, the surety may demand from the indemnitors even before paying the creditors. [Mercantile Insurance Company v. Ysmael, 169 SCRA 66, 1989]

C. EFFECT OF GUARANTY C.1. EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND THE CREDITOR 1.

CIVIL LAW

The guarantor has the right to benefit from excussion/ exhaustion [Art. 2058]

“The right of guarantors…to demand exhaustion of the property of the principal debtor, exists only when a pledge or a mortgage has not been given as special security for the payment of the principal obligation.” [Southern Motors, Inc. v.

The guarantor cannot be compelled to pay the creditor unless the latter has: (a) Exhausted all of the property of the debtor; and (b) Resorted to all the legal remedies against the debtor.

Barbosa, 1956] “The surety in the present case bound itself "jointly and severally" [in solidum] with the

Exceptions to benefit of excussion [Art. 2059] (1) As provided in Art. 2059:

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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.

defendant; and excussion [previous exhaustion of the property of the debtor] shall not take place "if he [the guarantor] has bound himself solidarily with the debtor." [Luzon Steel Corp. v. Sia, 1969] (2) If he does not comply with Art. 2060 In order that the guarantor may make use of the benefit of excussion, he must: (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 (3) If he is a judicial bondsman and sub- surety [Art. 2084] (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.

3. The creditor has the duty to make prior demand for payment from the guarantor [Art. 2060] The demand is to be made only after judgment on the debt. Joining the guarantor in the suit against the principal debtor is not the demand intended by law. Actual demand has to be made. 4. The guarantor has the duty to set up the benefit of excussion [Art. 2060] As soon as he is required to pay, guarantor must also point out to the creditor available property (not in litigation or encumbered) of the debtor within the Philippines. 5. The creditor has the duty to resort to all legal remedies [Arts. 2058, 2061] After the guarantor has fulfilled the conditions required for making use of the benefit of excussion, it becomes the duty of the creditor to: (1) Exhaust all the property of the debtor pointed out by the guarantor; (2) If he fails to do so, he shall suffer the loss for the insolvency of the debtor, but only to the extent of the value of the said property

2. The creditor has the right to secure a judgment against the guarantor prior to the excussion 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.

6. The creditor has the duty to notify the guarantor in the action against the debtor

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[Art. 2062]

CIVIL LAW

subrogated to the rights of the creditor [Art. 2067]

Notice to the guarantor is mandatory in the action against the principal debtor. The guarantor, however, is not duty bound to appear in the case, and his nonappearance shall not constitute default, w/ its consequential effects.

A guarantor who pays the debt is entitled to every remedy which the creditor has against the principal debtor, to enforce every security and all means of payments; to stand in the place of the creditor not only through the medium of the contract, but even by means of the securities entered into without the knowledge of the surety; having the right to have those securities transferred to him though there was no stipulation for it, and to avail himself of all securities against the debtor

Rationale: To give the guarantor the opportunity to allege and substantiate whatever defenses he may have against the principal obligation, and chances to set up such defenses as are afforded him by law 7. A compromise shall not prejudice the person not party to it [Art. 2063]

The need to enforce the provisions on indemnity in Article 2066 forms the basis for the subrogation clause of Article 2067. The assumption, however, is that the guarantor who is subrogated to the rights of the creditor, has the right to be reimbursed for his answering for the obligation of the debtor. Absent this right of reimbursement, subrogation will not be proper.

A compromise between creditor and principal debtor benefits the guarantor but does not prejudice him. A compromise between guarantor and the creditor benefits but does not prejudice the principal debtor. 8. Co-guarantors are entitled to the benefit of division [Art. 2065]

2. The guarantor has the duty to notify the debtor before paying the creditor [Art. 2068]

The benefit of division applies only when there are several guarantors and one debtor for a single debt. Except when solidarity has been stipulated, a coguarantor is liable only to the extent of his share in the obligation as divided among all the co-guarantors.

Should payment be made without notification, and supposing the debtor has already made a prior payment, the debtor would be justified in setting up the defense that the obligation has already been extinguished by the time the guarantor made the payment. The guarantor will then lose the right of reimbursement and consequently the right of subrogation.

C.2. EFFECTS OF GUARANTY BETWEEN THE DEBTOR AND THE GUARANTOR

3. The guarantor cannot demand reimbursement for payment made by him before the obligation has become due [Art. 2069]

1. The guarantor who pays has the right to be

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in view of the probability that he would be called upon to pay the debt. As such, he may, in the alternative, obtain release from the guaranty; or demand security that shall protect him from any proceeding by the creditor, and against the insolvency of the debtor.

General rule: Since a contract of guaranty is only subsidiary, the guarantor cannot be liable for the obligation before the period on which the debtor’s liability will accrue. Any payment made by the guarantor before the obligation is due cannot be indemnified by the debtor.

Art. 2066 and 2071 Distinguished Art. 2066 Art. 2071 Provides for the Provides for the enforcement of the protection before guaranty/surety against he has paid but the debtor after he has after he has paid the debt become liable Gives a right of action Protective remedy after payment before payment Substantive Right Preliminary remedy

Exception: Prior consent or subsequent ratification by the debtor 4. The guarantor may proceed against the debtor even before payment has been made [Art. 2071] General rule: Guarantor has no cause of action against the debtor until after the former has paid the obligation. Exceptions [Art. 2071]: (a) When he is sued for the payment; (b) In case of insolvency of the principal debtor; (c) When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; (d) When the debt has become demandable, by reason of the expiration of the period for payment; (e) After the lapse of 10 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 10 years; (f) If there are reasonable grounds to fear that the principal debtor intends to abscond; (g) If the principal debtor is in imminent danger of becoming insolvent.

C.3. EFFECTS OF GUARANTY BETWEEN CO-GUARANTORS

AS

When there are two or more guarantors, one debtor and one debt: (a) The one who pays may demand from each of the others the share proportionally owing to him (b) If any of the guarantors is insolvent, his share shall be borne by the others, including the payer, in the same proportion [Art. 2073] For purposes of proportionate reimbursement, the other guarantors may interpose such defenses against the paying guarantor as are available to the debtor against the creditor, except those that are personal to the debtor [Art. 2074]

Requisites for the applicability of Art. 2073 (1) Payment has been made by one guarantor; (2) The payment was made because (a) Of the insolvency of the debtor, or

Rationale: To enable the guarantor to take measures for the protection of his interest

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(b) By judicial demand (3) The paying guarantor seeks to be indemnified only to the extent of his proportionate share in the total obligation.

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and the creditor, and (3) that it was made without the consent of the surety or with a reservation of rights with respect to him. [Filipinas Textile Mills v. CA, November 12, 2003]

D. EXTINGUISHMENT OF GUARANTY

E. LEGAL AND JUDICIAL BONDS

Once the obligation of the debtor is extinguished in any manner provided in the Civil Code, the obligation of the guarantor is also extinguished [Art. 2076]. However, there may be instances when, after the extinguishment of the guarantor’s obligation (as in the case of a release from the guaranty), the obligation of the debtor still subsists.

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 [2082 in relation to Art. 2056] (1) He possesses integrity; (2) He has capacity to bind himself; (3) He has sufficient property to answer for the obligation which he guarantees.

Although the guarantor generally has to make payment in money, any other thing of value, if accepted by the creditor, is valid payment and therefore releases the guarantor (dacion en pago) [Art. 2077].

Pledge or mortgage in lieu of bond [2083] Guaranty or suretyship is a personal security.

If one guarantor is released without the consent of the others, the release would benefit the co-guarantors to the extent of the proportionate share of the guarantor released [Art. 2078].

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.

A guarantor is released if the creditor, without the guarantor’s consent, extends the time within which the debtor may perform his obligation [Art. 2079]. This is to protect the interest of the guarantor should the debtor be insolvent during the period of extension and deprive the guarantor of his right to reimbursement.

Bondsman not entitled to excussion [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.

The guarantors are released if by some act of the creditor they cannot be subrogated to the rights, mortgages and preferences of the latter. [Art. 2080]

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.

IV. Pledge

In order to constitute an extension discharging the surety, it should appear that the extension was for (1) a definite period, (2) pursuant to an enforceable agreement between the principal

Pledge – is a contract constituted to secure the fulfillment of a principal obligation where the thing pledged, which may be a movable, or an

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incorporeal right evidenced by a document, is placed in the possession of the creditor or a third person by common agreement. [Art. 2093 in relation to Art. 2085]

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has a right to retain it by way of pledge until he is paid. This is called the mechanic’s lien. [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. This is called the agent’s lien. [Art. 1914] (4) The laborer’s wages shall be a lien on the goods manufactured or the work done. [Art. 1707]

The pledgor must be the absolute owner of the thing pledged, and he must have the free disposal of the property, and in the absence thereof, that he be legally authorized for the purpose. [Art. 2085 (2) and (3)]

A. CHARACTERISTICS

NOTE: (1) In legal pledges, the remainder of the price of the sale shall be delivered to the obligor. (2) Public auction of legal pledges may only be executed after demand of the amount for which the thing is retained. It shall take place within one month after the demand, otherwise the pledgor may demand the return of the thing pledged, provided s/he is able to show that the creditor did not cause the public sale without justifiable grounds. [Article 2122]

(1) Real – perfected upon the delivery of the thing pledged [Art. 1316] (2) Accessory – cannot exist independently (3) Unilateral – obligation on the part of the creditor to return the thing pledged upon the fulfillment of the principal obligation (4) Subsidiary– obligation incurred does not arise until the fulfillment of the secured principal obligation

B. KINDS

C. ESSENTIAL REQUISITES

(1) Voluntary or Conventional – created by agreement of the parties.

Common to pledge and mortgage [Art. 2085] (1) Constituted to secure the fulfillment of a principal obligation. (2) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. (3) 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. (4) Cannot exist without a valid obligation. (5) Debtor retains the ownership of the thing given as a security. (6) When the principal obligation becomes due, the thing pledged or mortgaged may be alienated for the payment to the creditor. [Art. 2087]

(2) Legal – created by operation of law.

LEGAL PLEDGE / PLEDGE BY OPERATION OF LAW [ARTS. 2121-2122] (1) Necessary expenses shall be refunded to every possessor, but only a 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

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D. REQUISITES FOR PERFECTION

(1) Transfer of possession to the creditor or to third person by common agreement is essential [Art. 2093]. (a) Actual delivery is important. (b) Constructive 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. (2) All movables within the commerce of man may be pledged as long as they are susceptible of possession [Art. 2094]. (3) Incorporeal rights may be pledged. The instruments representing the pledged rights shall be delivered to the creditor; if negotiable, must be indorsed [Art. 2095]. (4) Pledge shall take effect against 3rd persons only if the following appear in a public instrument: (a) Description of the thing pledged. (b) Date of the pledge [Art. 2096]. (5) The thing pledged may be alienated by the pledgor or owner only 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 to have possession [Art. 2097]. (6) Creditor has 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 [Art. 2098]. (7) Special Laws apply to pawnshops and establishments engaged in making loans secured by pledges. Provisions of the Civil Code shall apply subsidiarily to them.

(1) The thing pledged is placed in the possession of the creditor or a third person [Art. 2093] (2) For the pledge to take effect as against third persons, a description of the thing pledged and the date of the pledge should appear in a public instrument [Art. 2096]

E. OBLIGATIONS OF PLEDGEE (1) The pledgee cannot deposit the thing pledged with a 3rd person, unless there is a contrary stipulation [Art. 2100]. (2) Is responsible for the acts of his agents or employees with respect to the thing pledged [Art. 2100]. (3) Has no right to use the thing or to appropriate its fruits without authority from the owner [Art. 2104] (4) May cause the 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 [Art. 2108].

F. RIGHTS OF PLEDGOR (1) Takes responsibility for the flaws of the thing pledged [Art. 2101 in relation to Art. 1951]. (2) 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 [Art. 2105]. (3) Subject to the right of the pledgee under article 2108, pledgor 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 [Art. 2107]. (4) May require that the thing be deposited with a 3rd person, if through the negligence or willful act of the pledgee the

In case of doubt as to whether a transaction is a pledge or a dacion in payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and interests. [Manila Banking Corp. v. Teodoro, 1989]

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thing is in danger of being lost or impaired [Art. 2106].

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less than the amount due. (2) If the price of sale is more than amount due, the debtor is not entitled to the excess unless the contrary is provided. (3) If the price of sale is less, the creditor is not entitled to recover the deficiency. A contrary stipulation is void.

The pledgee can temporarily entrust the physical possession of the chattels pledged to the pledgor without invalidating the pledge. The pledgor is regarded as holding the pledged property merely as trustee for the pledgee. The type of delivery will depend upon the nature and the peculiar circumstances of each case. [Yuliongsiu v. PNB (1968)]

H. PLEDGE AS DISTINGUISHED FROM CHATTEL MORTGAGE [ARTS. 2140, 1484] Chattel Mortgage

A pledgee cannot become the owner of, nor appropriate to himself, the thing given in pledge. If by the contract of pledge the pledgor continues to be the owner of the thing pledged during the pendency of the obligation, it stands to reason that in case of loss of the property, the loss should be borne by the pledgor. [PNB v. Atendido (1954)]

Pledge

Delivery of Personal Property Not required Delivery is required for validity Registration in the Chattel Mortgage Register Necessary for validity Not necessary; of the CM against Public document is third persons enough to bind third persons Right to Excess of Proceeds of Sale The excess goes to The excess goes to the the debtor/ pledgee/creditor, mortgagor unless otherwise stipulated Right to Recover Deficiency Creditor/ mortgagee Creditor/ mortgagee is can recover from the not entitled to recover debtor/ mortgagor, any deficiency after the except if covered by property is sold, Recto Law notwithstanding contrary stipulation The provisions of the Civil Code on pledge, insofar as they are not in conflict with the Chattel Mortgage Law shall be applicable to chattel mortgages [Art. 2141]

G. FORECLOSURE G.1. Requirements in sale of the thing pledged by a creditor, if credit is not paid on time [Art. 2112] (1) Debt is due and unpaid. (2) Sale must be at a public auction. (3) Notice to the pledgor and owner, stating the amount due. (4) Sale must be made with the intervention of a notary public. (5) If at the first auction the thing is not sold, a second one with the same formalities shall be held. (6) If at the second auction, there is no sale either, the creditor may appropriate the thing pledged but he shall give an acquittance (release) for his entire claim.

I. PACTUM COMMISSORIUM It is a stipulation that allows the creditor to appropriate the collateral, or dispose of it, in contravention of the provisions on foreclosure, and as such, is considered null and void [Gomez-Somera].

G.2. EFFECTS OF THE SALE OF THE THING PLEDGED [Art. 2115] (1) Extinguishes the principal obligation, whether the proceeds of the sale is more or 440

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the mortgage improvements which the mortgagor may subsequently acquire, install or use in connection with real property already mortgaged belonging to the mortgagor is valid.

(1) There is property pledged [collateral] by way of security for the payment of the principal obligation (2) There is a stipulation for automatic appropriation by the creditor in case of non-payment of the principal obligation within the stipulated period

B. CHARACTERISTICS (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 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 percentage thereof. (3) Mortgage creates an encumbrance over the property, but ownership of the property is not parted with. It merely restricts the mortgagor’s jus disponendi over the property. The mortgagor may still sell the property, and any stipulation to the contrary is void [Art. 2130] (4) Mortgage extends to the natural accessions, to the improvements of growing fruits and the rents or income not yet received when the obligation becomes due, including indemnity from insurance, and/or amount received from expropriation for public use [Art. 2127] (a) Applies only when the accessions and accessories subsequently introduced belongs to the mortgagor. (b) To exclude them, there must be an express stipulation, or the fruits must be collected before the obligation becomes due. (c) Third persons who introduce improvements upon the mortgaged property may remove them at any time

EFFECT ON PLEDGE The nullity of the pactum commissorium does not affect the validity of the contract of pledge. The creditor may recover the credit from the proceeds of a foreclosure sale effected in accordance with law [Gomez-Somera].

J. EQUITABLE MORTGAGE It is a contract that reveals the intention of the parties to charge property as security for a debt, but contains nothing impossible or contrary to law [Gomez-Somera].

ESSENTIAL REQUISITES (1) Parties entered into a contract denominated as a contract of sale (2) The true intention is to secure an existing debt by way of mortgage

V. Real Mortgage Mortgage – a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, immediately making immovable property or real rights answerable to the principal obligation in case it is not complied with at the time stipulated.

A. OBJECTS OF REAL MORTGAGE [Art. 2124] 1. Immovables 2. Alienable real rights over immovables. Future property cannot be an object of mortgage; however, a stipulation subjecting to

C. KINDS (1) Voluntary – constituted by the will of the

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owner of the property on which it is created (2) Legal – required by law to be executed in favor of certain persons: (a) Persons in whose favor the law establishes a mortgage have no other right than to demand the execution and recording of the document in which the mortgage is formalized [Article 2125] (b) The bondsman who is to be offered in virtue of a provision of law or of a judicial order shall have the qualifications prescribed in Art 2056 [integrity, capacity to bind himself, and sufficient property to answer for the obligation], and in other laws [Article 2082] (c) If the person bound to give a bond should not be able to do so, a pledge or mortgage considered sufficient to recover his obligation shall be admitted in lieu thereof [Article 2083] (3) Equitable – One which, although lacking the proper formalities of a mortgage, shows the intention of the parties to make the property a security for the debt. (a) Lien created by equitable mortgage ought not to be defeated by requiring compliance with formalities necessary to the validity of voluntary real estate mortgage. Ex.: Pacto de retro (b) Provisions governing equitable mortgage: Arts. 1365, 1450, 1454, 1602, 1603, 1604 and 1607.

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Where only a portion of the loan is released, the mortgage becomes enforceable only as to the proportionate value of the loan [Central Bank v. CA] Indivisibility applies only as to pledgors/mortgagors who are themselves debtors in the principal obligation, and not to accommodation pledgors/ mortgagors When several things are pledged or mortgaged, each thing for a determinate portion of the debt, the pledges or mortgage, are considered separate from each other. But when the several things are given to secure the same debt in its entirety, all of them are liable for the debt, and the creditor does not have to divide his action by distributing the debt among the various things pledged or mortgaged. Even when only a part of the debt remains unpaid, all the things are still liable for such balance. [Tolentino] The question is whether or not the written instrument in controversy was a mortgage or a conditional sale. The correct test, where it can be applied, is the continued existence of a debt or liability between the parties. If such exists, the conveyance may be held to be merely a security for the debt or an indemnity against the liability. [Reyes v. Sierra, 93 SCRA 473]

E. ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE (a) Constituted to secure the fulfillment of a principal obligation. (b) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. (c) 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. Note: Third persons who are not parties to the principal obligation may secure the

D. PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE [Arts. 2089 to 2090] A mortgage directly and immediately subjects the property upon which it is imposed. It is indivisible even though the debt may be divided, and such indivisibility is likewise unaffected by the fact that the debtors are not solidarity liable. [Dayrit v. CA]

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(d) (e) (f)

(g)

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latter by pledging or mortgaging their own property. [Art. 2085] 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 pledged or mortgaged may be alienated for the payment to the creditor. [Art. 2087] Must be recorded in the Registry of Property in order to be validly constituted. Note: The mortgage would still be binding between the parties even if the instrument is not recorded.

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Kinds of foreclosure 1. Judicial Foreclosure 2. Extrajudicial Foreclosure Judicial Foreclosure Foreclosure Judicial Court intervenes There is equity of redemption – period starts from the finality of the judgment until order of confirmation Decisions are appealable No need for a special power of attorney in the contract of mortgage

F. FORECLOSURE OF MORTGAGE Foreclosure – is the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation secured by the mortgage.

vs.

Extrajudicial

Extrajudicial No court intervention There is right of redemption – period start from date of registration of certificate of sale Not appealable Special power of attorney in favor of the mortgage is required in the contract

F.1. JUDICIAL FORECLOSURE

In general, an action for foreclosure of a mortgage is limited to the amount mentioned in the mortgage, except when the mortgage contract intends to secure future loans or advancements

[Rule 68, Rules of Court] (1) May be availed of by bringing an action in the proper court which has jurisdiction over the area wherein the real property involved or a portion thereof is situated (2) If the court finds the complaint to be wellfounded, it shall order the mortgagor to pay the amount due 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) If the mortgagor fails to pay at time directed, the court, upon motion, shall order the property to be sold to the highest bidder at a public auction. (4) Upon confirmation of the sale by the court, also upon motion, it shall operate to divest the rights of all parties to the action and to vest their rights to the purchaser subject to such rights of redemption as may be allowed by law

Blanket Mortgage/Dragnet – mortgage that subsumes all debts of past or future origin Mortgage may be used as a “continuing security” which secures future advancements and is not discharged by the repayment of the amount in the mortgage Alienation or assignment of mortgage credit is valid even if it is not registered Acceleration clause allowed Acceleration clause, or the stipulation stating that on the occasion of the mortgagor’s default, the whole sum remaining unpaid automatically becomes due and demandable, is ALLOWED

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(5) Before the confirmation, the court retains control of the proceedings; execution on judgment (6) The proceeds of the sale shall be applied to the payment of the: (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 (7) Sheriff’s certificate is executed, acknowledged and recorded to complete the foreclosure

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(5) Surplus proceeds of foreclosure sale belong to the mortgagor. (6) Debtor (who must be a natural person) has the right to redeem the property sold within 1 year from and after the date of sale. (a) If the mortgagee is a bank and the debtor is a juridical person, then there is no right of redemption. However, it may redeem the property before the registration of the TCT to the buyer, which is similar to the equity of redemption. The TCT must be registered within three months after the foreclosure. (b) The mortgagor can only legally transfer the right to redeem and the use of the property during the period of redemption. (7) Remedy of party aggrieved by foreclosure is a petition to set aside sale and the cancellation of writ of possession. However, if the mortgagee is a bank, the mortgagor is required to post a bond equal to the value of the mortgagee’s claim. (8) Republication of the notice of sale is necessary for the validity of the postponed extrajudicial sale (9) In foreclosure of real estate mortgage under Act 3135, the buyer at auction may petition the land registration court for a writ of possession pending the one-year period of redemption of the foreclosed property.

Nature of judicial foreclosure proceedings (1) Quasi in rem action. Hence, jurisdiction may be acquired through publication. (2) Foreclosure is only the result or incident of the failure to pay debt. (3) Survives death of mortgagor.

F.2. EXTRAJUDICIAL FORECLOSURE [Act 3135] (1) Applies to mortgages where the authority to foreclose is granted to the mortgagee. (2) Authority is not extinguished by death of mortgagor or mortgagee. This is an agency coupled with interest. (3) Public sale should be made after proper notice to the public, otherwise it is a jurisdictional defect which could render the sale voidable. (4) There is no need to notify the mortgagor, where there is no contractual stipulation therefor. Proper notice consists of: (a) posting notice in three public places and/or (b) publication in newspaper of general circulation Purpose of notice is to obtain the best bid for the foreclosed property

F.4. NATURE OF POWER OF FORECLOSURE BY EXTRAJUDICIAL SALE (1) Conferred for mortgagee’s protection. (2) An ancillary stipulation. (3) A prerogative of the mortgagee.

Note: (a) Both

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execution sale governed by Rule 39, ROC. (b) Foreclosure retroacts to the date of registration of mortgage. (c) A stipulation of upset price, or the 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.

F.5. RIGHT OF MORTGAGEE RECOVER DEFICIENCY

G. WAIVER CREDITOR

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OF

SECURITY

BY

(1) Mortgagee may waive the right to foreclose his mortgage and maintain a personal action for recovery of the indebtedness. (2) Mortgagee cannot have both remedies. This is because he only has one cause of action, the non-payment of the mortgage debt.

TO

H. REDEMPTION

(1) Mortgagee is entitled to recover deficiency. (2) If the deficiency is embodied in a judgment, it is referred to as deficiency

It is a transaction by which the mortgagor reacquires the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created

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.

KINDS: (1) Equity of redemption – in judicial foreclosure of real estate mortgage under the ROC, it is the right of the mortgagor to redeem the mortgaged property by paying the secured debt within the 120 day period from entry of judgment or after the foreclosure sale, but before the sale of the mortgaged property or confirmation of sale A formal offer to redeem preserves the right of redemption, e.g., by filing an action to enforce the right to redeem (2) Right of redemption – in extrajudicial foreclosure of real estate mortgage, the right of the mortgagor to redeem the property within a certain period after it was sold for the satisfaction of the debt. (If the mortgagee is a bank, the redemption period expires after registration of the sale.) (a) For natural persons – one year from the registration of the TCT (b) For juridical persons – three months from the foreclosure (c) Formal offer to redeem must be with tender of redemption price to preserve right of redemption

F.6. EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE (1) Where there is right to redeem, inadequacy of price is immaterial because the judgment debtor may redeem the property. Exception: Where 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 it is 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. A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage contract.

[Caltex v. IAC, 176 SCRA 741]

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Note: There is no right of redemption in pledge and chattel mortgage.

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Note: The obligation to pay interest is not the essence of the 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.

The rule up to now is that the right of a purchaser at a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. The title to land sold under mortgage foreclosure remains, in the mortgagor or his grantee until the expiration of the redemption period and conveyance by the master's deed [Medida v. CA]

C. AS DISTINGUISHED FROM OTHER CONTRACTS Antichresis Pledge Kind of property Real property Personal property Perfection Mere consent Delivery of thing pledged

VI. Antichresis Antichresis – a real security transaction that arises by contract, with the antichretic creditor acquiring the right to receive the fruits of an immovable of the antichretic debtor, and the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal. [Art. 2132]

Antichresis

Real mortgage Possession Delivered to creditor Retained by debtor Right to the fruits Creditor acquires only Creditor does not the right to receive have the right to fruits receive fruits, but a real right over the property is created Payment of taxes and charges Creditor is generally Creditor has no obliged to pay obligation to pay Application of fruits First applied to the Mortgagee has no payment of interest, such obligation and then to principal

A. CHARACTERISTICS (1) Accessory contract – it secures the performance of a principal obligation (2) Formal contract – it must be in a specified form to be valid [Art. 2134]

B. SPECIAL REQUISITES (1) It can cover only the fruits of an immovable property (2) Delivery of the immovable is necessary for the creditor to receive the fruits, not to make the contract binding (3) Amount of principal and interest must be specified in writing; otherwise, the contract of antichresis shall be void [Art.2134] (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

D. OBLIGATIONS OF ANTICHRETIC CREDITOR (1) To pay taxes and charges on the estate, including necessary expenses [Art.2135] (a) The creditor may avoid said obligation by: (b) Compelling the debtor to reacquire enjoyment of the property

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is thereby divested of his title. [Section 3, Act 1508]

(c) 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

It is a contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. [Art. 2140]

A. CHARACTERISTICS

E. REMEDIES OF CREDITOR IN CASE OF NON-PAYMENT OF DEBT

(1) It is an accessory contract because it secures performance of a principal obligation (2) It is a formal contract because it requires registration in the Chattel Mortgage Register for its validity [but only as against third persons] (3) It is a unilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation. (4) The excess of the proceeds of the sale goes to the debtor or mortgagor (5) Creditor or mortgagee can recover deficiency from the debtor or mortgagor, except if covered by the Recto Law

(1) Action for specific performance (2) Petition for the sale of the real property as in a foreclosure of mortgage under Rule 68 of the Rules of Court [Art.2137] (a) The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge – [Tavera v. El Hogar Filipino, Inc.; Art. 1939] (b) A stipulation authorizing the antichretic creditor to appropriate the property upon the non-payment of the debt within the agreed period is void [Art. 2088] Because of the right of the creditor to judicially foreclose, antichresis is generally viewed as a species of real estate mortgage, in which the mortgagee retains possession of the collateral and takes the fruits of the property in lieu of interest on the debt. [Gomez-Somera]

B. OBLIGATIONS SECURED

VII. Chattel Mortgage

An increase or extension of the chattel mortgage obligation becomes a new chattel mortgage in itself. Although a contract TO mortgage that includes future debts is a binding commitment, the contract OF chattel mortgage itself is not perfected until after an agreement covering the newly contracted debt is executed. [Gomez-Somera]

A chattel mortgage can only cover obligations existing at the time the mortgage is constituted. It cannot secure after-incurred obligations even if these future debts are accurately described.

A “conditional sale” of personal property as security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named. If the condition is performed according to its terms, the mortgage and sale immediately become void, and the mortgagee

C. PROPERTIES COVERED

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Generally, only personal or movable property can be covered by a chattel mortgage. However, the parties may agree to treat real property as personal property for purposes of executing a chattel mortgage. There must be a description of the property as would enable the parties or other persons to identify the same after reasonable investigation and inquiry.

with his principal obligation, and no right of innocent third persons is prejudiced.

D. VALIDITY MORTGAGE

If the mortgagor does not reside in the Philippines – in the province in which the property is situated

OF

F.2. VENUE If the mortgagor resides in the Philippines – in the office of the register of deeds of the province in which the mortgagor resides at the time of the making of the chattel mortgage

CHATTEL

Chattel mortgage shall not be valid against any person except the mortgagor, his executors or administrators unless: (1) The possession of the property is delivered to and retained by the mortgagee or (2) The mortgage is recorded. [Sec. 4, Act 1508]

If the property is located in a different province – registration in both provinces is required

F.3. EFFECT (1) Creates real rights which follows the chattel (2) It is an effective and binding notice to other creditors (3) Registration gives the mortgagee symbolical possession

E. FORMAL REQUISITES (1) It should substantially comply with the form prescribed by law (2) It should be signed by the person/s executing the same in the presence of two witnesses who shall sign the mortgage as witnesses to the execution thereof and (3) Each mortgagor and mortgagee or, in the absence of the mortgagee, his agent or attorney, shall make and subscribe an affidavit in the form prescribed by law, which affidavit, signed by the parties to the mortgage and the two witnesses and the certificate of the oath signed by the person authorized to administer an oath shall be appended to such mortgage and recorded therewith. [Sec. 5, Act 1508]

F. REGISTRATION MORTGAGE

OF

Affidavit of good faith is required, and it states that the chattel mortgage is— (1) Made solely for the purpose of securing the obligation specified in the chattel mortgage, and (2) The principal obligation is a just and valid obligation, and one not entered into for the purpose of fraud The effect of absence of affidavit of good faith is that the chattel mortgage is vitiated only as against third persons without notice Effect of failure to register in the Chattel Mortgage Registry The mortgage is binding between the parties. However, the right of the person in whose favor the law establishes a mortgage is to demand the execution and the recording of the instrument.

CHATTEL

F.1. PERIOD There is substantial and sufficient compliance with the law when registration is made by the mortgagee before the mortgagor has complied

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Registration of assignment of mortgage not required A chattel mortgage may be alienated or assigned to a third person

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any part thereof to be sold at a public auction by a public officer: (1) After 30 days from the time of condition broken (2) At a public place in the municipality where the mortgagor resides, or where the property is situated (3) Provided at least 10 day-notice of the time, place, and purpose of such sale has been posted at 2 or more public places in such municipality, and (4) The mortgagee, his executor, administrator, or assign shall notify the mortgagor or person holding under him and the persons holding subsequent mortgages of the time and place of sale at least 10 days previous to the sale: (a) Either by notice in writing directed to him or left at his abode, if within the municipality, or (b) Sent by mail if he does not reside in such municipality

The debtor is protected if he pays his creditor without actual knowledge that the debt has been assigned Failure of mortgagee to discharge the mortgage If the mortgagee, assign, administrator, executor, or either of them, (1) After performance of the condition before or after the breach thereof, or (2) After tender of the performance of the condition, at or after the time fixed for the performance, does not within ten days after being requested thereto by any person entitled to redeem, discharge the mortgage in the manner provided by law, the person entitled to redeem may recover of the person whose duty it is to discharge the same, twenty pesos for his neglect and all damages occasioned thereby in an action in any court having jurisdiction of the subject-matter thereof. [Act 1508, Sec. 8]

DISPOSITION OF PROCEEDS The proceeds of the sale shall be applied to the payment: (1) Costs and expenses of keeping and sale (2) Payment of the obligation secured by the mortgage (3) The residue shall be paid to persons holding subsequent mortgages in their order (4) The balance shall be paid to the mortgagor or person holding under him on demand

When the condition of the chattel mortgage is broken, a mortgagor or person holding a subsequent mortgage, or a subsequent attaching creditor may redeem the same by paying or delivering to the mortgagee the amount due on such mortgage and the reasonable costs and expenses incurred by such breach of condition before the sale thereof. 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.

VIII. Quasi-Contracts A quasi-contract is that juridical relation resulting from a lawful, voluntary and unilateral act, and 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 [Art. 2142]

G. FORECLOSURE The mortgagee, his executor, administrator or assign may cause the mortgaged property or

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A. NEGOTIORUM GESTIO (UNAUTHORIZED MANAGEMENT) Negotiorum gestio – takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority [Art. 2144]. Reimbursement must be made to the gestor (i.e., one who carried out the business) for necessary and useful expenses, as a rule.

(c) If he fails to return the property or business after demand of the owner (d) If he assumed management in bad faith [Art. 2147] (e) If he is manifestly unfit to carry on the management (f) If by his intervention he prevented a more competent person from taking up the management. [Art. 2148]

The obligation does not arise: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner.

Note: The gestor shall not be liable for (e) and (f) if the management was assumed to save the property or business from imminent danger. (5) Be personally liable for contracts which he entered into with third persons, even though he acted in the name of the owner, and there shall be no right of action between the owner and third persons.

