CIVIL LAW Atty. Rachelle Castro

UNIVERSITY OF THE CORDILLERAS BAR OPERATIONS 2011 CIVIL LAW Prepared by:

ATTY. RACHELLE CASTRO I. PERSONS 1. Retroactivity of Laws, NCC Art. 4 Laws shall have no retroactive effect, unless the contrary is provided. Exceptions to Rule: (1) When the law itself so expressly provides.-- This has two exceptions: (a) when the retroactivity of a penal statute will make it an ex post facto law, (“Sec. 22. No ex post facto law or bill of attainder shall be enacted. Sec. 22, Article III, 1987 Constitution) and (b) When the retroactive effect of the statute will constitute an impairment of the obligation of contract. (“Sec. 10. No law impairing the obligation of contracts shall be passed.” Sec. 10, Article III, 1987 Constitution) (2) In case of Penal statutes.-- Penal laws shall have retroactive effect insofar as they favor the accused who is not a habitual criminal, even though at the time of the enactment of such laws final sentence has already been rendered. (Art. 22, RPC) (3) In case of Remedial statutes.-- Remedial statutes are those which refer to the method of enforcing rights or of obtaining redress of their invasion. (4) In case of Curative statutes.-- Curative statutes are those which undertake to cure errors and irregularities. (5) In case of laws interpreting others.-- These are laws which are intended to clarify doubts or interpret an existing law. (6) In case of laws creating new rights.-- provided that it does not prejudice another acquired right of the same origin. (7) If the law is of an emergency measure and authorized by the police power of the State. (8) Tax laws – which impose taxes may be given retroactive effect. Liability for taxes is incidental to social existence. (Lorenzo vs. Posadas, 64Phil 353) 2. Territoriality Principle – Operation of law is co-extensive with territorial sovereignty (Art. 14, NCC), particularly in case of penal laws, and laws of public security and safety. Territoriality and Generality Principle Art. 14. Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in Philippine territory, subject to the principles of public international law and to treaty stipulations. There are 2 principles involved here: Territoriality and Generality. Territoriality means that our criminal laws are enforceable only within Philippine territory. Exception to the territoriality principle is Article 2 of RPC. Generality which means that within the Philippine territory, our criminal laws will apply to anyone, citizen or alien. Our penal laws equally apply to aliens who live or sojourn in the Philippines based on the principle that during their stay, they owe allegiance to the country

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though temporary in nature. The same rule is embodied in Article 2 of the RPC. UNIVERSALITY AND TERRITORIALITY PRINCIPLE: Universality: Penal laws and those of general welfare and those of public security are binding on all who reside and sojourn in the Philippine territory. (Art. 14) Prohibititve laws concerning persons, their acts and their property, and those intended to promote public order and good morals, shall not be made nugatory by any foreign laws or judgments nor by an action or agreement made in a foreign country. (Art. 17, p. 3) Basis of the rule is the right of the State to protect itself and its policies in order to achieve its ends. “Art. 14. Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in Philippine territory, subject to the principles of public international law and to treaty stipulations” Thus, any offense committed by any person (Filipino or alien) within the territory of the country is an offense against the State. The State has, therefore, the power to prosecute and punish the offender, national of foreigner. Exceptions: (1.) Those, who under principles of public internal law enjoy diplomatic immunities (from suit) such as heads of states, foreign ambassadors or diplomats provided they do not travel incognito. NOTE: Consuls do not have immunities (2.) Those expressly excluded from our jurisdiction due to treaty stipulations EXTRATERRITORIAL JURISDICTION: “The juridical power of the State extending beyond the physical limits of a particular state or country.” (Blacks Law Dictionary., 6 th Ed.) Where the State has jurisdiction over specific crimes although the same was committed outside its jurisdiction. “Art. 2 (RPC) Application of its provisions. – Except as provided in the treaties and laws of preferential application, the provisions of this Code shall be enforced not only within the Philippine Archipelago, including its atmosphere, its interior waters and maritime zone, but also outside its jurisdiction, against those who: 1. Should commit an offense while on a Philippine ship or airship; 2. Should forge or counterfeit any coin or currency note if the Philippine Islands or obligations and securities issued by the Government of the Philippine Islands; 3. Should be liable for acts connected with the introduction into these Islands of the obligations and securities mentioned in the preceding number; 4. While being public officers or employees, should commit an offense in the exercise of their functions; or 5. Should commit any of the crimes against national security and the law of nations, x x x 3.

Lex Rei Sitae

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Art. 16. Real property as well as personal property is subject to the law of the country where it is situated. 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 succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. EXCEPTIONS TO LEX REI SITAE: (1) In case of successional rights to real property, the law that governs is the national law of the decedent (Art. 16, par. 2 Civil Code); as well as capacity to succeed (in inheritance) is also governed by the national law of the decedent (Art. 1039, CC); (2) Contracts involving real property but which do not deal with the title to such real property shall not necessarily be governed by the lex rei sitae. The proper law of the contract governs (3) In contracts where real property is given by way of security, the principal contract of i.e loan is governed by the proper law of the contract; the accessory contract of mortgage is governed, however, by the law of the state where the real property mortgaged is situated. 4.

Formalities (LEX LOCI CELEBRATIONIS) – The forms and solemnities of contracts, wills and other public instruments are governed by the law of the country in which they are executed. (Art. 17, par. 1) Refers to the formal or extrinsic validity

5. Renvoi Doctrine – Where our law provides that a foreign law should be applied, such application takes place despite any provision of that foreign law that another law should apply in case of conflict. 6.

Nationality Principle “Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon the citizens of the Philippines even though living abroad.” In the Philippines, we follow the nationality or citizenship theory, that is, the national law of the person is applied in matters involving personal relations. In the U.S, and Great Britain, the domiciliary or territoriality theory is followed such that, the law of the domicile is applied on matters involving personal relations.

FAMILY CODE: Validity of Marriage – in determining the validity of marriage, it is to be tested by the law in force at the time the marriage was contracted. 1.

Requisites for validity of marriage: a. Essential requisites: i. Legal capacity of the contracting parties who must be a male and a female; and • Legal capacity defined: male or female of the age of 18 years or upwards not under any of the impediments in Articles 37 (incestuous marriages), 38 void marriages by reason of public

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policy). (Art. 5) •

“to grant the changes in name and sex sought by petitioner will substantially reconfigure and greatly alter the laws on marriage and family relations – it will allow the union of a man with another man who has undergone sex reassignment, a male-to-female post operative transsexual. (Silverio vs. Republic, 537 SCRA 373) Such a marriage is void. ii. Consent freely given in the presence of the solemnizing officer (Art. 2, FC) – consent of the contracting parties and not their parents should they 18 years old and up. b. Formal requisites: (Art. 3) 1. Authority of the solemnizing officer The authority of the officer or clergyman shown to have performed a marriage ceremony will be presumed in the absence of any showing to the contrary. (Alcantara vs. Alcantara, 531 SCRA 446) Authorized solemnizing officers are: 1.1. incumbent member of the judiciary within the court’s jurisdiction; 1.2. any priest, rabbi, imam, or minister of any church or religious sect duly authorized by his church or religious sect and registered with the civil registrar general, acting within the limits of the written authority granted him; 1.3. any ship captain or airplane chief only when the marriage is in articulo mortis; 1.4. any military commander of a unit to which a chaplain is assigned, in the absence of the latter, during military operation where the marriage is in articulo mortis; 1.5. any consul-general, consul or vice consul where the marriage is abroad between Filipino citizens ; 1.6. mayors (Local Government Code) Absence of authority of the solemnizing officer- the marriage is void, however, where either or both of the contracting parties believing in good faith that the solemnizing officer had the legal authority to do so, the marriage is valid (Art. 35, p. 2) 2.

A valid marriage license except where no marriage license is necessary: a. marriage in articulo mortis (art. 27) b. residence of either or both parties are in far areas and no means of transportation to appear before the local civil registrar; (Art. 28) c. marriage among Muslims or among members of the ethnic cultural communities, provided they are solemnized in accordance with their customs, rites, practices; (Art. 33) d. co-habitation for at least five years and without any legal impediments to marry each other; (Art. 34)

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 witness of legal age. Note that “No prescribed form or religious rite for the solemnization of the marriage is required. It shall be necessary however, contracting parties to appear personally before the solemnizing officer and declare

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in the presence of not less than two witnesses of legal age that they take each other as husband and wife.” (Art. 6) Effect of absence or defect in any of the requisites: a. The absence of any of the essential for formal requisites shall render the marriage void (Art. 4) Note: Case of Navarro vs. Domagtoy, July 19, 1996 where the court held that “where judge solemnizing a marriage outside his court’s jurisdiction, there is a resultant irregularity in the formal requisite, which, while it may not affect the validity of the marriage, may subject the officiating official to administrative liability.” b. A defect in any of the essential requisites shall render the marriage voidable; (Art. 4, par. 2) c. An irregularity in the formal requisites shall not affect the validity of the marriage but the party or parties responsible for the irregularity shall be civilly, criminally and administratively liable. (Art. 4 par. 3) 4. Void Marriages 1. Void marriages under Art. 35 1.1. 1.2. 1.3. 1.4. 1.5. 1.6.

those contracted by any party below 18 years of age Those solemnized by any person not legally authorized to perform marriages Those solemnized without a license Those bigamous or polygamous marriages not falling under Art. 41 Article 41 refers to a valid bigamous marriage Those contracted through mistake of one contracting party as to the identity of the other; and Those subsequent marriages that are void under Art. 53

2. Psychological Incapacity of one or both of the contracting parties to perform his or her essential marital obligations (Art. 36) 3. Incestuous marriages, whether the relationship between the parties be legitimate or illegitimate (Art. 37) 3.1 3.2 4. 4.1.

5.

Between ascendants and descendants of any degree; and Between brothers and sisters, whether of the full or half-blood

Marriages declared void by reason of public policy (Art. 38) Between collateral blood relatives, whether legitimate or illegitimate, up to the fourth civil degree; 4.2. Between step-parents and step-children 4.3. Between parents-in-law and children-in-law 4.4. Between the adopting parent and the adopted child; 4.5. Between the surviving spouse of the adopting parents and the adopted child; 4.6. Between the surviving spouse of the adopted child and the adopter; 4.7. Between an adopted child and a legitimate child of the adopter 4.8. Between the adopted children of the same adopter 4.9. Between parties where one, with the intention to marry the other, killed that other person’s spouse or his or her own spouse Marriages under Art. 40 “The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis of a final judgment declaring such previous marriage void.

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6.

Marriages under 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 the marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law.”

7.

Failure to comply with the recording requirements under Art. 52 (Art. 53) Either of the former spouses may marry again after complying with the requirements in Art. 52; otherwise, the subsequent marriage is void. “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. (Art. 52)

5. Voidable Marriages (Art. 45) KINDS: 1. No parental consent for a contracting party who is 18 years of age or over but below 21 years of age; 2. Unsound mind 3. Consent was obtained through fraud 3.1 3.2 3.3 3.4

Non-disclosure of a previous conviction by final judgment of a crime involving moral turpitude Concealment by the wife of the fact that at the time of the marriage , she was pregnant by a man other than her husband Concealment of sexually transmissible disease, regardless of its nature, existing at the time of the marriage; or Concealment of drug addiction, habitual alcoholism, or homosexuality or lesbianism existing at the time of the marriage No other misrepresentation or deceit as to character, health, rank, fortune or chastity shall constitute such fraud as will give grounds for action for the annulment of marriage. (Art. 46)

4. 5. 6. -

Consent was obtained by force, intimidation, or undue influence Physical incapability to consummate the marriage which appears incurable Affliction with a sexually transmissible disease found to be serious and appears to be incurable Marriage under Article 26

All marriages solemnized outside of the Philippines, in accordance with the laws in force in the country where they are solemnized, and valid there as such, shall also be valid in the Philippines except: 7. those contracted by any party below 18 years of age 8. Those bigamous or polygamous marriages not falling under Art. 41 9. Those contracted through mistake of one contracting party as to the identity of the other; and 10. Those subsequent marriages that are void under Art. 53 Art. 26, 2nd par.: “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 likewise have capacity to remarry”

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6. PROPERTY RELATIONS Kinds: a. Absolute Community Property b. Conjugal Partnership of Gains c. Complete Separation of Property d. Any other regime 7. Marriage Settlement ; Form and Modification (Art. 76 and 77) a. Must be in writing b. Signed by the parties c. Executed before the marriage d. Any subsequent modification must be made before the celebration of the marriage 8. Donations By Reason of Marriage – those made before the celebration of the marriage, in consideration of the same, and in favor or one or both of the future spouses (Art. 82) Limitation – If the future spouses agree upon a regime other than the ACP, they cannot donate to each other in their marriage settlements more than 1/5 of their present property. Any excess shall be considered void. (Art. 84) 9. Revocation of donation by reason of marriage: (Art. 86) DPN may be revoke by the donor in the following cases: 1. If the marriage is not celebrated or judicially declared void an initio except donations made in the marriage settlements, which in these cases are considered void if the marriage does not take place. 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 donee being the guilty spouse 5. If it is with a resolutory condition and the condition is complied with 6. When the donee has committed an act of ingratitude as provided in the provisions of the Civil Code on donations in general. 10. Absolute Community of Property When ACP governs property regime of the spouses: e. when the spouses have entered into marriage without having chosen any property regime; f. when the property regime chosen is void g. when the choose the ACP to govern their property relations during the marriage 11.

What constitutes Community Property

Consists of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. (Art. 91) Presumption of property acquired during the marriage, is that it belongs to the community property (Art. 93) Winnings is game of chance, betting or any other kind of gambling but not losses which shall be borne by the loser. (Art. 95) 12.

Excluded from ACP

a. Property acquired during the marriage by gratuitous title by either spouse, and the fruits as well as the income thereof, if any, unless expressly

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provided by the donor, testator or grantor that they shall form part of the ACP b. Property for personal and exclusive use of either spouse. However, jewelry shall form part of the community property; c. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage, and the fruits as well as the income thereof; 13.

Conjugal Partnership of Gains

Concept: The husband and wife place in a common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance, and upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them, unless otherwise agreed in the marriage settlement. (Art. 105) -

What forms Part of CPG – 1. All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. (Art. 116) 2. Art. 117 1. those acquired by onerous titled during the marriage at the expense of the common fund; 2. Those obtained from the labor, industry, work or profession of either or both of the spouses; 3. The fruits, natural, industrial, or civil due or received during the marriage from the common property, as well as the net fruits from the exclusive property of each spouse; 4. The share of either spouse in the hidden treasure which the law awards to the finder or owner of the property where the treasure is found; 5. Those acquired through occupation such as fishing or hunting; 6. Livestock existing upon the dissolution of the partnership in excess of the number of each kind brought to the marriage by either spouse; and 7. Those which are acquired by chance, such as winnings from gambling or betting. Losses shall be borne exclusively by the loserspouse.

3. Whenever an amount or credit payable within a period of time belongs to one of the spouses, the sums which may be collected during the marriage in partial payments or installments on the principal shall be exclusive property of the spouse. However, interest falling due during the marriage on the principal shall belong to the conjugal partnership. (Art. 119) 4. Art. 120 Ownership of improvements made on the separate property of the spouses at the expense of the partnership or efforts of either or both spouses depending on cost of improvement made by the CP and the resulting increase in value. If it is more than the value of the property at the time of improvement, the entire property of one spouse shall belong to the CPG. (Art. 120) -

Excluded from the CPG a. That which is brought to the marriage as his or her own; b. That which each acquires during the marriage by gratuitous title; c. That which is acquired by right of redemption, by barter or by

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exchange with property belonging to only one of the spouses; and d. That which is purchased with exclusive money of the wife or of the husband (Art. 109) -

Dissolution of the CPG; same grounds as in the ACP (Art. 126)

14. Complete Separation of Property 15. Property Regime or Unions without Marriage 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 or 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 coownership. X x x 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 default of or waiver of 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. •

Relationships included under Art. 147: 1. the man and the woman must (a) be capacitated to marry each other; (b) live exclusively with each other as husband and wife; and )c) be without the benefit of marriage; 2.