In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shall govern. In the second case, the rules on agency in Title X of this Book shall be applicable. [Art. 2144]

The gestor shall not be personally liable for such contracts, provided: (a) The owner has expressly or tacitly ratified the management, or (b) When the contract refers to things pertaining to the owner of the business. [Art. 2152]

A.1. OBLIGATIONS OF A GESTOR (1) Perform his duties with all the diligence of a good father of a family (2) Pay the damages which through his fault and negligence may be suffered by the owner of the property/business under his management [Art. 2145]

Note: The responsibility of two or more gestors shall be solidary, unless the management was assumed to save the thing or business from imminent danger.

(3) Be liable for the acts of the persons to whom he delegated all or some of his duties. This is without prejudice to the direct obligation of the delegate to the owner of the business. [Art. 2146]

A.2. OBLIGATIONS OF THE OWNER OF THE PROPERTY OR BUSINESS Although the management was not expressly ratified, the owner who enjoys the advantages of the same shall: (a) Be liable for the obligations incurred in his interest (b) Reimburse the gestor for the necessary and useful expenses and for the damages the latter may have suffered in the performance of his duties

(4) Be liable for any fortuitous event under the following conditions: (a) If he undertakes risky operations which the owner was not accustomed to embark upon (b) If he has preferred his own interest to that of the owner

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WHEN DEBT NOT YET DUE

The above obligations shall be incumbent upon the owner if the management had for its purpose the prevention of an imminent and manifest loss, although no benefit may have been derived. [Art. 2150]

If the payer was in doubt whether the debt was due, he may recover if he proves that it was not due. [Art. 2156]

RESPONSIBILITY OF TWO OR MORE PAYEES

If the owner did not derive any benefit and there was no imminent and manifest danger to the property or business, the owner would still be liable for the abovementioned obligations and expenses, provided: (5) The gestor has acted in good faith; and (6) The property or business is intact, ready to be returned to the owner. [Art. 2151]

When there has been payment of what is not due, their responsibility is solidary.

WHEN MONEY OR THING DELIVERED IS OWNED BY THIRD PERSON The payee cannot demand that the payor prove his ownership of the thing delivered.

A.3. EFFECT OF RATIFICATION

Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter.

The ratification of the management by the owner of the business produces the effects of an express agency, even if the business may not have been successful. [Art. 2149]

A.4. EXTINGUISHMENT MANAGEMENT

If the owner, in spite of such information, does not claim it within the period of one month, the payee shall be relieved of all responsibility by returning the thing deposited to the payor.

OF

(1) When the owner repudiates or puts an end thereto (2) When the gestor withdraws from the management, subject to Art. 2144 (3) By the death, civil interdiction, insanity or insolvency of the owner or the gestor. [Art. 2153]

B. SOLUTIO PAYMENT)

INDEBITI

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If the payee has reasonable grounds to believe that the thing has not been lawfully acquired by the payor, the former may return the same. [Art. 2158]

LIABILITY OF PAYEE If in bad faith, he shall be liable: (1) For legal interest if a sum of money is involved, or (2) For the fruits received or which should have been received if the thing produces fruits, and (3) For any loss or impairment of the thing for any cause, and (4) For damages to the person who delivered the thing, until it is recovered. [Art. 2159]

(UNDUE

Solution indebiti – takes place when something is received when there is no right to demand it, and it was unduly delivered through mistake. The recipient has the duty to return it [Art. 2154]. This situation covers payment by reason of a mistake in the construction or application of a doubtful or difficult question of law [Art. 2155]

If in good faith, he shall be liable: (1) For the impairment or loss of the thing certain and determinable or its accessories

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and accessions insofar as he has thereby been benefited. (2) For the return of the price or assign the action to collect the sum if he has alienated the same. [Art. 2160]

(3) When the person obliged to support an orphan, or an insane or other indigent person unjustly refuses to give support to the latter, any third person may furnish support to the needy individual, with right of reimbursement from the person obliged to give support. The provisions of this article apply when the father or mother of a child under eighteen years of age unjustly refuses to support him. [Art. 2166]

EXEMPTION FROM THE OBLIGATION TO RESTORE THE PAYMENT UNDULY MADE A person who, believing in good faith that the payment was being made of a legitimate and subsisting claim, (1) destroyed the document, or (2) allowed the action to prescribe, or (3) gave up the pledges, or (4) cancelled the guaranties for his right shall be exempt from the obligation to restore.

(4) When through an accident or other cause a person is injured or becomes seriously ill, and he is treated or helped while he is not in a condition to give consent to a contract, he shall be liable to pay for the services of the physician or other person aiding him, unless the service has been rendered out of pure generosity. [Art. 2167]

The person who paid unduly may proceed only against the true debtor or the guarantors with regard to whom the action is still effective. [Art. 2162]

PRESUMPTION OF MISTAKE, DEFENSE

PAYMENT

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(5) When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation. [Art. 2168]

BY

The presumption arises if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause.

(6) When the government, upon the failure of any person to comply with health or safety regulations concerning property, undertakes to do the necessary work, even over his objection, he shall be liable to pay the expenses. [Art. 2169]

C. OTHER QUASI-CONTRACTS (1) When, without the knowledge of the person obliged to give support, it is given by a stranger, the latter shall have a right to claim the same from the former, unless it appears that he gave it out of piety and without intention of being repaid. [Art. 2164]

(7) When by accident or other fortuitous event, movables separately pertaining to two or more persons are commingled or confused, the rules on co-ownership shall be applicable. [Art. 2170] (8) The rights and obligations of the finder of lost personal property shall be governed by Articles 719 and 720. [Art. 2171]

(2) When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. [Art. 2165]

(9) The right of every possessor in good faith to reimbursement for necessary and useful

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expenses is governed by Article 546. [Art. 2172]

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(3) Against the same debtor (4) Who has insufficient property AND (5) Is insolvent

(10) When a third person, without the knowledge of the debtor, pays the debt, the rights of the former are governed by Articles 1236 and 1237. [Art. 2173]

B. CLASSIFICATION OF CREDITS (1) Special Preferred Credits (a) These are considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency. [NCC 2243] (b) Taxes in NCC 2241 and 2242 shall first be satisfied. [NCC 2243] Only taxes enjoy a preference; for all other claims, there is only a concurrence of credits. [Gomez-Somera] (c) They exclude all other claims to the extent of the value of the affected property. (d) These take precedence over ordinary preferred credits insofar as the property, to which the liens attach, is concerned. [Gomez-Somera] (e) Pro-rating – total amount to be paid is equal to:

(11) When in a small community a nationality of the inhabitants of age decide upon a measure for protection against lawlessness, fire, flood, storm or other calamity, any one who objects to the plan and refuses to contribute to the expenses but is benefited by the project as executed shall be liable to pay his share of said expenses. [Art. 2174] (12) Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter. [Art. 2175]

IX. Concurrence and Preference of Credits Concurrence of credits – implies possession by two or more creditors of equal rights or privileges over the same property or all of the property of the debtor.

Credit ------------------ x value of property Total amount of concurring debts

Preference of credits – is the right held by a creditor to be preferred in the payment of his claim above others out of the debtor’s assets.

(2) Ordinary Preferred Credits (a) These enjoy a preference, excluding the credits that are later in order, but only as against the value of the property not otherwise subjected to any special preferred credit. [GomezSomera] (b) NCC 2244 does not create a lien on specific property; rather, it create rights in favor of certain creditors to have the free property of the debtor applied in accordance with an order of preference.

Preference – is merely a method adopted to determine and specify the order in which credits should be paid, as opposed to a lien, which creates a charge on a particular property. [DBP v. NLRC (1990)]

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incidental expenses, until their delivery and for thirty days thereafter; (10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; (11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale. In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor, within thirty days from the unlawful seizure.

(3) Common Credits These enjoy no preference, and there is only a concurrence of credits, which must be paid pro rata regardless of dates [NCC 2245, 2251].

B.1. SPECIAL PREFERRED CREDITS ON SPECIFIC MOVABLE PROPERTY Art. 2241. With reference to specific movable

property of the debtor, the following claims or liens shall be preferred: (1) Duties, taxes and fees due thereon to the State or any subdivision thereof; (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; (3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; (4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof; (5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed; (6) Claims for laborers' wages, on the goods manufactured or the work done; (7) For expenses of salvage, upon the goods salvaged; (8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (9) Credits for transportation, upon the goods carried, for the price of the contract and

B.2. SPECIAL PREFERRED CREDITS ON SPECIFIC IMMOVABLE PROPERTY AND REAL RIGHTS Art. 2242. With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: (1) Taxes due upon the land or building; (2) For the unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged; (6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the

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immovable preserved or improved; (7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits; (8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (9) Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (10) Credits of insurers, upon the property insured, for the insurance premium for two years.

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for the common interest of the creditors, when properly authorized and approved by the court; (9) Taxes and assessments due the national government, other than those mentioned in Articles 2241, No. 1, and 2242, No. 1; (10) Taxes and assessments due any province, other than those referred to in Articles 2241, No. 1, and 2242, No. 1; (11) Taxes and assessments due any city or municipality, other than those indicated in Articles 2241, No. 1, and 2242, No. 1; (12) Damages for death or personal injuries caused by a quasi-delict; (13) Gifts due to public and private institutions of charity or beneficence; (14) Credits which, without special privilege, appear in [a] a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively.

B.3. ORDINARY PREFERRED CREDITS Art 2244. With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: (1) Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court; (2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; (3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own; (4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment; (5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency; (6) Support during the insolvency proceedings, and for three months thereafter; (7) Fines and civil indemnification arising from a criminal offense; (8) Legal expenses, and expenses incurred in the administration of the insolvent's estate

Worker preference in case of bankruptcy

PD 442 Labor Code, as amended, Art. 110. In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid.

B.4. COMMON CREDITS Art. 2245. Credits of any other kind or class, or

by any other right or title not comprised in the four preceding articles, shall enjoy no preference.

C. ORDER OF PREFERENCE OF CREDITS (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 [Art.2246].

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(2) If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof [Art.2247] (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 [Art.2248]. (4) If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessment of the taxes and assessments upon the immovable property or real right [Art. 2249]. (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 [Art.2250]. (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: (a) Order established by NCC 2244 (b) Common credits referred to in NCC 2245 shall be paid pro rata regardless of dates [Art.2251].

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(2) Future property: (a) 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 [Sec. 68 and 69, Insolvency Law, Act 1956] (3) Property in custodia legis and of public dominion

D. EXEMPT PROPERTY (1) Present property (a) Family home [Arts. 152, 153 and 155] (b) 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] (c) Rule 39, Sec. 13 (d) Sec 118, Public Land Act [CA 141, as amended]

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LAND, TITLES, & DEEDS

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I. Torrens System

(a) Fee Simple – An absolute title in perpetuity; Title to land is conferred upon a man and his heirs absolutely and without any limitation imposed upon the estate (b) Fee Tail – One designed to pass title from grantee to his heirs, in the intent of the grantor being to keep the property in the grantee’s line of issue (c) Life Estate – One held for the duration of the life of the grantee; In some cases, it may terminate earlier as by forfeiture (2) Less-than-Freehold Estate – Signifies some sort of right short of title (a) Estate for Years – In the nature of a lease; grantee or lessee takes over possession of the land for a period agreed upon but the grantor retains the legal title to the property (b) Tenancy from period to period – Also in the nature of a lease which may run from month to month or from year to year, with the peculiarity of automatic renewal from time to time, unless expressly terminated by either party (c) Tenancy at will – Another form of lease agreement where a person is permitted to occupy the land of another without any stipulation as to period, but either party reserves the right to terminate the occupation at will or at any time

Land Title – It is the evidence of the right of the owner or the extent of his interest, by which he can maintain control, and as a rule, assert right to exclusive possession and enjoyment of the property. [Pena, Registration of Land Titles and Deeds, p. 3] Title and Certificate of Title Distinguished

Title

Certificate of Title Definition

Lawful cause or ground of possessing that which is ours. That which constitutes a just cause of exclusive possession, or which is the foundation of ownership of property.

It is a mere evidence of ownership; it is not the title to the land itself.1

Deed – A written instrument executed in accordance with law, wherein a person grants or conveys to another certain land, tenements or hereditaments.

ELEMENTS OF A DEED: (a) (b) (c) (d) (e) (f) (g)

Grantor Grantee Words of Grant Description of the property involved Signature of the grantor At least two (2) witnesses Notarial acknowledgment

Land Registration – A judicial or administrative proceeding whereby a person’s claim of ownership 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.

Estate – An estate, strictly speaking, represents the nature, extent, degree, and quantity of a person’s interest in land.

Nature of Land Registration – Judicial proceedings for the registration of lands throughout the Philippines shall be in Rem and shall be based on the generally accepted

TYPES OF ESTATE: (1) Freehold Estate – Indicates title of ownership 1

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Castillo v. Escutin

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principles underlying the Torrens system [Sec. 2, par. 1, PD 1529]

(2) As held in Legarda v. Saleeby [31 Phil. 590 (1915)] (a) To quiet title to the land and to stop forever any question as to the legality of said title (b) To relieve the land of unknown claims (c) To guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized (d) To give every registered owner complete peace of mind (e) To issue a certificate of title to the owner which shall be the best evidence of his ownership of the land (f) To avoid conflicts of title in and to real estate and to facilitate transactions (3) As held in Capitol Subdivisions, Inc. v. Province of Negros Occidental [7 SCRA 60 (1963)] (a) To avoid possible conflicts of title in and to real property, and (b) To facilitate transactions relative thereto by giving the public the right to rely upon the face of the Torrents certificate of title and to dispense with the need of inquiring further

It is therefore binding on the whole world because “by the description in the notice (of initial hearing of the application for registration) “To Whom It May Concern,” all the world are made parties defendant.” [Aquino, Land Registration and Related Proceedings, p. 3, citing Esconde v. Borlongay, 152 SCRA 603, 1987]

A. LAWS IMPLEMENTING REGISTRATION (1) (2) (3) (4) (5) (6)

LAND

Property Registration Decree [PD 1529, as amended] Cadastral Act [Act 2259, as amended] Public Land Act [CA 141, as amended] Emancipation Decree [PD 27, as amended] Comprehensive Agrarian Reform Law of 1988 [RA 6657, as amended] Indigenous Peoples Rights Act of 1997 [RA 8371]

To simplify and streamline land registration proceedings, Presidential Decree No. 1529 was issued on June 11, 1978, otherwise known as the Property Registration Decree, governing registration of lands under the Torrens system as well as the recording of transactions relating to unregistered lands, including chattel mortgages. This Decree consolidates, in effect, all pre-existing laws on property registration with such appropriate modifications as are called for by existing circumstances. [Pena, p. 9]

B. PURPOSES REGISTRATION

OF

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Object of Registration – Only real property or real rights may be the object of registration under the existing land registration laws. CLASSIFICATION OF LANDS: (1) Private or public (2) Alienable or inalienable (3) Registered or unregistered (4) Registrable or Non-registrable

LAND Registrable lands are: (1) Alienable public agricultural lands,  If in the public domain, the land must be classified as alienable and disposable. It must be classified as such at the time of filing the

(1) To notify and protect the interests of strangers to a given transaction, who may be ignorant thereof [Sapto, et al. v. Fabiana, 103 Phil. 683, 1958]

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application for registration. [Republic v. CA and Naguit, 2005] (2) Private lands

of real estate and to render title safe and indefeasible.” [The Philippine Torrens System by Florencio Ponce 1964]

Non-registrable lands - those found in the Civil Code dealing with non-registrable properties (e.g. property of public dominion)

By "Torrens" system generally are meant those systems of registration of transactions with interest in land whose declared object is, under governmental authority, to establish and certify to the ownership of an absolute and indefeasible title to realty, and to simplify its transfer. [Grey-Alba v. Dela Cruz, GR No. L524]

Torrens System - A system for registration of land under which, upon landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title. [Black’s Law Dictionary]

ADVANTAGES (1) Secures title (2) Protection against fraud (3) Simplified dealings (4) Restoration of the estates to its just value, whose depreciation is caused by some blur, technical defect (5) Barred the recurrence of faults in the title [Legarda v. Saleeby]

The boldest effort to grapple with the problem of simplification of title to land was made by Mr. (afterwards Sir Robert) Torrens, a layman, in South Australia in 1857. . . . In the Torrens system title by registration takes the place of "title by deeds" of the system under the "general" law. A sale of land, for example, is effected by a registered transfer, upon which a certificate of title is issued. The certificate is guaranteed by statute, and, with certain exceptions, constitutes indefeasible title to the land mentioned therein. The object of the Torrens system, them, is to do away with the delay, uncertainty, and expense of the old conveyancing system.

Nature: Judicial in nature. Purpose: The real purpose of the Torrens system of registration is to quiet title to land; to put a stop forever to any question of the legality of the registration, in the certificate, or which may arise subsequent thereto. [Pena, p. 47]

The Torrens system was introduced in the Philippines by Act No. 496, which took effect on Jan. 1, 1903. This was later amended and superseded by PD 1529 which took effect on June 11, 1978.

C. ADMINISTRATION TORRENS SYSTEM

OF

THE

(1) Land Registration Authority  The agency charged with the efficient execution of the laws relative to the registration of lands  Under the executive supervision of the DOJ  Consists of an Administrator assisted by 2 Deputy Administrators

The underlying principle of the Torrens system is security with facility in dealing with land. This is made possible by defining the absolute status of a given property in a certificate of title with a governmental and universal guaranty. This certificate of title should better be known as certificate of title and encumbrances. In the words of Torrens himself the main objects are “to simplify, quicken, and cheapen the transfer

(2) Register of Deeds

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conveyance but a contract between the grantee and the Government and evidence of authority to the Register of Deeds to make registration. (c) The act of registration is the operative act to affect and convey the land.

 Constitutes a public repository of records of instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is situated  Headed by the Register of Deeds, assisted by a Deputy

Probative Value: A Torrens Certificate of Title is valid and enforceable against the whole world. It may be received in evidence in all courts of the Philippines, and shall be conclusive as to all matters contained therein, principally the identity of the owner of the covered land thereby and identity of the land.

CERTIFICATE OF TITLE The Torrens Title – Certificate of ownership issued by 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 thereon or otherwise reserved by law (1)

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A Torrens title, once registered, cannot be defeated, even by adverse, open and notorious possession. A registered title under the Torrens system cannot be defeated by prescription. The title, once registered, is notice to the whole world. All persons must take notice. No one can plead ignorance of the registration. [Egao v. CA, 1989]

Original Certificate of Title (OCT) – it is the first certificate of title issued in the name of the registered owner by the Register of Deeds covering a parcel of land which had been registered under the Torrens System, by virtue of judicial or administrative proceedings

D. EFFECT OF REGISTRATION UNDER THE TORRENS SYSTEM

(2) Transfer Certificate of Title (TCT) – the subsequent certificate of title pursuant to any deed of transfer or conveyance to another person. The Register of Deeds shall make a new certificate of title and give the registrant an owner’s duplicate certificate. The previous certificate shall be stamped “cancelled.”

(1) Land is placed under the operation of the Torrens system (2) 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 (a) It is an elemental rule that a decree of registration bars all claims and rights which arose or may have existed prior to the decree of registration. By the issuance of the decree, the land is bound and title thereto quieted, subject only to certain exceptions under the property registration decree. [Heirs of Alejandra Delfin, namely, Leopoldo Delfin, et al. v. Avelina

(3) Patents – Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree [PD 1529, Sec. 103, par. 1] (a) Patents only involve public lands which are alienated by the Government pursuant to the Public Land Act (CA 141, as amended] (b) The patent (even if denominated as deed of conveyance) is not really a 461

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Rabadon, G.R. No. 165014, July 31, 2013] (b) Exceptions: (i) Those claims 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 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

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Note: Registration is not equivalent to legal title  Under the Torrens system, registration only gives validity to the transaction or creates a lien upon the land. It merely confirms, but does not confer, ownership [Lu v. Manipon, GR No. 147072, 2002]

E. EFFECT OF NON-REGISTRATION If a purchaser, mortgagee or grantee should fail to register his deed the conveyance, in light of our existing registration laws, shall not be valid against any person unless registered. Exceptions: (1) The grantor, (2) His heirs and devisees, and (3) Third persons having actual notice or knowledge thereof.

(3) Title to the land becomes non-prescriptible (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, 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, 1977] (4) Land becomes incontrovertible and indefeasible. A decree of registration and registered title cannot be impugned, enlarged, altered, modified, or diminished either in collateral or direct proceeding after the lapse of the 1-year period prescribed by the law. (a) Exceptions: (i) If previous valid title of the same land exists (ii) When the land covered is not capable of registration (iii) When acquisition of certificate is attended by fraud (5) Torrens certificate is presumed valid and devoid of flaws.

It is a settled rule that lands under a Torrens title cannot be acquired by prescription or adverse possession. Section 47 of P.D. No. 1529, the Property Registration Decree, expressly provides that no title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession. [Dream Village

Neighborhood Association, Inc., represented by its Incumbent President Greg Seriego v. Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.]

DEALINGS IN LAND BEFORE ISSUANCE OF DECREE: With the filing of an application for registration, the land described therein does not cease to become open to any lawful transaction. If the transaction takes place before the issuance of the decree of registration, Section 22 of PD 1529 provides that the instrument is to be presented to the RTC, together with a motion praying that the

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same be considered in relation with the pending application.

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utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant.

However, if the motion is filed after the decision of adjudication has become final but before the issuance of the decree by the Administrator of Land Registration Authority, the court shall require the interested party to pay the fees prescribed as if such instrument had been presented for registration in the office of the Register of Deeds. [Pena, p. 72-73] LACHES, WHEN IT APPLIES. Laches sets in if it would take 18 years for a person to file an action to annul the land registration proceedings, especially so if the registrant has already subdivided the land and sold the same to innocent third parties. A party’s long inaction or passivity in asserting his rights over disputed property precludes him from recovering the same. [Heirs of Teodoro

The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

dela Cruz vs. CA, 298 SCRA 172; Aurora Ignacio v. Valeriano Basilio, et al., G.R. No. 122824, Sept. 26, 2001]

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays, and lagoons.

II. The Regalian Doctrine

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.

A western legal concept that was first introduced by the Spaniards into the country through the laws of the Indies and the Royal Cedulas. Whereby the Philippines passed to Spain by virtue of “discovery” and conquest. Consequently, all lands became the exclusive patrimony and dominion of the Spanish Crown. [Agcaoili] Sec. 2, Art. XII of the 1987 Constitution

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

All 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 other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and

The principle of State ownership of lands and all other natural resources had its roots in the 1935 Constitution, which expressed the overwhelming sentiment in the Convention in

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favor of the principle of State ownership of natural resources and the adoption of the Regalian doctrine as articulated in Sec. 1, Art

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A. EFFECTS (1) All lands of public domain belong to the state, and that the State is the source of any asserted right to ownership in land and charged with the conservation of such patrimony [Republic v. IAC, GR No. 71285] (2) All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State [Dir. Of Lands v. IAC, 1993, 219 SCRA 339] (3) Any applicant for judicial confirmation of an imperfect title has the burden of proving, by incontrovertible evidence, that the (a) land applied for is alienable and disposable public land; and, (b) the applicant, by himself or through his predecessors-in-interest had occupied and possessed the land, in the concept of owner, openly, continuously, exclusively, and adversely since June 12, 1945, or earlier. [Pelbel Manufacturing Corp. v. CA, GR No. 141325]

XIII. The 1973 Constitution reiterated the Regalian Doctrine in Sec. 8, Art. XIV. The present Constitution provides that, except for agricultural lands of the public domain which alone may be alienated, forest or timber, and mineral lands, as well as all other natural resources must remain with the State, the exploration, development, and utilization of which shall be subject to its full control and supervision albeit allowing it to enter into coproduction, joint venture, or productionsharing agreements, or into agreements with foreign-owned corporations involving technical or financial assistance for large-scale exploration, development, and utilization. [Secs. 2 and 3, Art. XII; La Bugal-B’laan Tribal Association, Inc. v. Ramos]

B. CONCEPT OF NATIVE TITLE, TIME IMMEMORIAL POSSESSION

Enshrined in the Constitution [Art 12, Sec 2 & 3], it states that all lands of public domain belong to the state, thus private title to land must be traced to some grant, express or implied, from the state, i.e. The Spanish Crown or its successors, the American Colonial government and thereafter the Philippine Republic

A recognized exception to the theory of jura regalia, the ruling in Carino v. Insular Government institutionalized the recognition of the existence of native title to land, or ownership of land by Filipinos by virtue of possession under a claim of ownership since time immemorial and independent of any grant from the Spanish Crown [Agcaoili]

It does not negate native title to lands held in private ownership since time immemorial [Cruz v. Sec. of Environment and Natural Resources]

Lands under native title are not part of public domain, “lands possessed by an occupant and his predecessors since time immemorial, such possession would justify the presumption that the land had never been part of the public domain or that it had been private property even before the Spanish conquest [Republic v. CA, GR No. 130174]

It recognized ownership of land by Filipinos independent of any grant from the Spanish crown on the basis of possession since time immemorial [cf: Carino v. Insular Government], it is presumed to have been held prior the Spanish conquest and never to have been public land.

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Cultural Communities/Indigenous People (ICCs/IPs) concerned, shall be embodied in a Certificate of Ancestral Domain Title (CADT), which shall recognize the title of the concerned ICCs/IPs over the territories identified and delineated [Sec. 11, IPRA]

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domain. Private land may be transferred or conveyed only to individuals or entities ‘qualified to acquire lands of public domain’ [II Bernas] The 1935 Constitution reserved the right xxx for Filipino citizens or corporations at least sixty percent of the capital of which was owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence they have also been disqualified from acquiring private lands. [Krivenko v. Register of Deeds, GR No. L-630: Ong Ching Po v CA, GR. No. 113427]

Like a Torrens title, a CADT is evidence of private ownership of land by native title. Native title, however, is a right of private ownership particularly granted to ICCs/IPs over their ancestral lands and domains. The IPRA categorically declares ancestral lands and domains held by native title as never to have been public land. [Cruz v. Sec. of Environment and Natural Resources, 2000, GR No. 135385]

General Rule: Non-Filipinos cannot acquire or hold title to private lands of public domain, except only by way of legal succession [Halili v.

III. Citizenship Requirement

CA, GR No. 113539, Sec 2, 5 Art XII Constitution] Exceptions: (1) Aliens by way of hereditary succession (2) Natural born citizens who have lost their citizenship- limited to 5,000 sq. m. for urban land and 3 hectares for rural land [RA No. 7042 as amended by RA No. 8179] (3) Aliens, although disqualified to acquire lands of public domain, may lease private land for a reasonable period provided, that such lease does not amount to a virtual transfer of ownership. They may also be given an option to buy property on the condition that he is granted Philippine citizenship. [Llantino v. Co liong Chong, GR

A. INDIVIDUALS Art. XII, Sec. 3, 1987 Constitution provides, in part: Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant.

No. 29663] (4) Lands acquired by an American citizen prior the proclamation of Philippine Independence on July 4, 1946 but after the passage of the 1935 Constitution may be registered, based on the ordinance appended to the 1935 Constitution [Moss v.

Director of Lands, GR No. L-27170]

The Krivenko Doctrine - The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of public

(5) Land sold to an alien which is now in the hands of a naturalized citizen can no

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longer be annulled [De Castro v. Tan, GR No. L-31956]. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. The purpose of the prohibition ceases to be applicable. [Barsobia v. Cuenco, GR No. L33048]

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IV. Original Registration Original Registration - This is a proceeding brought before the 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.

B. CORPORATIONS

A decree of registration merely confirms, but does not confer ownership. [City Mayor of Parañaque City v. Ebio] Registration does not vest title or give title to the land, but merely confirms and thereafter protects the title already possessed by the owner, making it imprescriptible by occupation of third parties. The registration does not give the owner any better title than he has. He does not obtain title by virtue of the certificate. He secures his certificate by virtue of the fact that he has a fee simple title. [Legarda v. Saleeby]

Private corporations may not hold alienable lands of the public domain except by lease for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. [1987 Constitution, Art. XII, Sec. 3] Limitations to Ownership of Land by Corporations: (1) For private lands: (a) At least 60% Filipino [Sec. 7, Art. XII, 1987 Constitution] (b) Restricted as to extent reasonably necessary to enable it to carry out the purpose for which it was created (c) If engaged in agriculture, it is restricted to 1,024 hectares (2) For patrimonial property of the State [Sec. 3, Art. XII, 1987 Constitution] (a) Lease only for a limited period of 25 years; cannot own land of the public domain (b) Limited to 1,000 hectares (c) Applies to both Filipino and Foreign Corporations

Distinguished from subsequent (1) Original Registration – When right of ownership or title to land is for the first time made of public record (2) Subsequent Registration – Any transaction affecting such originally registered land, if in order, may be registered in the Office of the Register of Deeds concerned

A. KINDS REGISTRATION:

OF

ORIGINAL

(1) Voluntary – by filing with the proper court under: (a) PD 1529, Property Registration Decree (b) CA 141, Public Land Act (c) RA 8371, IPRA (2) Involuntary – as in Cadastral Proceedings (1) This is compulsory registration initiated by the government to adjudicate ownership of the land (2) Involuntary on the part of the claimant but they are compelled to substantiate their claim or interest

A corporation sole may acquire and register private agricultural land [RC Apostolic Administrator of Davao v. LRC GR No. L-8415]: A corporation sole, which consists of one person only, is vested with the right to purchase and hold real estate and register the same in trust for the faithful or members of the religious society or church for which the corporation was organized

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(b) Does not own more than 24 hectares of land in the Philippines, or has not had the benefit of any gratuitous allotment of more than 24 hectares of land since the occupation of the Philippines by the United States (c) NOTE: they may enter a homestead of not exceeding 24 hectares of agricultural land of the public domain

B. WHO MAY APPLY: (1) Under Sec. 14, PD 1529 (a) Those who by themselves or through their predecessors-in-interest, have been in open, continuous, exclusive and 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. (b) Those who have acquired ownership of private lands by prescription under the provisions of existing laws. (c) Those who have acquired ownership of private lands or abandoned river beds by right or accession or accretion under the existing laws. (d) Those who have acquired ownership of land in any other manner provided for by law. (i) If land is owned in common, ALL co-owners shall file the application jointly (ii) If land has been sold under pacto de retro, the vendor a retro may file an application for the original registration of the land, provided, however that should the period for redemption expire during the pendency of the registration proceedings and ownership to the property consolidated in the vendee a retro, the latter shall be substituted for the applicant and may continue the proceedings. (iii) A trustee on behalf of his principal may apply for original registration of any land held in trust by him, unless prohibited by the instrument creating the trust.

(3) Under RA 8371 (a) Sec. 11 – Formal recognition of ancestral domains by virtue of Native Title may be solicited by ICCs/IPs concerned (b) Sec. 12 – Option to secure certificate of title under CA 141 or Land Registration Act 496 (i) Individual members of cultural communities with respect to individually-owned ancestral lands who, by themselves or through their predecessors-in -interest, have been in continuous possession and occupation of the same in the concept of owner since time immemorial or for a period of not less than thirty (30) years immediately preceding the approval of this Act and uncontested by the members of the same ICCs/IPs shall have the option to secure title to their ancestral lands (ii) Option granted shall be exercised within 20 years from the approval of RA 8371 Where to File: The court that should take cognizance of a registration case is that which has territorial jurisdiction over the property. General Rule: RTC of the province, city, or municipality where the property is situated

(2) Under Sec. 12, CA 141; Any person who: (a) Is a citizen of the Philippines over the age of 18, or the head of a family

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The RTC shall have exclusive jurisdiction over all applications original for registration of title, with power to hear and determine all questions arising upon such applications or petition. [Sec. 2, par. 2, P.D. No. 1529]

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(3) The full names and addresses of all occupants of the land and those of the adjoining owners, if known, and, if not known, it shall state the extent of the search to find them. (4) Whether the property is conjugal, paraphernal or exclusively owned by the applicant.

Exception: Delegated jurisdiction to the MTC, MeTC, and MCTC by the Supreme Court in cadastral and land registration cases IF: (1) There is no controversy over the land, OR (2) Its value is less than P100,000 [Sec. 34, BP 129]

STEP 2: Filing of application for registration by the applicant; (a) Form of the application (1) In writing (2) Signed by the applicant/s or person duly authorized in his behalf (3) Sworn before any officer authorized to administer oath for the province or city where the application was actually signed (4) Application is presented in duplicate

(c) Documents to accompany the application [from Regulations in Ordinary Land Registration Cases] (1) Tracing-cloth plan duly approved by the Director of Lands, together with two blueprint or photographic copies thereof; (2) Three copies of the corresponding technical descriptions; (3) Three copies of the surveyor’s certificate; (4) All original muniments of title in the possession of the applicant which prove his rights, to the title he prays for or to the land he claims; and (5) Certificate in quadruplicate of the city or provincial treasurer of the assessed value of the land, at its last assessment for taxation, or, in the absence thereof, that of the next preceding year. However, in case the land has not been assessed, the application may be accompanied with an affidavit in quadruplicate of the fair market value of the land, signed by three disinterested persons.