Void marriages under:

(a) Articles 36 (psychological incapacity; (b) Art. 44 marriage where the absent spouse has been declared presumptively dead and the present spouse as well as the 2 nd spouse of the subsequent marriage are in bad faith; and © Art. 53. Failure to comply with the recording requirements after a marriage is declared void Art. 148. In cases of cohabitation not falling under Art. 147, acquired by both of the parties through their actual joint money, property, or industry shall be owned by them proportion to their respective contributions. In the absence contribution shall be deemed equal.

only properties contribution of in common in of proof , their

In one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the ACP or CPG existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided in art. 147. •

Relationships included under Art. 148: 1. a man and a woman living together as husband and wife, without he benefit of marriage, but are NOT CAPACITATED to marry; 2. an adulterous relationship; 3. a bigamous or polygamous marriage; 4. incestuous void marriages under Art. 37; and 5. void marriages by reason of public policy under Art. 38

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16.Paternity and Filiation Legitimate children - Children conceived or born during the marriage of the parents are legitimate. (Art. 164) are

Illegitimate Children - Children conceived and born outside a valid marriage illegitimate; unless otherwise provided by the Family code. (Art. 165) Legitimated Children -Only children conceived and born outside 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. (Art. 177)

NOTE: R.A. 9858 amended Article 177 of the Family Code, “Children conceived and born outside of wedlock of parents who, at the time of conception of the former, were not disqualified by any impediment to marry each other, or were so disqualified only because either or both of them were below 18 years of age, may be legitimated.” (passed on October 13, 2009) Legitimation shall take place by a subsequent valid marriage between parents. The annulment of a voidable marriage shall not affect the legitimation. (Art. 178) The effects of legitimation shall retroact to the time of the child’s birth. (Art. 180) 17. Adopted children Purely personal between the adopted child and the adopted parent. 18. IMPUGNING THE LEGITIMACY OF A CHILD Art. 166. Legitimacy of a child may be impugned only on the following grounds: 1.) That it was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the birth of the child because of: a.) b.) c.)

the physical incapacity of the husband to have sexual intercourse with his wife; the fact that the husband and wife were living separately in such a way that sexual intercourse was not possible; serious illness of the husband, which absolutely prevented sexual intercourse;

2. That it is proved that for biological or other scientific reasons, the child could not have been that of the husband, except in the instance provided in the second par. Of Art. 164; or 3. That in case of children conceived through artificial insemination, the written authorization or ratification of wither parent was obtained through mistake, fraud, violence, intimidation, or undue influence. Where the husband was able to prove any of the grounds enumerated above, the child will neither be considered legitimate or illegitimate in so far as he is concerned because they are not related to each other. In so far as the mother is concerned, the child will be considered her illegitimate child. Art. 167. The child shall be considered legitimate although the mother may

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have declared against its legitimacy or may have been sentenced as an adulteress. 19.Family Home – when is it deemed constituted? A family home is deemed constituted on a house and lot from the time it is occupied as a family residence; there is no need to constitute the same judicially or extrajudicially. Versonla vs. CA, 497 SCRA 385 II. PROPERTY •

A building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. Hence, a valid real estate mortgage can be constituted only on the building erected on the land belonging to another.

•

Chattel mortgage on real property – Under certain conditions, a property may have a character different from that provided in Article 415 and 416 (enumerations of immovable and movable properties). The parties to a contract of chattel mortgage may, by agreement, treat as personal that which by nature would be real, i.e. building which by its nature is considered real property. Said chattel mortgage over a building is binding between the parties to said agreement since they are estopped from claiming otherwise. With respect to third persons, not parties to the contract, the building is considered immovable property.

•

Machinery, receptacles, instruments, or implements – The machinery, etc. must be placed by the owner of the tenement or his agent to be considered as immovable property. Machinery is movable by nature and becomes immobilized only when placed on a plant by the owner of the property or plant, but not so when placed by a tenant, usufructuary, or a person having only a temporary right, unless such person acted as an agent of the owner. Thus, where a tenant places the machinery under the express provision of lease that it shall become part of the plant belonging to the owner upon the termination of the lease without compensation to the lessee, the tenant acts as an agent of the owner and the immobilization of the machinery takes place by reason of permanent destination to the machinery. But if the attachment or immobilization is for the use of the lessee which does not inure to the lessor at the end of the lease contract, then it remains personal property. For the machinery, etc. to be considered immovable property, said machinery, etc. must tend directly to meet the needs of the industry or works carried on in a building or on a piece land. The movable (machinery, etc.) must first be “essentially and principal elements of an industry or works without which, such industry or works would be unable to function or carry on the industrial purpose for which it was established.” Where the movables are merely incidental e.g. cash registers, typewriters found in hotels and restaurants are merely incidental for these businesses can continue or carry on their functions without these equipments and thus retain their nature as movable property. •

OWNERSHIP – Limitations on the right of ownership: 1. those imposed by the state in the exercise of the power of taxation, police power and power of eminent domain; 2. those imposed by law such as legal easement and the requirement of

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legitime succession; 3. those imposed by the grantor of the property on the grantee, either by contract e.g. donation, or by last will; 4. those imposed by the owner himself such as voluntary easement, mortgage, pledge and lease; and 5. those imposed by the Constitution e.g. prohibition of alienation in favor of aliens •

Article 441. to the owner belongs the natural, industrial and civil fruits. Thus all fruits belong to the owner of a thing. Exceptions; a person, other than the owner of a property, owns the fruits thereof: a. b. c. d.

e.

possession in good faith by another – the possessor in good faith is entitled to the fruits received before the possession is legally interrupted (Art. 544); usufruct – the usufructuary is entitled to all the fruits of the property in usufruct (Art. 566); lease of rural lands – the lessee is entitled to the fruits of the land together with the owner, getting the civil fruits in the form of rents paid by the lessee; (Art. 1680 and 1654); pledge – the pledge is entitled to receive the fruits, income, dividends, pr interests which the pledge earns or produces but with the obligation to compensate or set-off what he receives with those which are owing him. (Art. 2102);; antichresis – the creditor acquires the right to receive the fruits of an immovable of his debtor, but with the obligation to apply them, first, to the interest if owing, and then to the principal amount of the credit. (Art. 2132)

•

When the fruits or crop have already been gathered or harvested when the owner recovers the possession, the possessor in bad faith shall return the fruits gathered but has the right to deduct the expenses of planting and harvesting. A possessor in bad faith or good faith is entitled to reimbursement for the necessary expenses of preservation of the land (Art. 452);

•

The good faith or bad faith of the possessor is material where the fruits are still pending (ungathered) at the time he gave up his possession. A builder, planter or sower, in bad faith has no right of reimbursement for expenses, nor to the fruits. The owner gets the fruits without indemnity by the principle of accession continua. But the possessor in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.

•

Art. 449. Builder, sower, or planter (BPS) in Bad faith – The BPS FORFEITS what he has built, planted or sown without any right to be paid indemnity therefore. He is, however, entitled to reimbursement for necessary expenses of preservation of the land incurred by him (Art. 452) but without the right of retention until reimbursement which is given to a possessor in good faith (Art. 546) - If the products have already been gathered (separated from the land) by the builder, planter or sower and they are ordered delivered to the owner of the land, the builder etc. should be reimbursed for the expenses incurred for the production, gathering and preservation of the fruits (Art. 443) if the crop is still standing or growing at the time the owner of the land recovers it, the planter in bad faith loses them without the right to any indemnity (Art. 449).

•

Accretions affecting lands registered under the Torrens system:

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•

-

In case of diminution of area – accretion are natural incidents to land bordering on running rivers or streams and are not affected by the registration law. Hence, registration does not protect the riparian owner against diminution of the area of his land through the gradual changes in the course of the adjoining stream. Accretions which the banks of rivers may gradually receive from the effect of the current becomes the property of the owners of the banks.

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In case of increase in area – although an alluvion is automatically owned by the riparian owner from the moment the soil deposit can be seen, it does not automatically become registered land, just because the land which receives such accretion is covered by a Torrens title, thereby making the alluvial property imprescriptible. Ownership of a piece of land is one thing and registration under the Torrens system of that ownership is another. So, alluvial deposit acquired by a riparian owner of registered land by accretion may be subjected to acquisition through prescription by a third person, by failure of the owner to register the said accretion within the prescribed period.

CO-OWNERSHIP 

Co-owners obligation to contribute to expenses: 1. Preservation of the thing co-owned – the expenses of preservation of the thing or right owned in common and the amount of taxes due thereon should be borne by ALL. A co-owner who advanced them has a right to demand reimbursement from the others in proportion to their respective interests in the co-ownership. These are NECESSARY EXPENSES 2. Useful expenses – even if the value of the community property is thereby increased, they are not covered, the purpose of co-ownership not being for profit, unless such expenses were incurred with the consent of the others. 3. Expenses for pure luxury or mere pleasure – are not also refundable not being for preservation. However, should any improvements be made to embellish the thing or right owned in common, the consent of the MAJORITY of the co-owners is required and all shall contribute. 4. Any alteration made on the right or thing owned in common needs the UNANIMOUS CONSENT of the co-owners and not a mere majority since acts of alteration is an act of ownership and not mere administration. Alteration is a change in the thing which involves a change from the state or essence in which the others believe it should remain, or withdrawal of the thing from the use to which they wish it to be intended; or any other transformation which prejudices the condition or substance of the thing or its enjoyment by the others.

•

SALE MORTGAGE OF COMMON PROPERTY – each co-owner has the absolute right to freely dispose of his pro indiviso share and of the fruits and other benefits arising from that share but the transferee does not acquire any specific or determinate physical portion of the whole, his right being limited to the portion which may be allotted to him upon the partition of the property. -

If a deed of sale appears to convey a definite or segregated portion of the property under co-ownership that is still undivided, does not make the sale a nullity per se. The sale is valid subject only to the

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condition that the interests acquired by the vendee must be limited to the part that may be assigned to the co-owner-vendor in the division upon the termination of the co-ownership. -

Even if the co-owner sells the whole property as his own, the sale is valid insofar as his ideal portion is concerned unless the sale is authorized by the other co-owners. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one coowner will only transfer the rights of said co-owner to the buyer, and the buyer thus becomes a co-owner of the property.

•

PARTITION – Article 494 grants the each co-owner the right to demand at any time partition of the thing owned in common, insofar as his share is concerned for “no co-owner shall be obliged to remain in the co-ownership.” The action to demand partition is imprescriptible or cannot be barred by laches absent a clear repudiation of the co-ownership by a co-owner clearly communicated to the other co-owners.

•

EXCEPTION to the right to demand partition: 1. 2. 3. 4. 5.

•

when the co-owners have agreed to keep the thing undivided for a certain period of time, not exceeding 10 years; which term may be extended provided each extension does not exceed 10 years. when the partition is prohibited by the donor or testator for a certain period not exceeding 20 years; when the partition is prohibited by law i.e. the community or conjugal property of the husband and wife; the family home; party walls and fences ; when partition would render the thing unserviceable for the use which it is intended. The co=ownership in this case may be terminated in accordance with Article 498. when another co-owner has possessed the property as exclusive owner and for a period sufficient to acquire it by prescription ( repudiation of the co-ownership having been successful)

REDEMPTION in co-ownership redounds to the benefit of all. Where a lot and improvement were mortgaged by the deceased parents, a co-ownership existed among the heirs during the period given by law to redeem the foreclosed property. Redemption by one heir during this period would inure to the benefit of all. But where the heir purchased the property from the mortgagee (to whom the property was sold at the foreclosure sale) after the redemption period had expired and after the mortgagee had consolidated its ownership and a new title was issued in his name, there was no longer any co-ownership to speak of. When the heirs allowed the one year period of redemption to expire without redeeming their parent’s former property and permitted the consolidation of ownership and the issuance of a new title, the co-ownership was extinguished.

•

After partition, co-ownership ceases to exists; not right of legal redemption exists- Where the party seeking to redeem is the owner of a portion already determined and identifies, he cannot be considered a coowner and, hence, he cannot redeem under Art. 1620 of the New Civil Code. Once the property is subdivided and distributed among the co-owners, the community is considered to have been terminated and there is no reason to sustain any right of legal redemption.

•

Registration in the name of co-owner merely creates a trust – registration of land subject of co-ownership in the name of one co-owner is not repudiation of co-ownership for purposes of prescription. Article 494(5)

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provides that no prescription shall run in favour of a co-owner or co-heirs as long as he expressly or impliedly recognizes the co-ownership. The registration merely created a trust in favour of his co-owners. •

An oral partition among co-heirs is valid and does not fall under the Statute of Frauds – Oral partition is valid as there is no law that required partition among heirs to be in writing to be valid. The requirement that partition be put in a public document and registered has for its purpose the protection of creditors and at the same time the protection of the heirs themselves against tardy claims. Partition is not covered by the Statute of Frauds because partition is not a conveyance of property but simply a segregation and designation of the part of the property which belongs to the co-owners.

•

Possession as a fact cannot be recognized at the same time in two different personalities except in the case of co-possession –(Art. 538) possession as a fact ma exist at the same time in two or more distinct personalities but, as a general rule, the law will recognized only one as the actual or real possessor. Thus the rule on preference of possession as follows: 1.

2.

3.

4.

•

The present or actual possessor shall be preferred If X, through force and intimidation, ejected Y, actual possessor, from the land, Y will still be considered as the present possessor and will be preferred because X cannot be said to have acquired possession (Art. 536) if there are two possessors the longer in possession If both X and Y occupied a portion of a land both claiming ownership of the entire parcel of land but Y was first is taking possession, Y shall be preferred. If the dates of possession are the same, the possessor with a title i.e. right or document evidencing his right to support his possession; and If they possessed at the same time but X is a squatter while Y is a lessee, preference shall be in favor of Y. The lease contract with the owner is Y’s title. if all the above are equal, the fact of possession shall be judicially determined, and in the meantime, the thing shall be placed in judicial deposit (Arts. 2005-2009)

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 (art. 562) 

Obligations of the usufructuary: a. BEFORE the U. begins  to make an inventory of the property; and  to give security b. during the usufruct  to take care of the property  to replace with the young thereof animals that die or are lost in certain cases when the usufruct is constituted on flock or herd of livestock  to make ordinary repairs  to notify the owner of urgent extraordinary repairs  to permit works and improvements by the naked owner not prejudicial to the usufructuary  to pay annual taxes and charges of the FRUITS

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     c. at  

 •

to pay interest on CAPITAL paid by the naked owner to pay debts when the usufruct is constituted on the whole of a patrimony to secure the naked owner’s or court’s approval to collect credits in certain cases to notify the owner of any prejudicial act committed by third persons ; and to pay for court expenses and costs regarding the usufruct the termination of the usufruct to return the thing in usufruct to the naked owner unless there is a right of retention to pay legal interest at the time that the usufruct lasts, on the amount spent by the owner for extraordinary repairs (Art. 594); and the proper interest on the sums paid as taxes by the owner (Art. 596); and to indemnify the naked owner for any losses due to his negligence or of his transferees (Arts. 589-590)

When no security is needed to be given by the usufurctuary: 1. 2. 3. 4. 5. 6.

the donor who has reserved the usufruct of the property donated; the parents who are the usufructuaries of their children’s property, except when the parents contract a second (or subsequent) marriage; when the naked owner renounces or waives his right to the inventory or security; where the title constituting the usufruct relieves the usufructuary from the obligation ; where the usufructuary asks that he be exempt from the obligation and no one will be injured thereby when the usufructuary is under obligation to give security but cannot afford to do so and no one is wiling to give security for them, the court on humane considerations (i.e. poor family badly in need of a house_ may allow the usufructuary to enjoy the property upon taking an oath –“by virtue of a promise under oath”- to take care of the property and retain it until the termination of the usufruct (Art. 612) I lieu of giving a security. NOTE: under this instance (no. 6) the usufructuary cannot alienate or lease the property for this means that he does not need it if he does alienate his right of usufruct. The oath is what is called “CAUCION JURATORIA”

III. MODES OF ACQUIRING OWNERSHIP A. DONATION o Kinds: 1. 2. 3. 4.

SIMPLE – or that cause of which is the pure liberality of the donor in consideration of the donee’s merits remunatory or compensatory – that which is given out of gratitude on account of the services rendered by the donee to the donor, provided they do not constitute a demandable debt. modal – that which imposes upon the donee a burden (e.g. services to be performed in the future) less than the value of the gift; onerous – that the value of which is considered the equivalent of the consideration for which it is given and is thus governed by the rules on obligations and contracts (Art. 733)

NOTE:

Illegal

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or

impossible

conditions

in

SIMPLE

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REMUNATORY donations shall be considered as not imposed. (Art. 727) In modal donations, a burden (which is necessarily future) less than the value of the gift is imposed upon the donee. If the burden is considered the equivalent of the thing or right given, then the donation is an onerous one. If the donation is onerous (or modal as to the onerous portion), the illegal or impossible condition will render the donation void. Being contractual in nature, the rule applicable would be Art. 1183 on obligations and contracts. •

REVOCATION OF DONATION – affects the whole donation and is allowed during the lifetime of the donor: 1. 2. 3.

•

REDUCTION OF DONATION – this generally affects a portion only of the donation and is allowed during the lifetime of the donor or after his death: 1. 2. 3. 4.

•

birth, appearance, or adoption of a child of the donor subsequent to the donation; non-fulfillment of a resolutory condition imposed by the donor (Art. 765) Ingratitude of the donee (Art. 765)

failure of the donor to reserve sufficient means for support of himself or his dependent relatives (Art. 750) failure of the donor to reserve sufficient property to pay off his existing debts (Art. 759) Inofficiousness; the donation exceeds that which the donor can give by will (Arts. 752, 771); and birth, appearance, or adoption of a child of the donor (Art. 760)

Who may ask for reduction? 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 of inofficious donations. They cannot renounce their right during the lifetime of the donor. (Art. 771) Donees, devisees and legatees who are not entitled to the legitime and the creditors of the deceased can neither ask for the reduction nor avail themselves thereof (Art. 772)

B.

SUCCESSION

Q: What is meant by succession? A: Succession is 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, NCC) Q: How may succession be characterized? A: Succession involves the following: It is a mode of acquisition The property, rights & obligations to the extent of the value of ther inheritance transmitted The transmission takes place only by virtue of death The transmission takes place either by will or by operation of law The transmission is from one to another Q: When does succession take place?

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A: Succession takes place: Death of the decedent Express will of the testator calling succession and/or provision of law prescribing successors The rights or properties subject of succession are transmissible Transferee is still alive (did not predecease the testator) Transferee is capacitated to inherit The transferee accepted of the inheritance. (Art. 774-777, NCC) Q: In succession, who is a decedent? A: "Decedent" is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator. (Art. 775, NCC) Q: Who is an heir? A: An heir is a person called to the succession either by the provision of a will or by operation of law. (Art. 782, NCC) Q: Who are devisees and legatees? A: Devisees and legatees are persons to whom gifts of real and personal property are respectively given by virtue of a will. (Art. 782, NCC) Q: What does the inheritance consists of? A: The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death and also those which have accrued thereto since the opening of the succession. (Art. 776 and 781, NCC) Q: When is the right of succession transmitted? A: The rights to the succession are transmitted from the moment of the death of the decedent. (Art. 777, NCC) Q: What are the types of succession? A: Succession may be: (1) Testamentary; (2) Legal or intestate; or (3) Mixed (Art. 778, NCC) Q: Define testamentary succession. A: Testamentary succession is that which results from the designation of an heir, made in a will executed in the form prescribed by law. (Art. 779, NCC) Q: How is mixed succession effected? A: Mixed succession is that effected partly by will and partly by operation of law. (Art. 780, NCC) Q: What is a will? A: 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, NCC) Q: May a testator designate another person to make a will for him? A: No, because the making of a will is a strictly personal act, hence, it can not be left in whole or in part to the discretion of a third person, or accomplished through the instrumentality of an agent or an attorney. (Art. 784, NCC) Q: What may be entrusted by the testator to a third person? A: The testator may entrust to a third person The distribution of specific property or sums of money that he may leave in general to specified classes or causes, and The designation of the persons, institutions or establishments to which such

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property or sums are to be given or applied. (Art. 786, NCC) Q: Does the invalidity of one of several dispositions contained in a will result in the invalidity of the other dispositions? A: No. The invalidity of one of several dispositions contained in a will does not result in the invalidity of the other dispositions, unless it is to be presumed that the testator would not have made such other dispositions if the first invalid disposition had not been made. (Art. 792, NCC) Q: What is the rule as regards after-acquired property? A: Property acquired after the making of a will shall only pass thereby, as if the testator had possessed it at the time of making the will, should it expressly appear by the will that such was his intention. (Art. 793, NCC) Q: What law governs the validity of the will? A: The validity of a will as to its form depends upon the observance of the law in force at the time it is made. (Art. 795, NCC) Q: Who are capacitated to execute a will? A: A person who executes a will must be: Not expressly prohibited by law Aged 18 years old and above Of sound mind, at the time of its execution (Art. 796-798, NCC) Q: When is a testator of “sound mind”? A: To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. It shall be sufficient if the testator was able at the time of making of the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act. (Art. 799, NCC) Q: What is the exception to the general rule on the presumption of soundness of mind of the testator? A: The soundness of mind of the testator shall not be presumed: (1) When the testator, one month or less, before making his will was publicly known to be insane; or (2) Was under guardianship at the time of the making of the will (Torres and Lopez de Bueno v. Lopez, 48 Phil. 117; Art. 799, NCC) Q: What is the effect of the supervening incapacity of the testator? A: Supervening incapacity does not invalidate an effective will, nor is the will of an incapable validated by the supervening of capacity. (Art. 801, NCC) Q: What are the requisites for a valid notarial will? A: A valid notarial will must be: In writing In a language or dialect known to the testator Subscribed at the end by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction Attested & subscribed by three or more credible witnesses in the presence of the testator and of one another Each and every page, except the last, must be signed by the testator or by the person requested by him to write his name, and by the instrumental witnesses of the will, on the left margin Each and every page of the will must be numbered correlatively in letters placed on the upper part of each page Contain an attestation clause, stating the following: (a) The number of pages used upon which the will is written (b) The fact that the testator signed the will and every page, or caused

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some other person to write his name, under his express direction, in the presence of the instrumental witnesses (c) All the instrumental witnesses witnessed and signed the will and all its pages in the presence of the testator and of one another (d) It must be acknowledged before a notary public by the testator and the witnesses. (Art. 804-806, NCC) Q: What are the additional requisites of a notarial will if the testator be deaf or deaf-mute? A: The additional requirements are: (1) Testator must personally read the will, if able to do so; (2) Otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, its contents. (Art. 807, NCC) Q: What are the additional requisites of a notarial will if the testator is blind? A: The will shall be read to the testator twice: 1. Once by one of the subscribing witnesses 2. Once by the notary public before whom the will is acknowledged. (Art. 808, NCC) Q: Is the use of the testator of a thumb mark instead of his signature valid? A: In one case decided by the SC, it was held that since the testator is suffering from partial paralysis, the act of using his mark instead of his usual signature is valid. It likewise stated that the manner of using a mark in authenticating his will is a matter of preference. Both the use of a signature or a thumb mark is good. A statute requiring a will to be "signed" is satisfied if the signature is made by the testator's mark. (Lopez v. Liboro, 81 Phil. 249) Q: How about if the testator makes use of a cross as a sign to authenticate the will, is the will be valid? A: If the “cross” as used in the will to authenticate the same is the usual signature of the testator, then the will is valid for complying with the requirements established by law. However, if the “cross” is not the usual signature of the testator, the will is void. It is for the reason that a cross does not have the trustworthiness of a thumb mark. (Garcia v. Lacuesta, 90 Phil. 189) Q: What is the result of an unsigned attestation clause? Ans: An unsigned attestation clause results in an unattested will. (Aluad vs. Aluad, October 17, 2008) Q: What is the two-fold purpose of acknowledgement in a notarial will? Ans: The acknowledgement in a notarial will has a two-fold purpose: to safeguard the testator’s wishes long after his demise; and to assure that his estate is administered in the manner that he intends it to be done. (Lee vs, Tambago, February 12, 2008) Q: What excludes the collateral relatives from succeeding to the estate of the decedent? Ans: Only the presence of descendants, ascendants or illegitimate children excludes collateral relatives from succeeding to the estate of the decedent. (Carlos vs. Sandoval, 574 SCRA 116) Q: Y is one of the three instrumental witnesses in the making of the will of X, a lawyer and at the same time the Notary Public before whom the will is acknowledged. Is the will attested and subscribed by at least three credible witnesses? A: No. The notary public before whom the will was acknowledged cannot be considered as the third instrumental witness since he cannot acknowledge before himself his having signed the will. To acknowledge before means to avow; to own as

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genuine, to assent, to admit; and "before" means in front or preceding in space or ahead of. Consequently, if the third witness were the notary public himself, he would have to avow assent, or admit his having signed the will in front of himself. This cannot be done because he cannot split his personality into two so that one will appear before the other to acknowledge his participation in the making of the will. To permit such a situation to obtain would be sanctioning a sheer absurdity. (Cruz v. Villasor, 54 SCRA 31) Q: Should the attestation clause be in the dialect or language known by the testator? A: No, because the attestation clause does not form part of the testamentary disposition. Q: What are the formalities which are required in the execution of a holographic will? A: From the provisions of Arts. 804 and 810 of the NCC, it is clear that the testator, in the execution of the holographic will, the will must be: (1) entirely written by the hand of the testator himself; (2) dated by the hand of the testator himself; (3) signed by the hand of the testator himself; and (4) executed in a language or dialect known to the testator. (Arts. 804 and 810, NCC) Q: Are there exceptions to the rule that the original copy of the holographic will should be presented to the probate court for visual examination before it can be admitted to probate? A: Yes. It is possible that a photostatic copy, or even a mimeographed or carbon copy may be substituted for the original document. This is so, because in these cases, compliance with the requirements stated in Article 811 of the NCC would still be possible. (Gan v. Yap, 104 Phil. 509, August 30, 1958) Q: How do you authenticate additional dispositions? A: To authenticate additional dispositions, the same must be signed and dated by the testator. (Art. 812, NCC) Q: What are the rules when, in a holographic will, there are dispositions which were not signed by the testator? A: Jurisprudence provides that 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. In case of insertions, cancellation, erasure or alterations in a holographic will, the testator must authenticate the same by his full signature. The requirements in Article 813, of the NCC affect the validity of the disposition contained in the holographic will, but not its probate. If the testator fails to sign and date some of the dispositions, the result is that these dispositions cannot be effectuated. Such failure however, does not render the whole testament void. (Art. 813, NCC) Q: Article 815 of the NCC provides that when a Filipino is in a foreign country, he is authorized to make a will in any of the forms established by the law of the country in which he may be. Such will may be probated in the Philippines. Is the law mandatory? A: No. The Article is merely permissive. The word “authorized” makes it permissive. (Art. 815, NCC) Q: What law governs the formalities for wills executed by an alien abroad? A: An alien who executes a will abroad may make a will in accordance with the formalities (extrinsic validity) prescribed by the law of: (a) The place of his residence or domicile; (b) His own country or nationality; (c) The Philippines;

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(d) The law of the place of execution. (Art. 17, par. 1.; Art. 816, NCC) Q: Why are joint wills prohibited in the Philippines? A: Joint wills are prohibited in the Philippines because they: (1) encourage undue influence, murder, or attempt to kill the other because generally, joint wills benefit each other; (2) run counter to the idea that wills are revocable. It makes revocation more difficult. E.g., tearing it up destroys the will of another. (3) undermine the personal element of a will. It becomes a multiple will. (Art.818, NCC) Q: Who are qualified to act as instrumental witnesses to the execution of a will? A: According to Article 820 of the New Civil Code, a witness to the execution of an ordinary will must have the following qualifications: (1) He must be of sound mind; (2) He must be of 18 years of age or more; (3) He must not be blind, deaf, of dumb; and (4) He must be able to read and write. (Art. 820, NCC) Q: Who are disqualified to act as instrumental witnesses to the execution of a will? A: The following are disqualified from being witnesses to a will: (1) Any person not domiciled in the Philippines; (2) Those who have been convicted of falsification of a document, perjury or false testimony. (3) Any person who is not of sound mind; (4) Any person who is less than 18 years of age; (5) Any person who is blind, deaf, or dumb; and (6) Any person who cannot read and write.(Arts. 820 and 821, NCC) Q: When is a subsequent document a codicil and when is it another will? A: It is a codicil when it explains, adds to, or alters a provision in a prior will. It is another will if it makes an independent disposition. (Art. 825, NCC) Q: If a will, executed as required by this NCC, incorporates into itself by reference any document or paper, what requisites must be present in before such document or paper will be considered a part of the will? A: Such document or paper shall be considered a part of the will if the following requisites are present: (1) The document or paper referred to in the will must be in existence at the time of the execution of the will; (2) The will must clearly describe and identify the same, stating among other things the number of pages thereof; (3) It must be identified by clear and satisfactory proof as the document or paper referred to therein; and (4) It must be signed by the testator and the witnesses on each and every page, except in case of voluminous books of account or inventories. (Art. 827, NCC) Q: Can the revocation of a will be waived? A: No, the revocation of a will can never be waived. Any waiver or restriction of this right is void. (Art. 828, NCC) Q: How is a will revoked? What law governs revocation? A: It depends upon the place where the revocation is made. 1. If done outside the Philippines: a. If the testator is not domiciled in the Philippines: (i) The law of the place where the will was made; or (ii) The law of the place where the testator was domiciled at the time of the revocation

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b. If the testator is domiciled in the Philippines: (i) Philippine law because his domicile is here; or (ii) Law of the place of revocation pursuant to Art. 17, NCC 2. If done in the Philippines, follow Philippine law. (Art. 829, NCC) Q: What is destruction of the will which is contemplated in order to consider the will revoked by destruction? A: There must be a physical destruction of the will itself. (Art. 830, NCC) Q: If the testator totally destroyed the will and he changed his mind, is there revocation? A: Yes. The act was already consummated. His remedy is to execute another will. (Art. 830, NCC) Q: What is the difference between an invalid will and a valid but ineffective will? A: An invalid revoking will cannot revoke another will. But a valid though ineffective will can revoke. (Art. 832, NCC) Q: What is ‘republication’? A: It is the process of re-establishing a will, which has become useless because it was void, or had been revoked. (Art. 835, NCC) Q: How is republication made? A: Republication may be made by: a) re-execution of the original will; or b) execution of a codicil. (Art. 835, NCC) Q: What is the effect of the allowance of a will? A: Subject to the right of appeal, the allowance of the will, either during the lifetime of the testator or after his death, shall be conclusive as to its due execution. (Art. 838, NCC) Q: What are the grounds for the disallowance of a will? A: Article 839 of the New Civil Code provides “The will shall be disallowed in any of the following cases: (1) If the formalities required by law have not been complied with; (2) If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution; (3) If it was executed through force or under duress, or the influence of fear, or threats; (4) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; (5) If the signature of the testator was procured by fraud; (6) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature thereto. This enumeration is exclusive. They either make the will void or valid. There is no such thing as a voidable will. (Art. 839, NCC) Q: What is meant by institution of heir? A: Institution of heir is an act by virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligations. (Art. 840, NCC) Q: What is preterition and its effects? A: 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. Devises and legacies are valid insofar as they are not in officious. (Art. 854, NCC).

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Q: What is the effect if an heir who was totally omitted was given a donation or given a very small share? A: If the heir was given a share, even if very small or minimal, there is no preterition. All he has to do is to ask for the completion of his share. (ART. 855, NCC; Reyes vs. Barretto-Datu, 19 SCRA 85). If the heir has been given a donation, there is no preterition since the donation is considered an advance inheritance. (Art. 1073, NCC). Q: If an heir was omitted, from where will his share be taken? A: It shall be taken from: (a) The estate not disposed of by the will; or (b) Proportionately from the shares of the other compulsory heirs, if the first is not enough. (Art. 855, NCC). Q: What is substitution of heirs? A: Substitution of heirs is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted. (ART. 857, NCC). Q: What is fideicommissary substitution? A: Fedeicommissary substitution is one by virtue of which a testator institutes a first heir and charges him to preserve and transmit the whole part of the inheritance to a second heir. (Art. 863, NCC; Rabadillavs CA, et. al., G.R. No. 113725, June 29, 2000). Q: What are the requisites or limitations of fideicommissary substitution? A: They are: (1) There must be a first heir; (2) Obligation must be imposed upon the first heir to preserve and transmit the property; (3) There must be a second heir; (4)The first and second heirs must be only one degree apart; (5)Both heirs must be alive or at least conceived at the time of the death of the testator; (6) It must be expressed (Art. 867); (7) It must not burden the legitime ( Arts. 864, 872, 904, NCC); (8) It must not be conditional. Q: What is substitucion sub modo and state its requisites? A:Substitucion sub modois what is otherwise known as a modal substitution. Its requisites are as follows: 1. The testator states the object of the institution; 2. The testator states the purpose or application of the property left by the testator; 3. The testator states the charge imposed by the testator upon the heir. ( Johnny Rabadillavs CA, et al, G.R. No. 113725, June 29 , 2000) Q: What is a disposition captatoria? A: It is any disposition made upon the condition that the heir shall make some provision in his will in favor of the testator or of any other person. (Art. 875, NCC) Q: Is disposition captatoria valid? Why? A: No. It is void, because it makes the making of a will contractual or with a consideration. Basically, a will is an act of pure liberty. Q: An adopted child inherits like a legitimate child. Is the said entitled to represent his father in the inheritance of his father’s ascendants? Why? A: No. While it is true that the adopted child shall be deemed to be a legitimate child and has the same rights as the latter, these rights do not include the right of representation. The relationship created by the adoption is between the adopting parents and the adopted only and does not extend to the blood relatives of either