(b) Contents of the application: (1) A description of the land (2) The citizenship and civil status of the applicant, whether single or married, and, if married, the name of the wife or husband, and, if the marriage has been legally dissolved, when and how the marriage relation terminated. It shall also state

(d) Amendments to the Application (1) Sec. 19, PD 1529 permits the applicants to amend the application at any stage of the proceedings upon such just and reasonable terms as the court may order; (2) However, Sec. 23, PD 1529 mandates that there is a need to comply with the required publication and notice as in

C. PROCEDURE IN ORDINARY LAND REGISTRATION STEP 1: Survey of the land by the Bureau of Lands or a duly registered private surveyor Note: No plan of such survey, whether it be original or subdivision, may be admitted in land registration proceedings until approved by the Director of lands [Sec. 1858, Administrative Code]

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an original application if the amendment is substantial as in: (i) A change in the boundaries (ii) An increase in the area of the land applied for; or (iii) The inclusion of an additional land

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(b) The initial hearing shall be 45 – 90 days from the date of the order [Sec. 23, PD 1529] STEP 4: Transmittal to the LRA The application and the date of initial hearing together with all the documents or other evidences attached thereto are transmitted by the Clerk of Court to the Land Registration Authority (LRA)

(e) Special Cases: (1) If the land bounded by a road, the applicant must state in his application if he claims any portion of the land within the limits of the road, or if he likes to have the boundaries determined. [Sec. 20, PD 1529] (2) If the applicant is a non-resident, he shall appoint an agent or representative who is a Philippine resident. [Sec. 16, PD 1529] (3) Intestate Estate of Don Mariano San Pedro v. CA (1996): A person claiming ownership of real property must clearly identify the land claimed by him. (4) In re: Application for Land Registration v. Republic (2008): An applicant in a land registration case must prove the facts and circumstances evidencing the alleged ownership of the land applied for. General statements which are mere conclusions of law and not factual proof of possession are unavailing. The deeds in its favor only proved possession of its predecessorsin-interest as early as 1948. (The law now stands that a mere showing of possession for 30 years is not sufficient. OCEN possession must be shown to have stated on June 12, 1945 or earlier.)

STEP 5: Publication of a notice of the filing of the application and date and place of hearing (a) Publication shall be sufficient to confer jurisdiction upon the court. [Sec. 23, PD 1529] (b) Form and contents of the notice: (1) Addressed to all persons appearing to have an interest in the land involved (2) Requires all persons concerned to appear in court on the date and time indicated to show cause why the application for registration should not be granted (c) The public shall be given notice of the initial hearing of the application by publication (1) The Commissioner of Land Registration (CLR) shall cause it to be published once in the Official gazette AND once in a newspaper of general circulation (2) This is sufficient to confer jurisdiction to the court (d) It is not necessary to give personal notice to the owners or claimants of the land sought to be registered to vest the court with authority over the res. Land registration proceedings are actions in rem. [Dir. Of Lands v. CA, 276 SCRA 276] (e) Once the registration court had acquired jurisdiction over a certain parcel, or parcels, of land in the registration proceedings in virtue of the publication of the application, that jurisdiction attaches

STEP 3: Setting of the date for the initial hearing of the application by the Court; (a) The court shall issue an order setting the date and hour of the initial hearing within 5 days from filing of the application

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to the land or lands mentioned and described in the application. If it is later shown that the decree of registration had included land or lands not included in the original application as published, then the registration proceedings and the decree of registration must be declared null and void insofar — but only insofar — as the land not included in the publication is concerned. [Benin v. Tuason, 57 SCRA 531]

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(1) CLR shall cause the sheriff or his deputy to post the notice at least 14 days before the hearing: (2) In a conspicuous place on each parcel of land included in the application and in a conspicuous place on the bulletin board of the municipal building of the municipality or city in which the land or portion thereof is situated. (3) The court may also cause notice to be served to such other persons and in such manner as it may deem proper.

STEP 6: Service of notice upon contiguous owners, occupants and those known to have interest in the property by the Sheriff;

(c) Notice of application and initial hearing by publication is sufficient and the mere fact that a person purporting to have a legitimate claim in the property did not receive personal notice is not a sufficient ground to invalidate the proceedings although he may ask for the review of the judgment or the reopening of the decree of registration, if he was made the victim of actual fraud. [Republic v. Abadilla, CA; G.R. No. 6902-R, Oct. 6, 1951]

(a) Mailing: (1) Within 7 days from publication, the CLR shall mail a copy of the notice (2) Copies of the notice shall be mailed to: (i) Every person named in the notice whose address is known. (ii) the Secretary of Public Highways, to the Provincial Governor, and to the Mayor of the municipality or city, in which the land lies, if the applicant requests to have the line of a public way or road determined (iii) Secretary of Agrarian Reform, the Solicitor General, the Director of Lands, the Director of Mines and/or the Director of Fisheries and Aquatic Resources, (as appropriate) if the land borders on a river, navigable stream or shore, or on an arm of the sea where a river or harbor line has been established, or on a lake, or if it otherwise appears from the application or the proceedings that a tenant-farmer or the national government may have a claim adverse to that of the applicant

STEP 7: Filing of answer or opposition to the application by any person whether named in the notice or not; (a) Who may file? Any person claiming an interest, whether named in the notice or not (b) When to file? On or before the date of initial hearing, or within such further time as may be allowed by the court. (c) What shall it contain? It shall state all the objections and the interest claimed by the party the remedy desired. (d) How shall it be made? It shall be signed and sworn to by him or by some other duly authorized person. Sec. 25, PD 1529 provides for the requisites of an opposition:

(b) Posting:

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(1) It shall set forth “all the objections to the application” and (2) It shall state the “interest claimed by the party filing the same”

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(b) Sec. 27, PD 1529: Court may either: (1) Hear the parties and their evidence, or (2) Refer the case or any part thereof to a referee (a) Referee shall hear the parties, receive their evidence, and submit his report thereon to the Court within 15 days after termination of such hearing (b) Hearing before a referee may be held at any convenient place within the province or city as may be fixed by him and after reasonable notice thereof shall have been served to the parties concerned (c) Upon receipt of the report the Court may: (i) Adopt the same (ii) Set aside the report (iii) Modify the report (iv) Refer back or recommit the case to the referee for presentation of evidence

(e) Effect of Failure to Answer: (1) If no one appears/files an answer, upon motion, the court shall order a default to be recorded. (2) By the description in the notice "To all Whom It May Concern", all the world are made parties defendant and shall be concluded by the default order. (3) Where an appearance has been entered and an answer filed, a default order shall be entered against persons who did not appear and answer. (4) Absence of opposition does not justify outright registration. [Director of Lands vs. Agustin, 1921] (f) Effects of Default: (1) With respect to the Applicant – he has the right to present or adduce evidence ex parte (2) With respect to those covered by the default order – they have no legal standing in court; therefore, they are no longer allowed to participate and no opportunity to present evidence

STEP 9: Promulgation of judgment by the Court; (a) This is the adjudication, determination, and resolution of the issue of ownership (b) Forms of Judgment: (1) Dismissal of the application – with prejudice or without prejudice (2) Partial Judgment – in a case where only a portion of the land subject of registration is contested, the court may render partial judgment provided that a subdivision plan showing the contested and uncontested portions approved by the Director of Land is previously submitted to said court. [Sec. 28, PD 1529] (3) Judgment Confirming Title - Judgment may be rendered confirming the title of the applicant, or the oppositor as the

(g) For relief from an order of default, see Sec.

3, Rule 18, Rules of Court STEP 8: Hearing of the case by the court (a) Applicable procedural law: (1) Reception of evidence is governed by PD 1529 (2) Rules of Court shall, insofar as not inconsistent with the provisions of the Decree, be applicable to land registration and cadastral cases by analogy or in a suppletory character and whenever practicable and convenient [Sec. 34, PD 1529]

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case may be, to the land or portions thereof upon finding that the party concerned has sufficient title proper for registration. [Sec. 29, PD 1529]

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(a) Decree is entered in the LRA (b) Every decree of registration shall: (1) Bear the day of the year, hour, and minute of its entry, (2) Be signed by the Administrator of the Land Registration Authority in his ex officio capacity as Clerk of Court in land registration matters (3) State whether the owner is: (i) Married or unmarried, and if married, the name of the husband or wife, provided that if the land adjudicated is conjugal property, it shall be issued in the names of both spouses. (ii) If the owner is under disability, it shall state the nature of the disability, (iii) If the owner is a minor, his age (4) Contain a description of the land as finally determined by the court, (5) Set forth the estate of the owner, and also, in such manner as to show their relative priority, all particular estates, mortgages, easements, liens, attachments and other encumbrances, including rights of tenant-farmer, if any, to which the land or owner’s estate is subject, (6) Contain any other matter properly to be determined

(c) Finality of Judgment - Sec. 30, par. 1, PD 1529 provides that the judgment becomes final upon the expiration of 30 days counted from receipt of notice of judgment. Note: This has been MODIFIED to the lapse of 15 days counted from receipt of notice of judgment as per Sec. 39, BP 129 STEP 10: Issuance of the decree (a) If the court finds after hearing that the applicant or adverse claimant has title as stated in his application or adverse claim and proper for registration, a decree of confirmation and registration shall be entered (b) The Court declares the decision final and instructs the LRA to issue a decree of confirmation and registration within 15 days from entry of judgment  Note: it is not the court that issues the decree, but the LRA (c) One year after issuance of the decree, it becomes incontrovertible and amendments of the same will not be allowed except in cases of clerical errors (1) Court retains jurisdiction over the case until after the expiration of 1 year from the issuance of the decree of registration. [Gomez v. CA, 1988] (2) Note: While a decision in land registration proceeding becomes final after the expiration of thirty days from the date of service of its notice, the decree of registration does not become final until after the lapse of one year from the date of its issuance and entry.

STEP 12: Sending of copy of the decree of registration to the corresponding Register of Deeds (Registrar of Land Titles and Deeds)

STEP 13: Transcription of the decree of registration (a) It is transcribed in the registration book of the Registrar of Land Titles and Deeds (b) Registrar issues owner’s duplicate OCT of the applicant by the Registrar of Land

STEP 11: Entry of the decree of registration

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Appeal – Sec. 30, PD 1529 as amended by BP 129 provides that an appeal may be taken from the judgment of the court as in ordinary civil cases.  Period in Sec. 30, PD 1529 has been modified to 15 days as per Sec. 39, BP 129

Titles and Deeds, upon payment of the prescribed fees.

D. EVIDENCE NECESSARY Proofs necessary in land registration (1) Proofs that land has been declassified from the forest zone, is alienable or disposable, and is registrable (e.g. Presidential proclamation, legislative acts) (2) Identity of the land (e.g. survey plan) (3) Possession and occupation of the land for the length of time and in the manner required by law [Sec. 4, PD 1073 amending Sec. 48(b) and (c) of Public Land Act] (4) If he claims private ownership not because of his possession, he must prove the basis of such claim by submitting muniments of title.

Unlike ordinary civil actions, the adjudication of land in a cadastral or land registration proceeding does not become final in the sense of incontrovertibility until after the expiration of one (1) year after the entry of the final decree of registration. As long as a final decree has not been entered by the LRA and the period of 1 year has not elapsed from date of such decree, the title is not finally adjudicated and the decision in the registration proceeding continues to be under the control and sound discretion of the court rendering it. [Gomez v. CA, 168 SCRA 503, 1988]

Proving Private Ownership: (1) Spanish titles are inadmissible and ineffective proof of ownership in land registration proceedings filed AFTER Aug. 16, 1976 [PD 892 as discussed in Santiago v. SBMA, GR No. 156888, 2006] (2) Tax declaration and receipts are not conclusive but have strong probative value when accompanied by proof of actual possession. [Municipality of Santiago vs.

Action for Reconveyance: (a) When to file: (1) Before issuance of decree, or within/after 1 year from entry (2) If based on implied trust, 10 years; (3) If based on expressed trust and void contract, imprescriptible (4) If based on fraud, 4 years from the discovery (b) Not available if the property has already been transferred to an innocent purchaser for value. (c) It does not reopen proceedings but a mere transfer of the land from registered owner to the rightful owner [Esconde v. Barlongay, 1987]

CA, 1983] (3) Other proofs such as testimonial evidence

E. REMEDIES: An aggrieved party in a registration proceeding may avail himself of the following remedies: (1) Motion for New Trial [see Rule 37, ROC] (2) Appeal (3) Relief from Judgment [see Rule 38, ROC] (4) Annulment of Judgment [see Rule 47, ROC] (5) Reconveyance (6) Recovery of Damages (7) Reversion (8) Review of Decree of Registration

Action for Damages - It can be availed of when reconveyance is no longer possible as when the land has been transferred to an innocent purchaser for value [Ching v. CA, 1990]

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Reversion - Instituted by the government, thru Solicitor General in all cases where lands of public domain are held in violation of the Constitution or were fraudulently conveyed.

CIVIL LAW

omission of the lien or interest was fraudulent; (3) That the property has not been transferred to an innocent purchaser for value; and (4) That the action is fi led within one year from the issuance and entry of the decree of registration. [Cruz v. Navarro, GR No. L-27644, 1973]

Indefeasibility of title, prescription, laches, and estoppel do not bar reversion suits. Petition to Reopen or Review Decree of Registration – Sec. 32, PD 1529 (a) To whom available: Only to an aggrieved party who has been deprived of land or any estate or interest therein by decree of registration (b) When to file: Within 1 year from entry of decree of registration (1) Upon expiration of the 1 year period, every decree becomes incontrovertible (2) The Court held that the petition may be filed at any time after rendition of the court’s decision (no need to wait for actual entry in the LRA) and before expiration of one year from entry of the final decree of registration. [Rivera v.

F. PETITIONS AND MOTIONS AFTER ORIGINAL REGISTRATION (a) Lost Duplicate Certificate (1) Person in interest must file a sworn statement that the certificate is lost before the Register of Deeds (2) A petition will then be filed for the issuance of new title (3) Court will order issuance of new title after due notice and hearing, with memorandum that it is issued in place of a lost certificate (b) Petition seeking surrender of duplicate title (1) In voluntary and involuntary conveyances; when the duplicate cannot be produced, the party must petition the court to compel surrender of duplicate certificate of title to Register of Deeds (2) After hearing, court may order issuance of a new certificate and annul the old certificate

Moran, 48 Phil. 836; Director of Lands v. Aba, et al., 68 Phil. 85.] (c) Sole and ONLY Ground: Actual Fraud (1) Actual fraud proceeds from an intentional deception practiced by means of misrepresentation or concealment of material fact (2) The fraud must consist in an intentional omission of fact required by law to be stated in the application or a wilful statement of a claim against the truth (d) Requisites for Petition to Reopen or Review (1) That the plaintiff is the owner of the land ordered registered in the name of the defendant, or that the plaintiff’s lien or interest in said property does not appear in the decree or title issued in the defendant’s name; (2) That the registration was procured through actual fraud, or that the

(c) Amendment and alteration of certificate of title (1) A certificate of title cannot be altered or amended except in a direct proceeding in court which is summary in nature (2) Grounds: (i) New interest that does not appear on the instrument have been created 474

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(ii) Interest have been terminated or ceased (iii) Omission or error was made in entering certificate (iv) Name of person on certificate has been changed (v) Registered owner has married (vi) Marriage has terminated (vii) Corporation has dissolved and has not conveyed the property within 3 years after its dissolution (viii) Allowable corrections as long as the rights or interest of persons are not impaired

CIVIL LAW fire, flood, or other force majeure as determined by the LRA (2) Number of certificates of title lost or damaged should be at least 10% of the total number in possession of the Register of Deeds (3) In no case shall the number of certificates of title lost or damaged be less than 500; AND (4) Petitioner must have the duplicate copy of the certificate of title [RA 6732]

(d) Reconstitution of Certificate of title (1) The restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition, under the custody of the Register of Deeds (2) 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, 1990] (3) Kinds: (i) Judicial (1) A petition is filed before the RTC (2) Petition is published in the Official Gazette for 2 consecutive issues and posted on main entrance of municipality for at least 30 days before hearing (3) Hearing is then conducted (4) Court may then order reconstitution if meritorious

V. Judicial Confirmation Of Imperfect Or Incomplete Titles Applicable law: CA 141, as amended No title or right to, or equity in, any lands of the public domain may be acquired by prescription or by adverse possession or occupancy except as expressly provided by law. [CA 141, Sec 57] The Public Land Act recognizes the concept of ownership under the civil law. This ownership is based on adverse possession and the right of acquisition is governed by the Chapter on judicial confirmation of imperfect or incomplete titles. When applicable: This applies only to alienable and disposable agricultural lands of the public domain. Under Sec. 6 of CA 141, the classification of public lands into alienable and disposable forest lands, or mineral lands is the prerogative of the Executive Department.

(ii) Administrative, which may be availed only in case of: (1) Substantial loss or destruction of original land titles due to

The rule on confirmation of imperfect title does not apply unless and until the land classified 475

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as, say, forest land, is released in an official proclamation to that effect so that if may form part of the disposable agricultural lands of the public domain. [Bracewell vs. CA, 2000]

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(4) Natural-born citizens of the Philippines, who have lost their Philippine citizenship, who have acquired disposable and alienable lands of the public domain from Filipino citizens who had possessed the same in the same manner and for the length of time indicated in numbers (1) and (2) above.

The law, as presently phrased, requires that possession of lands of the public domain must be from June 12, 1945 or earlier, for the same to be acquired through judicial confirmation of imperfect title [Republic v. Doldol, 1998] Who may apply: (a) Individuals: (1) Filipino citizens who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of public domain under a bona fide claim of acquisition since June 12, 1945 or prior thereto since time immemorial [Sec. 48, CA 141, as amended by Sec. 4, PD 1073]

(b) Corporations (1) Private domestic corporations or associations which had acquired lands from Filipino citizens who had possessed the same in the manner and for the length of time indicated in numbers (1) and (2) above. Notwithstanding the prohibition in the 1973 and 1987 Constitutions against private corporations holding lands of the public domain except by lease not exceeding 1000 hectares, still a private corporation may institute confirmation proceedings under Sec. 48, (b) of the Public Land Act if, at the time of institution of the registration proceedings, the land was already private land. On the other hand, if the land was still part of the public domain, then a private corporation cannot institute such proceedings. [Dir.

(2) Filipino citizens who by themselves or their predecessors-in-interest have been, prior to effectivity of PD 1073 on Jan. 25, 1977, in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership for at least 30 years, or at least since Jan. 24, 1947 [RA 1942]

Of Lands v. IAC and ACME, 146 SCRA 509, 1986]

(3) Natural born citizens of the Philippines who have lost their citizenship and who has legal capacity to enter into a contract under Philippine laws may be a transferee of private land up to a maximum area of 5,000sqm, in case of urban land, or 3 hectares in case of rural land to be used by him for business or other purposes [Sec. 5, RA 8179]

A. FILING OF THE APPLICATION: Period of Filing is EXTENDED: RA No. 9176 extended the period to file an application for judicial confirmation of imperfect or incomplete title to December 31, 2020. Prior to RA 9176 the deadline for filing was on Dec. 31, 1987.

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Scope of the Application: RA 9176 also limited the area subject of the application to 12 hectares. Prior to RA 9176, the maximum area applied for was 144 hectares.

(c) Administrative Order issued by the DENR Secretary (d) Bureau of Forest Development Land Classification Map (e) Certification by the Director of Forestry (f) Investigation reports of Bureau of Lands Investigator (g) Legislative act or statute (2) The identity of the land; the following may be submitted: (a) Survey plan (b) Tracing cloth plan and blue print copies of plan (c) Technical description of the land (d) Tax declarations (e) Boundaries and area (3) Possession and occupation of the land for the length of time and in the manner required by law

Applicant must Prove: (1) The land is alienable and disposable land of public domain; and (2) They have been in open, continuous, exclusive, and notorious possession and occupation of the land for the length of time and in the manner and concept provided by law [Dir. Of Lands v. Buyco, 1992]

B. PROCEDURE CONFIRMATION:

IN

JUDICIAL

Sec. 48, par.1, of CA 141 as amended provides, “The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor under the Land Registration Act…”

VI. Registration

Cadastral

Nature: It 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.

Hence, the procedure in original registration discussed in the previous section is also followed in judicial confirmation of imperfect or incomplete title.

C. EVIDENCE NECESSARY SUBSTANTIATE APPLICATION:

CIVIL LAW

Unlike other kinds of registration, this is compulsory as it is initiated by the government.

TO

The applicant must prove: (1) That the land applied for has been declassified and is a public agricultural land, is alienable and disposable, or otherwise capable of registration. Specifically, the following may be presented: (a) Presidential proclamation (b) Executive Order

The government does not seek the registration of land in its name. The objective of the proceeding is the adjudication of title to the lands or lots involved in said proceeding.

A. DISTINGUISHED FROM ORDINARY REGISTRATION

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Ordinary Registration Voluntary Applicant is a person claiming title to the land Usually involves land; it may also refer to public agricultural lands if the object of the action is judicial confirmation of imperfect or incomplete title (in which case CA 141 applies) Applicant comes to court to confirm his title and seek registration of the land in his name If the applicant fails to prove his title, application may be dismissed without prejudice Res judicata DOES NOT apply

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STEP 3: Director of Lands gives notice to interested persons

Cadastral Registration

Contents of the Notice: (a) Day on which the survey will begin (b) Full and accurate description of the lands to be surveyed

Compulsory Applicant is the Director of Lands

STEP 4: Publication of notice (a) Published once in the Official Gazette (b) A copy of the notice in English or the national language shall be posted in a conspicuous place on the bulletin board of the municipal building of the municipality in which the lands or any portion thereof is situated

All classes of land are covered

STEP 5: A copy of the notice shall also be sent to: (a) Mayor of the municipality (b) Barangay captain (c) Sangguniang Panlalawigan and Sangguniang Bayan concerned

Government asks the court to settle and adjudicate the title of the land

STEP 6: Geodetic engineers or other Bureau of Land employees in charge of the survey shall give notice reasonably in advance of the date of the survey

In cadastral registration, if the applicant cannot prove that he is entitled to the land, the land becomes public land. There IS res judicata.

They shall also mark the boundaries of the lands with monuments STEP 7: Interested persons should communicate with the geodetic engineer if he requests for any information about the land

Procedure in Cadastral Registration: Sec. 35

and 36, PD 1529

STEP 8: Actual survey and plotting of the land

STEP 1: Determination of the President that public interest requires title to unregistered lands be settled and adjudicated  President then orders the Director of Lands to conduct cadastral survey

STEP 9: Director of Lands represented by Solicitor General shall institute original registration proceedings (a) Petition is filed in the appropriate RTC where the land is situated

STEP 2: Director of lands shall make a cadastral survey

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VII. Subsequent Registration

(b) Contents of the Petition: (1) That public interest requires that the title to such lands be settled and adjudicated and praying that such titles be so settled and adjudicated (2) Description of the lands (3) Accompanied by a plan thereof (4) Such other data as may serve to furnish full notice to the occupants of the lands and to all persons who may claim any right or interest therein

Subsequent registration - a proceeding 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 n interest

A. NECESSITY AND EFFECTS OF REGISTRATION

STEP 10: Publication, mailing posting

[Sec. 51 and 52, PD 1529]

STEP 11: Hearing Jurisdiction of the Cadastral Court: (1) Adjudicate title to any claimant thereto (2) Declare land as a public land (3) Order correction of technical description (4) Order the issuance of new title in place of the title issued under voluntary registration proceedings (5) Determine the priority of overlapping title (6) Order the partition of the property

The deed, mortgage, lease, or other voluntary instrument, except a will shall ONLY operate as: (1) A contract between the parties and (2) Evidence of authority to the Register of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned.

STEP 12: Decision

Also, by registration, it creates constructive notice to the world.

STEP 13: Issuance of the decree and certificate of title

General Rule: A forged deed is an absolute nullity and conveys no title.

Note: Reopening of cadastral cases no longer allowed

Exception: If there is good faith, a TCT has already been issued to the purchaser, the latter being an innocent purchaser for value according to Sec. 39, PD 1529, then the title is good.

RA 931, effective June 20, 1953 for five (5) years, authorizing the reopening of cadastral cases under certain conditions and which had been extended until Dec. 31, 1968, is no longer in force.

General Rule: A person dealing with registered property need not go beyond, but only has to rely on, the title. [Campillo v. PNB, 1969]

Courts are thus without jurisdiction or authority to reopen a cadastral proceeding since Dec. 31, 1968. [Aquino, p. 107, citing Republic v. Estenzo, 158 SCRA 282, 1988]

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He is charged with notice only of such burdens and claims which are annotated on the title, for registration is the operative act that binds the property.

Voluntary Dealings Presentation of the owner’s duplicate certificate of title is required to notify; mere entry insufficient 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.

Exception: When should a purchaser investigate? (1) Banks are required to exercise more care and prudence in dealing with registered lands for their business is one affected with public interest. The general rule does not apply. (2) When party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make inquiry. [Leung Yee v. Strong Machinery, 1918] (3) When purchaser is in bad faith; e.g. he had full knowledge of a previous sale. [Jamoc v. CA, 1991] (4) When a person buys land from one whose rights over the land is evidenced only by a deed of sale and an annotation in the certificate of title but no TCT. [Quiniano v. CA, 1971]

B. TWO TYPES OF DEALINGS (1) Voluntary Dealings – these are deeds, instruments, documents which are the results of free and voluntary acts of parties thereto. (2) Involuntary Dealings – these refer to writ, order, or process issued by the court of record affecting registered land, also other instruments which are not willful acts of the registered owner, executed without his knowledge or consent.

CIVIL LAW

Involuntary Dealings

Entry in the day book is sufficient notice to all persons

Lenin v. Bass, (1952): 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.

Villasor v. Camon, (1951): It is necessary to register the deed or instrument in the entry book and a memorandum thereof shall also be made in the owner’s duplicate certificate and its original

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Voluntary Dealings

Involuntary Dealings

Spouses Labayen v. Leonardo Serafica, (2008): At the time

AFP Mutual Benefit

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(2) File instrument creating or transferring interest and certificate of title with Register of Deeds together with: (a) Owner’s duplicate - the issuance of a new transfer certificate without presentation of an owner’s duplicate is unwarranted and confers no right on the purchaser [PNB v. Fernandez, 1935] (b) Payment of fees & documentary stamp tax (c) Evidence of full payment of real estate tax (d) Document of transfer – 1 copy additional for city/provincial assessor

of the filing of the Association v. Santiago, petition for (2008): Entry of the cancellation of attachment in the books encumbrance, the is sufficient notice to all lease contract persons. Hence, the already lost its fact that the deed of efficacy. Thus, there sale was already is no basis to save annotated is of no its annotation on moment with regard to defendant’s title. third persons. The The fact that the preference created by cancellation of the the levy on attachment lease contract was is not diminished by the forged is of no subsequent registration moment, for there of the deed of sale. was no violation of a right.

(3) Payment of fees and DST (a) After payment of entry fee the Register of Deeds shall enter the instruments in a primary entry book [Sec. 56, PD 1529] (b) The national, provincial and city governments are exempted from payment of entry fees (c) RA 456 prohibits registration of documents affecting real property which is delinquent in the payment of real estate taxes. Further, if evidence of such payment is not presented with 15 days from the date of entry of said document in the primary entry book of the register of deeds the entry shall be deemed cancelled.

C. VOLUNTARY DEALINGS Registration of Voluntary Instruments in General Process of Registration [Sec. 55, PD 1529] (1) The deed or other voluntary instrument must contain: (a) The following details of the grantee or other person acquiring or claiming interest: (1) Full name (2) Nationality (3) Residence (4) Postal address (5) Civil status (if married, include name in full of spouse) (b) If grantee is a corporation: It must contain a recital showing that such corporation or association is legally qualified to acquire private lands

(4) Entry of the Instrument in the Primary Entry Book: Instruments are regarded as registered from the time the Register of Deeds enters them in the book (5) TCT shall then be issued Registration of Dealings Less than Ownership [Sec. 54, PD 1529] If an instrument does not divest ownership or title from owner or from transferee of the registered owners, then NO NEW CERTIFICATE shall be entered or issued.

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new one issued describing therein the remaining portion (c) If there are SUBSISTING encumbrances and annotations:  They shall be carried over in the new certificate or certificates; except when they have been simultaneously discharged.

Process of Registration for Dealings less than Ownership (1) Filing of the instrument with the Register of Deeds (2) A brief memorandum thereof is made: (a) On the certificate of title by the Register of Deeds and signed by him, and (b) On the owner’s duplicate Cancellation or extinguishment of such interests shall be registered in the same manner.

Registration of Mortgages and Leases [Sec. 60, PD 1529] Sec. 60, PD 1529 provides that mortgages and leases shall be registered in the manner provided in Sec. 54 (Dealings less than ownership)

Registration of Deeds of Sale and Transfers

(a) If ENTIRE property is the subject [Sec. 57, PD 1529] (1) Owner executes and registers the deed which must be sufficient in form. (2) A new certificate of title is issued and Register of Deeds prepares and delivers to grantee his owner's duplicate certificate (3) Register of Deeds notes upon the OCT and the duplicate certificate the date of transfer, the volume and page of the registration book where the new certificate is registered (4) The original and the owner's duplicate of the grantor's certificate shall be stamped "cancelled". (5) The deed of conveyance shall be filed and indorsed with the number and the place of registration of the certificate of title of the land conveyed.

The deed shall take effect upon the title only from the time of registration. When a deed of mortgage is presented, the Register of Deeds will enter upon the OCT and upon the owner’s duplicate a memorandum thereof and shall sign said memorandum. Registration of Powers of Attorneys [Sec. 64, PD 1529] Powers of attorney and revocations shall be registered with the Register of Deeds of the province or city where the land lies. Any instrument revoking such power shall be registered in like manner.

(b) If ONLY A PORTION of property is the subject [Sec. 58, PD 1529]

Registration of Trusts Registration is by memorandum: (1) A memorandum by the words “in trust” or “upon condition” or other apt words is made if a deed or other instrument is filed in order to: (a) Transfer registered land in trust, or upon any equitable condition or limitation expressed therein, or (b) Create or declare a trust or other equitable interests in such land without transfer [Sec. 65, PD 1529]

(1) Include a plan which shows all the portions already subdivided with verified and approved technical description. (2) That plan with the certified copy of the technical descriptions shall be filed with the Register of Deeds for annotation in the TCT.

(3) Register of Deeds shall issue a TCT and cancel the grantor's certificate partially OR it may be cancelled totally and a

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shall be filed with the Register of Deeds where the land lies, containing number of certificate of title of land to be affected or description of land [PD 1529, Sec 69] (2) Register of Deeds to index attachment in names of both plaintiff & defendant or name of person whom property is held or in whose name stands in the records (a) If duplicate of certificate of title is not presented: (i) Register of Deeds shall within 36 hours send notice to registered owner by mail stating that there has been registration & requesting him to produce duplicate so that memorandum be made (ii) If owner neglects or refuses – Register of Deeds shall report matter to court. (b) Court after notice shall enter an order to owner to surrender certificate at time & place to be named therein. (3) Although notice of attachment is not noted in duplicate, notation in book of entry of Register of Deeds produces effect of registration already

(2) A memorandum by the words “with power to sell,” or “power to mortgage” or other apt words is made when: The instrument creating or declaring a trust or other equitable interest contains an EXPRESS POWER to sell, mortgage, or deal with the land in any manner However, if an implied or constructive trust is claimed, person claiming such must execute a sworn statement thereof with the Register of Deeds, containing a description of the land, the name of the registered owner and a reference to the number of the certificate of title. Such claim shall not affect the title of a purchaser for value and in good faith before its registration. [Sec. 68, PD 1529]

D. INVOLUNTARY DEALINGS The following involuntary dealings affecting registered land must be registered: (1) Attachments [Sec. 69, PD 1529] (2) Sale on execution or for taxes or for any assessment [Sec. 74, PD 1529] (3) Adverse claim [Sec. 70, PD 1529] (4) Notice of lis pendens [Sec. 76, PD 1529]

Effect of registration of attachment (1) Creates real right (2) Has priority over execution sale (3) But between 2 attachments – one that is earlier in registration is preferred

Registration of Attachment Attachment is 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.