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party. (Republic vs CA, G.R. No. 92326, January 24, 1992; Testico vs. Del Val, 12 SCRA 406; DelaPuerta vs. CA, 181, SCRA 862). Q: What is reserva troncal? A: Reserva Troncal is a system of reserve by virtue of which an ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant, or a brother or sister, is obliged to reserve 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. (Art. 891, NCC). Q: What are the requisites of reserva troncal? A: They are the following: (a) Property was inherited by operation of law by an ascendant from a descendant upon the death of the latter; (b) Acquisition by the descendant from an ascendant upon the death of the latter (c) Descendant should have died without any legitimate issue in the direct descending line who could inherit from him; (d) There must be relatives of the descendant who are within the third degree and who belong to the line from which the property came. Q: What requisites must be complied with in order that the reservatarios may qualify as such? A: They are the following: (a) They must be legitimate relatives of the descendant-propositus and the origin; (b) They must be related to the descendant-propositus within the third degree; (c) They must belong to the line from which the reservable property came; (d) They must survive the reservista. Q: How is reserva extinguished? A: Reserva is extinguished by: (a) The death of the ascendant-reservista; (b) The death of all relatives of the descendant-propositus within the third degree who belong to the line from which the property came. In such case, the active subject of the reserve disappears, as a consequence of which the resolutory condition which limits the title to the reservista also disappears; (c) Loss of the reservable property for causes not due to the fault of or negligence of the reservista; (d) Waiver or renunciation by the reservatarios. The renunciation may be before or after the death of the reservista. If the renunciation is made before the death of the reservista, such renunciation cannot affect other third degree relatives who may be born subsequently and who survived the reservista; if it is made after the death of the reservista, the reservation is extinguished but only insofar as the share of the renouncer is concerned. The renunciation may be either express or implied; (e) Prescription of the right of the reservatarios, when the ascendant – reservista holds the property adversely against them in the concept of an absolute owner. (See Maghirang vs. Balcita, 48 Phil 551; Carillo vs. De la Paz, 18 SCRA 467; Sumaya, et.al. vs IAC, et al., September 2, 1991 Q: What is the legal effect of a renunciation or compromise as regards a future legitime? A: Every renunciation or compromise as regards a future legitime between the person owing it and his compulsory heirs is void and the latter may claim the same upon the death of the former; but they must bring to collation whatever they may have receive by virtue of the renunciation or compromise. (Art. 905, NCC)

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Q: What is the effect of testamentary dispositions which are inofficious or excessive? A: The impaired or diminished legitime of the compulsory heirs shall be reduced upon his petition. (Art. 907, NCC) Q: What is meant by Net Asset of the Estate? A: It is the difference between the gross estate less all debts and charges. (Art. 908, NCC) Q: What is the meaning of Net Hereditary Estate? A: It is the sum of net asset of the estate plus the value of collationable donations. (Art. 908, NCC) Q: What is meant by collation? A: It is a fictitious mathematical process of adding the value of the thing donated to the net value of the hereditary estate. Q: Where shall donation given to children is charged? A: It shall be charged to their legitime and the excess to the free portion. When it is inofficious, it shall be reduced. (Art. 909, NCC) Q: Where shall donation made to strangers is charged? A: It shall be charged to the part of the estate of which the testator could have disposed by his last will. When it is inofficious it shall be reduced. (Art. 909, NCC) Q: Where shall donation received by illegitimate children during the lifetime of his father or mother is charged? A: It shall be charged to their legitime. Should they exceed the portion that can be freely disposed of, they shall be reduced. (Art. 910, NCC) Q: What is the order of preference in the payment of inheritance to those entitled thereto? A: The order of preference is: (1) The legitimes shall first be paid; (2) Then the donations inter vivos; (3) Next, the preferred devises and legacies; and (4) Lastly, the other devises and legacies and all other testamentary dispositions to take effect mortis causa, shall be reduced pro rata, without distinction, in case the free portion is not sufficient. (Art. 911, NCC) Q: What are the requisite of a valid disinheritance? A: For disinheritance to be valid the following requisites must be complied with: (1) It must be done in a valid will (Art 916, NCC); (2) It must be express (Art. 918, NCC); (3) It must be with a legal cause (Art. 916, NCC); (4) There must be a true cause (arts. 917 and 918, NCC); (5) There must be an existing cause; (6) It must be total or complete; (7) The cause must be stated in the will (Art 918); (8) The heir disinherited must be identified; (9) The will must not have been revoked. Q: What is meant by imperfect disinheritance? A: Imperfect disinheritance refers to disinheritance without specification of the cause, or for a cause the truth of which, if contracted, is not proved, or which is not one of those recognized by law. (Art. 918, NCC) In other words, it refers to all of those cases where the disinheritance is not made in accordance with the requisite formalities prescribed by law. Q: What are the effects of imperfect or ineffective disinheritance? A: They are:

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(1) The institution of heirs is annulled, but only in so far as it may prejudice the person disinherited, that is, in so far as his legitime is concerned; (2) The devises, legacies, and other testamentary dispositions shall be valid to such extent as will not impair the legitime. Art. 918, NCC) Q: What are the grounds for disinheritance of children? A: The following shall be sufficient causes for the disinheritance of children and descendants whether legitimate or illegitimate: (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; (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. Art. 919, NCC) Q: What are the grounds for disinheritance of ascendants? A: The following shall be sufficient causes for the disinheritance of parents or ascendants whether legitimate or illegitimate: (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 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. (Art. 920, NCC) Q: What are the grounds for disinheritance of a spouse? A: The following shall be sufficient causes for the disinheriting a spouse: (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. (Art. 921, NCC)

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Q: What are the effects of reconciliation between the offender and the offended in case of disinheritance? A: Subsequent reconciliation between the offender and the offended person deprives the latter of the right to disinherit and renders ineffectual any disinheritance that may have been made. (Art. 922, NCC) Q: What is the effect of valid disinheritance? A: The effects are as follows: (1) The disinherited compulsory heir is completely excluded from the participation in the inheritance, not only as a compulsory heir with respect to the legitime and as a voluntary heir as regard devises and legacies, but also as intestate heir as to the free part, where there is no institution of any heir, or with respect to the legitime only where there is institution of heir; (2) The children and descendants of the person disinherited heir shall take his place and acquire the right of compulsory heirs with respect to the legitime and, where there is no institution of heir or the institution does not cover the whole free portion, also to his share of the free portion; and (3) The disinherited parents shall not have the usufruct or administration of the property which constitute the legitime. (Art. 923, NCC) Q: Is the legacy or devise of a thing belonging entirely to a third person valid or void? A: If the testator knowing that the thing bequeathed does not belong to him, orders that it be acquired in order to give it to the legatee or devisee, the disposition is valid.. If the owner of the property refuses to alienate it or demands an excessive price, the heir or the estate is bound to give only the just value of the thing. (Art. 931, NCC) Q: Is the legacy or devise of a thing belonging entirely to a legatee or devisee valid or ineffective? A: The legacy or devise of a thing belonging entirely to legatee or devisee at the time of the execution of the will shall be ineffective. It is obvious that is already owned by the legatee or devisee cannot be transmitted to him. However if the testator expressly orders the interest pertaining to another be extinguished or paid, then the legacy or devise is valid to such interest. (Art. 932, NCC) Even if the thing is subsequently alienated by the legatee or devisee to a third person, it remains void. The legacy or devise is not revived because it was void at its inception. But if the alienation is to the testator himself and he continues in his possession at the time of his death, the disposition becomes valid. (Art. 933, NCC) Q: What is the legal effect if the testator orders the payment of what he believes he owes but does not in fact owe? A: The disposition shall be considered as not written. (Art. 939, NCC) Q: If the estate of the testator should not be sufficient to satisfy all the legacies and devises, what is the order of payment that must be followed? A: If the estate should not be sufficient to cover all the legacies or devises, their payment shall be made in the following order: 1. Remuneratory legacies or devises; 2. Legacies or devises declared by the testator to be preferential; 3. Legacies for support; 4. Legacies for education; 5. Legacies or devises of a specific determinate thing which forms a part of the estate; 6. All others pro rata. (Art. 950, NCC) INTESTATE SUCCESSION

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Q: What is legal succession? A: Legal succession is that kind of succession prescribed by the law and presumed to be the desire of the deceased which takes place when the expressed will of the decedent has not been set down in a will. Q: When may legal or intestate succession take place? A: If may take place: 1. if the 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 to, or dispose of all the property belonging to the testator. In such a case, legal succession shall take place only with respect to the property which the testator has no disposed; 3. If the suspensive condition attached to the institution of heir does not happen or is not fulfilled, or if the heir dies before the testator, or repudiates the inheritance, there being no substitution, and no right of accretion takes place; 4. When the heir instituted is incapable of succeeding, except in cases provided in the code. Q: May a probate court determine ownership of the subject? A; The jurisdiction of the regional trial court as a probate court or intestate court relates only to matters having to do with the settlement of the estate and probate of the will of the deceased persons and does not extend to the determination of questions of ownership that arise during the proceedings. Q: What is the effect of the principle the nearest excludes the farthest to the right of representation? A: It is without prejudice to the right of representation because by virtue of representation the farther becomes just as near. Q: Between a grandfather and a brother, who will inherit intestate from the decedent? A: Although it is true that both as just as near in degree, still it is the grandfather alone who should inherit because the direct line is preferred over the collateral line. Q: How must shares be divided between relatives in the same degree? A. Relatives in the same degree shall inherit in equal shares, subject to the provisions of art 1006 with respect to relatives of full and half blood, and of art 987 par 2, concerning division between the paternal and maternal lines. Q: May a person who repudiates be represented? A: No, and heir repudiating cannot be represented. Q: In a situation where is the sole heir or all heirs repudiate the inheritance, who may be called to succeed? A: The relatives of the following degree, in their own right and not by right of representation. Q: Suppose one of the two heirs is incapacitated and the other repudiated, how may their children inherit? A: The children of the incapacitated may inherit by right of representation and the children of the one who repudiated are excluded for he cannot be represented. Q: Define right of representation. A: A right created by fiction of law where in a representative is raised to the place and degree of the person represented, and acquires the rights which the latter would have if he were living or able to inherit. Q: When may right of representation exist? A: Right of representation exists when there is predecease, incapacity and disinheritance.

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Q: From whom does the representative inherit? A: The representative does not inherit from the person represented but rather from the person whom the person represented could have inherited from. Q: In intestate succession, right of representation will cover what properties? A: The right of representation when proper in intestate succession covers all the person being represented would have inherited. Q: In testate succession, the right of representation will cover what properties? A: The right of representation when proper in testate succession only covers the legitime. Q: May an adopted child represent? A: No, because there is no filiation whether by blood or by law between the adopted child and the parent of the adopter. While a person thru his legal actuation can give himself an heir, he cannot by the same action gives his relatives an heir. Q: May an adopted child be represented? A: No, because there is no filiation whether by blood or by law between the adopted child and the parent of the adopter. While a person thru his legal actuation can give himself an heir, he cannot by the same action gives his relatives an heir. Q: To whom will the representative succeed? A: The representative does not succeed the person represented but the one whom the person represented would have succeeded. Q: Where may the right of representation take place? A: The right of representation takes place only in the direct descending line but never in the ascending. Q: May the right of representation occur in the collateral line? A: Yes, in the collateral line, it takes place only in favor of the children of the brothers or sisters, whether they are of the full or half blood. Q: Between the nephew and grandnephew of the decedent, who will inherit? A: Only the nephew will inherit, the right of representation in the collateral line takes place in favor only of the children of the brothers or sisters. Q: If an illegitimate child predeceased his parents, how will he inherit from his grandparents? A: They shall inherit by right of representation. (Art. 990, NCC) Q: In what extent the right to inherit in the collateral line? A: The right to inherit ab intestate shall not extend beyond the fifth degree of relationship in the collateral line. (Art. 1010, NCC) Q: When will the State entitled to succeed the entire estate of a deceased person? A: In the absence of compulsory heirs, surviving spouse and collateral relatives up to the fifth degree. (Art. 1011) Q: What is accretion? A: Accretion 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 the 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-devises, or co-legatees. (Art. 1015, NCC) Q: When does the right of accretion take place?

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A: In testamentary succession the right of accretion takes place in the following cases: (1) Predecease of the instituted heir. (2) Incapacity of the instituted heir. (3) Repudiation by the instituted heir. (4) Nonfulfillment of the suspensive condition imposed upon the instituted heir. (5) Ineffective testamentary dispositions. In intestate succession the right of accretion takes place in the following cases: (1) Predecease of a legal heir. (2) Incapacity of a legal heir. (3) Repudiation by a legal heir. It must be noted, however, that, strictly speaking, it is only in case of repudiation that there can be accretion in intestate succession because it is only then that there is a vacancy in the inheritance. However, whether the rules of intestate succession or accretion shall be applied in case of predecease or incapacity, the results are the same. Q: What requisites must exists in order that accretion will take place in testamentary succession? A: The following must exist: (1) That two or more persons be called to the same inheritance, or to the same portion thereof, pro indiviso;and (2) That one of the persons thus called die before the testator, or renounce the inheritance, or be incapacitated to receive it. (Art. 1016, NCC) Q: What is earmarking? A: It means that there is particular designation or physical segregation from all others of the same class. Q: If a person repudiates his share in the inheritance, to whom will his share go? A: The vacated share will go to his co-heirs. (Art. 1018, NCC) Q: Can an heir who repudiates his inheritance be represented? A: No, for one who renounces cannot be represented. Q: How will the co-heirs inherit if the vacated share is the legitime? A: Should the part repudiated be the legitime, the other co-heirs shall succeed to it in their own right, and not by the right of accretion. (Art. 1021, NCC) Q: How will the co-heirs inherit if the vacated share is the free portion? A: If the vacated share is the free portion, the other co-heirs shall inherit by accretion. (Art. 1021, NCC) Q: In testamentary succession, to whom the vacant share go if there is no right of accretion and no substitution? A: It shall pass to the legal heirs of the testator, who shall receive it with the same charges and obligations. (Art. 1022, NCC) Q: What are the three kinds of relative incapacity? A: The three kinds of relative incapacity are: first, because of possible undue influence; second, because of public policy and morality; and third, because of unworthiness. Q: What are those donations that are considered void by reason public morality? A: The following donations shall be void:

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(1) (2) (3)

Those made between persons who were guilty of adultery or concubinage at the time of the donation; Those made between persons found guilty of the same criminal offence, in consideration thereof; Those made to a public officer or his wife, descendants and ascendants, by reason of his office. (Art. 1028, NCC)

Q: Is there a need that the spouse be convicted of adultery? A: No. There need not be any criminal conviction for the guilt of the spouse because the guilt of the spouse can be proven civilly. Q: Who are incapable of succeeding by reason of worthiness? A: 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; (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. (Art. 1032, NCC) Q: What are the instances that the causes of unworthiness will not affect? A: If the testator had knowledge of the unworthiness thereof at the time he made the will, or if, having known of them subsequently, he should condone them in writing. (Art. 1033, NCC) Q: How may the causes of unworthiness erased? A: Since acts of unworthiness are offenses directed against the decedent, only the decedent and no other can erase the effects of such unworthiness. He can do this by pardoning the offense either expressly or impliedly. Q: If a person is incapacitated to inherit, may he still be represented? A: Yes. If the person incapacitated to inherit have children or descendants, the latter should acquire his right to the legitime. However, the incapacitated heir has no right of usufruct or administration over the property received by the representative. (Art. 1035, NCC) Q: What law governs the capacity to succeed of the decedent? A: Capacity to succeed is governed by the law of the nation of the decedent. (Art. 1039, NCC) Q: What are the requisites before acceptance or repudiation is done? A: The requisites before a person may accept or repudiate an inheritance are: a. The heir must be certain of the death of the decedent; b. The heir must be certain of his right to the inheritance; and c. The heir must have free disposal of his property. (Art. 1043, NCC)

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Q: How is acceptance made? A: Acceptance may be express or tacit. An express acceptance must be made in a public or private document. A tacit acceptance is one resulting from acts by which the intention to accept is necessarily implied, or which one would have no right to do except in the capacity of an heir. Acts of mere preservation or provisional administration do not imply an acceptance of the inheritance if, through such acts, the title or capacity of an heir has not been assumed. (Art. 1049, NCC) An inheritance is deemed accepted: (1) If the heirs sells, donates, or assigns his right to a stranger, or to his coheirs, or to any of them; (2) If the heir renounces the same, even though gratuitously, for the benefit of one or more of his co-heirs; (3) If he renounces it for a price in favor of all his co-heirs indiscriminately; but if this renunciation should be gratuitous, and the co-heirs in whose favor it is made are those upon whom the portion renounced should devolve by virtue of accretion, the inheritance shall not be deemed as accepted. (Art. 1050, NCC) Q: How is repudiation made? A: The repudiation of an inheritance shall be made: a. by a public instrument; b. by an authentic instrument; and c. by a petition to the court having jurisdiction over the testamentary or intestate proceedings but must be presented within 30 days from order of court for the distribution of the estate, otherwise, this is deemed to be an acceptance. (Art. 1051, NCC) Q: What is collation? A: Collation means computing or adding certain values to the estate, and charging the same to the legitime. It also means computing or adding certain values to the estate, and charging the same to the free portion. (Art. 1061, NCC) Q: What is the status of ownership of the estate of the decedent, before its partition, where there are two or more heirs? A: Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased. (Art. 1078, NCC) Q: What is partition? A: Every act which is intended to put an end to indivision among co-heirs and legatees and devises is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction. (Art. 1082, NCC) Q: Can a co-heir have the right to demand the division of the estate? A: Every co-heir has the right to demand the division of the estate unless the testator should have expressly forbidden its partition, in which case the period of indivision shall not exceed twenty years as provided in article 494. This power of the testator to prohibit the division applies to the legitime. (Art. 1083, NCC) Q: Can a partition, judicial or extra-judicial, be rescinded on account of lesion? A: Yes, a partition, judicial or extra-judicial, may also be rescinded on account of lesion, when anyone of the co-heirs received things whose value is less, by at least one-fourth, than the share to which he is entitled, considering the value of the things at the time they were adjudicated. (Art. 1098, NCC) Q: Can a partition made by the testator be impugned on the ground of lesion? A: No, 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