Duty of Register of Deeds - Duty is ministerial but may refuse registration in the following circumstances: (1) Title to land is not in the name of defendant Exception: If petitioner is an heir (2) No evidence is submitted to show that he has present or possible future interest in land

Kinds (1) Preliminary (2) Garnishment (3) Levy on execution

Process of Registration (1) Copy of writ in order to preserve any lien, right or attachment upon registered land

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(3) Memorandum shall be entered in the certificate as an adverse claim or encumbrance (4) After the period of redemption has expired & no redemption (2 years from registration of auction sale) is made: cancellation of title & issuance of a new one (5) Before cancellation, notice shall be sent to registered owner: to surrender title & show cause why it shall not be cancelled

Execution sale (1) To enforce a lien of any description on registered land, any execution or affidavit to enforce such lien shall be filed with Register of Deeds where the land lies (2) Register in the registration book & memorandum upon proper certificate of title as adverse claim or as an encumbrance (3) To determine preferential rights between 2 liens: priority of registration of attachment

Note: Actual knowledge is equivalent to registration

Tax sale (a) Sale of land for collection of delinquent taxes and penalties due the Government (b) In personam (all persons interested shall be notified so that they are given opportunity to be heard) (1) Notice to be given to delinquent tax payer at last known address (2) Publication of notice must also be made in English, Spanish & local dialect & posted in a public & conspicuous place in place wherein property is situated & at the main entrance of the provincial building (c) Sale cannot affect rights of other lien holders unless they are given the right to defend their rights: due process must be strictly observed (d) Tax lien superior to attachment

Registration of Notice Lis Pendens Purpose of notice of lis pendens: To keep the subject matter within the power of the court until the entry of final judgment. It therefore creates merely a contingency & not a lien. When notice of lis pendens is proper: (1) To recover possession of real estate (2) To quiet title (3) To remove clouds upon the title thereof (4) For partition (5) Other proceedings of any kind in court directly affecting the title to land or the use or occupation thereof or the buildings thereon When notice of lis pendens is NOT proper: (1) Proceedings for the recovery of money judgments (2) Attachments (3) Proceedings on the probate of wills (4) Administration of the estate of deceased persons (5) Levies on execution (6) Foreclosure

Note: No need to register tax lien because it is automatically registered once the tax accrues. However sale of registered land to foreclose a tax lien needs to be registered. Process of Registration (1) Officer’s return shall be submitted to Register of Deeds together with duplicate title (2) Register in the registration book

Process of Registration: By Memorandum or Notice stating (1) The institution of the action or proceeding (2) The court wherein the same is pending (3) The date of the institution of the action

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(4) Reference to the number of the certificate of title (5) Adequate description of the land affected and registered owner thereof

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protect the rights of the party who caused it to be registered (2) Register of Deeds may also cancel upon verified petition of the party who caused such registration (3) Deemed cancelled when certificate of clerk of court stating manner of disposal of proceeding is registered

Other parties who need to register (1) Assignee in involuntary proceeding for insolvency (a) Duty of the officer serving notice to file a copy of the notice to the Register of Deeds where the property of debtor lies (b) Assignee elected or appointed by court shall be entitled to entry of new certificate of registered land upon presentment of copy of assignment with bankrupt’s certificate of title (duplicate) (c) New certificate shall note that it is entered to him as assignee or trustee in insolvency proceedings (2) Government in eminent domain (a) Copy of judgment shall be filed in the Register of Deeds 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

Registration of Adverse Claim A claim is adverse when: [Sec. 70, par. 1, PD 1529] (1) Claimant’s right or interest in registered land is adverse to the registered owner, and (2) Such right arose subsequent to date of original registration, and (3) No other provision is made in the Decree for the registration of such right or claimant Requisites for registration of an adverse claim: (1) The adverse claimant must give a statement of the following in writing: (a) His alleged right or interest (b) How and under whom such alleged right or interest is acquired (c) The description of the land in which the right or interest is claimed and (d) The number of the certificate of title

Effect of registration (1) Impossibility of alienating the property in dispute during the pendency of the suit – may be alienated but purchaser is subject to final outcome of pending suit (2) Register of Deeds is duty bound to carry over notice of lis pendens on all new titles to be issued

(2) The statement must be: (a) Signed by the adverse claimant (b) Sworn before a notary public (3) The statement must also state his residence or the place to which all notices may be served upon him.

Cancellation of lis pendens [PD 1529, Sec. 77] (1) Before final judgment – court may order cancellation after showing that notice is only for the purpose of molesting an adverse party or it is not necessary to

Duration of an adverse claim (a) 30 days from the date of registration. (b) After that the annotation of adverse claim may be cancelled upon filing of a verified petition by the party in interest.

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(c) When cancelled, no second adverse claim

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(2) Waters under Art. 502, Civil Code (a) Rivers and natural beds (b) Continuous or intermittent waters of springs and brooks running in their natural beds and the beds themselves (c) Waters rising continuously or intermittently on lands of public dominion (d) Lakes and lagoons formed by Nature on public lands, and their beds (e) Rain waters running through ravines or sand beds, which are also part of public dominion; (f) Subterranean waters on public lands (g) Waters found within the zone of operation of public works, even if constructed by a contractor (h) Waters rising continuously or intermittently on lands belonging to private persons, to the State, to a province, or to a city or municipality from the moment they leave such lands (i) The waste waters of fountains, sewers, and public establishments

based on the same ground may be registered by the same claimant.

VIII. Non-Registrable Properties All 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 other natural resources are owned by the State. [Sec. 2, Art. XII, 1987 Constitution] With the exception of agricultural lands, all other natural resources shall not be alienated. [Sec. 2, Art. XI, 1987 Constitution] The classification of public lands is an exclusive prerogative of the Executive Department of the Government and not of the courts. In the absence of such classification, the land remains as unclassified land until it is released therefrom and rendered open to disposition. [Aquino, p. 41, citing Dir. Of Lands

Specific kinds of non-registrable properties or lands (1) Forest or timberland, public forest, forest reserves (2) Mangrove swamps - Mangrove swamps or mangroves should be understood as comprised within the public forests of the Philippines as defined in Sec. 1820, Administrative Code of 1917. [Dir. Of Forestry v. Villareal, 170 SCRA 598, 1980] (3) Mineral lands - Both under the 1987 Constitution and Sec. 2 of the Public Land Act, mineral lands are not alienable and disposable. [Lepanto Consolidated Mining Co. v. Dumyung, 89 SCRA 532, 1979] (4) Foreshore land and seashore - Seashore, foreshore, and/or portions of territorial waters and beaches, cannot be registered. Even alluvial formation along the seashore

and Dir. Of Forest Development v. CA, 129 SCRA 689, 1984] Civil Code provisions dealing with nonregistrable properties (1) Properties of public dominion [Art. 420, Civil Code] (a) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (b) 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.

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is part of public domain. [Aquino, p. 45,

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Limitation. [Pena citing Martinez v. CA, GR No. L-31271, 1974]

citing Dizon v. Rodriguez, 13 SCRA 704, 1965]

IX. Dealings With Unregistered Lands

(5) Lakes - Lakes are part of public dominion. [Art. 502(4), Civil Code] (6) Military Reservations - The reservation made segregates it from the public domain and no amount of time in whatever nature of possession could have ripen such possession into private ownership. [Republic v. Marcos, 52 SCRA 238, 1973] (7) Watershed - The Constitution expressly mandates the conservation and utilization of natural resources, which includes the country’s watershed. [Tan v. Dir. Of Forestry, 125 SCRA 302, 1983] (8) Grazing lands - While the 1987 Constitution does not specifically prove that grazing lands are not disposable, yet if such lands are part of a forest reserve, there can be no doubt that the same are incapable of registration. [Aquino, p. 49, citing Dir. Of Lands v. Rivas] (9) Previously titled land - Proceeds from the indefeasibility of the Torrens title. (10) Alluvial deposit along river when manmade - Such deposit is really an encroachment of a portion of the bed of the river, classified as property of the public domain under Art. 420, par. 1 and Art. 502 (1) of the Civil Code, hence not open to registration. [Republic v. CA, 132 SCRA 514, 1984]

No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. [Sec. 113, par. 1, PD 1529]

EFFECTS OF TRANSACTIONS COVERING UNREGISTERED LAND (1) As between the parties – The contract is binding and valid even if not registered (2) As among third persons – There must be registration for the transaction to be binding against third persons

PRIMARY ENTRY REGISTRATION BOOK

BOOK

AND

The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. (1) The Primary Entry Book shall contain, among other particulars: (a) Entry number (b) Names of the parties (c) Nature of the document (d) Date, hour and minute it was presented and received (2) The Registration Book – Provides spaces whereon the annotation is made after the instrument has been entered in the Primary Entry Book

The land registration court has no jurisdiction over non-registrable property and cannot validly adjudge the registration of title thereof in favor of a private applicant. [Pena, p. 105] Thus, where it has so been adjudged, the river not being capable of private appropriation or acquisition by prescription, the title thereto may be attacked, either directly or collaterally, by the State which is not bound by any prescriptive period provided by the Statute of

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Process of Registration (1) Registration is by way of annotation (2) The instrument dealing with unregistered land is presented before the Register of Deeds (3) The Register will then determine if it can be registered: (a) If, on the face of the instrument, it appears that it is sufficient in law, the Register of Deeds shall forthwith record the instrument (b) In case the Register of Deeds refuses its administration to record, he shall advise the party in interest in writing of the ground or grounds for his refusal  The latter may appeal the matter to the Commissioner of Land Registration Third Party with a better right NOT prejudiced It shall be understood that any recording made under this section shall be without prejudice to a third party with a better right. [Sec. 113, PD 1529] Better right – refers to a right which must have been acquired by a third party independently of the unregistered deed, such, for instance, as title by prescription, and that it has no reference to rights acquired under that unregistered deed itself. [Pena, p. 600] Involuntary dealings in unregistered lands PD 1529 now permits the registration of involuntary dealings in unregistered lands. Tax sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record under Sec. 113. [Sec. 113 (d), PD 1529]

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I. Preliminary Considerations

A.2. ACCORDING TO SCOPE (1) General – Tort liability is based on any of the three categories: intentional, negligent, strict liability (2) Specific – Includes trespass, assault, battery, negligence, products liability, and intentional infliction of emotional distress

A. DEFINITION OF TORT A.1. ACCORDING COMMISSION

TO

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MANNER

OF

B. DEFINITION OF QUASI-DELICT

(1) Negligent Tort – consists in the failure to act according to the standard of diligence required under the attendant circumstances. It is a voluntary act or omission which results in injury to others, without intending to cause the same.

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 pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

Note: While the term “tort” has been used interchangeably with the term “quasidelict”, the latter merely represents an area of tort law concerned with damage resulting from fault (by doing a positive act constituting negligence) or negligence (by omitting to do an act due to negligence) of the defendant.

Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American or common law concept. Torts is much broader than culpa aquiliana because it includes not only negligennce, but intentional criminal acts such as assualt and battery, false imprisonment and deceit. In the general scheme of the Philippine legal system envisioned by the Commission responsible for drafting the New Civil Code, intentional and malicious acts with certain exceptopms, are to be governed by the Revised Penal Code while negligent acts or omissions are to be covered by Article 2176 of the Civil Code. In between these opposite spectrums are injurious acts which, in the absence of Article 21, would have been beyond redress. Thus, Article 21 fills that vacuum [Baksh v. CA (1993)].

(2) Intentional Tort – perpetrated by one who intends to do that which the law has declared to be wrong. It is conduct where the actor desires to cause the consequences of the act, or that he believes that the consequences are substantially certain to result therefrom. (3) Strict Liability – one is liable independent of fault or negligence. It only requires proof of a certain set of facts. Liability here is based on the breach of an absolute duty to make something safe. It most often applies to ultra-hazardous activities or in product liability cases. It is also known as “absolute liability” or liability without fault.”

Cangco v. Manila Railroad (1918): The concept of quasi-delict does not cover intentional acts. The liability arising from from extracontractual culpa is always based upon a voluntary act or omission, which, without willful intent, but by mere negligence or inattention, has caused damage to another.

Strict liability is imposed by articles 1314, 1711, 1712, 1723, 2183, 2184, 2187, 2189, 2190, 2191, 2192, 2193.

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D. CULPA AQUILIANA DISTINGUISHED FROM CULPA CONTRACTUAL; PRESENCE OF CONTRACTUAL RELATIONS

Cinco v. Canonoy (1979): The concept of quasidelict is so broad that it includes not only injuries to persons but also damage to property.

D.1. AS TO SOURCE In Culpa Aquiliana

C. CULPA AQUILIANA DISTINGUISHED FROM CRIME

or non-contractual obligation, it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations, the vinculum exists independently of the breach of voluntary duty assumed by the parties when entering into the contractual relation [Cangco v. Manila Railroad (1918)].

A quasi-delict is a separate source of obligation under Article 1157.

Art. 2177. 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.

D.2. AS TO BURDEN OF PROOF When the source of the obligation upon which the plaintiff’s cause of action depends is a negligent act or omission, the burden of proof rests upon the plaintiff to prove the negligence—if he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of the plaintiff, and it is alleged that the plaintiff has failed or refused to perform the contract, it is not necessary for the plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery. [Cangco v. Manila Railroad (1918)].

RPC, Art. 100. Every person criminally liable for a felony is also civilly liable.

Barredo v. Garcia (1942): A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. However, the same negligent act causing damage may produce civil liability arising from a crime under Article 100 of the Revised Penal Code, or create an action for quasi-delict.

L.G. Foods v. Philadelfa (2006): An act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender—for civil liability ex delicto, and independent civil liabilities. The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or complaint.

D.3. AS TO APPLICABILITY OF THE DOCTRINE OF PROXIMATE CAUSE The doctrine of proximate cause [to establish the fault or negligence of the defendant] is applicable only in actions for quasi-delict, not in actions involving breach of contract [Calalas v. CA (2000)].

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D.4. AS TO THE DEFENSE OF AN EMPLOYER FOR THE NEGLIGENCE OF AN EMPLOYEE

CIVIL LAW negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply.

As it is not necessary for the plaintiff in an action for breach of contract to show that the breach was due to the negligent conduct of the defendant or his servants, proof on the part of the defendant that the negligence or omission of his servants or agents caused the breach of contract would not constitute a defense to the action [Cangco v. Manila Railroad (1918)].

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do [Layugan v. IAC (1988)].

Presence of Contactual Relations The Supreme Court held there may instances where there can be a quasi-delict even when there is a contract between the parties. The test (whether a quasi-delict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the application of quasi-delict provisions to the case [Far East v. CA (1995)].

Jorge v. Sicam (2007): The diligence with which the law requires the individual to at all times govern his conduct varies with the nature of the situation in which he is placed and the importance of the act which he is to perform. To determine whether there has been negligence by the defendant, this 2-step analysis may be used: 1) determine the diligence required of the actor under the circumstances, and 2) determine whether the actor has performed the diligence required. Failing the second step would lead to the conclusion that the defendant has been negligent.

II. QUASI-DELICT Elements: [PNR v. Brunty (2006)] (a) Damage to the plaintiff (b) Negligence by act/omission of the defendant (c) Connection of the cause and effect between the fault/negligence of the defendant and the damage incurred by the plaintiff.

Amedo v. Rio (1954): By jumping into the sea, the employee failed to exercise even slight care and diligence and displayed a reckless disregard of the safety of his person. His death was caused by his notorious negligence. Notorious negligence has been held to be tantamount to gross negligence which is want of even slight care and diligence.

A. NEGLIGENCE Art. 1173. The fault or negligence of the obligor 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. When

A.1. DEFAULT STANDARD OF CARE: GOOD FATHER OF A FAMILY Picart v. Smith (1918):

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Test: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent man would have used in the same situation? If not, then he is negligent. Negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him, but is determined in the light of human experience and the facts involved in the particular case. Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences.

CIVIL LAW (3) Experts (In General)

Far Eastern Shipping v CA (1998): Those who undertake any work calling for special skills are required not only to exercise reasonable care in what they do but also possess a standard minimum of special knowledge and ability. In all employments where peculiar skill is requisite, one who offers his services is understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same employment.

Culion v Philippine Motors (1930): When a person holds himself out as being competent to do things requiring professional skill, he will be held liable for negligence if he fails to exhibit the care and skill of one ordinarily skilled in the particular work which he attempts to do.

A.2. STANDARD OF CARE NEEDED IN SPECIFIC CIRCUMSTANCES (1) Operators of Motor Vehicles

Anonuevo v CA (2004): Because of inherent differences between motorists and cyclists, the former being capable of greater speed and destruction, operators of motor vehicles have a higher standard in his duty of care.

(4) Doctors Cruz v. CA (1997): Whether or not a physician has committed an ‘inexcusable lack of precaution’ in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment of present state of medical science. It is in this aspect of medical malpractice that expert testimony is essential to establish not only the standard of care of the profession but also that the physician’s conduct in the treatment and care falls below such standard.

(2) Banks Consolidated Bank v CA (2003): The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 (RA 8791), which took effect on 13 June 2000, declares that the State recognizes the ‘fiduciary nature of banking that requires high standards of integrity and performance.’ This fiduciary relationship means that the bank’s obligation to observe high standards of integrity and performance is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family.

(5) Pharmacists US v. Pineda (1918): The profession of pharmacy, it has been said again and again, is one demanding care and skill. Even under the first conservative expression, "ordinary care" with reference

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Ylarde v. Aquino (1988): The degree of care

to the business of a druggist…must be held to signify "the highest practicable degree of prudence, thoughtfulness, and vigilance, and most exact and reliable safeguards consistent with the reasonable conduct of the business in order that human life may not constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicine.”

required to be exercised must vary with the capacity of the person endangered to care for himself. …The standard of conduct to which a child must conform for his own protection is that degree of care ordinarily exercised by children of the same age, capacity, discretion, knowledge and experience under the same or similar circumstances.

Mercury Drug v De Leon (2008): Mistake is

(8) In case of insane persons US v. Baggay (1911): A lunatic or insane person who, in spite of his irresponsibility on account of the deplorable condition of his deranged mind, is still reasonably and justly liable with his property for the consequences of his acts.

negligence and care is no defense.

(6) Possessor of Extremely Dangerous Instrumentalities Pacis v Morales (2010): 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.

A.3. PRESUMPTIONS OF NEGLIGENCE i. IN MOTOR VEHICLE MISHAPS (1) Liability of the owner

Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of the due diligence, prevented the misfortune. xxx If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

(7) Children

Taylor v. Manila Railroad (1910): The

Art. 2186. Every owner of a motor vehicle

conduct of an infant of tender years is not to be judged by the same rule, which governs that of an adult. …The care and caution required of a child is according to his maturity and capacity only, and this is to be determined in each case by the circumstances of the case.

Jarco

Marketing

v.

CA

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shall file with the proper government office a bond executed by a government-controlled corporation or office, to answer for damages to third persons. The amount of the bond and other terms shall be fixed by the competent public official. “Owner” shall mean the actual legal owner of the motor vehicle, in whose name such vehicle is duly registered with the LTO. Registration of motor vehicles is required not because it is the operative act which transfers ownership in

(1999):

No contributory negligence can be imputed to children below 9 years old.

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vehicles, but because it is the means by which the owner can be identified so that if any accident occurs, or damage or injury is caused in the operation of the vehicle, responsibility can be fixed.

a right to be indemnified by the real owner of the amount he was required to pay. This rule applies both to private and to common carriers with respect to their passengers.

The owner is solidarily liable with the driver for motor vehicle mishaps when: (a) The owner was IN the vehicle at the time, AND (b) The owner could have, by the use of due diligence, prevented the misfortune.

require that a person must possess a certain measure of skill or proficiency either in the mechanics of driving or in the observance of traffic rules before he may own a motor vehicle. The test of his negligence, within the meaning of Article 2184, is his omission to do that which the evidence of his own senses tells him he should do in order to avoid the accident. And as far as perception is concerned, absent a minimum level imposed by law, a maneuver that appears to be fraught with danger to one passenger may appear to be entirely safe and commonplace to another. Were the law to require a uniform standard of perceptiveness, employment of professional drivers by car owners who, by their very inadequacies, have real need of drivers' services, would be effectively proscribed.

Caedo v. Yu Khe Tai (1968): The law does not

Note: If the owner was NOT inside the vehicle, Art. 2180 applies. The presumption is against the owner of the motor vehicle. He has the burden of proving due diligence. Thus, once a driver is proven negligent in causing damage, the law presumes the vehicle owner equally negligent and imposes upon the latter the burden of proving proper selection and supervision of employee as a defense. As held in Vargas v. Langcay (1962), “the registered owner/operator of a passenger vehicle is jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries or death sustained in the operation of said vehicles. Regardless of who the actual owner of a vehicle is, the operator of record continues to be the operator of the vehicle as regards the public and third persons and as such is directly and primarily responsible for the consequences incident to its operation, so that in contemplation of law, such owner/operator of record is the employer of the driver, the actual operator and employer being considered merely as his agent.”

Duavit v. CA (1989): An owner of a vehicle

Tamayo v. Aquino (1959): The registered owner

(2) Liability of the driver

of a motor vehicle is primarily liable for the damage or injury caused to another, but he has

Art. 2184. xxx It is disputably presumed that a

cannot be held liable for an accident involving the said vehicle if the same was driven without his consent or knowledge and by a person not employed by him.

Chapman v. Underwood (1914): The owner of the motor vehicle is not liable for the misfortune unless the negligent acts of the driver are continued for such a length of time as to give the owner a reasonable opportunity to observe them and to direct his driver to desist therefrom. The act complained of must be continued in the presence of the owner for such a length of time that the owner, by his acquiescence, makes his driver’s act his own.

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guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months.

CIVIL LAW in war, act of owner of the goods, character of the goods, order of competent public authority), if the goods are lost destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required under Art. 1733.

Art. 2185. Unless there is proof to the

contrary, 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. Article 2184 establishes a presumption of negligence on the part of the driver based on previous violations of traffic regulations. Article 2185 establishes a presumption of negligence on the basis of simultaneous violations.

Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.

Sanitary Steam v. CA (1998): Despite the presumption of negligence arising from the traffic regulation violation, the claimant must still prove that such negligence was the proximate cause in order to successfully claim for damages.

iv. RES IPSA LOQUITUR The doctrine of res ipsa loquitur (“the thing or the transaction speaks for itself”) is a rule of evidence (not of substantive law) peculiar to the law of negligence. The doctrine treats the injury itself as proof of negligence.

Añonuevo v. CA (2004): Article 2185 was not formulated to compel or ensure obeisance by all to traffic rules and regulations. It does not apply to non-motorized vehicles, in recognition of the unequal footing of standards applicable to motor vehicles as opposed to other types of vehicles.

Elements: [Ramos v. CA (1999)] (a) The accident is of a kind which ordinarily does not occur in the absence of someone’s negligence; (b) It is caused by an instrumentality within the exclusive control of the defendant or defendants; and (c) The possibility of contributing conduct, which would make the plaintiff responsible, is eliminated.

ii. POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES Art. 2188. There is prima facie presumption of negligence if the death or injury results from his possession of dangerous weapons or substances, such as firearms and poison, except when the use or possession thereof is indispensable in his occupation or business.

Basis

DM Consunji v. CA (2001): The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge, and therefore is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence.

iii. COMMON CARRIERS Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article (calamity, act of public enemy

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Effect

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xxx

Ramos v. CA, supra: The fact of the occurrence

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent the damage.

of an injury, taken with the surrounding circumstances, raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a question of fact for defendant to meet with an explanation.

Also referred to as the “doctrine of imputed negligence”. The rationale is to extend liability by legal fiction to those in a position to exercise absolute or limited control over the direct tortfeasor. The doctrine does not apply where moral culpability can be imputed directly, as when there is actual intent to cause harm to others.

In medical malpractice cases, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed with because the injury itself provides the proof of negligence. The reason is that the general rule on the necessity of expert testimony applies only to such matters clearly within the domain of medical science, and not to matters that are within the common knowledge of mankind which may be testified to by anyone familiar with the facts.

The liability of the vicarious obligor is primary and direct (solidarily liable with the tortfesor), not subsidiary. His responsibility is not conditioned upon the insolvency of or prior recourse against the negligent tortfeasor.

Note: For the res ipsa loquitur doctrine to apply, it must appear that the injured party had no knowledge as to the cause of the accident, or that the party to be charged with negligence has superior knowledge or opportunity for explanation of the accident.

Under Article 2180 Persons Vicariously Liable

A.4. PERSONS LIABLE

Actor

Father and, in case Minor children who live in of his death or their company incapacity, the mother

(1) The direct tortfeasor

Art. 2176. Whoever by act or omission causes

damage to another, there being fault or negligence, is obliged to pay for the damage done. xxx

Guardians

The tortfeasor may be a natural or juridical person. For natural persons, apply requisites of Art. 2176 and for juridical persons, apply vicarious liability provisions.

Minors or incapacitated persons who are under their authority and live in their company

Owners and Employees in the service of managers of an the branches in which the establishment or latter are employed or on enterprise the occasion of their functions

(2) Persons vicariously liable

Art. 2180. The obligation imposed by Article

Employers

2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

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tasks, even though the former are not engaged in any business or industry

children's homes, orphanages and similar institutions duly accredited by the proper government agency.

Special agent

Art 2180, par 2 of the Civil Code which holds the father liable for damages has been modified by the Family Code and PD 603. Art. 211 of the FC declares joint parental authority of the mother and father over common children. The parent(s) exercising parental authority are liable for the torts of their children.

Teachers or heads Pupils and students or of establishments apprentices, so long as of arts and trades they remain in their custody (a) Persons exercising parental authority

Art. 2180 (2). The father and, in case of his

Who are liable for minors? (1) Parents/Adoptive parents (2) Court-appointed guardians (3) Substitute Parental Authorities (a) Grandparents (b) Oldest qualified sibling over 21 years old (c) Child’s actual custodian, provided he is qualified and over 21 years old. (4) Special Parental Authorities (a) School (b) Administrators (c) Teachers (d) Individual, entity, or institution engaged in child care

death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.

FC, Art. 221. Parents and other persons

exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority subject to the appropriate defenses provided by law. FC, Art. 216. In default of parents or a judicially appointed guardian, the following person shall exercise substitute parental authority over the child in the order indicated: (1) The surviving grandparent, as provided in Art. 214; (2) The oldest brother or sister, over twentyone years of age, unless unfit or disqualified; and (3) The child's actual custodian, over twentyone years of age, unless unfit or disqualified.

Illegitimate children Responsibility is with the mother whom the law vests with parental authority. Basis of liability of parents and adopters Parental liability is anchored upon parental authority coupled with presumed parental dereliction in the discharge of the duties accompanying such authority. The parental dereliction is, of course, only presumed and the presumption can be overturned under Article 2180 of the Civil Code by proof that the parents had exercised all the diligence of a good father of a family to prevent the damage [Tamargo v. CA (1992)].

Whenever the appointment or a judicial guardian over the property of the child becomes necessary, the same order of preference shall be observed.

FC, Art. 217. In case of foundlings, abandoned neglected or abused children and other children similarly situated, parental authority shall be entrusted in summary judicial proceedings to heads of

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Meaning of “Minority” Par. 2 and 3 of Art. 2180 speak of minors. Minors here refer to those who are below 21 years of age, not below 18 years. The law reducing the majority age from 21 to 18 years old did not amend these paragraphs. Basis is FC, Art. 236 (3), as amended by RA 6809, provides, “Nothing in this Code shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below 21 years of age mentioned in the second and third paragraphs of 2180 of the Civil Code.”

CIVIL LAW (b) Teachers and schools

Art. 2180 (7). Lastly, teachers or heads of

establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.

FC, Art. 218. The school, its administrators and teachers, or the individual, entity or institution engaged in child are shall have special parental authority and responsibility over the minor child while under their supervision, instruction or custody. Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution.

Art. 2180 (3). Guardians are liable for damages

caused by the minors or incapacitated persons who are under their authority and live in their company.

FC, Art. 219. Those given the authority and

The liability of guardians with respect to their wards is governed by the same rule as in the liability of parents with respect to their children below 21 years and who live with them

responsibility under the preceding Article shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable.

“Incompetent” includes (Rule 92, ROC): (1) Those suffering the penalty of civil interdiction, (2) Prodigals, (3) Deaf and dumb who are unable to read and write (4) Unsound mind, even though they have lucid intervals (5) Being of sound mind, but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves or manage their property

The respective liabilities of those referred to in the preceding paragraph shall not apply if it is proved that they exercised the proper diligence required under the particular circumstances. All other cases not covered by this and the preceding articles shall be governed by the provisions of the Civil Code on quasi-delicts. Under Article 2180, the teacher is liable for the acts or omissions of the pupils and students, and so is the head of establishment of arts and trades for the apprentices, so long as they remain in custody, regardless of age. Under the Family Code, liability attaches to the school, its administrators and teachers, or the individual or entity engaged in child care, so long as the child is under their supervision, instruction, or custody, and the child is below 18 years old.

Liability of minor or insane tortfeasor without a parent or guardian He shall be answerable with his own property in an action against him where a guardian ad litem shall be appointed. [Art. 2182]

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CIVIL LAW The liability imposed upon employers with respect to damages occasioned by the negligence of their employees to whom they are not bound by contract is based on the employer’s own negligence, such as when he places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such vehicle [Cangco v. Manila Railroad (1918)].

Basis of liability of teachers and heads of establishments of arts and trades They stand, to a certain extent, in loco parentis and are called upon to exercise reasonable supervision over the conduct of the child [Palisoc v. Brillantes (1971)].

Palisoc v. Brillante (1971): “Custody” means the protective and supervisory custody that the school, its head and teachers exercise over the pupils, for as long as they are in attendance in school, which includes recess time.

Professional Services v. CA and Agana (2010): This Court still employs the "control test" to determine the existence of an employeremployee relationship between hospital and doctor. Under the "control test", an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task. The Court earlier ruled that there was employer-employee relationship between the doctor and employee but reversed itself upon motion for reconsideration. They still held the hospital liable on the basis of agency and corporate responsibility.

Amadora v. CA (1988): As long as it is shown that the student is in the school premises pursuant to a legitimate student objective, in the exercise of a legitimate right, or the enjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues. (c) Owners/managers of establishments/employers

Art. 2180 (4). The owners and managers of an

establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions.

Filamer v. IAC (1992): “Within the scope of their assigned task” in Art. 2180 includes any act done by an employee in furtherance of the interests, or for the account of the employer at the time of the infliction of the injury or damage.

Art. 2180 (5). Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

Basis of liability Employer’s negligence in (1) The selection of their employees (culpa in eligiendo) (2) The supervision over their employees (culpa in vigilando)

Philippine Rabbit v. Philam Forwarders (1975): “Owners and managers of an establishment or enterprise” does not include a manager of a corporation. (Spanish term “directores” connotes “employer.” But manager of a corporation is not an employer, but rather merely an employee of the owner.)

Presumption of Negligence The presentation of proof of the negligence of its employee gives rise to the presumption that the defendant employer did not exercise the diligence of a good father of a family in the

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selection and supervision of its employees [Lampesa v. De Vera (2008)]. DISTINCTION BETWEEN THE PARAGRAPHS OF ART. 2180

4TH

AND

necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure performance of acts as indispensable to the business of and beneficial to their employee.

5TH

Castilex Industrial Corp. v. Vasquez (1999): A distinction must be made between the two provisions to determine what is applicable. Both provisions apply to employers: the fourth paragraph, to owners and managers of an establishment or enterprise; and the fifth paragraph, to employers in general, whether or not engaged in any business or industry. The fourth paragraph covers negligent acts of employees committed either in the service of the branches or on the occasion of their functions, while the fifth paragraph encompasses negligent acts of employees acting within the scope of their assigned task. The latter is an expansion of the former in both employer coverage and acts included. Negligent acts of employees, whether or not the employer is engaged in a business or industry, are covered so long as they were acting within the scope of their assigned task, even though committed neither in the service of the branches nor on the occasion of their functions. For, admittedly, employees oftentimes wear different hats. They perform functions which are beyond their office, title or designation but which, nevertheless, are still within the call of duty.

DEFENSE

OF

DILIGENCE

IN

SELECTION

CIVIL LAW

Due diligence in the selection of employees require that the employer carefully examined the applicant for employment as to his qualifications, his experience and record of service. Criminal Negligence

Fernando v. Franco (1971): The vicarious liability of the employer for criminal negligence of his employee is governed by RPC 103. Conviction of the employee conclusively binds the employer. Defense of due diligence in the selection and supervision of the employee is not available. The employer cannot appeal the conviction. Note: The liability of the employer under Art. 103 RPC is subsidiary. Registered Owner Rule The registered owner of the vehicle is primarily responsible to the public for whatever damage or injury the vehicle may have caused, even if he had already sold the same to someone else. The policy is the easy identification of the owner who can be held responsible so as not to inconvenience or prejudice the third party injured [Cadiente v. Macas (2008)]. The registered owner, however, has the right to be indemnified by the real or actual owner of the amount that he may be required to pay as damages for the injury caused to the plaintiff [Orix Metro Leasing v. Mangalinan (2012)]. This rule applies even if the vehicle is leased to third persons. The liability of the registered owner is subject to his right of recourse against the transferee or buyer.

AND

SUPERVISION

Metro Manila Transit v. CA (1993): Due diligence in the supervision of employees includes the formulation of suitable rules and regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his or her employees and the imposition of

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(d) The State

CIVIL LAW answerable

for

damages

[Fontanilla

v.

Maliaman (1991)].

1987 Constitution, Art. XVI, Sec. 3. The State may not be sued without its consent.

(3) Joint tortfeasors

Art. 2180 (3). The State is responsible in like

Art. 2194. The responsibility of two or more

manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable.

persons who are liable for quasi-delict is solidary. Definition of “Joint Tortfeasors”

Filipinas Broadcasting Network v. AMECBCCM (2005): They are all persons who

Instances where the State gives its consent to be sued (1) Art. 2180 (6) is an example of an express legislative consent. Here, the State assumes a limited liability for the acts of its special agents. (2) Art. 2189 provides for state liability for damages caused by defective condition of public works. (3) Local Government Code provides for the liability of local government units for wrongful exercise of its proprietary (as opposed to its governmental) functions. The latter is the same as that of a private corporation or individual. [Mendoza v. De Leon, (1916)]

command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet in the commission of a tort, or who approve of it after it is done, if done for their benefit. Applicability of the provision The provision applies when there are 2 or more persons who have participated in the commission of a single quasi-delict. The injury must be indivisible.

B. CAUSE Concept of Proximate Cause In order that civil liability for negligence may arise, there must be a direct causal connection between the damage suffered by the plaintiff and the act or omission of the defendant.

Merritt v. Government of the Philippine Islands (1960): A special agent is one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if he is a special official. This concept does not apply to any executive agent who is an employee of the active administration and who on his own responsibility performs the functions which are inherent in and naturally pertain to his office.

Where the particular harm sustained was reasonably foreseeable at the time of the defendant’s misconduct, his act or omission is the legal cause thereof. Foreseeability is the fundamental basis 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 reasonably subjected to a general but definite class of risks. [Jarencio]

A corporate body performing nongovernmental functions becomes liable for the damage caused by the accident resulting from the tortious act of its driver-employee. Such corporate body assumes the responsibility of an ordinary employer and as such, becomes

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There are 2 types of proximate cause: (1) Proximate cause immediately resulting in injury: defined as “that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred” [Bataclan v. Medina (1957)]. (2) Proximate cause not immediately resulting in injury but sets in motion a chain of events, also known as Proximate Legal Cause: that 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 a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinary 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.