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when it appears or may reasonably be presumed, that the intention of the testator was otherwise. (Art. 1099, NCC) PRESCRIPTION Q: What are the two kinds and period of acquisitive prescription of rights? A: Acquisitive prescription is either ordinary or extraordinary. Ordinary acquisitive prescription requires possession in good faith and with just title for ten years. In extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted adverse possession thereof for thirty years without need of title or of good faith. (Gesmundon, et al. v. CA Gr no. 119870, Dec. 23, 1999, citing heirs of SegundaManingding v. CA, 276 SCRA 601) (Art. 1108, NCC) Q: Against whom prescription runs? A: Prescription, both acquisitive and extinctive, runs against: a) Minors and other incapacitated persons who have parents, guardians or other legal representatives; b) Absentees who have administrators, either appointed by them before their appearance, or appointed by the courts; c) Persons living abroad, who have managers or administrators; and d) Juridical persons, except the State and its subdivisions. (Art. 1108,NCC) Q: Does prescription run between husband and wife, or between parents and children, or between guardian and ward? A: Prescription does not run between husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree. Neither does prescription run between parents and children during the minority or insanity or the latter, and between guardian and ward during the continuance of the guardianship. (Art. 1109, NCC) Q: What are the things or properties that cannot be acquired by prescription? A: Properties of spouses, parents and children, wards and guardians, under restrictions imposed by law. (Art. 1109,NCC) Q: Does prescription obtained by a co-proprietor or co-owner benefit the others? A: Yes, prescription obtained by a co-proprietor or a co-owner shall benefit the others. (Art. 1111, NCC) Q: What are the two kinds of acquisitive prescription? A: Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. (Art. 1117, NCC) Q: What are the characteristics of possession needed for purposes of prescription? A: Possession has to be in the concept of an owner, public, peaceful and uninterrupted. (Art. 1118, NCC) Q: Are acts of possessory character executed in virtue of license or by mere tolerance of the owner available for purposes of possession? A: No, acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be available for the purpose of possession. (Art. 1119, NCC) Q: How is civil interruption produce? A: Civil interruption is produce by judicial summons to the possessor. (Art. 1123, NCC)

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IV. LAND TITLES AND DEEDS •

The Regalian doctrine does not negate NATIVE TITLE to lands held in private ownership since time immemorial. In Carino vs. Insular the Supreme Court ruled and recognized the existence of native title to land, or ownership of land by Filipinos b virtue of possession under a claim of ownership since time immemorial and independent of any grant from the Spanish Crown as an exception to the theory of jura regalia.

•

Registration does not vest title. It is merely evidence of such title over a particular land. Our land registration laws does not give the holder any better title than what he actually has.

•

Registration is not a mode of acquiring ownership but is merely a procedure to establish evidence of title over realty. It is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership.

•

A certificate of title issued pursuant to a public land patent has the same validity and efficacy as a certificate of title issued through ordinary registration proceedings.

•

A certificate of title shall not be subject to collateral attack nor shall it be altered, modified or cancelled except in a direct proceeding in accordance with law.

•

Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding 25 years, renewable for not more than 25 years and not to exceed 1,000 hectares in area.

•

Private corporations or associations are disqualified from acquiring alienable lands of the public domain. However, where at the time the corporation acquired the land, its predecessor-in-interest had been in possession and occupation thereof in the manner and for the period prescribed by law as to entitle him to registration in his name, then the proscription against corporations acquiring alienable lands of the public domain except through lease does not apply for the land was no longer public land but private property.

•

If the possession of alienable and disposable land commenced only after June 12, 1945, one can still apply for registration of the property through prescription (Sec. 14[2] PRD). Properties classified as alienable public land may be converted into private property by ordinary prescription of 10 years or extraordinary prescription of 30 years, without need of title or good faith.

•

Application for confirmation of title under the PRD: 1. The public shall be given notice of the initial hearing by means of publication, mailing and posting. The requirement of giving notice by all three modes is MANDATORY. 

Purpose of publication- (a) to confer jurisdiction upon the court over the res; and (b) to apprise the whole world of the pending registration case so that they may assert their rights or interests in the land, if any, and oppose the application, if so minded.



A land registration is a proceeding in rem, and the proceeding requires constructive seizure of the land as against all persons,

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including the state. 

Publication is a newspaper is necessary to accord with the due process requirement. Publication in a newspaper of general circulation remains an indispensable procedural requirement.

2. AMENDMENT OF THE APPLICATION - Where the amendment consists in a substantial change in the boundaries or increase in area of land, or involve the inclusion of additional are, the amendment shall be subject to the same requirement of publication and notice as in the case of an original application. Where no publication has even been made except the initial publication, and this did not include the additional area, the registration court had no jurisdiction over the said included and additional area and its adjudication to the applicant over the additional area is a nullity. 3. ORDER OF GENERAL DEFAULT – if no person appears and answers within the time allowed, the court shall, up[on motion of the application, order a default to be entered and require the applicant to present evidence. The notice states :TO ALL WHOM IT MAY CONCERN” - all the world are made parties defendants and shall be included in the default order, the general default is addressed to the whole world. 4. ORDER OF SPECIAL DEFAULT – when an appearance has been entered and an answer filed, a default order shall be entered against persons who did not appear and answer. This special order of default is directed only against those who did not enter their appearance and file an answer. 5. WHEN JUDGMENT BECOMES FINAL – the judgment rendered in a land registration case becomes final upon the expiration of fifteen (15) days to be counted from the date the party concerned receives notice thereof, including the Solicitor General who appears for the State. 6.

Writ of possession in land registration cases –

After the registration of a land is decreed in favor of the applicant, he as well as any subsequent purchaser of the property has the right to the title and possession of the land, and to that end he may ask the proper court for the issuance of a writ of possession, provided the same has not been issued before. A writ of possession may be issued not only against the person who has been defeated in a registration case but also against anyone unlawfully and adversely occupying the land or any portion thereof DURING the land registration proceedings UP TO THE ISSUANCE of the final decree. 7.

Writ will NOT issue against persons taking possession AFTER issuance of final decree

When the parties against whom a writ of possession is sought entered into possession after the issuance of the final decree, and none of them had been a party in the registration proceedings, the writ of possession will, not issue. A person who took possession of the land after final; adjudication of the same in registration proceedings cannot be summarily ousted through a writ of possession secured by a mere motion and that regardless of any title or lack of title of persons to hold possession of the land in question, they cannot be ousted without giving them their day in court in proper independent proceedings. The remedy is to institute a separate action for unlawful entry or detainer or for reinvindicatory action, as the case may be.

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8. Decree of registration cannot be issued until after the judgment becomes final Execution pending appeal is not applicable in land registration proceedings. It is fraught with dangerous consequences. Innocent purchasers may be misled into purchasing real properties upon reliance on a judgment which may be reversed on appeal. 9. The Torrens title becomes indefeasible and incontrovertible after one year from the issuance of the decree. 10.

REMEDIES of aggrieved party: a.

Motion for new trial or reconsideration – within the period for taking an appeal (15 days from receipt of the decision)

GROUNDS (FAME ; newly discovered evidence) b.

Appeal – within 15 days from receipt of a copy of the decision

c.

Relief from judgment or relief from denial of appeal Verified, filed within 60 days after the petitioner learns of the judgment, final order, or other proceeding to be set aside, and not more than 6 months after such judgment or final order was entered, or such proceeding was taken

d.

Review of Decree (Sec. 32 PD 1529) Within one (1) year from the issuance of the decree of registration and that the registration was procured through actual fraud provided that the property has not passed to an innocent purchaser for value

e.

Reconveyance (Sec. 53 and 96) – provided the property has not passed to an innocent purchaser for value

f. g. h. i. k.

Damages (Sec. 32) Claim against the Assurance Fund Reversion (Sec. 101, CA No. 141 Annulment of Judgment Criminal Prosecution under the Revised Penal Code

11. CADASTRAL PROCEEDINGS – in the absence of fraud, title to land in cadastral proceedings is vested on the owner, upon the expiration of the period to appeal from the decision or adjudication by the cadastral court, without such appeal being perfected, and from that time the land becomes registered property which cannot be lost by adverse possession. 12. Prohibition against alienation of lands acquired under the HOMESTEAD and FREE PATENT Provisions Sec. 118. Except in favor of the government or any of its branches, units or institutions or legally constituted banking corp. lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. No alienation, transfer, or conveyance of any homestead after 5 years

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and before 25 years after the issuance of title shall be valid without he approval of the Secretary of Agriculture and Natural Resources, x x x. Any encumbrance made on the parcel of land acquired under a free patent or homestead within five years from the grant of such patent results in the cancellation of the grant and the reversion of the land to public domain. The prohibition starts from the date of approval up to and including the fifth year from and after the date of the issuance of the patent or grant. The patent is considered issued once the order for its issuance is promulgated and therefore, the five year period is computed from this date and not from the date of registration with the Register of Deeds or from the date of the certificate of title. 13. PERIOD OF REPURCHASE – When mortgage and conveyance allowed already, the 5-year period for legal redemption starts from the date of the execution of the deed of sale, and not from the date of registration in the office of the Register of Deeds. The five year period of redemption fixed in Sec. 119 of the PLA of homestead sold at extrajudicial foreclosure begins to run from the date after the expiration of the 1 year period of repurchase allowed in an extrajudicial foreclosure. Five year period starts to run after the expiration of the redemption period under Act. 3135, as amended, within which to exercise the right to repurchase under the PLA. 14. FORECLOSURES OF MORTGAGE: •

MORTGAGOR’S EQUITY OF REDEMPTION – After the execution of a real estate mortgage, the mortgagor has an equity of redemption exercisable within the period stipulated in the mortgage deed. In case of judicial foreclosure, the equity of redemption subsists after the sale and before it is confirmed by the court.

•

However, in case of judicial foreclosure of mortgage in favor of banking institutions, Sec. 78 of the General Banking Laws grants the mortgagor a right of redemption which may be exercised within one year from the sale – which is from the registration of the sale with the register of deeds.

V. OBLIGATIONS AND CONTRACTS SOURCES OF OBLIGATION Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. (1089a) DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE A DETERMINATE THING (See Arts. 1163, 1164, 1166.) 1.

To preserve or take care of the thing due with the diligence of a good father of a family

DILIGENCE OF A GOOD FATHER OF A FAMILY– ordinary care or that diligence which an average

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or reasonably prudent person would exercise over his own property NOTE: Rule on Standard of Care • That which the law requires; or • That stipulated by the parties; or • In the absence of the two, diligence of a good father of a family 2.

To deliver the fruits of the thing: Right to the fruits of the thing from the time the obligation to deliver it arises.

WHEN OBLIGATION TO DELIVER ARISES • GENERAL RULE: From the time of the perfection of the contract (i.e. meeting of the minds between the parties) •

EXCEPTIONS a. when the parties made a stipulation as regards the right of the creditor to the fruits of the thing b. when the obligation is subject to a suspensive condition or period; arises upon fulfillment of the condition or arrival of the period

KINDS OF DELAY 1. Mora Solvendi– default on the part of the debtor: • Mora Solvendi Ex re– default in real obligations • Mora Solvendi Ex persona– default in personal obligations • GENERAL RULE: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. •

EXCEPTIONS (no demand necessary) a. When the obligation or the law expressly so declare; or b. 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 c. When demand would be useless, as when the obligor has rendered it beyond his power to perform 2.

Mora Accipiendi – default on part of creditor when he unjustifiably refuses to accept the performance of the obligation.

3.

Compensatio morae– both parties are in default (in reciprocal obligations); there is no actionable default on the part of both parties

RULE ON FORTUITOUS EVENT: • •

GENERAL RULE: No liability for fortuitous event EXCEPTIONS: 1. 2. 3. 4.

When expressly declared by law ( bad faith, subject matter is generic, debtor is in delay ) When expressly declared by stipulation or contract When nature of obligation requires assumption of risk When the obligor is in default or has promised to deliver the same thing to two or more persons who do not have the same interest (Art. 1165[3])

REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS

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1. 2. 3. 4. 5. 6.

Exact fulfillment of the obligation by specific or substitute performance with a right to damages in either case; In case of reciprocal obligations, petition the court to resolve the contract; Pursue the leviable (not exempt from attachment under the law) property of the debtor; Accion directa (Arts. 1729 and 1652):Right of the lessor to go directly to sublessee for unpaid rents of the lessee. Right of the laborers or persons who furnish materials for a piece of work undertaken by a contractor to go directly to the owner for any unpaid claims due to the contractor Accion subrogatoria – to be subrogated to all the rights and actions of the debtor save those which are inherent in his person Accion Pauliana– asking the court to rescind or to impugn all the acts which the debtor may have done to defraud the creditors (Arts. 1380-1389)

PURE AND CONDITIONAL OBLIGATIONS PURE –

one whose effectivity or extinguishment does not depend upon the fulfillment or non- fulfillment of a condition or upon the expiration of a period and is demandable at once CONDITIONAL – one whose effectivity is subordinated to the fulfillment or non-fulfillment of a future AND uncertain event or upon a past event unknown to the parties CONDITION 1.

Future and uncertain event or a past event unknown to the parties

Suspensive – happening of condition gives rise to obligation • Effects: a. Effectivity retroacts to the day of the constitution of the obligation b. No retroactivity with reference to fruits or interest and prescription c. Creditor may preserve rights d. Debtor – recovery of payment by mistake or even w/o mistake

IMPOSSIBLE AND ILLEGAL CONDITIONS • •

GENERAL RULE: They shall annul the obligation which depends upon them EXCEPTIONS: a. pre-existing obligation b. if obligation is divisible c. in simple or remuneratory donations d. testamentary dispositions e. conditions not to do an impossible thing OBLIGATIONS WITH A PERIOD

OBLIGATIONS WITH A PERIOD – An obligation which depends on a future and certain event (See Arts 1193, 1196) WHEN STIPULATION SAYS “PAYABLE WHEN ABLE” – IT IS WITH A PERIOD, REMEDY: 1. Agreement among parties 2. Court shall fix period of payment when parties unable to agree KINDS: 1. Resolutory ( in diem ) – demandable at once but terminates upon arrival of the day certain • Day certain – that which must necessarily come, although it may not be known when 2. Suspensive ( ex die ) –obligation becomes demandable on the day stipulated TERM Interval of time which is future and

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CONDITION Fact or event

which

is

future

or

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certain

uncertain or a past event unknown to the parties Time w/c must necessarily come although it Future and uncertain fact or event which may or may not happen may not be known when Exerts an influence upon the time of demandability Exerts an influence upon the very or extinguishment of an obligation existence of the obligation itself Does not have any retroactive effect unless Has retroactive effect there is an agreement to the contrary When it is left exclusively to the will of the When it is left exclusively to the will of debtor, the existence of the obligation is the debtor, the obligation is void affected TWHEN COURTS MAY FIX PERIOD: 1. 2. 3. 4.

If the obligation does not fix a period, but from its nature and circumstances it can be inferred that a period was intended by the parties If the duration of the period depends upon the will of the debtor In case of reciprocal obligations, when there is a just cause for fixing a period If the debtor binds himself when his means permit him to do so

PERIOD FOR WHOSE BENEFIT • •

GENERAL RULE: When a period is designated for the performance or fulfillment of an obligation, it is presumed to have been established for the benefit of both creditor and debtor. EXCEPTION: When it appears from the tenor of the obligation or other circumstances that the period has been established in favor of one or the other.