CIVIL LAW Differentiated from: (1) Concurrent Cause – Several causes producing the injury, and each is an efficient cause without which the injury would not have happened. The injury is attributed to any or all the causes, and recovery may be had against any or all of those responsible.

Far Eastern Shipping v. CA (1998): As a general rule, that negligence in order to render a person liable need not be the sole cause of an injury. It is sufficient that his negligence, concurring with one or more efficient causes other than the plaintiff’s, is the proximate cause of the injury. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury. Where their concurring negligence resulted in injury or damage to a third party, they become joint tortfeasors and are solidarily liable for the resulting damage.

Mercury Drug v. Baking (2007). Respondent was mistakenly given Dormicum, a potent sleeping tablet, instead of medication for his blood sugar. He took a pill for 3 consecutive days and on the third day, he fell asleep on the wheel and figured in a vehicular accident. The Court found that the proximate cause of the accident was the Mercury Drug employee’s mistake in reading the prescription.

(2) Remote Cause – a cause which would have been a proximate cause, had there been no efficient intervening cause after it and prior to the injury.

Manila Electric v. Remonquillo (1956): A prior and remote cause cannot be made the basis 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

Note: Here, 3 days have elapsed from the time of the negligent act determined by the Court as the proximate cause; thus, the Court did not consider the time element in determining proximate cause but the nature and gravity of the injury.

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v. Jose Ching (2008). Plaintiff, however,

would not have happened but for such condition or occasion.

must establish a sufficient link between the act or omission and the damage or injury. That link must not be remote or farfetched; otherwise, no liability will attach. The damage or injury must be a natural and probable result of the act or omission.

(3) Intervening Cause The test of determining whether or not the intervening cause is sufficient to absolve a prior cause of the injury is as follows: whether the intervention of a later cause is a significant part of the risk involved in the defendant’s conduct, or is so reasonable connected with it that the responsibility should not be terminated. In the affirmative, such foreseeable intervening forces are within the scope of the original risk, and hence of the defendant’s negligence. In the negative, there exists an efficient intervening cause that relieves the defendant of liability.

(3) Substantial factor If the actor’s conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresees nor should have foreseen the harm or the manner in which it occurred, does not prevent him from being liable. [Philippine Rabit v. IAC (1990)] (4) Mixed considerations There is no exact formula to determine probable cause. It is based upon mixed considerations of logic, common sense, policy and precedent [Dy Teban v. Jose Ching, supra].

Phoenix Construction v. IAC (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 negligent, among other reasons, because of failure to guard against it. There is an intervening cause combining with the defendant’s conduct to produce the result, and the defendant’s negligence consists in failure to protect the plaintiff against that very risk.

(5) Cause v. condition

Phoenix Construction v. IAC (1987): The distinction between cause and condition has already been 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 intervense. 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.

Tests to Determine Proximate Cause (1) But for / Sine qua non rule Whether such negligent conduct is a cause without which the injury would not have occurred or is the efficient cause which set in motion the chain of circumstances leading to the injury. [Bataclan v. Medina, supra]

(6) Last clear chance The Doctrine of Last Clear Chance Also known as: "doctrine of discovered peril” or “doctrine of supervening negligence” or “humanitarian doctrine”.

(2) Sufficient link The Supreme Court has adopted a relaxation of the “but for” test in Dy Teban

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The antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence [PNR v. Brunty (2006)].

CIVIL LAW where the proximate cause of the injury has been established. The doctrine is not applicable in the following cases: Consolidated Bank v. CA (2003): The doctrine of last clear chance does not apply in a case of culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability. Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract.

Picart v. Smith (1918): If both parties are found to be negligent; but, their negligence are not contemporaneous, the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party. Simply stated, it covers successive acts of negligence:

Pantranco v. Baesa (1989): Last clear chance applies only if the person who allegedly had the last opportunity to avert the accident was aware of the existence of peril or should, with exercise of due care, have been aware of it. The doctrine can never apply where the party charged is required to act instantaneously, and if the injury cannot be avoided by application of all means at hand after the peril is or should have been discovered.

Primary negligence of the defendant

Contributory negligence of the plaintiff

Bustamante v. CA (1991): The doctrine of last clear chance, as enunciated in Anuran v. Buno, applies in a suit between the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. It will be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence.

Subsequent negligence of the defendant in failing to avoid the injury to the plaintiff Note:  If plaintiff is the proximate cause: no recovery can be made.  If plaintiff is not the proximate cause: Recovery can be made but such will be mitigated.  If negligence of parties is equal in degree, then each bears his own loss.

PNR v. Brunty (2006): The doctrine of last clear chance finds no application in a case

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RPC, Art. 11. The following do not incur any

C. DEFENSES

criminal liability: (5) Any person who acts in the fulfillment of a duty or in the lawful exercise of a right or office

C.1. DUE DILIGENCE TO PREVENT THE DAMAGE UNDER ARTICLE 2180 Art. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

(8) Any person who acts in obedience to an order issued by a superior for some lawful purpose

xxx

C.4. DAMNUM ABSQUE INJURIA There can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty.

(8) The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

Custodio v. CA (1996): Right to recover damages does not arise from the mere fact that the plaintiff suffered losses. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.

Ramos v. PEPSI (1967): The presumption of negligence on the part of the master or employer, either in the selection of servant/employee or in the supervision, when an injury is caused by the negligence of a servant/employee may be rebutted if the employer shows to the satisfaction of the court that in the selection and supervision, he has exercised the care and diligence of a good father of a family

Injury

Damage

Damages

Illegal invasion Loss, hurt, Recompense of a legal right harm resulting or from the injury compensation awarded

C.2. ACTS OF PUBLIC OFFICERS Vinzons-Chato v. Fortune (2008): When what is involved is a duty owing to the public in general, an individual cannot have a cause of action the public officer although he may have been injured by the action or inaction of the officer, except when the individual suffers a particular or special injury.

Amonoy v. Gutierrez (2001): “One who made use of his own legal right does no injury, thus, whatever damages are caused to another should be borne solely by him under the principle of damnum absque injuria. This principle, however, does not apply when there is an abuse in the exercise of a person’s right.”

C.3. AUTHORITY OF LAW Art. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.

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MH Rakes v. Atlantic (1907): Contributory

C.5. PLAINTIFF’S NEGLIGENCE IS THE PROXIMATE CAUSE

negligence does not defeat an action if it can be shown that the defendant might, by the exercise of reasonable care and prudence, have avoided the consequences of the injured party's negligence. Where the plaintiff contributes to the principal occurrence as one of its determining factors, he cannot recover. Where, in conjunction with the occurrence, he contributes only to his own injury, he may recover the amount that the defendant responsible for the event should pay for such injury, less a sum deemed a suitable equivalent for his own imprudence.

Art.

2179. When the plaintiff’s own negligence was the proximate cause of his injury, he cannot recover damages. xxx This defense of plaintiff’s negligence as proximate cause is absolute, for it bars recovery on the part of the plaintiff. In Manila Electric v. Remoquillo (1956), the Court did not allow recovery by Magno, ruling that his death was primarily caused by his own negligence and in some measure by the too close proximity of the “media agua” to the electric wire.

Genobiagon v. CA (1989): The defense of contributory negligence does not apply in criminal cases committed through reckless imprudence, since one cannot allege the negligence of another to evade the effects of his own negligence.

Bernardo v. Legaspi (1914): If the plaintiff in a negligence action, by his own carelessness contributed to the principal occurrence, that is, to the accident, as one of the determining causes thereof, he cannot recover.

C.7. FORTUITOUS EVENT

C.6. CONTRIBUTORY NEGLIGENCE OF THE PLAINTIFF

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which, could not be foreseen, or which, though foreseen, were inevitable.

Art. 2179. xxx But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

Elements of caso fortuito [Juntilla v. Fontanar (1985)]: (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 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; and (d) The obligor must be free from any

Art. 2214. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. Contributory negligence is defined as conduct on the part of the injured party, which contributed as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection [Valenzuela v. CA (1996)].

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Nikko Hotel v. Roberto Reyes (2005): The

participation in the aggravation of the injury resulting to the creditor.

doctrine does not find application to the case because even if respondent Reyes assumed the risk of being asked to leave the pary, petitioners, under Articles 19 and 21 of the Civil Code, were still under the obligation to treat him fairly in order not to expose him to unnecessary ridicule and shame.

Hernandez v. COA (1984): The robbery that happened to him cannot be said to be the result of his imprudence and negligence, having occurred in a public utility. This was undoubtedly a fortuitous event covered by the said provisions, something that could not have been reasonably foreseen although it could have happened.

C.9. PRESCRIPTION Art. 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict;

C.8. PLAINTIFF’S ASSUMPTION OF RISK / VOLENTI NON FIT INJURIA The doctrine of volenti non fit injuria (that to which a person assents is not presumed in law as injury) refers to self-inflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so. This is so because, in theory, the plaintiff’s acceptance of the risk has wiped out the defendant’s duty, and as to the plaintiff the defendant’s negligence is not a legal wrong.

However, when the action arises from or out of any act, activity, or conduct of any public officer involving the exercise of powers or authority arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within one (1) year. Art. 1150. The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought.

Requisites: (a) That the plaintiff had actual knowledge of the danger; (b) That he understood and appreciated the risk from the danger; and (c) That he voluntarily exposed himself to such risk

Prescription periods:  4 years for QD  1 year for defamation

Kramer v. CA (1989): It is clear that the prescriptive period must be counted when the last element occurs or takes place, the time of the commission of an act or omission violative of the right of the plaintiff, which is the time when the cause of action arises. Thus, the prescription period begins from the day the quasi-delict is committed.

The defense is not applicable in the following cases: Ilocos Norte v. CA (1989): A person is excused from the force of the rule (volenti non fit injuria), that when he voluntarily assents to a known danger he must abide by the consequences, if an emergency is found to exist or if the life or property of another is in peril or when he seeks to rescue his endangered property.

C.10. WAIVER Art. 6. Rights may be waived, unless the waiver is contrary to law, public order, public 508

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this is found in the obvious truth that man should subordinate his acts to the precepts of prudence and if he fails to observe them and cause damage to another, he must repair the damage.”

policy, morals, or good customs or prejudicial to a third person with a right recognized by law. Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.

A. HUMAN RELATIONS TORTS

C.11. EMERGENCY RULE OR SUDDEN PERIL DOCTRINE Valenzuela v. CA (1996): An individual, who

A.1. ABUSE OF RIGHT Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

suddenly finds himself in a situation of danger and is required to act without much time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently and upon reflection may appear to be a better solution, unless the emergency was brought by his own negligence.

Generally, the exercise of any right must be in accordance with the purpose for which it was established. It must not be excessive or unduly harsh; there must be no intention to injure another.

III. INTENTIONAL TORTS

There is abuse of right when: (1) The right is exercised for the only purpose of prejudicing or injuring another (2) The objective of the act is illegitimate (3) There is an absence of good faith

Manresa: “Liability for personal acts or omission is founded on that indisputable principle of justice recognized by all legislators that when a person by his act or omission causes damage or prejudice to another, a juridical relation is created by virtue of which the injured person acquires a right to be indemnified and the person causing the damage is charged with the corresponding duty of repairing the damage. The reason for Case

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Elements [Albenson v. CA (1993)]: (a) There is a legal right or duty; (b) Which is exercised in bad faith; (c) For the sole intent of prejudicing or injuring another.

Legal Right and Injury

Doctrine

Velayo v. Shell (1959) Right to transfer credit.

The standards in NCC 19 are The transfer of credit from Shell implemented by NCC 21. Philippines to Shell USA was deemed a violation of NCC 21 as it allowed Shell to attach properties of their creditor CALI to the prejudice of its other creditors.

Globe v. CA (1989)

Right to dismiss an employee.

When a right is exercised in a The dismissal itself was not illegal but it manner which does not conform

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was the manner of dismissal which was deemed in violation of Article 19, as such was based on unfounded accusations of dishonesty.

with the norms in NCC 19, and results in damage to another, a legal wrong is thereby committed. The law, therefore, recognizes a primordial limitation on all rights.

University of the East Academic freedom. v. Jader (2000) The conscious indifference of the school in not informing its student that he could not graduate formed the basis for the award of damages.

The conscious indifference of a person to the rights or welfare of the others who may be affected by his act or omission can support a claim for damages.

Amonoy v. Gutierrez Right to demolish another’s house on his The principle of damnum absque (2001) own property. injuria does not apply when the Amonoy obtained a judgment in his favor exercise of the legal right is for Gutierrez to vacate. A demolition order suspended or extinguished pursuant was issued but the court suspended it with to a court order. The exercise of a a TRO. Amonoy proceeded with the right ends when the right demolition. In a complaint for damages, disappears, and it disappears when he claims the principle of damnum absque it is abused, especially to the prejudice of others. injuria. Nikko Hotel Manila Right to forbid uninvited guests from Garden v. Reyes entering the party. (2005) Ruby Lim’s throwing out of complainant Reyes, as a gatecrasher in a private party, was merely in exercise of her duties as Executive Secretary of the hotel where the party was held, and did not constitute a violation of Article 19.

Article 19, known to contain what is commonly referred to as the principle of abuse of rights, is not a panacea for all human hurts and social grievances. The object of this article is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties. NCC 20 does not distinguish, and the act may be done willfully or negligently.

A.2. ACTS CONTRARY TO LAW

Requisites (a) The act must be willful or negligent; (b) It must be contrary to law; and (c) Damages must be suffered by the injured party.

Art. 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. The provision is intended to provide a remedy in cases where the law declares an act illegal but fails to provide for a relief to the party injured. [Jarencio]

Garcia v. Salvador (2007). Salvador was misdiagnosed with Hepatitis, as a result of which she lost her job. During trial, it was proven that the clinic was operating under substandard conditions, in violation of the Clinical Laboratory Law, DOH Administrative

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Baksh v. CA (1993): Where a man's promise

Order No. 49-B, and the Philippine Medical Technology Act of 1969. The Court held that violation of a statutory duty is negligence, and that Article 20 provides the legal basis for award of damages to a party who suffers damage whenever one commits an act in violation of some legal provision.

to marry is in fact the proximate cause of the acceptance of his love by a woman and his representation to fulfill that promise thereafter becomes the proximate cause of the giving of herself unto him in a sexual congress, proof that he had, in reality, no intention of marrying her and that the promise was only a subtle scheme or deceptive device to entice or inveigle her to accept him and to obtain her consent to the sexual act, could justify the award of damages pursuant to Article 21 not because of such promise to marry but because of the fraud and deceit behind it and the willful injury to her honor and reputation. It is essential, however, that such injury should have been committed in a manner contrary to morals, good customs or public policy.

A.3. ACTS CONTRARY TO MORALS Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

This article is designed “to expand the concept of torts and quasi-delict in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically enumerate and punish in statute books”. [Baksh v. CA (1993)]

Tanjanco v. CA (1966): However, when for one whole year, the plaintiff, a woman of legal age, maintained sexual relations with the defendant, with repeated acts of intercourse, there is here voluntariness. No case under Article 21 is made.

Elements: [Albenson v. CA (1993)] (a) There is an act which is legal; (b) But which is contrary to morals, good customs, and public policy; and (c) It is done with intent to injure.

(2) Malicious Prosecution Malicious prosecution is the institution of any action or proceeding, either civil or criminal, maliciously and without probable cause.

Examples of acts contrary to morals: (1) Breach of Promise to Marry and Moral Seduction Wassmer v. Velez (1964): Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the above-described preparation and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs xxx.

Elements: [Magbanua v. Junsay (2007)] (a) The fact of the prosecution or that the prosecution did occur and that the defendant was himself the prosecutor or that he instigated its commencement; (b) That the action finally terminated with an acquittal; (c) That in bringing the action, the prosecutor acted without probable cause

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(d) That the prosecutor was actuated or impelled by legal malice, that is, by improper or sinister motive.

CIVIL LAW be confused with the manner in which this right is to be exercised and the effects flowing therefrom. If the dismissal was done antisocially or oppressively, then there is a violation of Article 1701, which prohibits acts of oppression by either capital or labor against the other, and Article 21, which makes a person liable for damages if he willfully causes loss or injury to another in a manner that is contrary to morals, good customs, or public policy. When the manner in which the company exercised its right to dismiss was abusive, oppressive and malicious, it is liable for damages.

Que v. IAC (1989): The mere dismissal of the criminal complaint by the fiscal’s office did not create a cause of action for malicious prosecution, because the proceedings therein did not involve an exhaustive examination of the elements of malicious prosecution. To constitute such, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person and that it was initiated deliberately by the defendant knowing that his charges were false and groundless.

A.4. UNJUST ENRICHMENT

Magbanua v. Junsay (2007): Malicious

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

prosecution involves not only criminal but civil and administrative suits as well. (3) Public Humiliation Pe v. Pe (1962): Lolita’s family filed a case against Alfonse Pe, a married man, for allegedly seducing Lolita and causing great damage to the name of her parents, brothers, and sisters. The Court sustained the claim, finding an injury to Lolita’s family in a manner contrary to morals, good customs and public policy as contemplated in Article 21 of the new Civil Code.

Art. 23. Even when an act or event causing damage to another’s property was not due to the fault or negligence of the defendant, the latter shall be liable for indemnity if through the act or event he was benefited.

Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

Grand Union v. Espino (1979): It is against

Art. 2143. The provisions for quasi contracts

morals, good customs and public policy to humiliate, embarrass and degrade the dignity of a person. Everyone must respect the dignity, personality, privacy and peace of mind of his neighbors and other persons (Article 26, Civil Code).

in this Chapter do not exclude other quasicontracts which may come within the purview of the preceding article. One person should not be permitted to unjustly enrich himself at the expense of another, but should be required to make restitution of, or for property or benefits received, retained, or appropriated where it is just and equitable that such restitution be

(4) Oppressive Dismissal

Quisaba v. Sta. Ines (1974): The right of an employer to dismiss an employee is not to

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MVRS Publications v. Islamic Da'wah Council (2003): Article 26 specifically applies to

made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly.

intentional acts which fall short of being criminal offenses. It itself expressly refers to tortious conduct which "may not constitute criminal offenses." The purpose is precisely to fill a gap or lacuna in the law where a person who suffers injury because of a wrongful act not constituting a crime is left without any redress. Under Article 26, the person responsible for such act becomes liable for "damages, prevention and other relief." In short, to preserve peace and harmony in the family and in the community, Article 26 seeks to eliminate cases of damnum absque injuria in human relations.

Enrichment at the expense of another is not per se forbidden. It is such enrichment without just or legal cause that is contemplated here. Just and legal cause is always presumed, and the plaintiff has the burden of proving its absence. The restitution must cover the loss suffered by the plaintiff but it can never exceed the amount of unjust enrichment of the defendant if it is less than the loss of the plaintiff. Requisites: (a) That the defendant has been enriched; (b) That the plaintiff has suffered a loss; (c) That the enrichment of the defendant is without just or legal ground; and (d) That the plaintiff has no other action based on contract, crime or quasi-delict.

The principal rights protected under this provision are the following: (1) The right to personal dignity (2) The right to personal security (3) The right to family relations (4) The right to social intercourse (5) The right to privacy (6) The right to peace of mind

A.5. VIOLATION OF HUMAN DIGNITY Art. 26. Every person shall respect the

Note: Coverage of Art. 26 is not limited to those enumerated therein, the enumeration being merely examples of acts violative of a person’s rights to dignity, personality, privacy and peace of mind. Other “similar acts” are also covered within the scope of the article.

dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of another’s residence; (2) Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause another to be alienated from his friends; (4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition.

VIOLATION OF PERSONAL DIGNITY In order to be actionable it is not necessary that the act constitutes a criminal offense. The remedy afforded by the law is not only the recovery of damages. “Prevention and other relief” is also available. In other words, injunction and other appropriate reliefs may also be obtained by the aggrieved party. VIOLATION OF PRIVACY Privacy is the right to be let alone, or to be free from unwarranted publicity, or to live without unwarranted interference by the public in

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matters in which the public is not necessarily concerned. This right is purely personal in nature, such that it can be invoked only by the person actually injured, it is subject to a proper waiver, and it ceases upon death. However, the privilege may be given to heirs of a deceased to protect his memory, to protect the feelings of the living heirs.

CIVIL LAW  This is not limited to situations where the wrongdoer physically trespasses into one’s property.  Generally, there is no invasion of privacy when journalists report something that occurs in the public realm, except when the acts of the journalist are to an extent that it constitutes harassment.  RA 4200: It is illegal for any person not authorized by both parties to any private communication to secretly record such communication.

Reasonableness of Expectation of Privacy Test: [Ople v. Torres (1998)] (1) Whether by one’s conduct, the individual has exhibited an expectation of privacy (2) Whether this expectation is one that society recognizes and accepts as reasonable

(3) Publicity which puts one in a false light in the public eye – The interest here is in not being made or forced to appear before the public in an objectionable false light or position.

The general rule is that the right to privacy may only be invoked by natural persons. Juridical persons cannot invoke this because the basis to this right is an injury to the feelings and sensibilities of the injured party, and a corporation has none of those. The exception is where the right to privacy is invoked along with the right against unreasonable searches and seizures. “An individual’s right to privacy under Article 26(1) of the Civil Code should not be confined to his house or residence as it may extend to places where he has the right to exclude the public or deny them access” [Sps. Hing v. Choachuy (2013)].

Tort of putting in false light

Defamation

The embarrassment of Concerns the a person being reputational harm to a portrayed as person something he is not Statement should be Publication is satisfied actually made in even if communicated public to only one specific third person (4) Commercial appropriation of likeness of image – It consists of appropriation, for the defendant’s benefit or advantage (ex. used in defendant’s advertisement), of the plaintiff’s name or likeness (picture or portrait).

Types of invasion of privacy (1) Publication of embarrassing private facts – The interest here is the right to be free from unwarranted publicity, wrongful publicizing of private affairs and activities, as these are outside the ambit of legitimate public concern.

DISTURBANCE OF PEACE OF MIND The disturbance of the mental and emotional tranquility of the plaintiff by the defendant is a legal injury in itself and, therefore, a sufficient cause of action for damages, injunction, and other relief. A person, however, cannot be held liable for damages for the mental or emotional disturbance of the plaintiff which was due to

Ayer v. Capulong (1988): Public figures enjoy a limited right to privacy as compared to ordinary individuals. (2) Intrusion upon plaintiff’s private affairs

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the latter’s susceptibility to such disturbance, where the defendant had no knowledge of such peculiar susceptibility. The tendency of the law is to secure an interest in mental comfort only to the extent of the ordinary sensibilities of men.

CIVIL LAW was entitled to judge what was best for her and ask that her decisions be respected. Her parents, in so doing, certainly cannot be charged with alienation of affections in the absence of malice or unworthy motives, which have not been shown, good faith being always presumed until the contrary is proved.

Interference with Relations An interference with the continuance of unimpaired interests founded upon the relation in which the plaintiff stands toward one or more third persons [Prosser and Keeton].

Liability of Parents, Guardians or Kin The law distinguishes between the right of a parent to interest himself in the marital affairs of his child and the absence of rights in a stranger to intermeddle in such affairs. However, such distinction between the liability of parents and that of strangers is only in regard to what will justify interference. A parent is liable for alienation of affections resulting from his own malicious conduct, as where he wrongfully entices his son or daughter to leave his or her spouse, but he is not liable unless he acts maliciously, without justification and from unworthy motives. He is not liable where he acts and advises his child in good faith with respect to his child's marital relations in the interest of his child as he sees it, the marriage of his child not terminating his right and liberty to interest himself in, and be extremely solicitous for, his child's welfare and happiness even where his conduct and advice suggest or result in the separation of the spouses or the obtaining of a divorce or annulment, or where he acts under mistake or misinformation, or where his advice or interference are indiscreet or unfortunate, although it has been held that the parent is liable for consequences resulting from recklessness. He may in good faith take his child into his home and afford him or her protection and support, so long as he has not maliciously enticed his child away, or does not maliciously entice or cause him or her to stay away,

KINDS: (1) Family relations (2) Social relations (3) Economic relations (4) Political relations Family Relations ALIENATION OF AFFECTION This is a cause of action in favor of a husband against one who wrongfully alienates the affection of his wife, depriving him of his conjugal rights to her consortium, that is, her society, affection, and assistance. Elements: (a) Wrongful conduct of the defendant: intentional and malicious enticing of a spouse away from the other spouse (b) Loss of affection or consortium Note: Complete absence of affection between the spouses is not a defense. (c) Causal connection between such conduct and loss

Tenchavez v. Escaño (1965): There is no evidence that the parents of Vicenta, out of improper motives, aided and abetted her original suit for annulment, or her subsequent divorce; she appears to have acted independently, and being of age, she

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from his or her spouse. This rule has more frequently been applied in the case of advice given to a married daughter, but it is equally applicable in the case of advice given to a son.

CIVIL LAW xxx 2) Meddling with or disturbing the private life or family relations of another; Developed as an offshoot of the action for enticing away a servant and depriving the master of the proprietary interest in [the servant’s] services until there has been a gradual shift of emphasis away from “services” and toward a recognition of more intangible elements in the domestic relations, such as companionship and affection. [Prosser and Keeton, p. 916]

LOSS OF CONSORTIUM Lilius v. Manila Railroad Company (1934): The plaintiff Aleko E. Lilius also seeks to recover the sum of P2,500 for the loss of what is called Anglo-Saxon common law "consortium" of his wife, that is, "her services, society and conjugal companionship", as a result of personal injuries which she had received from the accident now under consideration. Inasmuch as a wife's domestic assistance and conjugal companionship are purely personal and voluntary acts which neither of the spouses may be compelled to render, it is necessary for the party claiming indemnity for the loss of such services to prove that the person obliged to render them had done so before he was injured and that he would be willing to continue rendering them had he not been prevented from so doing.

INTRIGUING TO CAUSE ANOTHER TO BE ALIENATED FROM HIS FRIENDS

A person who committed affirmative acts intended to alienate the existing friendship of one with his friends is liable for damages. A man is a social being and for being so, he needs friends to socialize with and to depend upon in case of need. To alienate him wrongfully or with malice from his friends is to cause him suffering for which he is entitled to damages. Economic Relations

Art. 1314. Any person who induces another to

CRIMINAL CONVERSATION (ADULTERY) Interference with the marital relations by committing adultery with one of the spouses. This is obvious enough in the case of rape but also applies where the adulterous spouse consented to or initiated the intercourse. [Prosser and Keeton, p. 917]

violate his contract with another person shall be liable for damages to the other contracting party.

Prosser and Keeton: Tort liability may be imposed upon a defendant who intentionally and improperly interferes with the plaintiff’s rights under a contract with another person if the interference causes the plaintiff to lose a right under the contract or makes the contract rights more costly or less valuable. This law of interference of contract is part of a larger body of tort law aimed at protection of relationships.

Social Relations (1) Meddling with or disturbing family relations Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief;

Elements of tort interference: [So Ping Bun v. CA (1999)]

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(a) Existence of a valid contract (b) Knowledge on the part of the third person of the existence of contract; and (c) Interference of the third person is without legal justification or excuse.

CIVIL LAW not liable unless he acted in a notoriously arbitrary manner. The defense of good faith is not available because an officer is under constant obligation to discharge the duties of his office, and it is not necessary to show that his failure to act was due to malice or willfulness.

Gilchrist v. Cuddy (1915): Everyone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and credit. He has no right to be protected against competition; but he has a right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss comes as a result of competition, or the exercise of like rights by others, it is damnum absque injuria, unless some superior right by contract or otherwise is interfered with. Thus, a plaintiff loses his cause of action if the defendant provides a sufficient justification for such interference, which must be an equal or superior right in themselves. The defendant may not legally excuse himself on the ground that he acted on a wrong understanding of his own rights, or without malice, or bona fide, or in the best interests of himself.

Requisites: [Amaro v. Sumanguit (1962)] (a) Defendant is a public officer charged with a performance of a duty in favor of the plaintiff; (b) He refused or neglected without just cause to perform the duty; (c) Plaintiff sustained material or moral loss as a consequence of such nonperformance; (d) The amount of such damages, if material.

A.7. UNFAIR COMPETITION Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage.

So Ping Bun v. CA (1999): Bad faith/Malice is required to make the defendant liable for damages in cases of tortuous interference.

B. INDEPENDENT CIVIL ACTIONS

A.6 DERELICTION OF DUTY

Rule 111, Sec. 3, ROC. In the cases provided

Art. 27. Any person suffering material or

for in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In no case, however, may the offended party recover damages twice for the same act or omission charged in the criminal action.

moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken. This applies only to acts of nonfeasance or the nonperformance of some acts which a person is obliged or has responsibility to perform. The duty of the public servant must be ministerial in character. If the duty is discretionary, he is

B.1. VIOLATION OF CIVIL AND POLITICAL RIGHTS

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Art. 32. Any public officer or employee, or any

CIVIL LAW forced to confess his 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; (19) Freedom of access to the courts

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 just compensation when property is taken for public use (8) The right to 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 right to privacy of communication and correspondence (12) The right to become a member of associations and societies for purposes not contrary to law (13) The right to take part in a peaceable assembly and petition the government for redress of grievances (14) The right to be 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 the cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, to have compulsory process to secure the attendance of witnesses on is behalf; (17) Freedom from being compelled to be a witness against one’s self, or from being

In any of the cases referred to in this article, whether or not the defendant’s act or omission constitutes a criminal offense, the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted) and may be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated. The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal code or any other penal statute. Article 32 speaks of a particular specie of an “act” that may give rise to an action for damages against a public officer, and that is, a tort for impairment of rights and liberties. [Vinzons-Chato v. Fortune (2007)] Article 32 is clear that not only public officers but also private individuals can incur civil liability for violation of rights enumerated therein. Because the provision speaks of an officer, employee or person “directly or indirectly” responsible for the violation of the constitutional rights and liberties of another, it

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is not the actor alone who must answer for damages under Article 32. It is not even necessary that the defendant should have acted with malice or bad faith, otherwise, it would defeat its main purpose, which is the effective protection of individual rights. [Silahis v. Soluta (2006)]

action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action. Where the offense is defamation, fraud, or physical injuries, a civil action may be filed independently of the criminal action, even though no reservation is made.

Aberca, et al. v. Ver, et al. (1988): It is obvious

(1) Defamation – the offense of injuring a person’s character, fame or reputation through false or malicious statements. Defamation is an invasion of a relational interest since it involves the opinion which others in the community may have, or tend to have, of the plaintiff.

that the purpose of the above codal provision (Art. 32) is to provide a sanction to the deeply cherished rights and freedoms enshrined in the Constitution. Its message is clear; no man may seek to violate those sacred rights with impunity. In times of great upheaval or of social and political stress, when the temptation is strongest to yield — borrowing the words of Chief Justice Claudio Teehankee — to the law of force rather than the force of law, it is necessary to remind ourselves that certain basic rights and liberties are immutable and cannot be sacrificed to the transient needs or imperious demands of the ruling power. The rule of law must prevail, or else liberty will perish.

Elements of libel pursuant to RPC, Art. 353: [Daez v. CA (1990)] (a) An allegation or imputation of a discreditable act or condition concerning another (b) Publication of the imputation (c) Identity of the person defamed (d) Existence of malice

MVRS Publications, Inc. v. Islamic (2003):

B.2. DEFAMATION, FRAUD, PHYSICAL INJURIES

Where the defamation is alleged to have been directed at a group or class, it is essential that the statement must be so sweeping or all-embracing as to apply to every individual in that group or class, or sufficiently specific so that each individual in the class or group can prove that the defamatory statement was specifically pointed to him.

Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.

Yuchengco v. Manila Chronicle (2009): In determining whether certain utterances are defamatory, the words used are to be construed in their entirety and taken in their plain, natural and ordinary meaning, as they would naturally be understood by persons hearing or reading them, unless it appears that they were used and understood in another sense. When malice

Madeja v. Caro (1983): The civil action for damages that Article 33 allows to be instituted is ex-delicto. This is manifest from the provision which uses the expressions “criminal action” and “criminal prosecution”. Quoting Tolentino, the Court ruled that this provision is an exception to the general rule that the civil

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in fact is proven, assertions and proofs that the libelous articles are qualifiedly privileged communications are futile, since being qualifiedly privileged communications merely prevents the presumption of malice from attaching in a defamatory imputation.

CIVIL LAW evident that the term “physical injuries” could not have been used in its specific sense as a crime defined in the Revised Penal Code, for it is difficult to believe that the Code Commission would have used terms in same article—some in this general and others in its technical sense. In other words, the term “physical injuries” should be understood to mean bodily injury, not the crime of physical injuries, because the terms used with the latter are general terms. Corpus v. Paje (1969): Paje was acquitted of the charge of homicide and double serious physical injuries through reckless imprudence on the ground that the collision was a pure accident and the negligence charged against him did not exist. In a separate civil action to enforce civil liability filed by the heirs of the deceased, the Court ruled that criminal negligence is not one of the three crimes mentioned in Article 33, which authorizes the institution of an independent civil action. Although in the case of Dyogi v. Yatco, the Court held that the term “physical injuries” includes homicide, it is borne in mind that the charge against Paje was for reckless imprudence resulting in homicide, and the law penalizes the negligent or careless act, not the result thereof.

(2) Fraud – Estafa under RPC, 315; Article 33 does not cover violations of B.P. 22. (3) Physical Injuries (Assault and Battery) Battery Battery is the actual infliction of any unlawful or unauthorized violence on the person of another, irrespective of its degree. The law protects the interest of the individual in freedom from bodily harm or any impairment of the physical integrity of the body. Assault Assault is an intentional, unlawful offer of physical injury to another by force unlawfully directed toward the person of another, under such circumstances as to create a well-founded fear of imminent peril, coupled with the apparent present ability to effectuate the attempt if not prevented. The law seeks to protect the interest of the individual in freedom from offensive bodily touching although no actual harm is done.

B.3. NEGLECT OF DUTY

Carandang v. Santiago and Valenton (1955): Defamation and fraud (in Art. 33)

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

are used in their ordinary sense because there are no specific provisions in the Revised Penal Code using these terms as names of offenses defined therein, so that these two terms defamation and fraud must have been used not to impart to them any technical meaning in the laws of the Philippines, but in their generic sense. With these apparent circumstances in mind, it is 520

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suffice to support such action.

CIVIL LAW

IV. LIABILITY ATTACHED TO SPECIFIC PERSONS

Art. 34 covers a situation where: (1) There is danger to the life or property of a person; (2) A member of a city or municipal police force who is present in the scene refused or failed to render aid or protection to the person; and (3) Damages are caused whether to the person and/or property of the victim. Nature of liability (1) Of the police officer – Primary (2) City or municipality – Subsidiary

A. STRICT LIABILITY A.1. POSSESSOR OR USER OF ANIMALS Art. 2183. The possessor of an animal or

whoever may make use of the same is responsible for the damage which it may cause, although it may escape or be lost. This responsibility shall cease only in case the damage should come from force majeure or from the fault of the person who has suffered damage.

The defense of having observed the diligence of a good father of a family to prevent the damage is not available to the city/municipality.

Since the law makes no distinction, this is applicable to both wild (in case the wild animal is kept) and domestic animals. It is enough that defendant is the possessor, owner, or user of the animal at the time it caused the damage complained of, to hold him liable therefor.

B.4. CATCH-ALL INDEPENDENT CIVIL ACTION Art. 35. When a person, claiming to be injured by a criminal offense, charges another with the same, for which no independent civil action is granted in this Code or any special law, but the justice of the peace finds no reasonable grounds to believe that a crime has been committed, or the prosecuting attorney refuses or fails to institute criminal proceedings, the complaint may bring a civil action for damages against the alleged offender. Such civil action may be supported by a preponderance of evidence. Upon the defendant's motion, the court may require the plaintiff to file a bond to indemnify the defendant in case the complaint should be found to be malicious.

Vestil v. IAC (1989): Possession of the animal, not ownership, is determinative of liability under Art. 2183. The obligation imposed by said article is not based on the negligence or on the presumed lack of vigilance of the possessor or user of the animal causing damage. It is based on natural equity and on the principle of social interest that he who possesses animals for his utility, pleasure, or service, must answer for any damage which such animal may cause. The contention that the defendant could not be expected to exercise remote control of the animal is not acceptable. In fact, Art. 2183 holds the possessor liable even if the animal should “escape or be lost” and so be removed from his control. It is likewise immaterial that the animal was tame and was merely provoked by the victim. The law does not speak only of

If during the pendency of the civil action, an information should be presented by the prosecuting attorney, the civil action shall be suspended until the termination of the criminal proceedings.

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vicious animals but covers even tame ones as long as they cause injury.

sewers or deposits of infectious matter, constructed without precautions suitable to the place.

Possible defenses against this liability (1) Force Majeure (2) Fault of person suffering damage (3) Act of third persons

A.2. PROVINCES, MUNICIPALITIES

CITIES,

CIVIL LAW

Art. 2192. If damage referred to in the two preceding articles should be the result of any defect in the construction mentioned in article 1723, the third person suffering damages may proceed only against the engineer or architect or contractor in accordance with said article, within the period therein fixed.

AND

Art. 2189. Provinces, cities and municipalities

shall be liable for damages for the death of, 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.

Ownership of a building imposes on the proprietor thereof the duty to maintain it in good condition at all times to the end that it may not collapse either totally or partially as to cause damage or injury to another’s person or property. This duty obtains whether the building is leased or held in usufruct. Considering, however, that the lessee or usufructuary has direct and immediate control of the building, the law imposes on him the duty to notify the proprietor of such urgent or extraordinary repairs. And where the proprietor’s failure to make the necessary repairs was due to the failure of the lessee or usufructuary to notify him, the proprietor is entitled to indemnification for damages he may have been required to pay to the parties.

Guilatco v. Dagupan (1989): It is not even necessary that the defective roads or streets belong to the province, city or municipality for liability to attach. The article only requires that either control or supervision be exercised over said street or road.

A.3. PROPRIETOR OF BUILDING OR STRUCTURE Art. 2190. The proprietor of a building or

structure is responsible for the damages resulting from its total or partial collapse, if it should be due to the lack of necessary repairs.

Liability does not attach to the proprietor if the damage was caused by any defect in the construction mentioned in Article 1723, in which case the action should be against the engineer or architect.

Art.

2191. Proprietors shall also be responsible for damages caused: (1) By the explosion of machinery which has not been taken care of with due diligence, and the inflammation of explosive substances which have not been kept in a safe and adequate place; (2) By excessive smoke, which may be harmful to persons or property; (3) By the falling of trees situated at or near highways or lanes, if not caused by force majeure; (4) By emanations from tubes, canals,

Under Article 2190, the plaintiff is required to prove: (a) The total or partial collapse of a building or structure (b) That the defendant is the proprietor (c) That the collapse was due to the lack of necessary repairs

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Note: There is no requirement to prove negligence.

CIVIL LAW (1) A defect in those plans and specifications; or (2) Due to the defects in the ground.

Under Article 2191, with the exception of No. 1, negligence is also not an issue.

Contractor is liable if the edifice falls within 15 years due to: (1) Defects in the construction; (2) The use of materials of inferior quality furnished by the contractor; or (3) Due to any violation of the terms of the contract.

Gotesco Investment Corp. v. Chatto (1992): The owner or proprietor of a place of public amusement impliedly warrants that the premises, appliances and amusement devices are safe for the purpose for which they are designed, the doctrine being subject to no other exception or qualification than that he does not contract against unknown defects not discoverable by ordinary or reasonable means.

Here, the plaintiff need only prove that such conditions (defects) exist, and need not prove that negligence of the defendant be the cause of the conditions.

A.4. ENGINEER OR ARCHITECT OF COLLAPSED BUILDING

A.5. OWNERS OF ENTERPRISES OR OTHER EMPLOYERS

Art. 1723. The engineer or architect who drew

Art. 1711. Owners of enterprises and other

employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee's own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee's lack of due care contributed to his death or injury, the compensation shall be equitably reduced.

up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor. Acceptance of the building, after completion, does not imply waiver of any of the cause of action by reason of any defect mentioned in the preceding paragraph.

Art. 1712. If the death or injury is due to the

The action must be brought within ten years following the collapse of the building.

negligence of a fellow worker, the latter and the employer shall be solidarily liable for compensation. If a fellow worker's intentional malicious act is the only cause of the death or injury, the employer shall not be answerable,

Engineer or architect who drew up the plans and specifications is liable if the building collapses within 15 years due to:

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CIVIL LAW diligence in the selection and supervision of the fellow worker causing the death or injury

unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiff's fellow worker.

A.6. HEAD OF A FAMILY FOR THINGS THROWN OR FALLING

Alarcon v. Alarcon (1961): Alarcon, a teacher, hired Urzino and Azaña to dig a well on his land; in the course of which Urzino died of asphyxia. The Court found that under the principle of ejusdem generis, said “other employers” mentioned in Article 1711 must be construed to refer to persons who belong to a class analogous to “owners of enterprises”, such as those operating a business or engaged in a particular industry or trade, requiring its managers to contract the services of laborers, workers and/or employees. Alarcon, not owning any enterprise, did not fall under the category of “other employers”.

Art 2193. The head of a family that lives in a

building or a part thereof, is responsible for damages caused by things thrown or falling from the same. The purpose of the law is to relieve the injured party of the difficulty of determining and proving who threw the thing or what caused it to fall, or that either was due to the fault or negligence of any particular individual.

Dingcong

v.

Kanaan

(1941):

Lessee is considered as the head of the family. It is enough that he lives in and has control over it.

Situations covered: (1) Death or injury arising out of or in the course of employment – here, the employer is liable even if the event which caused the death or injury was purely accidental or due to a fortuitous event (2) Illness or disease caused by their employment or as the result of the nature of the employment

A.7. PRODUCTS LIABILITY i. MANUFACTURERS / PROCESSORS OF FOODSTUFFS Art. 2187. Manufacturers and processors of

foodstuffs, drinks, toilet articles and similar goods shall be liable for death or injuries caused by any noxious or harmful substances used, although no contractual relation exists between them and the consumers.

Defenses available to the employer: (1) When death or injury is not caused by a fellow worker  The mishap due to the employee’s own notorious negligence or voluntary act, or drunkenness (2) When death or injury is caused by a fellow worker  General rule: The employer is solidarily liable with the fellow worker causing the death or injury  Exception: If the only cause of the death or injury was the fellow worker’s intentional or malicious act  Exception to the exception: If it is shown that the employer did not exercise due

Under the foregoing provision, liability is not made to depend upon fault or negligence of the manufacturer or processor. The provision likewise dispensed with any contractual relation between the manufacturer and the consumer, thereby clearly implying that liability is imposed by law as a matter of public policy. Proof of negligence under this provision is not necessary; as such, traditional contract and warranty defenses as (1) lack of privity; (2) lack

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of reliance on a warranty; (3) lack of notice to the defendant of the breach of warranty; and (4) disclaimer of implied warranties are inapplicable.

CIVIL LAW for another person who attaches his own brand name to the consumer products, the latter shall be deemed the manufacturer. In case of imported products, the manufacturer's representatives or, in his absence, the importer, shall be deemed the manufacturer.

Requisites of liability (a) Defendant is a manufacturer or possessor of foodstuff, drinks, toilet articles and similar goods; (b) He used noxious or harmful substances in the manufacture or processing of the foodstuff, drinks or toilet articles consumed or used by the plaintiff; (c) Plaintiff’s death or injury was caused by the product so consumed or used; and (d) The damages sustained and claimed by the plaintiff and the amount thereof.

Article 92. Exemptions. – If the concerned department finds that for good or sufficient reasons, full compliance with the labeling requirements otherwise applicable under this Act is impracticable or is not necessary for the adequate protection of public health and safety, it shall promulgate regulations exempting such substances from these requirements to the extent it deems consistent with the objective of adequately safeguarding public health and safety, and any hazardous substance which does not bear a label in accordance with such regulations shall be deemed mislabeled hazardous substance.

Burden of proof The burden of proof that the product was in a defective condition at the time it left the hands of the manufacturer and particular seller is upon the injured plaintiff.

Article 97. Liability for the Defective Products. – Any Filipino or foreign manufacturer, producer, and any importer, shall be liable for redress, independently of fault, for damages caused to consumers by defects resulting from 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.

Who may recover Although the article used the term “consumer”, such term includes a “user” and “purchaser” of the injuriously defective food product or toilet article. The person who may recover need not be the purchaser of the foodstuff or toilet article.

A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances into consideration, including but not limited to: (a) presentation of product (b) use and hazards reasonably expected of it; (c) the time it was put into circulation.

ii. CONSUMER ACT – RA 7394, SECS. 92107 (CH. 1) Consumer Act Provisions Article 4. Definition of Terms. (n) "Consumer" means a natural person who is a purchaser, lessee, recipient or prospective purchaser, lessor or recipient of consumer products, services or credit.

A product is not considered defective because another better quality product has been placed in the market. The manufacturer, builder, producer or importer shall not be held liable when it evidences:

(as) "Manufacturer" means any person who manufactures, assembles or processes consumer products, except that if the goods are manufactured, assembled or processed

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(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.

CIVIL LAW (a) that there is no defect in the service rendered; (b) that the consumer or third party is solely at fault. Article 100. Liability for Product and Service Imperfection. – 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.

Article 98. Liability of Tradesman or Seller. – The tradesman/seller is likewise liable, pursuant to the preceding article when: (a) it is not possible to identify the manufacturer, builder, producer or importer; (b) the product is supplied, without clear identification of the manufacturer, producer, builder or importer; (c) he does not adequately preserve perishable goods. The party making payment to the damaged party may exercise the right to recover a part of the whole of the payment made against the other responsible parties, in accordance with their part or responsibility in the cause of the damage effected.

If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option: (a) the replacement of the product by another of the same kind, in a perfect state of use; (b) the immediate reimbursement of the amount paid, with monetary updating, without prejudice to any losses and damages; (c) a proportionate price reduction.

Article 99. Liability for Defective Services. – 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.

The parties may agree to reduce or increase the term specified in the immediately preceding paragraph; but such shall not be less than seven (7) nor more than one hundred and eighty (180) days.

The service is defective when it does not provide the safety the consumer may rightfully expect of it, taking the relevant circumstances into consideration, including but not limited to: (a) the manner in which it is provided; (b) the result of hazards which may reasonably be expected of it; (c) the time when it was provided.

The consumer may make immediate use of the alternatives under the second paragraph of this Article when by virtue of the extent of the imperfection, the replacement of the imperfect parts may jeopardize the product quality or characteristics, thus decreasing its value. If the consumer opts for the alternative under sub-paragraph (a) of the second paragraph of this Article, and replacement of the product is not possible, it may be replaced by another of a different kind, mark or model:

A service is not considered defective because of the use or introduction of new techniques. The supplier of the services shall not be held liable when it is proven: 526

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CIVIL LAW

Provided, That any difference in price may result thereof shall be supplemented or reimbursed by the party which caused the damage, without prejudice to the provisions of the second, third and fourth paragraphs of this Article.

if any; (c) a proportionate price reduction.

Article 101. Liability for Product Quantity Imperfection. – 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, the consumer having powers to demand, alternatively, at his own option: (a) the proportionate price (b) the supplementing of weight or measure differential; (c) the replacement of the product by another of the same kind, mark or model, without said imperfections; (d) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages if any.

Improper services are those which prove to be inadequate for purposes reasonably expected of them and those that fail to meet the provisions of this Act regulating service rendering.

The provisions of the fifth paragraph of Article 99 shall apply to this Article.

Article 105. Legal Guarantee of Adequacy. – The legal guarantee of product or service adequacy does not require an express instrument or contractual exoneration of the supplier being forbidden.

Reperformance of services may be entrusted to duly qualified third parties, at the supplier's risk and cost.

Article 103. Repair Service Obligation. – 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. Article 104. Ignorance of Quality Imperfection. – The supplier's ignorance of the quality imperfections due to inadequacy of the products and services does not exempt him from any liability.

The immediate supplier shall be liable if the instrument used for weighing or measuring is not gauged in accordance with official standards.

Article 106. Prohibition in Contractual Stipulation. – 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.

Article 102. Liability for Service Quality Imperfection. – 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, the consumer being entitled to demand alternatively at his option: (a) the performance of the services, without any additional cost and when applicable; (b) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages,

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CIVIL LAW

A.8. NUISANCE

of proper care skill exercised to and diligence avoid the injury

Art. 694. A nuisance is any act, omission, establishment, business, condition of property, or anything else which: (1) Injures or endangers the health or safety of others; or (2) Annoys or offends the senses; or (3) Shocks, defies or disregards decency or morality; or (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (5) Hinders or impairs the use of property.

Condition Act complained of the act of is already done which caused injury to the plaintiff

Art.

Easement against Nuisance

Remedy

696. Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it.

for Abatement

Art. 682. Every building or piece of land is subject to the easement which prohibits the proprietor or possessor from committing nuisance through noise, jarring, offensive odor, smoke, heat, dust, water, glare and other causes.

Art. 697. The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence.

Art. 683. Subject to zoning, health, police and other laws and regulations, factories and shops may be maintained provided the least possible annoyance is caused to the neighborhood.

Art. 698. Lapse of time cannot legalize any nuisance, whether public or private.

Nuisance is a condition and not an act or failure to act, so that if a wrongful condition exists, the person responsible for its existence is responsible for the resulting damages to others.

The provisions impose a prohibition upon owners of buildings of land from committing therein a nuisance or using such buildings or lands in a manner as will constitute a nuisance. It is based on the maxim sic utere tuo ut alienum non laedas (so use your own as not to injure another’s property).

Sangco: A person who creates or maintains a nuisance is liable for the resulting injury to others regardless of the degree of care or skill exercised to avoid the injury. The creation or maintenance of a nuisance is a violation of an absolute duty.

Velasco v. Manila Electric Co. (1971): The general rule is that everyone is bound to bear the habitual or customary inconveniences that result from the proximity of others, and so long as this level is not surpassed, he may not complain against them. But if the prejudice exceeds the inconveniences that such proximity habitually brings, the neighbor who causes such disturbances is held responsible

Liability for Negligence v. Liability for Nuisance Negligence Nuisance Basis

Action damages

There is continuing harm being suffered by the aggrieved party because of the maintenance of the act or thing which constitutes the nuisance

Liability is Liability attaches based on lack regardless of the

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for the resulting damage, being guilty of causing nuisance. There can be no doubt that commercial and industrial activities which are lawful in themselves may become nuisances if they are so offensive to the senses that they render the enjoyment of life and property uncomfortable. It is no defense that skill and care have been exercised and the most improved methods and appliances employed to prevent such result. In this case, the Court ruled that causing or maintaining disturbing noises or sounds may constitute an actionable nuisance.

CIVIL LAW from acts of public indecency, keeping disorderly houses, and houses of ill fame, gambling houses, etc. Nuisances have been divided into two classes: Nuisances per se, and nuisances per accidens. To the first belong those which are unquestionably and under all circumstances nuisances, such as gambling houses, houses of ill fame, etc. The number of such nuisances is necessarily limited, and by far the greater number of nuisances are such because of particular facts and circumstances surrounding the otherwise harmless cause of the nuisance. For this reason, it will readily be seen that whether a particular thing is a nuisance is generally a question of fact, to be determined in the first instance before the term nuisance can be applied to it.

Types of Nuisance: (1) Nuisance per se It is recognized as a nuisance under any and all circumstances because it constitutes a direct menace to public health and safety and, for that reason, may be abated summarily under the undefined law of necessity.

(3) Public nuisance

Art. 695. Nuisance is either public or private.

To become a nuisance per se, the thing must, of itself, because of its inherent qualities, without complement, be productive of injury, or, by reason of the matter of its use or exposure, threaten or be dangerous to life or property.

A public nuisance affects a community or neighborhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal. A private nuisance is one that is not included in the foregoing definition.

(2) Nuisance per accidens It becomes a nuisance depending upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide whether such a thing does in law constitute a nuisance.

A public nuisance is the doing of or the failure to do something that injuriously affects safety, health, or morals of the public, or works some substantial annoyance, inconvenience or injury to the public. It causes hurt, inconvenience, or damage to the public generally, or such part of the public as necessarily comes in contact with it in the exercise of a public or common right.

Iloilo Ice and Cold Storage Co. v. Municipal Council (1913): A nuisance is, according to

Art. 699. The remedies against a public nuisance are: (1) A prosecution under the Penal Code or any local ordinance: or (2) A civil action; or

Blackstone, "Any thing that works3 hurt, inconvenience, or damages." They arise from pursuing particular trades or industries in populous neighborhoods;

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CIVIL LAW

Art. 706. Any person injured by a private

(3) Abatement, without judicial proceedings.

nuisance may abate it by removing, or if necessary, by destroying the thing which constitutes the nuisance, without committing a breach of the peace or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by a private person be followed.

Art. 700. The district health officer shall take

care that one or all of the remedies against a public nuisance are availed of.

Art. 701. If a civil action is brought by reason

of the maintenance of a public nuisance, such action shall be commenced by the city or municipal mayor.

Art. 707. A private person or a public official

extrajudicially abating a nuisance shall be liable for damages: (1) If he causes unnecessary injury; or (2) If an alleged nuisance is later declared by the courts to be not a real nuisance.

Art. 702. The district health officer shall

determine whether or not abatement, without judicial proceedings, is the best remedy against a public nuisance.

Art. 703. A private person may file an action

(5) Attractive Nuisance General Rule: When people come to the lands or premises of others for their own purposes, without right or invitation, they must take the lands as they see them.

on account of a public nuisance, if it is specially injurious to himself. Art. 704. Any private person may abate a public nuisance which is specially injurious to him by removing, or if necessary, by destroying the thing which constitutes the same, without committing a breach of the peace, or doing unnecessary injury. But it is necessary: (1) That demand be first made upon the owner or possessor of the property to abate the nuisance; (2) That such demand has been rejected; (3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and (4) That the value of the destruction does not exceed three thousand pesos.

Exception: Attractive Nuisance doctrine.

Hidalgo Enterprises v. Balandan (1952): One who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children at 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 principle 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.

(4) Private nuisance It is one which violates only private rights and produces damage to but one or a few persons, and cannot be said to be public.

Art. 705. The remedies against a private nuisance are: (1) A civil action; or (2) Abatement, without judicial proceedings.

Del Rosario v. Manila Electric Co. (1932): It is doubtful whether contributory negligence can properly be imputed to the deceased, owing to

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his immature years and the natural curiosity which a child would feel to do something out of the ordinary, and the mere fact that the deceased ignored the caution of a companion of the age of 8 years does not, in our opinion, alter the case. Contributory negligence of a minor does not bar recovery, where his immaturity and natural curiosity impelled him to act to his injury; but discretion shown by the child is the decisive factor.

CIVIL LAW  The danger to the child must be caused by the attraction itself, or by something with which the attraction brings the child in contact.  Protects a meddling child, but not a danger which was created by the child himself.  Limited to latent dangers, and is no basis for recovery where peril is obvious or patent.  Does not apply to natural dangers.  The age and maturity of the injured child and the reason for the child’s presence are important considerations in the application of the doctrine.

When Applicable/Not Applicable: [De Leon on Torts and Damages] Summary of Strict Liability Person Strictly Liable

Defenses or Exceptions

For What

Possessor of an animal or For the damage the animal may cause  Force majeure whoever makes use of them  Fault of the person who even if the animal is lost or suffered damage escaped Owner of Motor Vehicle

Motor vehicle mishaps

 Solidary liability only if the owner was in the vehicle and if he could have prevented it thru due diligence  If not in vehicle, apply Art. 2180 for his liability as employer

Manufacturers and Death and injuries caused by any Absence of contractual relation processors of foodstuffs, noxious or harmful substances used not a defense drinks, toilet articles and similar goods Defendant in possession of Death or injury results from such Possession or use thereof is dangerous weapons/ possession indispensable in his occupation substances such as firearms or business and poison Provinces, Cities Municipalities

Proprietor structure

of

and The death or injuries suffered by any The defective public work is not person by reason of the defective under the LGU’s control or condition of roads, streets, bridges, supervision public buildings, and other public works

building/ (a) Total or partial collapse of Responsibility for collapse building or structure if due to lack should be due to the lack of of necessary repairs necessary repairs

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CIVIL LAW

(b) 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 (c) By excessive smoke, which may be harmful to persons or property (d) By falling of trees situated at or near highways or lanes, if not caused by force majeure (e) By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place Engineer or Architect

If within 15 years from completion of Action not brought within 10 the structure, the same should years from collapse collapse by reason of: (a) Defects in the plans or specifications; or (b) Defects in the ground. If within the same period, the edifice falls on account of: (a) Defects in the construction; (b) Used of materials of inferior quality furnished by him; or (c) Violation of the terms of the contract and he supervised the construction.

Contractor

If within 15 years from the completion Action not brought within 10 of the structure, the edifice falls on years from collapse account of: (a) Defects in the construction; (b) Used of materials of inferior quality furnished by him; or (c) Violation of the terms of the contract

Head of the Family that Liable for damages caused by things lives in a building or any thrown or falling from the same part thereof

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DAMAGES

CIVIL LAW

CIVIL LAW

DAMAGES

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I. Definition

(3) Damage resulting to the plaintiff

People vs. Ballesteros (1998): Damages may be defined as 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 right.

CLASSIFICATION Art. 2197. Damages may be: (1) Actual or compensatory; (2) Moral; (3) Nominal; (4) Temperate or moderate; (5) Liquidated; or (6) Exemplary or corrective.

INJURY VS. DAMAGE VS. DAMAGES Custodio v. CA (1996): Injury is the illegal invasion of a legal right. Damage is the loss, hurt, or harm, which results from the injury. Damages are the recompense or compensation awarded for the damage suffered.

ACCORDING TO PURPOSE (1) For adequate reparation of the injury (a) Compensatory (reparation of pecuniary losses) (b) Moral (reparation for non-pecuniary losses: injury to feelings; physical suffering, etc.) (2) For vindication of the right violated: Nominal (3) For less than adequate reparation: Moderate (4) For deterring future violations: Exemplary or corrective

Ocena vs. Icamina (1990): The obligation to repair the damages exists whether done intentionally or negligently and whether or not punishable by law. Heirs of Borlado v Vda. De Bulan (2001). Damages must be in Philippine legal tender currency.

WHEN DAMAGES RECOVERED

MAY

BE

ACCORDING TO DETERMINATION

Custodio v CA (1996). The mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.

ELEMENTS DAMAGES

FOR

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RECOVERY

MANNER

OF

(1) Conventional (or liquidated) (2) Non-conventional, which may either be: (a) Statutory (fixed by law, as in moratory interest) (b) Judicial (determined by the courts)

SPECIAL AND ORDINARY GENERAL DAMAGES Those which are the natural and necessary result of the wrongful act or omission asserted as the foundation of liability, and include those which follow as a conclusion of law from the statement of the facts of the injury.

OF

(1) Right of action (2) For a wrong inflicted by the defendant

SPECIAL DAMAGES

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Damages that arise from the special circumstance of the case, which, if properly pleaded, may be added to the general damages which the law presumes or implies from the mere invasion of the plaintiff’s rights. Special damages are the natural, but NOT the necessary result of an injury. These are not implied by law.

stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. The damages must be proven by competent evidence (admissible or probative) Oceaneering Contractors v Baretto (2011). There must be pleading and proof of actual damages suffered for the same to be recovered. In addition to the fact that the amount of loss must be capable of proof, it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. The burden of proof of the damage suffered is, consequently, imposed on the party claiming the same, who should adduce the best evidence available in support thereof… In the absence of corroborative evidence, it has been held that self-serving statements of account are not sufficient basis for an award of actual damages.

II. Actual & Compensatory Damages Compensatory damages are damages in satisfaction of, or in recompense for, loss or injury sustained. The phrase “actual damages” is sometimes used as synonymous with compensatory damages.

REQUISITES Asilio, Jr. v. People and Sps. Bombasi (2011): To seek recovery of actual damages, it is necessary to prove the actual amount of loss with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable.

MCC Industrial Sales Corp. v Ssangyong Corp. (2007). Actual or compensatory damages cannot be presumed, but must be proven with a reasonable degree of certainty.

WHEN IS A PERSON ENTITLED? (1) When there is a pecuniary loss suffered by him; (2) When he has alleged and prayed for such relief (Manchester Dev’t Corp vs. CA (1987)); (3) When he has duly proved it; (4) When provided by law or by stipulation.

Valencia vs. Tantoco (1956): Damages must be proved with reasonable accuracy, even when not denied.

DEGREE OF CERTAINTY REQUIRED AS TO: FACT, CAUSE AND AMOUNT OF DAMAGES

No proof of pecuniary loss is necessary for: moral, nominal, temperate, liquidated or exemplary damages. The assessment of such damages is discretionary upon the court, except liquidated ones. (Art. 2216)

ALLEGED AND CERTAINTY

PROVED

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Damages are not rendered uncertain just because they cannot be calculated with absolute exactness or because the consequences of the wrong are not precisely definite in pecuniary amount.

WITH

The principle, which will disallow recovery of damages when their existence rests solely on

Art. 2199. Except as provided by law or by

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speculation, applies both to the fact and cause of damages. (1) The requirement of certainty does not prevent the drawing of reasonable inferences from the fact and circumstance in evidence. (2) Events which occur after the wrong complained of may serve to render the damage sufficiently certain. (3) The damages must be susceptible of ascertainment in some manner other than by mere speculation, conjecture or surmise and by reference to some fairly definite standard, such as market value, established experience or direct inference from known circumstances.

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earning capacity is concerned with the determination of losses or damages sustained by the [plaintiffs], as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support they received or would have received from him had he not died in consequence of negligence of [defendant’s] agent… Only net earnings, and not gross earnings are to be considered. That is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses.

EXTENT OR SCOPE OF ACTUAL DAMAGES Source

Talisay-Silay vs. Associacion (1995): Where, however, it is reasonably certain that injury consisting of failure to realize otherwise reasonably expected profits had been incurred, uncertainty as to the precise amount of such unrealized profits will not prevent recovery or the award of damages.

Art. 2201

COMPONENTS Actual damage covers the following: (1) Value of loss; unrealized profit (2) Attorney’s fees and expenses of litigation (3) Interest

Extent of Liability

Contracts and Quasicontracts

LOSS COVERED; In General Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain.

Art. 2202

In other words, indemnification for damages is not limited to damnum emergens (actual loss) but extends to lucrum cessans (a cession of gain or amount of profit lost). Candano Shipping Lines, Inc. v Sugata-on (2007). The award of damages for loss of

Crimes and Quasidelicts

-If the obligor acted in GOOD FAITH, he shall be liable for natural and probable consequences of the breach, which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. -If the obligor acted with FRAUD, BAD FAITH, MALICE or WANTON ATTITUDE, he shall be responsible for all damages which may be reasonably attributed to the breach. Liability extends to all damages which are the natural and probable consequence of the act or omission complained of WON the damage was foreseen or could have been reasonably foreseen by the defendant is irrelevant

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Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

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BPI Family Bank v Franco (2007). Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it partakes of the nature of fraud…BPIFB acted out of the impetus of self-protection and not out of malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in Article 2201 and should not be held liable for all damages now being imputed to it for its breach of obligation.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.

Spouses Zalamea v CA (1993). That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight in spite of confirmed tickets cannot be disputed. Overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages.

Art. 2214. In quasi delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. Art. 2215. 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.

IN CRIMES AND QUASI-DELICTS Art. 2202. In crimes and quasi delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. In case of crimes, damages are to be increased or decreased according to aggravating or mitigating circumstances present. Interest, as part of damages, may be adjudicated in a proper case, in the Court’s discretion.

Daywalt vs. Recoletos et al. (1919): The damages recoverable upon breach of contract are, primarily, the ordinary, natural and in a sense the necessary damages resulting from the breach. Other damages, known as special damages, are recoverable where it appears that the particular conditions which made such damages a probable consequence of the breach were known to the delinquent party at the time the contract was made.

Contributory negligence of the plaintiff, in case of quasi-delicts, shall reduce the damages to which he may be entitled. However, in case of crimes, there is no mitigation for contributory negligence of the plaintiff. People v Sarcia (2009). The indemnity authorized by our criminal law as 537

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civil liability ex delicto for the offended party, in the amount authorized by the prevailing judicial policy and aside from other proven actual damages, is itself equivalent to actual or compensatory damages in civil law. The principal consideration for the award of damages is the penalty provided by law or imposable for the offense because of its heinousness, not the public penalty actually imposed on the offender… Hence, notwithstanding the fact that the imposable public penalty against the offender should be lowered due to his minority, there is no justifiable ground to depart from the jurisprudential trend in the award of damages in the case of qualified rape, considering the compensatory nature of the award of civil indemnity and moral damages.

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health, and his mental and physical condition before the accident… Taking into account [the plaintiff’s] outstanding abilities, he would have enjoyed a successful professional career in banking.

INJURY TO BUSINESS STANDING OR COMMERCIAL CREDIT Tanay Recreation Center vs. Fausto (2005): Loss of goodwill should be proven with the same standard of proof as other compensatory damages.

FORMULA FOR THE NET EARNING CAPACITY People vs. Aringue (1997): Net earning capacity = Life expectancy * (Gross annual income – Reasonable living expenses)

BUSINESS

Where: Life expectancy = 2/3 * (80 – age of victim at the time of death)

Art. 2205. Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiff's business standing or commercial credit.

Tan, et al. vs. OMC Carriers, Inc. (2011): As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity.

EARNING CAPACITY, STANDING

By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work, no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.

LOSS OR IMPAIRMENT OF EARNING CAPACITY Gatchalian vs. Delim (1991): The Court did not award actual damages because it was found that plaintiff’s employment was lost even before the injury upon which she was suing. The Court equated loss of employment with loss of earning capacity. Mercury Drug v Huang (2007). The plaintiff need not be actually engaged in gainful employment to recover damages due to loss or impairment of earning capacity. In determining the amount of damages to be awarded, the Supreme Court considered the plaintiff’s age, probable life expectancy, the state of his

DEATH BY CRIME OR QUASI-DELICT Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating

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circumstances. Additional exception found in Pleyto vs. Lomboy (2004): “Testimonial evidence suffices to establish a basis for which the court can make a fair and reasonable estimate of the loss of earning capacity.”

In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.

Note: Such an exception to documentary proof requirement only exists as to the loss of earning capacity.

IN RAPE CASES No statutory basis but in several cases the court awards compensatory damages to victims of rape. People vs. Astrologo (2007): “Civil indemnity, in the nature of actual and compensatory damages, is mandatory upon the finding of the fact of rape.” Awarded Php. 50,000 for simple rape. People vs. Apattad (2011): When imposable penalty is death, then the civil indemnity must be Php. 75,000.

CIVIL / DEATH INDEMNITY

People vs. Bartolini (2010): The SC held that it could not be proven that the age of the victim was such that it would support a penalty of death. Thus, it imposed reclusion perpetua instead. But SC said that this should not affect the civil liability to be imposed, and maintained the same at Php. 75,000.