PERIOD FOR THE BENEFIT OF THE CREDITOR •

Creditor may demand the fulfillment of the obligation at any time but the debtor cannot compel him to accept before the expiration of the period

PERIOD FOR THE BENEFIT OF THE DEBTOR • • • • • •

Debtor may oppose any premature demand of the creditor but he may renounce the benefit of the period by performing his obligation in advance (Manresa; WHEN DEBTOR LOSES RIGHT TO PERIOD: Insolvency of debtor, unless security provided Did not deliver security promised Impaired security through his own acts or through fortuitous event unless he gives new securities equally satisfactory Violates undertaking in consideration of extension of period Attempts to abscond

FACULTATIVE -

only one prestation has been agreed upon but another may be given in substitution

EFFECT OF LOSS OR DETERIORATION THRU NEGLIGENCE, DELAY OR FRAUD OF OBLIGOR: • •

Of thing intended as substitute- no liability Of the substitute after substitution is made – with liability

ALTERNATIVE – bound by different prestations but only one is due RIGHT OF CHOICE IN ALTERNATIVE OBLIGATIONS • As a general rule the right of choice belongs to debtor EFFECT OF LOSS OF OBJECTS OF ALTERNATIVE OBLIGATIONS 1. If the right of choice belongs to the debtor •

If through a fortuitous event all were lost, debtor cannot be held liable

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• • • 2.

for damages If 1 or more but not all of the things are lost or one or some but not all of the prestations cannot be performed due to fortuitous event or fault of the debtor, creditor cannot hold the debtor liable for damages because the debtor can still comply with his obligation If all things, except one, were lost, the debtor must comply by performing that which remain If all were lost by fault of the debtor the later is liable for the value of the last thing or service which became impossible

If right of choice belongs to the creditor • If 1 of the things is lost through a fortuitous event, the debtor shall perform the obligation by delivering that which the creditor should choose from among the remainder or that which remains if only 1 subsists • If the loss of 1 of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting or the price of that which, through the fault of the former, has disappeared with a right to damages • If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any 1 of them, also with indemnity for damages. ALTERNATIVE vs. FACULTATIVE

ALTERNATIVE a)Various things are due but the giving principally of one is sufficient b)If one of prestations is illegal, others may be valid but obligation remains c) If it is impossible to give all except one, the last one must still be given

FACULTATIVE a) Only one thing is due but a substitute may be given to render payment/fulfillment easy b) If principal obligations is void and there is no necessity of giving the substitute; nullity of P carries with it nullity of S c) If it is impossible to give the principal, the substitute does not have to be given; if it is impossible to give the substitute, the principal must still be given d) The right of choice is given only to the debtor

d)Right to choose may be given either to debtor or creditor CULTATIVE JOINT AND SOLIDARY OBLIGATIONS (See Arts. 1207 – 1222) EXCEPTIONS TO THE PRESUMPTION 1. when expressly stated that there is solidarity 2. when the law requires solidarity 3. when the nature of the obligation requires solidarity 4. when a charge or condition is imposed upon heirs or legatees and the testament expressly makes the charge or condition in solidum (Manresa) 5. when a solidary responsibility is imputed by a final judgment upon several defendants(Gutierrez v. Gutierrez) EFFECTS OF JOINT LIABILITY 1. Demand on one produces delay only with respect to the debt 2. Interruption in payment by one does not benefit or prejudice the other 3. Vices of one debtor to creditor has no effect on the others 4. Insolvency of one debtor does not affect other debtors JOINT DIVISIBLE OBLIGATIONS 1. Each creditor can demand for the payment of his proportionate share of the credit, while each debtor can be held liable only for the payment of his proportionate share of the debt 2. A joint creditor cannot act in representation of the other creditors while a joint debtor cannot be compelled to answer for the acts or liability of the other debtors

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JOINT INDIVISIBLE OBLIGATIONS 1. If there are 2 or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all the debtors, although each for his own share. The obligation can be enforced only by proceeding against all of the debtors. 2.

If there are 2 or more creditors, the concurrence or collective act of all the creditors, although each for his own share, is also necessary for the enforcement of the obligation

EFFECT OF BREACH • If one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. Consequently, it is converted into one of indemnity for damages. Innocent joint debtor shall not contribute to the indemnity beyond their corresponding share of the obligation.ILITY S INDIVISIBILITY SOLIDARITY Refers to the prestation which constitutes the Refers to the legal tie and consequently to object of the obligation The subjects or parties of the obligation Plurality of subjects is not required Plurality of subjects is indispensable In case of breach, obligation is converted into 1 of When there is liability on the part of the indemnity for damages because of breach, debtors because of the breach, the indivisibility of the obligation is solidarilty among the debtors remains terminated OLIDARITY SOLIDARY – must be expressed in stipulation or provided by law or by nature of obligation •

Instances where law imposes solidary obligation: a. b. c. d. e.

•

Obligations arising from tort Obligations arising from quasi-contracts Legal provisions regarding obligation of devisees and legatees Liability of principals, accomplices, and accessories of a felony Bailees in commodatum

EFFECTS: a. Payment made before debt is due, no interest can be charged, otherwise – interest can be charged b. Insolvency of one – others are liable for share pro-rata c. If different terms and conditions – collect only what is due, later on collect from any d. No reimbursement if payment is made after prescription or became

illegal e. f. g. interest h.

Remission made after payment is made – co- debtor still entitled to reimbursement Effect of insolvency or death of co-debtor – still liable for whole amount Fault of any debtor – every one is responsible – price, damage and Complete/ personal defense – total or partial( up to amount of share only ) if not personal to him

EFFECT OF LOSS OR IMPOSSIBILITY OF THE PRESTATION: 1. If without fault – no liability 2. If with fault – there is liability (also for damage and interest) 3. Loss due to fortuitous event after default – there is liability (because of default) DIVISIBLE AND INDIVISIBLE OBLIGATIONS (See Arts. 1223 – 1225) DIVISIBLE- obligation that is capable of partial performance

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• Execution of certain no of days work • Expressed by metrical units • Nature of obligation – susceptible of partial fulfillment . INDIVISIBLE– one not capable of partial performance • To give definite things • Not susceptible of partial performance • Provided by law • Intention of parties OBLIGATIONS WITH A PENAL CLAUSE (See Arts. 1226 – 1230) WITH PENAL CLAUSE – One to which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach CHARACTERISTICS OF PENAL CLAUSES: 1. Subsidiary - As a general rule, only penalty can be demanded, principal cannot be demanded, except: Penalty is joint or cumulative 2. Exclusive - takes place of damage, damage can only be demanded in the ff. cases: a. b. c.

Stipulation – granting right Refusal to pay penalty With dolo ( not of creditor )

CAUSES FOR REDUCTION OF PENALTY: 1. Partial/irregular performance 2. Penalty provided is iniquitous/ unconscionable MODES OF EXTINGUISHMENT OF OBLIGATION (Art. 1231): 1. Payment or performance 2. Loss of the thing due 3. Condonation or remission of debt 4. Confusion or merger of rights 5. Compensation 6. Novation 7. Annulment 8. Rescission 9. Fulfillment of resolutory condition PAYMENT OR PERFORMANCE - delivery of money and performance, in any other manner of the obligation REQUISITES FOR VALID PAYMENT/PERFORMANCE 1. With respect to prestation itself a. Identity b. Integrity or completeness c. Indivisibility 2.

With respect to parties - must be made by proper party to proper party a. Payor i. Payor - the one performing, he can be the debtor himself or his heirs or assigns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditor's consent ii.

3RD person pays/performs - only the creditor's consent; If performance is done also with debtor's consent - he takes the place of the debtor. There is subrogation except if the 3rd person intended it to be a donation

iii.

3rd person pays/performs with consent of creditor but not with debtor's consent, there payment is only to the extent that the payment has been beneficial to debtor

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b.

Payee i. Payee - creditor or obligee or successor in interest of transferee, or agent ii.

3rd person - if any of the ff. concur: • It must have redounded to the obligee's • benefit and only to the extent of such benefit • It falls under art 1241, par 1,2,3 – the benefit is total so, performance is total

iii.

Anyone in possession of the credit – but will apply only if debt has not been previously garnished

PAYMENT MADE TO AN INCAPACITATED PERSON, VALID IF 1. Incapacitated person kept the thing delivered, or 2. Insofar as the payment has been beneficial to him PAYMENT TO 3RD PARTY NOT AUTHORIZED,VALID IF PROVED AND ONLY TO THE EXTENTOF BENEFIT; PRESUMED IF 1. After payment, 3rd person acquires the creditor’s rights 2. Creditor ratifies payment to 3rd person 3. By creditor’s conduct, debtor has been led to make the payment (estoppel) PAYMENT MADE IN GOOD FAITH TO A PERSON IN POSSESSION OF CREDIT SHALL RELEASEDEBTOR; REQUISITES: 1. Payment by debtor must be made in good faith 2. Creditor must be in possession of the credit and not merely the evidence of indebtedness •

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

WHERE PAYMENT SHOULD BE MADE 1. In the place designated in the obligation 2. If there is no express stipulation and the undertaking is to deliver a specific thing – at the place where the thing might be at the moment the obligation was constituted 3. In other case – in the place of the domicile of the debtor • •

Time of payment - time stipulated Effect of payment– extinguish obligation Except: order to retain debt

SPECIAL RULES/FORMS OF PAYMENT 1.

APPLICATION OF PAYMENTS – the designation of the debt which payment shall be made, out of2 or more debts owing the same creditor: stipulation or application of party given benefit of period – OK; to be valid: must be debtor’s choice or w/ consent of debtor REQUISITES FOR THE APPLICATION OF PAYMENT: a. Various debts of the same kind b. Same debtor c. Same creditor d. All debts must be due •

EXCEPTION: there may be application of payment even if all debts are not yet due if: a. Parties so stipulate b. When application of payment is made by the party for whose benefit the term has been constituted

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c.

Payment is not enough to extinguish all debts

HOW APPLICATION IS MADE: a. b. c.

Debtor makes the designation If not, creditor makes it by so stating in the receipt that he issues – unless there is cause for invalidating the contract If neither the debtor nor creditor has made the application or if the application is not valid, then application, is made by operation of law

CONSIGNATION W/O PRIOR TENDER – allowed in: a. b. c. d. e.

Creditor absent or unknown/ does not appear at the place of payment Incapacitated to receive payment at the time it is due Refuses to issue receipt w/o just cause 2 or more creditor claiming the same right to collect Title of obligation has been lost

5.

LOSS OF THE THING DUE

LOSS OF THE THING DUE – partial or total/ includes impossibility of performance WHEN IS THERE A LOSS a. When the object perishes (physically) b. When it goes out of commerce c. When it disappears in such a way that: its existence is unknown or it cannot be recovered WHEN IS THERE IMPOSSIBILITY OF PERFORMANCE: a. Physical impossibility b. Legal impossibility i. Directly – caused as when prohibited by law ii. Indirectly – caused as when debtor is required to enter a military draft OBLIGATION TO DELIVER A SPECIFIC THING • GENERAL RULE: Extinguished • EXCEPTIONS: a. Debtor is at fault b. Debtor is made liable for fortuitous event because of a provision of law, contractual stipulation or the nature of the obligation requires assumption of risk on part of debtor OBLIGATION TO DELIVER A GENERIC THING • GENERAL RULE: Not extinguished • EXCEPTIONS: a. If the generic thing is delimited b. If the generic thing has already been segregated c. Monetary obligation OBLIGATION TO DO • GENERAL RULE: Debtor is released when prestation becomes legally or physically impossible without fault on part of debtor 5. REBUS SIC STANTIBUS REBUS SIC STANTIBUS - agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance; Obligor may be released in whole or in part based on this ground. REQUISITES a. The event or change could not have been foreseen at the time of the

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b. c. d.

execution of the contract The performance is extremely difficult, but not impossible (because if it is impossible, it is extinguished by impossibility The event was not due to the act of any of the parties The contract is for a future prestation

6. CONDONATION CONDONATION/REMISSION OF THE DEBT – gratuitous abandonment of debt; right to claim; donation; rules of donation applies; express ori mplied REQUISITES: a. There must be an agreement b. There must be a subject matter (object of the remission, otherwise there would be nothing to condone) c. Cause of consideration must be liberality (Essentially gratuitous, an act of liberality ) d. Parties must be capacitated and must consent; requires acceptance by obligor; implied in mortis causa and expressed intervivos e. Formalities of a donation are required in the case of an express remission f. Revocable – subject to rule on inofficious donation ( excessive, legitime is impaired and ingratitude and condition not followed g. Obligation remitted must have been demandable at the time of remission h. Waivers or remission are not to be presumed generally F 6. CONFUSION OR MERGER CONFUSION OR MERGER OF RIGHTS – character of debtor and creditor merged n same person with respect to same obligation

is

REQUISITES: a. It must take place between principal debtor and principal creditor only b. Merger must be clear and definite c. The obligation involved must be same and identical – one obligation only d.

Revocable, if reason for confusion ceases, the obligation is revived

7. COMPENSATION COMPENSATION – Set off; it is a mode of extinguishment to the concurrent amount the obligation of persons who are in their own right reciprocally debtors or creditors REQUISITES: a. Both parties must be mutually creditors and debtors - in their own right and as principals b. Both debts must consist in sum of money or if consumable , of the same kind or quality c. Both debts are due d. Both debts are liquidated and demandable (determined) e. Neither debt must be retained in a controversy commenced by 3rd person and communicated w/ debtor (neither debt is garnished) KINDS OF COMPENSATION a. b. c.

Legal – by operation of law; as long as 5requisites concur- even if unknown to parties and if payable in diff places; indemnity for expense of exchanges; even if not equal debts –only up to concurring amount Conventional – agreement of parties is enough, forget other requirement as long as both consented Facultative– one party has choice of claiming/ opposing one who has benefit of period may choose to compensate:

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i. ii.

d. e. f. 8. • • •

Not all requisites are present Depositum; commodatum; criminal offense; claim for future support; taxes Judicial– set off; upon order of the court; needs pleading and proof; all requirements must concur except liquidation Total – when 2 debts are of the same amount Partial – when 2 debts are not of the same amount NOVATION extinguishment of obligation by creating/ substituting a new one in its place Changing object or principal conditions Substituting person of debtor Subrogating 3rd person in right of creditor

EFFECTS OF NOVATION: a. Extinguishment of principal carries accessory, except: i. Stipulation to contrary ii. Stipulation pour autrui unless beneficiary consents iii. Modificatory novation only; obliged to w/c is less onerous iv. Old obligation is void b.

Old obligation subsists if new obligation is void or voidable but annulled

already (except: intention of parties) c.

If old obligation has condition i. ii.

If Resolutory and it occurred – old obligation already extinguished; no new obligation since nothing to novate If S us pensive and it never occurred –as if no obligation; also nothing to novate

d.

If old obligation has condition, must be compatible with the new obligation; if new is w/o condition – deemed attached to new

e.

If new obligation has condition i. If resolutory: valid ii. If suspensive and did not materialize: old obligation is enforced

KINDS OF NOVATION: a. REAL/ OBJECTIVE – change object, cause/consideration or principal condition b. PERSONAL/ SUBJECTIVE i. Substituting person of debtor (passive) •

EXPROMISION; initiative is from 3rdperson or new debtor; new debtor and creditor to consent; old debtor released from obligation; subject to full reimbursement and subrogation if made w/ consent of old debtor; if w/o consent or against will , only beneficial reimbursement; if new debtor is insolvent, not responsible since w/o his consent

•

DELEGACION; initiative of old debtor; all parties to consent; full reimbursement; if insolvent new debtor – not responsible old debtor because obligation extinguished by valid novation unless: insolvency already existing and of public knowledge or know to him at time of delegacion 1.Delegante – olddebtor 2.Delegatario – creditor

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3.Delegado – new debtor ii.

PRESUMED a. b. c.

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

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

DIFFERENT FROM PAYMENT OF 3 RD CHANGE OF DEBTOR PERSON 1. debtor is not necessarily released 1. debtor is released from debt 2. can be done w/o consent of creditor 2. needs consent of creditor – express or implied 3. one obligation 3. two obligations; one is extinguished and new one created 4. new debtor is obliged to pay 4. 3rd person has no obligation to pay if Insolvent pe CONVENTIONAL SUBROGATION ASSIGNMENT OF RIGHTS governed by Arts. 1300-1304 governed by Arts. 1624 to 1627 debtor’s consent is not required debtor’s consent is required extinguishes the obligation and gives rise to a transmission of right of the creditor to third person without modifying or new one extinguishing the obligation defects and vices in the old obligation defects and vices in the old obligation are cured and not cured takes effect upon moment of novation or as far as the debtor is concerned, takes subrogation effect upon notification PRINCIPAL CHARACTERISTICS OF CONTRACTS: 1. 2. 3. 4. 5. 6.

Autonomy of wills – parties may stipulate anything as long as not illegal, immoral, etc. Mutuality – performance or validity binds both parties; not left to will of one of parties Obligatory Force – parties are bound from perfection of contract: Fulfill what has been expressly stipulated All consequences w/c may be in keeping with good faith, usage and law Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement

EXCEPTION TO RELATIVITY: 1. Accion pauliana 2. Accion directa 3.Stipulation pour autrui REQUISITES OF STIPULATION POUR AUTRUI 1. Parties must have clearly and deliberately conferred a favor upon a 3 rd person 2. The stipulation in favor of a 3rd person should be a part of, not the whole contract 3. That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever 4. Neither of the contracting parties bears the legal representation or authorization of 3rd party

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5. 6.

The third person communicates his acceptance before revocation by the original parties Art 1312; Art 1314

KINDS OF CONTRACTS 1.

As to perfection or formation a. b. c.

Consensual – perfected by agreement of parties Real– perfected by delivery ( commodatum, pledge, deposit ) Formal/solemn – perfected by conformity to essential formalities (donation )

2.

As to cause a. Onerous – with valuable consideration b. Gratuitous – founded on liberality c. Remunerative – prestation is given for service previously rendered not as obligation

3.

As to importance or dependence of one upon another a. Principal – contract may stand alone b. Accessory – depends on another contract for its existence; may not exist on its own c. Preparatory – not an end by itself; a means through which future contracts may be made

4.

As to parties obliged a. Unilateral – only one of the parties has an obligation b. Bilateral – both parties are required to render prestations

5.

reciprocal

As to name or designation a. Nominate b. Innominate I. Do ut des – I give that you may give II. Do ut facias – I give that you may do III. Facio ut des – I do that you may give IV. Facio ut facias – I do that you may do

ESSENTIAL ELEMENTS OF CONTRACTS: 1. Consent 2. Subject Matter 3. Consideration WHEN OFFER BECOMES INEFFECTIVE: 1.

Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed Express or implied revocation of the offer by the offeree Qualified or conditional acceptance of the offer, which becomes a counter-

2. 3. offer 4. Subject matter communicated

becomes

illegal

or

impossible

before

acceptance

is

RULE ON CONTRACTS ENTERED INTO BY MINORS • •

GENERAL RULE: VOIDABLE EXCEPTIONS: a. Upon reaching age of majority – they ratify the same b. They were entered unto by a guardian and the court having jurisdiction had approved the same

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c. d.

They were contracts for necessities such as food, but here the persons who are bound to give them support should pay therefor Minor is estopped for having misrepresented his age and misled the other party (when age is close to age of majority as in the Mercadov Espiritu and Sia Suan v Alcantara cases.

DISQUALIFIED TO ENTER INTO CONTRACTS:(contracts entered into are void) 1. 2. 3. 4. 5.

Those under civil interdiction Hospitalized lepers Prodigals Deaf and dumb who are unable to read and write Those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming an easy prey for deceit and exploitation Incapacity INCAPACITY DISQUALIFI CATION Restrains the exercise of the right to Restrains the very right itself contract May still enter into contract through parent, Absolutely disqualified guardian or legal representative Based upon subjective circumstance of Based upon public policy and morality certain person Contracts entered into are merely Contracts entered into are void voidable SIMULATED CONTRACTS 1. Absolute – no intention to be bound at all, fictitious only – void from beginning 2. Relative – there is intention to be bound but concealed; concealed contract binds: a. No prejudice to 3rd persons b. Not contrary to law, morals, etc.

OBJECT REQUISITES: 1. Within the commerce of man - either existing or in potency 2. Licit or not contrary to law, good customs 3. Possible 4. Determinate as to its kind or determinable w/o need to enter into a new contract 5. Transmissible Absence of Causa Illegality of Causa Falsity of Causa Causa not stated in contract Inadequacy of Causa

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Void – produce no legal effect Void – produce no legal effect Voidable – party must prove that cause is untruthful; presumption of validity but rebuttable Presumed to Exist - burden of proof is on the person assailing its existence Does not Invalidate Contract per se Exceptions: •fraud •mistake •undue influence •cases specified by law- contracts entered when ward suffers lesion of

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more than 25 auCAUSE Direct and most proximate reason of a contract

MOTIVE Indirect or remote reasons

Objective and juridical reason of contract Cause us always same for each contracting party

Psychological or purely personal reason The motive differs for each contracting party

•

NOTE: Legality or illegality of cause affects the existence of validity of the contract; Legality or illegality of motive does not affect the existence or validity of contract

CAUSA IN SOME CONTRACTS: 1. 2. 3. 4.

Onerous contracts – the prestation of promise of a thing or service by the other Remuneratory contracts – the service or benefit remunerated Pure Beneficence – mere liberality of the donor or benefactor Accessory – identical with cause of principal contract, the loan which it derived its life and existence (ex: mortgage or pledge)

FORMS OF CONTRACT5 – in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or manifested WHEN FORM IS IMPORTANT: 1. For validity (formal/solemn contracts) 2. For enforceability (statute of frauds) 3. For convenience •

GENERAL RULE: contract is valid and binding in whatever form provided that 3 essential requisites concur

•

EXCEPTIONS a. Law requires contract to be in some form for validity - donation and acceptance of real property b. Law requires contract to be in some form to be enforceable - Statute of Frauds; contract is valid but right to enforce cannot be exercised; need ratification to be enforceable c. Law requires contract to be in some form for convenience - contract is valid and enforceable, needed only to bind 3rd parties Ex: public documents needed for the ff: i. Contracts w/c object is creation, transmission or reformation of real rights over immovables ii. Cession, repudiation, renunciation of hereditary rights/CPG iii. Power to administer property for another iv. Cession of action of rights proceeding from an act appearing in a public inst. v. All other docs where amount involved is in excess of 500 ( must be written even private docs )

REFORMATION OF CONTRACTS –

remedy to conform to real intention of parties due to mistake, fraud, inequitable conduct, accident

CAUSES/GROUNDS: 1. Mutual: instrument includes something w/c should not be there or omit what should be there a. Mutual b. Mistake of fact c. clear and convincing proof

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d.

causes failure of instrument to express true intention

2.

Unilateral a. one party was mistaken b. other either acted fraudulently or inequitably or knew but concealed c. party in good faith may ask for reformation

•

3.

Mistake by 3rd persons – due to ignorance, lack of skill, negligence , bad faith of drafter, clerk, typist

4.

Others specified by law – to avoid frustration of true intent

•

Requisites: a. There is a written instrument b. There is meeting of minds c. True intention not expressed in instrument d. Clear and convincing proof e. Facts put in issue in pleadings

NOTE: prescribes in 10 years from date of execution of instrument

WHEN REFORMATION NOT AVAILABLE: 1. Simple donation inter vivos 2. Wills 3. When real agreement is void 4. Estoppel when party has brought suit to enforce it KINDS OF DEFECTIVE CONTRACTS: 1.

RESCISSIBLE CONTRACTS – Those which have caused a particular economic damage either to one of the parties or to a 3rd person and which may be set aside even if valid. It may beset aside in whole or in part, to the extent of the damage caused' REQUISITES: a. Contract must be rescissible i. Under art 1381: Contracts entered into by persons exercising fiduciary capacity 1. 2. 3. 4. 5. 6. ii.

Entered into by guardian whenever ward suffers damage by more than1/4 of value of object Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property Contracts where rescission is based on fraud committed on creditor(accion pauliana) Objects of litigation; contract entered into by defendant w/o knowledge or approval of litigants or judicial authority Payment by an insolvent – on debts w/c are not yet due; prejudices claim of others Provided for by law - art 1526, 1534,1538, 1539, 1542, 1556, 1560, 1567and 1659

Under art 1382 - Payments made in a state of insolvency 1. Plaintiff has no other means to obtain reparation. 2. Plaintiff must be able to return whatever he may be obliged to return due to rescission 3. The things must not have been passed to 3rd parties who did not act in bad faith

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4.

It must be made within the prescribed period (of 4

years) OBLIGATION CREATED BY THE RESCISSION OF THE CONTRACT: Mutual Restitution a. Things w/c are the objects of the contract and their fruits b. Price with interest MUTUAL RESTITUTION NOT APPLICABLE WHEN a. creditor did not receive anything from contract b. thing already in possession of party in good faith; subject to indemnity only; if there are 2or more alienations – liability of 1stinfract or BADGES OF FRAUD a. consideration of the conveyance is inadequate or fictitious b. transfer was made by a debtor after a suit has been begun and while it is pending against him c. sale upon credit by an insolvent debtor d. evidence of indebtedness or complete insolvency e. transfer of all his property by a debtor when he is financially embarrassed or insolvent f. transfer made between father and son where there is present any of the above circumstances g. failure of the vendee to take exclusive possession of the property Rescission in Art 1191RESCISSION IN ART. 1191 RESCISSION PROPER IN ART. 1381 It is a principal action retaliatory in it is a subsidiary remedy character Only ground is non-performance of one’s There are 5 grounds to rescind. Nonobligation or what is incumbent upon him performance by the other is not important Applies only to reciprocal obligation Applies to both unilateral and reciprocal obligations Only a party to the contract may Even a third person who is prejudiced by demand the fulfillment or seek the rescission of the contract may demand the rescission of contract the contract. Court may fix a period or grant extension of time Court cannot grant extension of time for for the fulfillment of the obligation fulfillment of the obligation Its purpose is to cancel the contract Its purpose is to seek reparation for the damage or injury caused, thus allowing partial rescission of the contract ResciProper in 2. VOIDABLE CONTRACTS– intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity •

CHARACTERISTICS: a. Effective until set aside b. May be assailed or attacked only in an action for that purpose c. Can be confirmed (NOTE: confirmation is the proper term for curing the defect of avoidable contract) d. Can be assailed only by the party whose consent was defective or his heirs or assigns WHAT CONTRACTS ARE VOIDABLE: a. Minors ( below 18 ) b. Insane unless acted in lucid interval c. Deaf mute who can’t read or write d. Persons specially disqualified: civil interdiction e. In state of drunkenness f. In state of hypnotic spell

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KINDS OF FRAUD IN THE PERFORMANCE OF OBLIGATION OR CONTRACTS a.

Causal Fraud (dolo causante) – deception of serious character without which the other party would not have entered into; contract is VOIDABLE (Art. 1338)

b.

Incidental Fraud (dolo incidente) –deception which are not serious and without which the other party would still have entered into the contract; holds the guilty party liable for DAMAGES (Art. 1344)

c.

Tolerated Fraud – includes minimizing the defects of the thing, exaggeration of its god qualities and giving it qualities it does not have; LAWFUL misrepresentation

• •

NOTE: Expression of an opinion – not fraud unless made by expert and other party relied on the former’s special knowledge Fraud by third person – does not vitiate consent; only action for damages except if there is collusion between one party and the third person, or resulted to substantial mistake, mutual between parties.

•

CAUSES OF EXTINCTION OF ACTION TO ANNUL

3.

a.

PRESCRIPTION -Period to bring an action for Annulment i. Intimidation, violence, undue influence - 4 years from time defect of consent ceases ii. Mistake, fraud – 4 years from time of discovery iii. Incapacity - From time guardianship ceases

b. •

RATIFICATION REQUISITES i. knowledge of reason rendering contract voidable ii. such reason must have ceased, except incase of ratification effected by the guardian to contracts entered into by an incapacitated, iii. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right

c.

LOSS OF THE THING which is the object of the contract through fraud or fault of the person who is entitled to annul the contract

•

NOTE: Object is lost through a fortuitous event, the contract can still be annulled, but the person obliged to return the same can beheld liable only for the value of the thing at the time of the loss, but without interest thereon.

•

Ratification cleanses the contract of its defects from the moment it was constituted.

UNENFORCEABLE CONTRACT– valid but cannot compel its execution unless ratified extrinsic defect; produce legal effects only after ratified KINDS: a.

Unauthorized or No sufficient authority – entered into in the name of another when: i. No authority conferred ii. In excess of authority conferred ( ultra vires)

b.

Curable by Ratification - Both parties incapable of giving consent -2 minor or 2insane persons

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c.

Curable by Acknowledgment - Failure to comply with Statute of Frauds i. Agreement to be performed within a year after making contract ii. Special promise to answer for debt, default or miscarriage of another iii. Agreement made in consideration of promise to marry iv. Agreement for sale of goods, chattels or things in action at price not less than500; exception: auction when recorded sale in sales book v. Agreement for lease of property for more than one year and sale of real property regardless of price vi. Representation as to credit of another

TWO WAYS OF CURING UNENFORCEABLE CONTRACTS: a. b.

4.

Failure of defendant to object in time, to the presentation of parole evidence in court, the defect of unenforceability is cured Acceptance of benefits under the contract. If there is performance in either part and there is acceptance of performance, it takes it out of unenforceable contracts; also estoppel sets in by accepting performance, the defect is waived

VOID OR INEXISTENT – of no legal effect CHARACTERISTICS: a. It produces no effect whatsoever either against or in favor of anyone b. There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration c. It cannot be confirmed, ratified or cured d. If performed, restoration is in order, except if pari delicto will apply e. The right to set up the defense of nullity cannot be waived f. Imprescriptible g. Anyone may invoke the nullity of the contract whenever its juridical effects are asserted against him KINDS OF VOID CONTRACT: a.

Those lacking in essential elements: no consent, no object, no cause (inexistentones) – essential formalities are not complied with ( ex: donation propter nuptias – should conform to formalities of a donation to be valid ) i. ii. iii.

Those w/c are absolutely simulated or fictitious – no cause Those which cause or object did not exist at the time of the transaction – no cause/object Those whose object is outside the commerce of man – no

object iv. v.

Those w/c contemplate an impossible service – no object Those w/c intention of parties relative to principal object of the contract cannot be ascertained

b.

Prohibited by law

c.

Those expressly prohibited or declared void by law - Contracts w/c violate any legal provision, whether it amounts to a crime or not

d.

Illegal/Illicit ones – Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy ; Ex: Contract to sell marijuana KINDS OF ILLEGAL CONTRACTS

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PARI DELICTO DOCTRINE •

Both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts and not to inexistent contracts; does not apply when a superior public policy intervenes

•

EXCEPTION TO PARI DELICTO RULE – If purpose has not yet been accomplished and If damage has not been caused to any 3 rd person OTHER EXCEPTIONS: a. b.

c. person d. e. f. g.

Payment of Usurious interest 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 3rdperson payment of money or delivery of property made by an incapacitated agreement or contract which is not illegal perse and the prohibition is assigned for the protection of the plaintiff payment of any amount in excess of the maximum price of any article or commodity fixed by law or regulation by competent authority contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law one who lost in gambling because of fraudulent schemes practiced on him is allowed to recover his losses (Art. 313 RPC)even if gambling is prohibited.

REQUISITES OF ILLEGAL CONTRACTS: a. b. c.

Contract is for an illegal purpose Contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to 3rd parties Court believes that public interest will be served by allowing recovery (discretionary upon the court ) – based on remorse; illegality is accomplished when parties entered into contract; before it takes effect– party w/c is remorseful prevents it

EFFECTS OF ILLEGAL CONTRACTS a. If one party is incapacitated, courts may allow recovery of money, property delivered by incapacitated person in the interest of justice; pari delicto cannot apply because 1.

estoppel in pais (by conduct) incapacitated person does not know what he is entering into; unable to understand the consequences of his own action c. estoppel by silence d. estoppel by acceptance of benefits

2. Technical estoppel a. b.

c. d.

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Estoppel by record If agreement is not illegal per se but merely prohibited and prohibition is designated for the protection of the plaintiff – may recover what he has paid or delivered by virtue of public policy Estoppel by judgment Estoppel by laches

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LACHES OR STALE DEMANDS MUTUAL RESTITUTION IN VOID CONTRACTS • GENERAL RULE: parties should return to each other what they have given by virtue of the void contract in case LACHES • Failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it • ELEMENTS • Where nullity arose from defect in essential elements a. return object of contract and fruits b. return price plus interest • EXCEPTION: No recovery can be had in cases where nullity of contract arose from illegality of contract where parties are in pari delicto; except: a. incapacitated– not obliged to return what he gave but may recover what he has given 1.conduct on part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complaint seeks a remedy b.

other party is less guilty or not guilty

2. delay in asserting the complainant’s rights, the complainant having knowledge or notice, of the defendant’s conduct and having been afforded the opportunity to institute a suit 3. lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit NATURAL OBLIGATIONS • they are real obligations to which the law denies an action, but which the debtor may erform voluntarily. 4. injury to the defendant in the event relief is accorded to the complainant, or the suit in not held to be barred. • •

It is patrimonial, and presupposes a prestation. The binding tie of these obligations is in the conscience of man, for under the law, they do not have the necessary efficacy to give rise to an action.

LACHES PRESCRIPTION - Concerned with effect of delay Concerned with fact of delay Question of inequity of permitting the claim to be enforced Question or matter of time EXAMPLES OF NATURAL OBLIGATIONS ENUMERATED UNDER THE CIVIL CODE: 1. Performance after the civil obligation has prescribed 2. reimbursement of a third person for a debt that has prescribed 3. restitution by minor after annulment of contract 4. Delivery by minor of money or fungible thing in fulfillment of obligation 5. Performance after action to enforce civil obligation has failed 6. payment by heir of debt exceeding value of property inherited 7. payment of legacy after will have been declare

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KINDS: 1. estoppel in pais (by conduct) a. estoppel by silence b. estoppel by acceptance of benefits 2. Technical estoppel a. If a a. Estoppel by deed b. Estoppel by record c. Estoppel by judgment d. Estoppel by laches LACHES : Failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it VI. PARTNERSHIP AND AGENCY Contract of Partnership A. DEFINITION By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession (Art. 1767) B. ELEMENTS What are the characteristic or elements of the contract of partnership? The contract of partnership is: a. CONSENSUAL –because it is perfected by mere consent of the partners, although such consent must be manifested in certain cases by the proper formalities. b. NOMINATE – because it has a particular name under the Civil Code c. BILATERAL/MULTILATERAL – because it gives rise to reciprocal obligations; because it is entered into between two or more persons. d. PRINCIPAL: because its existence does not depend on the life of another contract. e. ONEROUS – because there is a valuable consideration; because certain contributions have to be made. f. PREPARATORY – because it is a means for entering into further contracts; in the sense that after it has been entered into, other contracts essential in the carrying out of its purposes can be entered into. g. There must be a contribution of money, property, or industry to a common fund. h. The object must be a lawful one. i. There must be an intention of dividing the profit among the partners since the firm is for common benefit or interest of the partners. j. There must be the affectio societatis - the desire to formulate an ACTIVE union. k. A new personality-that of the firm- must arise, distinct from the separate personality of each of the members. a. b. e. f.