Prof. Casis Book on Damages: Mere commission of the crime shall entitle the heirs of the deceased to such damages. But there has been inconsistency as to whether indemnity is 50,000 or 75,000.

AS TO THE LOSS OF EARNING CAPACITY General Rule: shall be awarded in every case, and that claimant shall present documentary evidence to substantiate claim for damages.

People vs. Pascual (2009): In cases of rape with homicide, civil indemnity in the amount of Php. 100,000 should be awarded to the heirs of the victim.

Exceptions: (1) If the deceased was self-employed and earning less than the minimum wage; or (2) The deceased was a daily wage worker earning less than the minimum wage.

ATTORNEY’S FEES AND EXPENSES OF LITIGATION Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be

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(c) Where defendant acted in gross and evident bad faith (d) When at least double judicial costs are awarded (1) By reason of plaintiff’s indigence in (a) Actions for legal support (b) Actions for recovery of wages of laborers, etc. (c) Actions for workmen’s compensation (2) By reason of crimes in (a) Criminal cases of malicious prosecution (b) Separate actions to recover civil liability arising from crime (3) By reason of equity (a) Where the defendant’s act compelled plaintiff to litigate with third persons (b) Where the Court deems it just and equitable

recovered, except: (1) When exemplary damages are awarded; (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

Note: In all cases, attorney’s fees and costs of litigation must be reasonable. Even if expressly stipulated, attorney’s fees are subject to control by the Courts. Quirante v IAC (1989). Attorney’s fees in CC 2208 is an award made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by execution.

In all cases, the attorney's fees and expenses of litigation must be reasonable. General Rule Attorney’s fees and costs of litigation are recoverable IF stipulated.

MERALCO v Ramoy (2008). Attorney's fees cannot be recovered except in cases provided for in CC 2208.

Exceptions If there is no stipulation, they are recoverable only in the following cases: (1) By reason of malice or bad faith (a) When exemplary damages are awarded (b) In case of a clearly unfounded civil action

Briones v Macabagdal (2010). Attorney’s fees and expenses of litigation are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, such must be specifically prayed for…and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable."

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No interest may be recovered on unliquidated (not fixed in amount) claims or damages, except when the demand can be established with reasonable certainty at the Court’s discretion.

Bank of America v Philippine Racing Club (2009). For CC 2208 (2), an adverse decision does not ipso facto justify an award of attorney’s fees to the winning party. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.

Compounding of interest Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on the point. Note that interest due can earn only at 6%, whether the rate of interest of the principal is greater than 6%.

INTEREST Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

Determination of legal interest (1) When an obligation, regardless of its source (i.e., law, contracts, quasicontracts, delicts or quasi-delicts) is breached, the contravenor can be held liable for damages. (2) With regard particularly to an AWARD OF INTEREST in the concept of actual and compensatory damages, the RATE of interest, as well as the ACCRUAL thereof, is imposed, as follows (Eastern Shipping Lines vs. CA, (1994) as modified by Nakar v. Gallery Frames, G.R. No. 189871 (2013)):

Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract. Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.

BASE

(a) When the obligation is breached, and it consists in the PAYMENT OF A SUM OF MONEY, i.e., a loan or forbearance of money, the interest due should be-

Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty. Interest accrues when: (1) The obligation consists in the payment of a sum of money (2) Debtor incurs in delay (3) There being no stipulation to the contrary

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RATE (a)That which may have been stipulate d in writing. (b) In the absence of stipulatio n, the rate of interest shall be 6% per annum

ACCRUAL To be computed from default, i.e., from JUDICIAL or EXTRAJUDICI AL demand under and subject to the provisions of Article 1169 of the Civil Code.

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(b) Furthermor e, the INTEREST DUE shall itself earn (c) When an obligation, NOT constituting a loan or forbearance of money, is breached, an interest on the AMOUNT OF DAMAGES awarded may be imposed at the discretion of the court.

DAMAGES RATE (legal interest)

ACCRUAL

Legal interest

From the time it is JUDICIALLY demanded.

6% per annum.

If claim or damages are LIQUIDATED, from default, i.e., from judicial or extrajudicial demand. (Art. 1169, Civil Code)

The actual base for the computation of legal interest shall be on the amount finally adjudged.

(d) When the 6% per JUDGMENT of the annum

BASE

CIVIL LAW RATE

court awarding a sum of money becomes final and executory, whether or not the case consists in the payment of a sum of money

ACCRUAL UNTIL ITS SATISFACTIO N, this period being deemed to be an equivalent to a forbearance of credit.

Note: The new rate of legal interest (6%) in Nacar does not apply to judgments that have become final and executory prior to July 1, 2013. Start of Delay (1) Extrajudicial: Demand letter (2) Judicial: Filing of complaint (3) Award

If UNLIQUIDATE D, from the time the demand can be established with reasonable certainty. Hence, the interest shall begin to run only FROM THE DATE THE JUDGMENT OF THE COURT IS MADE (at which time the quantification of damages may be deemed to have been reasonably ascertained). From FINALITY

Duty to Minimize Art. 2203. 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. Lim and Gunnaban vs. CA (2002): Article 2203 of the Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. One who is injured then by the wrongful or negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to prevent damage to it. Burden of Proof The DEFENDANT has the burden of proof to establish that the victim, by the exercise of the diligence of a good father of a family, could have mitigated the damages. In the absence of 542

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such proof, the amount of damages cannot be reduced.

(2) (3) (4) (5) (6) (7) (8) (9)

Note: The victim is required only to take such steps as an ordinary prudent man would reasonably adopt for his own interest.

III. Moral Damages

CIVIL LAW Besmirched reputation Mental anguish Fright Moral shock Wounded feelings Social humiliation Serious anxiety Similar injury

Though incapable of pecuniary computation If such is the proximate result of defendant’s act or omission.

Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission.

REQUISITES FOR AWARDING MORAL DAMAGES Sulpicio Lines v Curso (2010). The conditions for awarding moral damages are: (a) There must be an injury, whether physical, mental, or psychological, clearly substantiated by the claimant; (b) There must be a culpable act or omission factually established; (c) The wrongful act or omission of the defendant must be the proximate cause of the injury sustained by the claimant; and (d) The award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code.

Art. 2218. In the adjudication of moral damages, the sentimental value of property, real or personal, may be considered. Visayan Sawmill vs. CA (1993): Moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted.

GENERAL PRINCIPLES OF RECOVERY:

Bagumbayan Corp. vs. IAC (1984): Mental suffering means distress or serious pain as distinguished from annoyance, regret or vexation.

(1) Moral damages must somehow be proportional to the suffering inflicted. (2) In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting in physical injuries.

Mental anguish is intense mental suffering. Generally, damages for mental anguish are limited to cases in which there has been a personal physical injury or where the defendant willfully, wantonly, recklessly, or intentionally caused the mental anguish.

WHEN AWARDED

(3) By special rule in Article 1764, in relation to Article 2206, moral damages may also be awarded in case the death of a

Awarded when injury consists of: (1) Physical suffering

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(4)

(5)

(6)

(7)

(8)

(9)

DAMAGES

passenger results from a breach of carriage. In culpa aquiliana or quasi-delict, (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort, moral damages may aptly be recovered. This rule also applies to contracts when breached by tort. In culpa criminal, moral damages could be lawfully due when the accused is found guilty of physical injuries, lascivious acts, adultery or concubinage, illegal or arbitrary detention, illegal arrest, illegal search, or defamation. Malicious prosecution can also give rise to a claim for moral damages. The term "analogous cases," referred to in Article 2219, following the ejusdem generis rule, must be held similar to those expressly enumerated by the law. Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's fees, such filing, however, has almost invariably been held not to be a ground for an award of moral damages. (Expertravel& Tours vs. CA (1999)) The burden rests on the person claiming moral damages to show convincing evidence for good faith is presumed. In a case involving simple negligence, moral damages cannot be recovered. (Villanueva vs. Salvador (2006)) Failure to use the precise legal terms or "sacramental phrases" of "mental anguish, fright, serious anxiety, wounded feelings or moral shock" does not justify the denial of the claim for damages. It is sufficient that these exact terms have been pleaded in the complaint and evidence has been adduced (Miranda-Ribaya vs. Bautista (1980))

CIVIL LAW

(10) Even if the allegations regarding the amount of damages in the complaint are not specifically denied in the answer, such damages are not deemed admitted. (Raagas, et al. vs. Traya et al (1968)). (11) An appeal in a criminal case opens the whole case for review and this 'includes the review of the penalty, indemnity and damages’. Even if the offended party had not appealed from said award, and the only party who sought a review of the decision of said court was the accused, the court can increase damages awarded. (Sumalpong vs. CA (1997)) (12) It can only be awarded to natural persons. ABS-CBN vs. CA (1999): The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system. The statement in People vs. Manero and Mambulao Lumber Co. vs. PNB that a corporation may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is an obiter dictum. NAPOCOR vs. Philipp Brothers (2001): While it is true that besmirched reputation is included in moral damages, it cannot cause mental anguish to a corporation, unlike in the case of a natural person, for a corporation has no reputation in the sense that an individual has, and besides, it is inherently impossible for a corporation to suffer mental anguish. QUESTION Ortillo contracts Fabricato, Inc. to supply and install tile materials in a building he is donating to his province. Ortillo pays 50% of the contract price as per agreement. It is also agreed that the balance would be 544

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payable periodically after every 10% performance until completed. After performing about 93% of the contract, for which it has been paid an additional 40% as per agreement, Fabricato, Inc. did not complete the project due to its sudden cessation of operations. Instead, Fabricato, Inc. demands payment of the last 10% of the contract despite its non-completion of the project. Ortillo refuses to pay, invoking the stipulation that payment of the last amount of 10% shall be upon completion. Fabricato, Inc. brings suit for the entire 10% plus damages. Ortillo counters with claims for (a) moral damages for Fabricato, Inc.’s unfounded suit which has damaged his reputation as a philanthropist and respected businessman in his community, and (b) attorney’s fees.

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(6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of t his article, in the order named.

IN CRIMINAL OFFENSE RESULTING IN PHYSICAL INJURIES

Does Ortillo have a legal basis for his claim for moral damages? How about his claim for attorney’s fees, having hired a lawyer to defend him?

People v Villaver (2001). Under paragraph (1), Article 2219 of the Civil Code, moral damages may be recovered in a criminal offense resulting in physical injuries. In its generic sense, "physical injuries" includes death.

Suggested Answer: (a) There is no legal basis to Ortillo’s claim for moral damages. It does not fall under the coverage of Article 2219 of the New Civil Code. (b) Ortillo is entitled to attorney’s fees because Fabricato’s complaint is a case of malicious prosecution or a clearly unfounded civil action (Art. 2208 [4] and [11], NCC).

Arcona v CA (2002). In a case where the father of a family was stabbed to death, the SC said that “a violent death invariably and necessarily brings about emotional pain and anguish on the part of the victim’s family… For this reason, moral damages must be awarded even in the absence of any allegation and proof of the heirs’ emotional suffering.”

IN QUASI-DELICTS CAUSING PHYSICAL INJURIES

WHEN RECOVERABLE Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest;

B.F. Metal v Lomotan (2008). In culpa aquiliana, or quasi-delict, moral damages may be recovered (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort. The SC held that an employer that is vicariously liable with its employee-driver may also be held liable for moral damages to the injured plaintiff,

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arrest, thereby justifying the award of moral damages.

IN SEDUCTION, ABDUCTION, RAPE AND OTHER LASCIVIOUS ACTS

IN CASE OF MALICIOUS PROSECUTION

People vs. Calongui (2006): Anent the award of damages, civil indemnity ex delicto is mandatory upon finding of the fact of rape while moral damages is awarded upon such finding without need of further proof because it is assumed that a rape victim has actually suffered moral injuries entitling the victim to such award. If without factual and legal bases, no award of exemplary damages should be allowed.

Industrial Insurance v Bondad (2000). As a rule, no moral damages is imposed for litigation, because the law could not have meant to impose a penalty on the right to litigate. A person's right to litigate, as a rule, should not be penalized. This right, however, must be exercised in good faith. Absence of good faith in the present case is shown by the fact that petitioner clearly has no cause of action against respondents but it recklessly filed suit anyway and wantonly pursued pointless appeals, thereby causing the latter to spend valuable time, money and effort in unnecessarily defending themselves, incurring damages in the process.

People v Bartolini (2010). In a case where the offender-father was convicted of simple rape instead of qualified rape due to the prosecution’s failure to specifically allege the age and minority of the victim-daughter, but such was nonetheless established during the trial, the award of civil indemnity and moral damages in a conviction for simple rape should equal the award of civil indemnity and moral damages in convictions for qualified rape. Truly, [the victim’s] moral suffering is just as great as when her father who raped her is convicted for qualified rape as when he is convicted only for simple rape due to a technicality.

Mijares vs. CA (1997): Moral damages cannot be recovered from a person who has filed a complaint against another in good faith, or without malice or bad faith. If damage results from the filing of the complaint, it is damnum absque injuria. Barreto vs. Arevalo (1956): The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously.

People v Abadies (2002). Where there are multiple counts of rape and other lascivious acts, the SC awarded moral damages for each count of lascivious acts and each count of rape. Note: Recovery may be had by the offended party and also by her parents.

IN ACTS REFERRED TO IN ARTS. 21, 26, 27, 28, 29, 32, 34 &35, NCC

IN ILLEGAL OR ARBITRARY DETENTION OR ARREST

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

People v Bernardo (2002). Since the crime committed in this case is kidnapping and failure to return a minor under Article 270 of the Revised Penal Code, the same is clearly analogous to illegal and arbitrary detention or

Art. 26. Every person shall respect the dignity, personality, privacy and peace of

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performing a perfectly legal act, albeit with bad faith or in violation of the "abuse of right" doctrine.

mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of another's residence: (2) Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause another to be alienated from his friends; (4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition.

Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage. Art. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence. Upon motion of the defendant, the court may require the plaintiff to file a bond to answer for damages in case the complaint should be found to be malicious.

VIOLATION OF HUMAN DIGNITY Concepcion v CA (1998).The law seeks to protect a person from being unjustly humiliated. Using this provision, the SC awarded moral damages to the plaintiff, a married man, against the defendant, who confronted the plaintiff face-to-face, invading the latter’s privacy, to hurl defamatory words at him in the presence of his wife and children, neighbors and friends, accusing him of having an adulterous relationship with another woman. Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken.

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the absence of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground.

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;

REFUSAL OR NEGLECT OF DUTY Vital-Gozon v CA (1998). Under CC 27, in relation to CC 2219 and 2217, a public officer may be liable for moral damages for as long as the moral damages suffered by [the plaintiff] were the proximate result of [defendant’s] refusal to perform an official duty or neglect in the performance thereof. In fact, under Articles 19 and 27 of the Civil Code, a public official may be made to pay damages for 547

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(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; (2) The liberty of abode and of changing the same; (3) The privacy of communication and correspondence; (4) The right to become a member of associations or societies for purposes not contrary to law; (5) The right to take part in a peaceable assembly to petition the government for redress of grievances; (6) The right to be free from involuntary servitude in any form; (7) The right of the accused against excessive bail; (8) 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; (9) 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; (10) 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 (11) Freedom of access to the courts.

CIVIL LAW

entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted), and mat be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated. The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute.

VIOLATION OF CIVIL AND POLITICAL RIGHTS Conjuangco v CA (1999). The purpose of [CC 32] is to provide a sanction to the deeply cherished rights and freedoms enshrined in the Constitution. Under [CC 32], it is not necessary that the public officer acted with malice or bad faith. To be liable, it is enough that there was a violation of the constitutional rights of petitioner, even on the pretext of justifiable motives or good faith in the performance of one's duties. Meralco v Spouses Chua (2010). Article 32 of the Civil Code provides that moral damages are proper when the rights of individuals, including the right against deprivation of property without due process of law, are violated. 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.

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faith or with malice in the breach of the contract. However, a conscious or intentional design need not always be present since negligence may occasionally be so gross as to amount to malice or bad faith. Bad faith, in the context of Art. 2220 of the Civil Code, includes gross negligence. Thus, we have held in a number of cases that moral damages may be awarded in culpa contractual or breach of contract when the defendant acted fraudulently or in bad faith, or is guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations.

Art. 35. When a person, claiming to be injured by a criminal offense, charges another with the same, for which no independent civil action is granted in this Code or any special law, but the justice of the peace finds no reasonable grounds to believe that a crime has been committed, or the prosecuting attorney refuses or fails to institute criminal proceedings, the complaint may bring a civil action for damages against the alleged offender. Such civil action may be supported by a preponderance of evidence. Upon the defendant's motion, the court may require the plaintiff to file a bond to indemnify the defendant in case the complaint should be found to be malicious. If during the pendency of the civil action, an information should be presented by the prosecuting attorney, the civil action shall be suspended until the termination of the criminal proceedings.

Sulpicio Lines v Curso (2010). As an exception [to the requirement of bad faith], moral damages may be awarded in case of breach of contract of carriage that results in the death of a passenger.

Please refer to previous discussions on the provisions.

WHO MAY DAMAGES

RECOVER

MORAL

Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

IN WILLFUL INJURY TO PROPERTY Regala v Carin (2011). To sustain an award of damages, the damage inflicted upon [plaintiff’s] property must be malicious or willful, an element crucial to merit an award of moral damages under Article 2220 of the Civil Code

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages.

IN BREACH OF CONTRACT IN BAD FAITH Bankard, Inc. v Feliciano (2006). Moral damages may be recovered in culpa contractual where the defendant acted in bad

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and prestige, received P100,000; his wife Maria Lopez received P50,000 for her discomfort, and the fact that she was already sick and suffering a flu when she left the Philippines via defendant’s plane; and the Montelibanos received P25,000 each, for being immediate family members of Senator Lopez, and as such they likewise shared his prestige and humiliation.

brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named.

RELATIVES OF INJURED PERSONS Sulpicio Lines v Curso (2010). Article 2219 circumscribes the instances in which moral damages may be awarded. The provision does not include succession in the collateral line as a source of the right to recover moral damages. The usage of the phrase analogous cases in the provision means simply that the situation must be held similar to those expressly enumerated in the law in question

IV. Nominal Damages Nominal damages consist in damages awarded, not for purposes of indemnifying the plaintiff for any loss suffered, but for the vindication or recognition of a right violated by the defendant.

JURIDICAL PERSONS ABS-CBN vs. CA (1999): The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system. The statement in People vs. Manero and Mambulao Lumber Co. vs. PNB that a corporation may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is an obiter dictum.

FACTORS CONSIDERED DETERMINING AMOUNT

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REQUISITES AND CHARACTERISTICS (1) Invasion or violation of any legal or property right. (2) No proof of loss is required. (3) The award is to vindicate the right violated.

WHEN AWARDED Art. 2221. Nominal damages are 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.

IN

Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded.

Lopez v Pan American (1966). The amount of damages awarded in this appeal has been determined by adequately considering the official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other. The SC further considered the present rate of exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, the defendant being an international airline. Senate President Lopez, for his social standing

Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.

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One does not ask for nominal damages, and it is in lieu of the actual, moral, temperate, or liquidated damages.

CIVIL LAW

food service for the plaintiff’s guests. The SC did not award actual and moral damages because it found that the plaintiff’s failure to inform the hotel regarding the increase of guests (from 350 expected guests, at maximum capacity of 380, the number of guests reached 470) was the proximate cause of the plaintiff’s injury. Nevertheless, the SC awarded nominal damages under considerations of equity, for the discomfiture that the plaintiffs were subjected to during the event, averring that the hotel could have managed the "situation" better, it being held in high esteem in the hotel and service industry. Given respondent’s vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover.

Nominal damages are incompatible with actual, temperate and exemplary damages. Armovit vs. CA (1990): Nominal damages cannot co-exist with actual or compensatory damages. Francisco vs. Ferrer (2001): No moral or exemplary damages was awarded. Nevertheless, when confronted with their failure to deliver on the wedding day the wedding cake ordered and paid for, petitioners gave the lame excuse that delivery was probably delayed because of the traffic, when in truth, no cake could be delivered because the order slip got lost. For such prevarication, petitioners must be held liable for nominal damages for insensitivity, inadvertence or inattention to their customer's anxiety and need of the hour.

NATURE AND DETERMINATION OF AMOUNT Gonzales v People (2007). The assessment of nominal damages is left to the discretion of the trial court according to the circumstances of the case. Generally, nominal damages by their nature are small sums fixed by the court without regard to the extent of the harm done to the injured party. However, it is generally held that a nominal damage is a substantial claim, if based upon the violation of a legal right; in such a case, the law presumes damage although actual or compensatory damages are not proven.

Gonzales v PCIB (2011). Nominal damages "are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind.” Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. When granted by the courts, they are not treated as an equivalent of a wrong inflicted but simply a recognition of the existence of a technical injury. A violation of the plaintiff’s right, even if only technical, is sufficient to support an award of nominal damages. Conversely, so long as there is a showing of a violation of the right of the plaintiff, an award of nominal damages is proper.

V. Temperate Damages Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty.

Spouses Guanio v Makati Shangri-la (2011). The plaintiffs sought to recover damages from the hotel due to its breach of contract as regards

Art. 2225. Temperate damages must be reasonable under the circumstances.

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adequate proof was presented. The allowance of temperate damages when actual damages were not adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the injury.

These damages are awarded for pecuniary loss, in an amount that, from the nature of the case, cannot be proved with certainty.

REQUISITES

There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to one's commercial credit or to the goodwill of a business firm is often hard to show certainty in terms of money. (NOTE: In this case actual and temperate damages were awarded. It is postulated that the actual damages is for the car while the temperate damages is for the lost actual income not sufficiently proved.)

(1) Actual existence of pecuniary loss (2) The nature and circumstances of the loss prevents proof of the exact amount (3) They are more than nominal and less than compensatory. (4) Causal connection between the loss and the defendant’s act or omission. (5) Amount must be reasonable. Ramos vs. CA (2002): 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 as they cover two distinct phases.

FACTORS AMOUNT

IN

DETERMINING

De Guzman v Tumolva (2011). The SC awarded temperate damages where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the plaintiff suffered some pecuniary loss. The SC also increased the award of temperate damages from P100,000 to P150,000, taking into account the cost of rebuilding the damaged portions of the perimeter fence.

Citytrust Bank vs. IAC(1994): Temperate damages are incompatible with nominal damages hence, cannot be granted concurrently. Pleno vs. CA(1988): Temperate damages are included within the context of compensatory damages.Tan v OMC Carriers (2011). The SC awarded temperate damages in lieu of actual damages for loss of earning capacity where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income.

WHERE THERE ARE RECEIPTS PROVIDED AMOUNTING TO LESS THAN P25,000 People v Lucero (2010). Anent the actual damages, we note that the CA awarded P3,000.00 representing the amount spent for the embalming as shown by the receipt. However, the prosecution also presented a list of expenses such as those spent for the coffin, etc., which were not duly covered by receipt. If the actual damages, proven by receipts during the trial, amount to

Republic v Tuvera (2007). Courts are authorized to award temperate damages even in cases where the amount of pecuniary loss could have been proven with certainty, if no such

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is “ad terrorem,” while liquidated damages are “ad reparationem.”

less than P25,000.00, the victim shall be entitled to temperate damages in the amount of P25,000.00, in lieu of actual damages. In this case, the victim is entitled to the award ofP25,000.00 as temperate damages considering that the amount of actual damages is only P3,858.50. The amount of actual damages shall be deleted.

REQUISITES AND CHARACTERISTICS (1) Liquidated damages must be validly stipulated. (2) There is no need to prove the amount of actual damages. (3) Breach of the principal contract must be proved.

WHERE NO RECEIPTS WERE PROVIDED People v Gidoc (2009). The award of P25,000.00 as temperate damages in homicide or murder cases is proper when no evidence of burial and funeral expenses is presented in the trial court.

RULES GOVERNING CONTRACT

BREACH

OF

Art. 2228. When the breach of the contract committed by the defendant is not the one contemplated by the parties in agreeing upon the liquidated damages, the law shall determine the measure of damages, and not the stipulation.

People v Surongon (2007). Where the amount of actual damages cannot be determined because no receipts were presented to prove the same but it is shown that the heirs are entitled thereto, temperate damages may be awarded, fixed atP25,000.00. Considering that funeral expenses were obviously incurred by the victim’s heirs, an award ofP25,000.00 as temperate damages is proper.

Suatengco v Reyes (2008). Liquidated damages are those agreed upon by the parties to a contract to be paid in case of breach thereof. The stipulation on attorney’s fees contained in the said Promissory Note constitutes what is known as a penal clause. A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation. It functions to strengthen the coercive force of obligation and to provide, in effect, for what could be the liquidated damages resulting from such a breach. The obligor would then be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach.

VI.Liquidated Damages Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. Liquidated damages are those damages agreed upon by the parties to a contract to be paid in case of breach thereof.

General Rule: The penalty shall substitute the indemnity for damages and the payment of the interests in case of breach.

It differs from a penal clause in that in the latter case the amount agreed to be paid may bear no relation to the probable damages resulting from the breach. Basically, a penalty

Exceptions (1) When there is a stipulation to the contrary.

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(2) When the obligor is sued for refusal to pay the agreed penalty. (3) When the obligor is guilty of fraud.

one or more aggravating circumstances. Such damages are separate and distinct from fines and shall be paid to the offended party.

The amount can be reduced if: (1) it is unconscionable as determined by the court (2) there is partial or irregular performance.

VII. Exemplary Corrective Damages

CIVIL LAW

Award of exemplary damages is part of the civil liability, not of the penalty. Damages are paid to the offended party separately from the fines.

or

People v Dadulla (2011). Although an aggravating circumstance not specifically alleged in the information, albeit established at trial, cannot be appreciated to increase the criminal liability of the accused, the established presence of one or two aggravating circumstances of any kind or nature entitles the offended party to exemplary damages under Article 2230 of the Civil Code because the requirement of specificity in the information affected only the criminal liability of the accused, not his civil liability.

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. In common law, these damages were termed “punitive.” Canada v All Commodities Marketing (2008). The grant of temperate damages paves the way for the award of exemplary damages. Under Article 2234 of the Civil Code, a showing that the plaintiff is entitled to temperate damages allows the award of exemplary damages.

People v Alfredo (2010). Being corrective in nature, exemplary damages, therefore, can be awarded, not only in the presence of an aggravating circumstance, but also where the circumstances of the case show the highly reprehensible or outrageous conduct of the offender. As in this case, where the offender sexually assaulted a pregnant married woman, the offender has shown moral corruption, perversity, and wickedness. He has grievously wronged the institution of marriage. The imposition then of exemplary damages by way of example to deter others from committing similar acts or for correction for the public good is warranted in quasi-delicts; NCC Art. 2231

PNB vs. CA (1996): However, the award of P1,000,000 exemplary damages is also far too excessive and should likewise be reduced to an equitable level. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions.

WHEN RECOVERABLE IN CRIMINAL OFFENSES; NCC ART. 2230

Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence.

Art. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed when the crime was committed with

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Globe Mackay v CA (1989). In this case, the defendant, the previous employer of the plaintiff, wrote a letter to the company where the plaintiff subsequently applied for employment, stating that the plaintiff was dismissed by the defendant from work due to dishonesty, accusing plaintiff of malversation of defendant’s funds. Previous police investigations revealed that the defendant’s accusations against the plaintiff were unfounded, and cleared the plaintiff of such ‘anomalies’. Here, the lower court awarded exemplary damages to the plaintiff, which the defendant questioned, averring that CC 2231 may be awarded only for grossly negligent acts, not for willful or intentional acts. The SC upheld the grant of exemplary damages, stating that while CC 2231 provides that for quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith.

IN CONTRACTS AND CONTRACTS; NCC ART. 2232

CIVIL LAW

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.

Art. 2235. A stipulation whereby exemplary damages are renounced in advance shall be null and void.

REQUISITES TO RECOVER EXEMPLARY DAMAGES AND LIQUIDATED DAMAGES AGREED UPON The plaintiff must show that he/she is entitled to moral, temperate or compensatory damages: If arising from

QUASI-

Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

REQUISITES

Art. 2230

Crimes

Art. 2231

Quasi-delicts

Art. 2232

Contracts and Quasicontracts

When exemplary damages are granted The crime was committed with an aggravating circumstance/s Defendant acted with gross negligence Defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner

General Principles (1) Exemplary damages cannot be awarded alone: they must be awarded IN ADDITION to moral, temperate, liquidated or compensatory damages. (2) The purpose of the award is to deter the defendant (and others in a similar condition) from a repetition of the acts for which exemplary damages were awarded; hence, they are not recoverable as a matter of right. (3) The defendant must be guilty of other malice or else negligence above the ordinary.

Art. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. Art. 2234. While the amount of the 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. 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,

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(4) Plaintiff is not required to prove the amount of exemplary damages. (a) But plaintiff must show that he is entitled to moral, temperate, or compensatory damage; that is, substantial damages, not purely nominal ones. This requirement applies even if the contract stipulates liquidated damages. (b) The amount of exemplary damage need not be pleaded in the complaint because the same cannot be proved. It is merely incidental or dependent upon what the court may award as compensatory damages.

CIVIL LAW death of the deceased.

IN DEATH CAUSED BY BREACH OF CONDUCT BY A COMMON CRIME Heirs of Raymundo Castro vs. Bustos (1969): when death occurs as a result of a crime, the heirs of the deceased are entitled to the following items of damages: (1) As indemnity for the death of the victim of the offense — P12,000.00, without the need of any evidence or proof of damages, and even though there may have been mitigating circumstances attending the commission of the offense. (2) As indemnity for loss of earning capacity of the deceased — an amount to be fixed by the Court according to the circumstances of the deceased related to his actual income at the time of death and his probable life expectancy, the said indemnity to be assessed and awarded by the court as a matter of duty, unless the deceased had no earning capacity at said time on account of permanent disability not caused by the accused. If the deceased was obliged to give support, under Art. 291, Civil Code, the recipient who is not an heir, may demand support from the accused for not more than five years, the exact duration to be fixed by the court. (3) As moral damages for mental anguish, — an amount to be fixed by the court. This may be recovered even by the illegitimate descendants and ascendants of the deceased. (4) As exemplary damages, when the crime is attended by one or more aggravating circumstances, — an amount to be fixed in the discretion of the court, the same to be considered separate from fines. (5) As attorney's fees and expresses of litigation, — the actual amount thereof, (but only when a separate civil action to

DAMAGES IN CASE OF DEATH RE. CRIMES AND QUASI-DELICTS Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the

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recover civil liability has been filed or when exemplary damages are awarded). (6) Interests in the proper cases. (7) It must be emphasized that the indemnities for loss of earning capacity of the deceased and for moral damages are recoverable separately from and in addition to the fixed sum of P12,000.00 corresponding to the indemnity for the sole fact of death, and that these damages may, however, be respectively increased or lessened according to the mitigating or aggravating circumstances, except items 1 and 4 above, for obvious reasons.

CONTRIBUTORY NEGLIGENCE Genobiagon vs. CA (1989): The alleged contributory negligence of the victim, if any, does not exonerate the accused in criminal cases committed through reckless imprudence, since one cannot allege the negligence of another to evade the effects of his own negligence. Rakes vs. Atlantic (1907):If so, the disobedience of the plaintiff in placing himself in danger contributed in some degree to the injury as a proximate, although not as its primary cause. (Supreme Court in this case cited numerous foreign precedents, mostly leaning towards the doctrine that contributory negligence on the part of the plaintiff did not exonerate defendant from liability, but it led to the reduction of damages awarded to the plaintiff.)

At present, the SC allows civil indemnity of Php. 50,000 in cases of homicide (De Villa vs. People (2012)) and Php. 75,000 in cases of murder (People v. Camat (2012)). Sulpicio Lines v Curso (2010). The omission from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral damages for mental anguish by reason of the death of the deceased. Inclusio unius est exclusio alterius.

VIII. Graduation Damages

CIVIL LAW

Cangco vs. Manila Railroad Co. (1918): In determining the question of contributory negligence in performing such act — that is to say, whether the passenger acted prudently or recklessly — the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered.

of

PLAINTIFF’S NEGLIGENCE Manila Electric vs. Remonquillo (1956): Even if Manila Electric is negligent, in order that it may be held liable, its negligence must be the proximate and direct cause of the accident.

RULES IN CRIMES Art. 2204. In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances.

Bernardo vs. Legaspi (1914): Both of the parties contributed to the proximate cause; hence, they cannot recover from one another.

IN QUASI-DELICTS

IN CONTRACTS, QUASI-CONTRACTS AND QUASI-DELICTS

Art. 2214. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover.

Art. 2215 In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances

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(2) Defendant has done his best to lessen the plaintiff’s injury or loss.

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.

GROUNDS DAMAGES

FOR

MITIGATION

CIVIL LAW

Sweet Lines v CA (1983). The SC deemed CC 2215(2) inapplicable where the harm done to private respondents outweighs any benefits the plaintiffs may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel's first port of call, pursuant to its normal schedule.

RULE WHEN CONTRACTING PARTIES ARE IN PARI DELICTO Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault." In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."

OF

FOR CONTRACTS: (1) Violation of terms of the contract by the plaintiff himself; (2) Obtention or enjoyment of benefit under the contract by the plaintiff himself; (3) Defendant acted upon advice of counsel in cases where exemplary damages are to be awarded such as under Articles 2230, 2231, and 2232; (4) Defendant has done his best to lessen the plaintiff’s injury or loss.

This rule, however, is subject to exceptions that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413, Civil Code); (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party for whose protection the prohibition by law is intended if the

FOR QUASI-CONTRACTS: (1) In cases where exemplary damages are to be awarded such as in Art. 2232; (2) Defendant has done his best to lessen the plaintiff’s injury or loss.

FOR QUASI-DELICTS: (1) That the loss would have resulted in any event because of the negligence or omission of another, and where such negligence or omission is the immediate and proximate cause of the damage or injury;

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agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 1418-1419, Civil Code).

CIVIL LAW

Since the court below has already awarded compensatory and exemplary damages that are in themselves a judicial recognition that Plaintiff’s right was violated, the award of nominal damages is unnecessary and improper. Anyway, ten thousand pesos cannot, in common sense, be deemed “nominal”.

LIQUIDATED DAMAGES

ACTUAL AND LIQUIDATED

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.

Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof.

DAMAGES THAT MUST CO-EXIST

COMPROMISE Art. 2031. The courts may mitigate the damages to be paid by the losing party who has shown a sincere desire for a compromise.

EXEMPLARY WITH MORAL, TEMPERATE, LIQUIDATED OR COMPENSATORY Francisco vs. GSIS (1963): There is no basis for awarding exemplary damages either, because this species of damages is only allowed in addition to moral, temperate, liquidated, or compensatory damages, none of which have been allowed in this case, for reasons herein before discussed.

IX.Miscellaneous Rules DAMAGES THAT CANNOT CO-EXIST NOMINAL WITH OTHER DAMAGES Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.

Scott Consultants & Resource Development Corp. vs. CA (1995): There was, therefore, no legal basis for the award of exemplary damages since the private respondent was not entitled to moral, temperate, or compensatory damages and there was no agreement on stipulated damages.

Vda. De Medina vs. Cresencia (1956): The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record that the award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal damages cannot co-exist with compensatory damages.

DAMAGES ALONE

THAT

MUST

STAND

NOMINAL DAMAGES

The purpose of nominal damages is to vindicate or recognize a right that has been violated, in order to preclude further contest thereon; “and not for the purpose of indemnifying the Plaintiff for any loss suffered by him” (Articles 2221, 2223, new Civil Code.)

Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.

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PRIVATE INTERNATIONAL LAW

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I. Introduction 

A.SCOPE OF CONFLICTS OF LAWS: NATURE, DEFINITION AND IMPORTANCE 

A.2. DIVERSITY OF LAWS, CUSTOMS AND PRACTICES No law has any effect, of its own force, beyond the limits of the sovereignty from which its authority is derived. The extent to which the law of one nation, as put in force within its territory, whether by executive order, by legislative act, or by judicial decree, shall be allowed to operate within the dominion of another nation, depends upon what our greatest jurists have been content to call “the comity of nations.”

CIVIL LAW

law as to necessitate recourse to that system. That part of the law of each state or nation which determines whether, in dealing with a legal situation, the law of some other state or nation will be recognized, given effect, or applied. The law concerning the rights of persons within the territory and dominion of one nation by reason of acts, private or public, done within the dominion of another nation.

A.3. OBJECT, FUNCTION AND SCOPE The object and function of conflict of laws is to provide rational and valid rules or guidelines in deciding cases where either the parties, events or transactions are linked to more than one jurisdiction. i. Scope

“Comity,” in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws... [Hilton v Guyot, 159 US 113, 1895]

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

A.2. DEFINITION



Private international law  That part of municipal law which governs cases involving a foreign element.  Those universal principles of right and justice which govern the operation and effect of laws of another state or country.  That part of law which comes into play when the issue before the court affects some fact or event, or transaction that is so closely connected with a foreign system of

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Adjudicatory jurisdiction o Determines the circumstances that allow for a legal order to impose upon its judiciary the task of deciding multi-state and multinational disputes Choice-of-law o Refers to the probable sources from which the applicable law of the controversy may be derived. Recognition and enforcement of foreign judgments o Deals with the study of situations which justify recognition by the forum court of a judgment rendered by a foreign court or the enforcement of such within the forum.

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II. Jurisdiction and Choice of Law

[International Shoe Co. v. Washington, 326 US 310, 1945] o Minimum Contacts – this includes “its presence in the state through acts of authorized agents. [International Shoe Co. v. Washington]

A. JURISDICTION 



Judicial Jurisdiction – power or authority of a court to try a case, render judgment and execute it in accordance with law Legislative Jurisdiction – the ability of the state to promulgate laws and enforce them on all persons and property within its territory.





A.1. BASIS OF EXERCISE OF JUDICIAL JURISDICTION i. Jurisdiction over the Person

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



Jurisdiction over the person is acquired by the voluntary appearance of a party and his submission to authority. Over the person of the PLAINTIFF – the moment he invokes the aid of the court by filing a suit. Over the person of the defendant – when he enters his appearance OR is served with the legal process within the state (either through personal or substituted service of summons). o



 

CIVIL LAW

Under International Shoe, minimum contacts must exist between the forum and the defendant. Under the case of Shaffer v Heitner (433 US 186, 1977), the minimum contacts must exist among the forum, defendant and the cause of action.

ii. Jurisdiction over the Property



Results either from the seizure of the property under a legal process or from the institution of legal proceedings wherein the court’s power over the property is recognized and made effective.

iii. Jurisdiction over the Subject Matter  Subject matter jurisdiction or competence is “more than the general power conferred by law to take cognizance of cases of a general class to which the case belongs.  It is necessary that said power be properly invoked... by filing a petition.  Subject matter jurisdiction cannot be conferred by consent of the parties and a decision is void and may be set aside either directly or collaterally, where the court exceeds its jurisdiction and power in rendering it.

Exception: if he appears for the purpose of protesting the jurisdiction of the court.

Non-resident plaintiff – deemed to consent to the court’s exercise of jurisdiction over subsequent proceedings arising out of his original cause of action including counterclaims filed by the defendant. Traditional Approach – Presence in the state Modern Approach – Minimum contacts and fundamental fairness test

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A.2. WAYS OF DEALING CONFLICTS PROBLEM

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WITH

A

CIVIL LAW

to be the same as Philippine law. (3) The case under any of the exceptions to the application of foreign law. (a) When the foreign law is contrary to an important public policy (b) When the foreign law is penal in nature (c) When the foreign law is procedural in nature (d) When the foreign law is purely fiscal or administrative in nature (e) When the application of the foreign law will work undeniable injustice to the citizens of the forum (f) When the case involves real or personal property situated in the forum (g) When the application of the foreign law might endanger the vital interest of the state. (h) When the foreign law is contrary to good morals

i. Dismiss the Case Doctrine of Forum Non Conveniens  Definition: Even if the court assumes jurisdiction over the parties and the subject matter, it may decline to try the case on the ground that the controversy may be more suitably tried elsewhere. ii. Assume Jurisdiction Assumption of jurisdiction DOES NOT mean that the court will apply forum law. However, the presence of any one of the following factors would justify the application of internal law:

(1) A specific law of the forum decrees that internal law should apply Examples: (a) Article 16 of the Civil Code real and personal property are subject to the law of the country where they are situated. (b) Article 829 – revocation of a will done outside the Philippines maybe valid if done according to the law of the place where the will was made or lex domicile (c) Article 819 – prohibits Filipinos from making joint wills even when done abroad. (2) The proper foreign law was not properly pleaded and proved (a) Foreign law must be proved as a fact through Rules of evidence (e.g. official publication or copy, which has been consularized) (b) Doctrine of Processual Presumption – absent contrary proof, foreign law is presumed

B. CHOICE OF LAW B.1. APPROACHES TO CHOICE OF LAW i. Traditional Approaches Vested-Rights Theory

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An act done in a foreign jurisdiction gives rise to the existence of a right if the laws of that state provides so. This right vests in the plaintiff and he carries it with him to be enforced in any forum he chooses to bring suit. The forum refers to the law of the place of occurrence of the “last act” necessary to complete the cause of action.

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incorporation and place of business of the parties

ii. Modern Approaches Place of Most Significant Relationship

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



CIVIL LAW

Interest Analysis

Identifies a plurality of factors o The needs of the interstate and international system o Relevant policies of the concerned states o The relevant policies of other interested states and the relative interests of those in the determination of the particular issue o The protection of justified expectations of the parties o The basic policies underlying the particular field of law o Certainty, predictability and uniformity of result o Ease in the determination and the application of the law to be applied In torts o The place where the injury occurred o The place where the negligent conduct occurred o The domicile, resident or nationality of the parties o The place where the relationship between the parties is entered. In contracts o The law chosen by the parties o In the absence thereof;  the place of contracting  the place of negotiation  the place of performance  the domicile, residence, nationality, place of



Looks at the policy behind the laws of the involved state and the interest each state had in applying its own law.

Comparative Impairment



Weighs conflicting interests and apply the law of the state whose interest would be more impaired if its laws were not followed.

Functional Analysis



This approach looked into the general policies of the state beyond those reflected in its substantive law and to policies and values “relating to effective and harmonious intercourse between states.”

C. THE PROBLEM OF CHARACTERIZATION C.1 CHARACTERIZATION AND THE SINGLE-ASPECT METHOD  Traditional approach - Single-aspect method (concentrates on one element of a situation in order to connect the case to a particular legal community)  Modern approach – Multi-aspect method (all important factors of the case are analyzed and the applicable law is arrived at by “rationally elaborating and applying the policies and purposes underlying the particular legal rules that come in question as well as the needs of interstate or international intercourse.”)  The Philippines follows the single aspect method.

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of action arose. (Philippines has passed a borrowing statute)

Characterization - The process by which a court at the beginning of the choice-of-law process assigns a disputed question to an area in substantive law.

C.2 DECEPAGE Phenomenon where “different aspects of a case involving a foreign element may be governed by different systems of laws.”

i. Subject-Matter Characterization





Classification by a court of a factual situation into a legal category.



ii. Substance-Procedure Dichotomy

 

Directs the court to the extent it will apply foreign law. If the issue is substantive, the court MAY apply foreign law. But if it procedural, it is suppose to follow the law of the forum.





The Statute of Frauds is considered as substantive if the words of the law relate to forbidding the CREATION of obligation. In contrast, one that forbids ENFORCEMENT of the obligation is categorized as procedural.

D.1. DEFINITION Procedure whereby a jural matter presented is referred by the conflict of laws rules of the forum to a foreign state, the conflict of laws rule of which, in turn, refers the matter to the law of the forum or a third state.  Remission – reference is made back to the law of the forum  Transmission – reference is made to a third state

Statutes of Limitation and Borrowing Statute General Rule: Statutes of limitations were classified as procedural because they barred only the legal remedy without impairing the substantive right involved.  Exception: If the statute provides a shorter period for certain types of claims that fall within a wider classification covered by a general statute of limitations. (Specificity Test) Borrowing statutes



A case may be dissected into different issues, each analyzed as to which law shall apply. When such issue by issue analysis results in the application of different laws to different issues, then decepage occurs. Decepage is the effect of issue by issue analysis.

D. THE PROBLEM OF RENVOI

Statute of Frauds



CIVIL LAW

D.2. VARIOUS WAYS OF DEALING WITH THE PROBLEM OF RENVOI (1) Reject the renvoi - Forum conflict rules is deemed to refer only to the internal law of that state (i.e. that which would apply to a domestic case with no conflict-of-laws complications) (2) Accept the renvoi – looks into not just the internal law of the foreign state, but also the choice-of-law rules applicable in multistate cases. (3) Desistance or mutual disclaimer of jurisdiction (e.g. Forum court looks at

Bars the filing of a suit in the forum if it is already barred by the statute of limitations in the place where the cause

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foreign law; foreign law does not apply to non-residents; therefore, no one has applicable laws; Forum court then applies forum law) (4) Foreign Court Theory – the forum court would assume the same position that the foreign court would take were the case litigated in the foreign court.



E.1. EXTENT OF JUDICIAL NOTICE





Assume that the foreign law is the same as the law of the forum (doctrine of processual presumption) Apply the law of the forum

E.3. EXCEPTIONS TO THE APPLICATION OF FOREIGN LAW  The foreign law is contrary to an important public policy of the forum  The foreign law is procedural in nature  Issues are related to property (Lex Situs)  The issue involved in the enforcement of foreign claim is fiscal or administrative  The foreign law or judgment is contrary to good morals (Contra Bonos Mores)  The application of foreign law will work undeniable injustice to the citizens of the forum  The foreign law is penal in character  The application of the foreign law might endanger the vital interests of the state

E. NOTICE AND PROOF OF FOREIGN LAW



CIVIL LAW

The party whose cause of action or defense depended upon the foreign law has the burden of proving the foreign law. Such foreign law is treated as a question of fact to be properly pleaded and proved in conformity with the law of evidence of the state where it is presented. A judge is not authorized to take judicial notice of a foreign law and is presumed to know only domestic law.

E.2. PROOF OF FOREIGN LAW Methods to prove foreign law

 



Official publication of the law (and consularized) Copy of the law attested by the officer having the legal custody of the record or by his deputy. (and consularized) Expert witness

III. Personal Law A. NATIONALITY A.1. IMPORTANCE OF A PERSONAL LAW An individual’s personal law follows him wherever he is and governs those transactions which affect him most closely.

Effect of Failure to Plead and Prove Foreign Law

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Importance of Nationality in the Philippines Regulates

Dismiss the case for inability to establish a cause of action

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Family rights and duties Laws on succession Capacity to succeed

A.2. DETERMINATION OF NATIONALITY Who are Filipino Citizens

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 



Those who are citizens of the Philippines at the time of the adoption of the Constitution (1987) Those whose fathers or mothers are citizens of the Philippines Those born before January 17, 1973 of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority Those who are naturalized in accordance with law

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Natural-born citizens are those who are citizens of the Philippines without having to perform any act to acquire or perfect citizenship.

The place with which a person has a settled connection for certain legal purposes, either because his home is there or because that place is assigned to him by law. The place of his true, fixed permanent home and principal establishment, and to which, whenever he is absent, he has the intention of returning. To acquire a domicile, there must be concurrence of intention to make it one’s domicile and physical presence.

B.2. GENERAL RULES ON DOMICILE Rules on Domicile

(1) No person shall be without a domicile (2) A person cannot have two simultaneous domicile. (a) However, domicile may vary depending on the purpose (e.g. domicile for divorce will be different from domicile for the purpose of running for public office.) (3) It establishes a connection between a person and a particular territorial unit (4) The burden of proving a change of domicile is upon whoever alleges that a change has been secured. (a) Without overwhelming evidence to show a change of domicile, the court will decide in favor of the continuance of an existing domicile.

The Philippines follows the jus sanguinis principle which means the rule of descent or blood.

ii. Citizens by Naturalization

B. DOMICILE B.1. DEFINITION Domicile is defined by municipal law (Philippine Law) and private international law. Under municipal law



For juridical persons: domicile is determined by the law creating or recognizing it. In the absence thereof it shall be understood to be the place where their legal representation or place of business is.

Under private international law

i. Natural-Born Citizens

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CIVIL LAW

Art. 50 of the Civil Code provides: “For the exercise of civil rights and the fulfillment of civil obligations, the domicile of natural persons is the place of their habitual residence.”

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B.3. KINDS OF DOMICILE  Domicile of origin o Refers to a person’s domicile at birth (domicile of parents)  Domicile of choice o Voluntary domicile o



(7) Succession (both testate and intestate) Capacity  Juridical capacity – the fitness of a man to be the subject of legal relations.  Capacity to act – the power to do acts with juridical effects.

The place freely chosen by a person sui juris



Constructive domicile o By operation of law, a domicile is assigned to a person legally incapable of choosing their own domicile. (e.g. minors and mentally disabled)

The union of both produces complete civil capacity.

C.2. LEGISLATIVE JURISDICTION DISTINGUISHED FROM JUDICIAL JURISDICTION Status, once established by the personal law of the party, is given UNIVERSAL RECOGNITION.

C. PRINCIPLES ON PERSONAL STATUS AND CAPACITY

C.3. BEGINNING AND END OF PERSONALITY  The determination of the exact moment personality begins is referred to the individual’s personal law.  A declaration of death issued by a competent court is considered valid for all purposes. Upon the death of a person, some of his rights and obligations are totally extinguished while others are passed on to his successors.

C.1. DEFINITION Personal status

 

CIVIL LAW

Includes both condition and capacity Embraces such matters as: (1) The beginning and end of human personality (2) Capacity to have rights in general (3) Capacity to engage in legal transactions (4) Protection of personal interests (5) Family relations, particularly the relations between: (a) Husband and wife (b) Parent and child (c) Guardian and ward (6) Transactions of family law, especially (a) Marriage (b) Divorce (c) Separation (d) Adoption (e) Legitimation (f) Emancipation

C.4. ABSENCE Three ways of addressing conflict of laws problem regarding absence: (1) There is a rebuttable presumption that a person is dead when he has been absent for a number of years (2) A person’s unexplained absence is judicially investigated and established which results in legal effects similar to those of death (3) A judicial decree shall have to be issued declaring the person dead before the legal effects of death take place. 568

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The Philippines follows the first. Marriage is a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within limits provided by this Code. [Art. 1, Family Code]

C.5. NAME Philippine law provides that: “no person can change his name or surname without judicial authority.” Exceptions (according to Jurisprudence): (1) That the name is ridiculous or tainted with dishonor or extremely difficult to pronounce. (2) When the change is necessary to avoid confusion (3) When the right to a new name is a consequence of a change in status (4) A sincere desire to adopt a Filipino name to erase signs of a former alien nationality which unduly hamper social and business life. Whether an alien’s change of name is valid DEPENDS SOLELY ON HIS PERSONAL LAW.

Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. [Art. 15, Civil Code]

C.6. AGE OF MAJORITY

This follows the principle of LEX NATIONALII.

Age of majority is determined by the individual’s personal law.

i. Philippine Policy on Marriage and the Family

C.7. CAPACITY  

In case of doubt, courts will apply FORUM law because of marriage is greatly influenced by the values of society. (Prof. Elizabeth Pangalangan)

Capacity to act is governed by his personal law. The incapacities attached to his legal status go with him wherever he is.

This policy is expressed in various laws, e.g.:

IV. Choice of Law Problems

Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State. [Sec. 2, Art. XV of the 1987 Constitution]

A. CHOICE-OF-LAW IN FAMILY RELATIONS A.1. MARRIAGE

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Exceptions to the rule of lex loci celebrationis (these involve the question capacity to marry, which is a substantive requirement for marriage):

In case of doubt, all presumptions favour the solidarity of the family. Thus, every intendment of law or facts leans toward the validity of marriage, the indissolubility of the marriage bonds, the legitimacy of children, the community of property during the marriage, the authority of parents over their children, and the validity of defense for any member of the family in case of unlawful aggression. [Art. 220, Civil Code]

(1) Either/both parties are below 18 years old (2) Bigamous or polygamous marriages (3) Subsequent marriage without recording: (a) The judgment of nullity of the first marriage (b) Partition and distribution of the properties of the spouses (c) Delivery of the children’s presumptive legitimes (4) Mistake as to identity of the contracting party (5) One of the parties was psychologically incapacitated to comply with the essential marital obligations (6) Incestuous (7) Void by reason of public policy

ii. Extrinsic Validity of Marriage Extrinsic validity covers questions relating to formalities or “external conduct required of the parties or of third persons especially of public officers, necessary to the formation of a legally valid marriage.” In the Philippines, these are enumerated in Art 3 of the Family Code:

(1) Authority of the solemnizing officer (2) A valid marriage license except in cases provided in Chapter 2 of this Title; and (3) A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age.

iii. Intrinsic Validity of Marriage



 

All marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country... [Art. 26, par. 1, Family Code]

This follows celebrationis.

the

principle

of

lex

CIVIL LAW

Intrinsic validity refers to the general ability of a person to marry (e.g. age requirement and parental consent). This is controlled by the parties’ personal laws. Marriages celebrated by a Consular Official - Formal and intrinsic requirements under Philippine law shall be followed.

iv. Effects of Marriage Personal Relations Between the Spouses

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Includes mutual fidelity, respect, cohabitation, support and the right of the wife to use the husband’s family name.

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A.3. ANNULMENT AND DECLARATION OF NULLITY  Grounds are based on the defects at the time of the celebration of the marriage  Traditional approach: Grounds follow LEX LOCI CELEBRATIONIS  Modern Approach: Grounds follow LAW OF THE MARITAL DOMICILE.

Governed by the national law of the parties.

Property Relations of Spouses According to the Hague Convention:

 

Internal law designated by the spouses before the marriage In absence thereof, the internal law of the state in which both spouses fix their habitual residence.

A.4. PARENTAL RELATIONS  Legitimacy of the child is submitted to the personal law of the parents (in the Philippines, national law of the parents).

At least one Filipino spouse;



Property relations Philippine law

governed

by

A.2. DIVORCE AND SEPARATION  Absolute – termination of legal relationship between spouses by an act of law  Limited – separation from bed and board  Grounds for divorce and dictated by the LEX FORI.

i. Determination of Legitimacy of a Child Kinds of filiations

(1) Natural (a) Legitimate – governed by the personal law of the father (b) Illegitimate – governed by the personal law of the mother (2) Adopted

i. Divorce Decrees Obtained by Filipinos

ii. Parental Authority over the Child

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Decrees of absolute divorce are not valid if obtained by Filipinos abroad If decree is obtained by alien spouse capacitating him to marry, Filipino spouse shall have capacity to marry. (Art. 26, Family Code)

ii. Validity Foreigners

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Most countries follow the personal law of the father. In the Philippines, joint exercise of parental authority by the father and mother (Art. 211 of the Family Code).

A.5. ADOPTION  Process of adoption - governed by LEX DOMICILII

Between

This will be recognized in the Philippines under the principle of international comity, provided it does not violate a strongly held policy of the Philippines.

B. CHOICE OF LAW IN PROPERTY B.1. THE CONTROLLING LAW

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In the Philippines, both movables and immovables are governed by LEX SITAE Conflict arises when property is located in a foreign country and the foreign country has a law that distinguishes between real and personal property.

Unsettled in Philippine jurisdiction, however, Prof. Pangalangan suggests that the law which governs the contract from which the debt arises shall also govern the transfer of the debt.

C. CHOICE OF LAW IN CONTRACTS

B.2. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY  Real property – law of the place where the property is located B.3. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES  Formalities and effects of conveyance – Governed by lex situs

C.1. EXTRINSIC VALIDITY OF CONTRACTS  LEX LOCI CELEBRATIONIS (Art. 17 of the Civil Code) C.2. INTRINSIC VALIDITY OF CONTRACTS i. Lex Loci Contractus

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B.4. EXCEPTION TO LEX SITUS RULE  The transaction does not affect transfer of title to/ownership of the land (lex intentionis/lex voluntatis)  Contracts where real property is offered by way of a security for the performance of an obligation such as a loan. (loan is covered by rules on ordinary contracts though mortgage is governed by lex situs)  Testate or intestate succession and capacity to succeed (lex nationalii)

Looks into where “the last act is done which is necessary to bring the binding agreement into being so far as the acts of the parties are concerned.”

ii. Lex Loci Solutionis All matters relating to the:

(1) (2) (3) (4)

Time Place and manner of performance Sufficiency of performance Valid excuses for non performance

iii. Lex Loci Intentionis

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Philippine basis The 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. [Art. 1306, Civil Code]

B.5. SITUS OF CERTAIN PROPERTIES i. Situs of Personal Property for Tax Purposes

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Mobilia sequuntur personam However, it yields to established facts of legal ownership, actual presence and control elsewhere and cannot be applied if it would result in inescapable and patent injustice.

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ii. Situs of Debts

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Hence, LEX LOCI INTENTIONIS applies unless it is contrary to law, morals, good customs, public order or public policy of the Philippines.

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C.3. CAPACITY TO ENTER INTO CONTRACTS  Governed by the personal law of the parties (either LEX NATIONALII or LEX DOMICILII)

D.2. INTRINSIC VALIDITY OF WILLS  Governed by the national law of the decedent (Art. 16 of the Civil Code) D.3. INTERPRETATION OF WILLS  Governed by the national law of the decedent (Art. 16 of the Civil Code)

C.4. CHOICE OF LAW ISSUES IN CONFLICTS CONTRACTS CASES

D.4. REVOCATION

i. Choice of Forum Clause

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i. Done outside the Philippines, by a person not have domicile in the Philippines

Questions of venue, not jurisdiction Includes arbitration, not only choice of court.

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ii. Contracts with Arbitration Clause  Arbitration clause – a provision in a contract stipulating that any dispute arising from the contract shall be submitted to a particular body for arbitration

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Not negotiated by the parties Drafted by only one dominant party The only participation of the other party would be to affix his signature

D. CHOICE OF LAW IN WILLS, SUCCESSION AND ADMINISTRATION OF ESTATES

D.6. ADMINISTRATION OF ESTATES  Nationality and domicile does not affect administration  Authority of the administrator or executor is limited to the authority of the court that appointed such.

D.1. EXTRINSIC VALIDITY OF WILLS Filipino nationals

Lex nationalii Lex loci celebrationis

Aliens

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Lex domicilii Lex loci actus

D.5. PROBATE  Disallowance is essentially procedural in character – governed by the law of the forum  However, the court will look into the law of the foreign state where the will was made as to whether the extrinsic requirements in the execution of the will have been complied with.

Adhesion contracts

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Lex loci celebrationis Lex domicilii

ii. Done outside the Philippines, by a person domiciled in the Philippines

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E. CHOICE OF LAW IN TORTS AND CRIMES

Lex nationalii Lex domicilii Lex loci celebrationis

E.1. LEX LOCI DELICTI COMMISSI

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Law of the place where the alleged tort was committed Choice-of-Law o Common Law – vested rights theory (place of injury) o Civil Law – Tortious conduct Traditional View on Jurisdiction – an actor liable by LEX LOCI DELICTI is liable everywhere

Law of the place where the crime was committed

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i. The Most Significant Relationship

Considers the state’s contacts with the occurrence and the parties.

(1) Crimes committed by state officials, diplomatic representatives and officials of recognized international organizations (2) Crimes committed on board foreign vessels even if it is within the territorial waters of the coastal state, except: (Art. 27 of UNCLOS) (a) Consequences extends to the coastal state (b) Disturbs the peace or good order of the country (c) Requested by the master of the ship or diplomatic agent or consular officer of the flag state (d) If such measures are necessary for the suppression of illicit traffic in narcotic drugs or psychotropic substances. (3) Crimes committed by Philippine nationals abroad under Art. 2 of the RPC. (a) On a Philippine ship or airship (b) Forgery or counterfeit any coin or currency note of the Philippine

Considers the relevant concerns the state may have in the case and its interest in having its law applied on that issue.

iii. Cavers’ Principle of Preference

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Considers justice and social expediency

E.3. FOREIGN TORT CLAIMS 

An act is punishable if it has been made punishable as a crime by law. Developments in public international law now includes acts considered as a crime under international law.

Exceptions to lex loci delicti:

ii. Interest Analysis

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Since the crime is an “affront against the sovereignty and good order of the state within whose jurisdiction it occurs, each state must attend to the vindication of its own sovereignty.”

E.5. LEX LOCI DELICTI

E.2. MODERN THEORIES ON FOREIGN TORT LIABILITY

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Tortious liability is transitory - the liability resulting from the conduct is “deemed personal to the perpetrator of the wrong, following him whithersoever he may go, so that compensations may be exacted from him in any proper tribunal which may obtain jurisdiction of the defendant’s person, the right to sue not being confined to the place where the cause of action arises.”

E.4. DISTINGUISHING BETWEEN TORTS AND CRIMES  Crime is territorial  Crime is an injury to the state

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Islands or obligations and securities issued by the Government of the Philippine Islands (c) Introduction of those mentioned above into the Philippines (d) Public officers or employees committing an offense in the exercise of their functions (e) Crimes against national security and the law of nations, defined in Title One of Book Two of the RPC.

When the law creating or recognizing them, or any other provision does not fix the domicile of juridical persons

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iv. Jurisdiction over Foreign Corporations

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F.1. CORPORATIONS i. Personal law of a Corporation

Law of the state where it is incorporated

ii. Exceptions to the Rule of Incorporation Test Constitutional and Statutory Restrictions

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A state may exclude a foreign corporation from doing business within its territory, or prescribe any conditions as a prerequisite.

Control Test During War

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Courts may pierce the veil of corporate identity and look into the nationality of the controlling stockholders to determine the “citizenship” of the corporation

iii. Domicile or Residence Corporations Art. 51 of the Civil Code states:

of

the place where their legal representation is established or where they exercise their principal functions

A foreign corporation is granted a license to operate in the Philippines, it acquires domicile here.

F. CHOICE OF LAW AFFECTING CORPORATIONS AND OTHER JURIDICAL ENTITIES

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Foreign

A foreign corporation shall be recognized and allowed to transact business in any state which gives its consent. Foreign corporations doing business in the Philippines are bound by Philippine law. (Sec. 129 of the Corporation Code), except for (1) Provisions for creation, formation, organization or dissolution (2) Provisions which fix the relations liabilities, responsibilities or duties of stockholders, members, or officers of the corporation (3) Service upon foreign corporations doing business in the Philippines may be made on (a) Resident agent (b) If none: (i) Government official designated by law (ii) Any of its officers or (iii) Agent within the Philippines (iv) Through diplomatic channels

v. Right of Foreign Corporation to Bring Suit

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Prerequisite for filing a suit before Philippine courts:

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o License to transact business in the Philippines (Sec. 133 of the Corporation Code)

(3) Participating in the management, supervision, or control of any domestic business, firm, entity, or corporation in the Philippines (4) Any other act that implies a continuity of commercial dealings or arrangements (5) The exercise of some functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization

vi. Exceptions to the License Requirement Isolated Transactions

(1) One which is occasional, incidental and casual (2) Not of a character or business to indicate a purpose to engage in business (3) Does not constitute “doing business” as contemplated by law (4) Isolated if there is no: (a) Continuity of conduct (b) Intention to establish a continuous business within the state

F.2. PARTNERSHIPS  To determine the entitlements and limitations applicable to the partnership – law of the domicile applies  To determine the legal capacity of foreign corporations to contract – personal law applies o But Philippine law remains applicable to:  The creation of their establishments in the Philippines  The mercantile operations  The jurisdiction of the courts of the Philippines  To determine the existence of the partnership – personal law applies  To determine the grounds for dissolution and termination of the partnership – personal law applies

Action to Protect Trademark, Trade Name, Goodwill, Patent or for Unfair Competition

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Based on equity considerations

Agreements Fully Transacted Outside the Philippines

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Based on the policy of stabilizing commercial transactions.

Petition Filed is Merely a Corollary Defense in a Suit Against It vii. Definition and Scope of “Transacting Business” Under the Foreign Business Registration Act and Foreign Investments Act, acts that constitute doing business includes:

(1) Soliciting orders, service contracts, opening offices (2) Appointing representatives or distributors either (a) Domiciled in the Philippines (b) Stay in the country for 180 days or more

Extraterritorial enforcement of in personam judgments against partnership

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association if under the circumstances, there is jurisdiction over an individual A judgment against a partnership or association is enforceable against its assets in every state.

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In order to obtain a reciprocal treatment from the courts of other countries, we are compelled to take foreign judgments as they stand and to give them Full Faith and Credit

Obligation of foreign judgment

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V. Foreign Judgments

Derived from the vested rights theory

A.3. POLICIES UNDERLYING RECOGNITION AND ENFORCEMENT

A. RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS

Res judicata

A.1. DISTINCTION BETWEEN RECOGNITION AND ENFORCEMENT

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Foreign Judgment

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All decisions rendered outside the forum Encompasses judgments, decrees, and orders of (1) foreign governments (2)sister states in a federal government

A.4. REQUISITES FOR RECOGNITION OR ENFORCEMENT i. The Foreign Judgment was Rendered by a Judicial or Quasi-Judicial Tribunal which had Jurisdiction Over the Parties and the Case in the Proper Judicial Proceedings

Enforcement

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Occurs when the successful plaintiff fails to obtain satisfaction of a judgment in the court which granted it The plaintiff may try to enforce the judgment in another state where the defendant can be located

Bases of jurisdiction

(1) Proceedings in personam (a) Consent of the parties (b) Relation of the parties or events to the forum (2) Proceeding in rem (a) State power over the property found within the territory

Recognition

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Those who have contested an issue shall be bound by the result of the contest Prevents parties from litigating issues that have been determined by a valid local judgment Applies in the Philippines to foreign judgments through sec. 40, Rule 39

Occurs when the defendant wins, and asserts that decision in order to preclude the plaintiff from filing a suit on the same claim in another forum

ii. The Judgment Must Be Valid Under the Laws of the Court that Rendered It

A.2. BASES OF RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS

iii. The Judgment Must be Final and Executory to Constitute Res Judicata in Another Action

Comity

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The foreign judgment creates no obligation on the forum court to recognize or enforce it if it is merely interlocutory or provisional, contemplating a fuller investigation leading to a later final decision.

iv. The State Where the Foreign Judgment was Obtained Allows Recognition or Enforcement of Philippine Judgments

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Reiteration of international comity

v. The Judgment Must be for a Fixed Sum of Money

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Unless the foreign judgment specifies performance or delivery, there is nothing for the forum court to enforce.

vi. The Foreign Judgment Must Not be Contrary to the Public Policy or Good Morals of the Country Where it is to be Enforced vii. The Judgment Must Not Have Been Obtained by Fraud, Collusion, Mistake of Fact or Mistake of Law

A.5. PROCEDURE FOR ENFORCEMENT When a foreign judgment is recognized, it is not instantaneously executed as a judgment. A petition should be filed in the proper court attaching an authenticated copy of the foreign judgment to be enforced.

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Authentication calls for the Philippine consul assigned to the country where the foreign judgment was decreed to certify that had been rendered by a court of competent jurisdiction.

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