What are the essential features of partnership? There must be a valid contract; There must be mutual contribution of money property or industry to a common fund; The parties must have capacity to enter into a contract; The object must be lawful;

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g. h. a. b. c. d. e.

The purpose of the parties must be to obtain profits which shall be divided among themselves; The articles of co-partnership must not be kept secret among members. What are the legal characteristics of partnerships? Partnership derives its existence from the voluntary agreement of the members; It has a juridical personality separate and distinct from the partners; The partners are liable pro-rata for the contractual liabilities of the partnership; there is mutual agency between the partners; The partners are liable after exhaustion of partnership assets to the extent of their personal property except the limited partners. C. RULES TO DETERMINE EXISTENCE What are the rules for determining the existence of a partnership? They are:

1. Except in the case of a partnership by estoppels, persons who are not partners as to each other are not partners as to third persons. 2. Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property 3. The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; 4. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: a. As a debt by installments or otherwise; b. As wages of an employee or rent to a landlord; c. An an annuity to a widow or representative of a deceased partner d. As interest on a loan, though the amount of payment vary with the profits of the business e. As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. (Art. 1759) D. HOW PARTNERSHIP IS FORMED What are the formalities needed in a partnership? The following: a)

For validity of the contract (among the parties) as well as enforceability, no form is required as a general rule, regardless of the value of the contributions. Therefore, the contract may even be oral. (Magalona v. Pesayco 59 Phil 153) Exception: Whenever real properties or real rights in real properties are contributed -- regardless of the value – a public instrument is needed.

b)

For effectivity of the partnership contract insofar an innocent third persons are concerned, the same must be registered if real properties are involved. In what form shall a partnership be constituted? A partnership may be constituted in any form, hence, it may be oral or in writing; but where immovable property or real rights are contributed thereto, the partnership contract must be in a public instrument (Art. 1771) What are partnership?

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a) Personal Property 1) Less than P3,000 (total) – may be oral 2) 3,000 or more – must be in a public instrument and registered in the Securities and Exchange Commission. But even if this is not complied with, partnership is still valid and possesses a distinct personality. Evidently, the requirements are merely for administrative and licensing purposes. b)

Real Property – regardless of the value contributed, a public instrument is needed, with an attached inventory; otherwise the partnership is VOID and has no juridical personality even as between the parties. (Art 1773, Civil Code). Moreover, to be effective against third parties, the partnership must also be registered in the Registry of Property of the province where the real property contributed is found. After all, there is an alienation here of a real right on real property.

c) Limited Partnership – must be registered as such in the Office of the Securities and Exchange Commission; otherwise, it is not valid as a limited partnership. However, even without such registration, it may still be considered a general partnership, and as such, possesses juridical personality.

E. PARTNERSHIP TERM How may the duration of the partnership be agreed upon? a. Express – This has a definite period b. Implied – Upon achievement of its purpose When do the relationships of a partner begin which each other? The relationship begins from the moment of the execution of the contract. When does the partnership end? It ends on the expiration of a fixed term or accomplishment of a particular undertaking. Except that if it does end on this basis, it becomes a partnership at will. What are the instances where it becomes a partnership at will? a. There is no term, express or implied. Hence, there is an agreement that it will continue to exist. b. Partners or some of them who have acted habitually continues the business without or liquidation of the partnership affairs. F. UNIVERSAL VS. PARTICULAR; GENERAL VS. LIMITED Classify partnerships? As to object – 1.

Universal partnership which are of two kinds: i. universal partnership of all present property ii. universal partnership of profits 2. Particular Partnership i.e. A partnership for the practice of a profession is a particular partnership As to liability of the partners-

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1. General partnership – where all the partners are general partners who are liable with all their property after all partnership assets are exhausted 2. Limited partnership – where there is at least one general partner and at least one limited partner, the limited partner being liable only to the extent of his contribution. UNIVERSAL PARTNERSHIP: Define a universal partnership of all present property: A universal partnership of all present property is one 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 (Art. 1778) What is a universal partnership of all present property? In partnership of all present property, the contribution of the partners consists of: a) All the properties actually belonging to the said partners; b) The profits acquired with said properties. Define a universal partnership of profits: A universal partnership of profits comprises all that the partners may acquire by their industry or work during the existence of the partnership (Art. 1780) Distinguish universal partnership of all profits from universal partnership of all present property. The following are the distinctions between universal partnership of all profits and universal partnership of all present property: In universal partnership of all profits – a) Only the usufruct of the properties of the partners becomes the common property (owned by them and the partnership); naked ownership is retained by each of the partners. (see also Jacson v.Blum, 1 Phil 4) b) All profits acquired by the industry or work of the partners become common property (regardless of whether or not said profits were obtained through the usufruct contributed). In universal partnership of all present property – a) All the property actually belonging to the partners are contributed – and said properties become common property (owned by all the partners and by the partnership) b) As a rule, aside from the contributed properties only the profits of said contributed common property (not other profits). Is future property included in universal partnership of all present property? No. The following are the reasons why future (by inheritance, legacy, and donation) property cannot be included in the stipulation regarding the universal partnership of all present property: a)

First, as a rule, contracts regarding successional rights cannot be made. b) Secondly, a partnership demands that the contributed things be determinate, known, and certain. c) Thirdly, a universal partnership of all present properties really implies a donation, and it is well-known that generally, future property cannot be

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donated. PARTICULAR PARTNERSHIP: What is a Particular Partnership? Is a partnership where for its object are determinate things for the use of their fruits, or specific undertaking, or the exercise of a profession. What are the objects of a particular partnership? a. Determinate things – their use or fruits b. Specific undertaking c. Exercise of profession How may the duration of the partnership be agreed upon? a. Express – This has a definite period b. Implied – Upon achievement of its purpose When do the relationships of a partner begin which each other? The relationship begins from the moment of the execution of the contract. When does the partnership end? It ends on the expiration of a fixed term or accomplishment of a particular undertaking. Except that if it does end on this basis, it becomes a partnership at will. What is a partnership at will? It is a continued business by the habitual managers although the period has ended or the purpose has been accomplished. What are the instances where it becomes a partnership at will? a. There is no term, express or implied. Hence, there is an agreement that it will continue to exist. b. Partners or some of them who have acted habitually continue the business without liquidation of the partnership affairs. What are the effects of a partnership at will? The rights and duties of the partners remain the same as they where at such termination. GENERAL DISTINGUISHED FROM LIMITED PARTNERSHIP As to liability of the partners1. General partnership – where all the partners are general partners who are liable with all their property after all partnership assets are exhausted. 2. Limited partnership – where there is at least one general partner and at least one limited partner, the limited partner being liable only to the extent of his contribution. G. PARTNERSHIP BY ESTOPPEL What is estoppel? Estoppel is a bar which precludes a person from denying or asserting anything contrary to that which has been established a truth by his own deed or representation, either express or implied. Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. What is meant by partner by estoppel?

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A partner by estoppel refers to a person who represents himself, or consents to another or others representing him to any one, as a partner either in an existing partnership or in one that is fictitious or apparent. (Art 1825, NCC) When can a partnership by estoppel exist? If all the actual partners consented to the representation, then the liability of the person who represented himself to be a partner or who consented to such representation and the actual partners is considered a partnership liability. This is a case of partnership by estoppel. The person becomes an agent of the partnership and his act or obligation that of the partnership. How does a person not a partner become a partner by estoppel? He becomes a partner by estoppels under any of the following cases: a. He directly represents himself to anyone as a partner in an existing partnership or in a non-existing partnership with one or more persons not actual partners; or b. He indirectly represents himself by consenting to another representing himself as a partner in an existing partnership or in a non-existing partnership (Art. 1825) If a person is admitted as a partner into an existing partnership, shall he be liable for all the obligations of the partnership incurred by the partnership before his admission? Yes, he shall be liable for all the obligations arising before his admission as though he had been a partner when such obligations were incurred but his liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary. (Art. 1826) For obligations of the partnership incurred after he was admitted into the partnership, to what extent shall he be liable? For these obligations, he shall be liable to the extent of his separate property after the partnership assets have been exhausted. When is an existing or actual partnership bound by the representation made by or in behalf of a person (partner by estoppel) that he is a member of the partnership? The only instance under our law when an existing partnership is bound by the representation made by or in behalf of a partner by estoppel is when all of the Partners had given their consent to such representation. It will be only then that a partnership obligation shall result. (Art. 1825, NCC.) In such a case, any third person who, relying on such representations, gave credit to the partnership, can hold the partnership as well as all of the partners, including the partner by estoppel, liable in accordance with Art 1816 of the NCC. A good example of this would be those who, not being members of the partnership, include their names in the firm name. (Art 1815, NCC) What is the character of the liability of a partner by estoppel to persons who, relying on the representation that the former is a partner in an actual or apparent partnership, have given credit to such partnership? The character of the liability of a partner by estoppel to a person who, relying on the representation that the former is a partner in an actual or apparent partnership, have given credit to such partnership shall depend upon whether a partnership obligation has been created or not. If partnership obligation has been created, he is liable as though he were an actual member of the partnership. However, when no partnership obligation has been created, such as when there is actually no partnership or even where there is, not all of the members thereof had given their consent to the representation, he is merely liable pro rata with the other persons

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consenting to the representation. (Art. 1825, NCC) Does estoppel create a partnership? It must be emphasized that estoppel does not create partnership as between alleged partners. A contract, express or implied, is essential to the formation of a partnership. The law considers them as partners and the association as a partners and the association as a partnership only in so far as it is favorable to third persons by reason of equitable principle of estoppel. H. PARTNERSHIP VS. JOINT VENTURE Distinguish partnership from joint-stock company a. In a partnership the capital is not divided into shares while in a jointstock company the capital is divided into shares as in a corporation; b. In a partnership the management as a general rule is vested in all the partners, while in a joint-stock company the management is entrusted to a board of directors; c. In a partnership the partner cannot assign his interest in the partnership to a third person thereby making him a partner without the consent of the other partners, while in a joint-stock company a member can transfer his share or shares to another at any time without the consent of the other members; d. A partnership is an association of persons while a joint-stock company is an association of capital. I.

PROFESSIONAL PARTNERSHIP Particular Partnership - i.e. A partnership for the practice of a profession is a particular partnership J. MANAGEMENT – Arts. 1800-1803 What are the rights and obligations of a managing partner, whose appointment is contained in the articles of co-partnership? a. The partner who has been appointed manager in the articles of copartnership may: 1. Execute all acts of administration, despite the opposition of his partners; unless he should act in bad faith; 2. His power is irrevocable – meaning he can be removed from management only for just and lawful cause and by vote of controlling interest; 3. He cannot execute acts of strict dominion without the consent of all the other partners. (Art. 1800) b. The partner who has been appointed managing partner after the constitution of the partnership may: 1. Execute all acts of administration, despite the opposition of his partners, unless he should act in bad faith; 2. His power is revocable – meaning he can be removed from management at any time for any cause whatsoever. 3. He also cannot execute acts of strict dominion without the consent of all the other partners. (Art. 1800) What are the powers of two or more managing partners whose respective duties are not specified? If two or more partners have been appointed managing partners without specification of their respective duties, or without a stipulation that one of

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them shall not act without the consent of all the others, their powers are the following: 1. Each one may separately execute all acts of administration; 2. If one or more of the managing partners shall oppose the acts of others, then the decision of the majority of the managing partners shall prevail; 3. In case of a tie, then the matter shall be decided by a vote of the controlling interest; but 4. No one may execute acts of strict dominion without the consent of all the other partners. (Art. 1801) How shall management be exercised in case it is stipulated that none of the managing partners shall act without the consent of the others? 1. The concurrence of all shall be necessary for the validity of any act; 2. The absence or disability of any of them cannot be alleged; unless there is imminent danger or irreparable injury to the partnership. (Art. 1800) Who shall manage the partnership in case no manner of management has been agreed upon? 1. All the partners shall be considered agents of the partnership and whatever any one of them may do alone, provided it is an act of administration shall bind the partnership; 2. In case one or more oppose the act of one, it shall be settled by the vote of majority of all the partners; 3. In case of tie, it shall be settled by the vote of controlling interest; 4. None of the partners without the consent of the others, may: a. Make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership; b. If the refusal or consent by the other partners is manifestly prejudicial to the interest of the partnership, the court’s intervention may be sought. (Art. 1803) If appointment is made in the Articles of Partnership, is the power revocable or irrevocable? Power is irrevocable without just or lawful cause. In removing the managing partner appointed in the Articles of Partnership, what is the vote required? (1) To remove him for JUST cause, the controlling partners (controlling financial interest) should vote to OUST HIM. (Art. 1800, par.1) (2) To remove him WITHOUT CAUSE, or FOR AN UNJUST CAUSE, there must be UNANIMITY (including his own vote). What is the extent of power of the managing partner so named in the Articles of Partnership? (1) If he acts in GOOD faith, he may do all acts of ADMINISTRATION (not ownership) despite the opposition of his partners. (2) If in BAD faith, he cannot (however, he is presumed to be acting in good faith; moreover, if he really is in bad faith the controlling interest should remove him.) If appointment is made other than in the Articles of Partnership is the power revocable or irrevocable? Power to act may be revoked at any time, with or without just cause. What is the logic behind the rule stated above? Such appointment is a mere delegation of power, revocable at any time. (11 Manresa 381).

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What is the extent of power of such manager? Extent of power: As long as he remains manager, he can perform all acts of ADMINISTRATION, but of course, if the other people oppose and he persists, he can be removed. What are the powers of a managing partner? A managing partner can be presumed to have all the incidental powers to carry out the object of the partnership in the transaction of business, subject to the exception, however, that when powers are specifically restricted, he cannot exercise the powers expressly denied him. When the articles of association do not specify the powers of the managing partner, he has, on principle, the powers of a general agent, and even more; and when the object of the company is determined, the manager has all the powers necessary for the attainment of such object. What is the rule when there are two or more managers? Specific Rules - Each may separately execute all acts of administration (unlimited powers to administer). What is the exception to the rule? Except if any of the managers should oppose. (Here the decision of the MAJORITY shall prevail.) Who has the right to oppose? The right to oppose is not given to non-managers because in appointing their other partners as managers, they have stripped themselves of all participation in the administration. When must the other managers make the opposition? Before the acts produce legal effects insofar as third persons are concerned. Reason – for them to delay or for them to protest after third parties are affected would be unfair to said third parties. Moreover, the acts of the firm would be unstable. Suppose there is a tie, what is the rule? The partners owning the CONTROLLING INTEREST prevails – provided they are also managers. What happens when there has been an effective opposition, but still the manager goes ahead and execute the act opposed? Opposition by one partner to the projected act by another is sufficient to prevent it; and if the latter, ignoring such objection, goes ahead and executes the act, it shall be void, not only as among the members but also as to third persons, who had knowledge, or who could have known, of such opposition. When will the act be valid despite opposition of other managers? It will be valid with respect to the third person who contracted with a partner, if such third person is not of the opposition, and the contract is one within the scope of the administration of the partnership. The partner contracting is an agent of the partnership and within the scope of his authority, his contract with an innocent third person binds the principal. What if there is a specification of duties among the managers? If the separate duties of the managers are specified, such as when one is given charge of sales and another of purchases, each one is considered as exclusive and sole manager as to the acts within the sphere of his authority. When must there be unanimity in the actuations of the

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managers? In case it should have been agreed that none of the managing partners shall act without the consent of the others, the concurrence of all shall be necessary for validity of the acts, and the absence or disability of anyone of them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership. Suppose one the managers is absent or incapacitated, is unanimity still required? Yes, for the absence or incapacity is no excuse. What is the exception to the rule that absence or incapacity is no excuse? When there is imminent danger of grave or irreparable injury to the partnership. In joint management, who has the duty in securing the consent of the other partner? In such case, the obligation to secure the consent of the other partner rests upon the partner entering into the contract. It is not imposed upon the third person who enters into the contract and who is not required to verify whether the partner entering into the contract has previously obtained the consent of the others. It is presumed that such consent has been given, unless the contrary has been previously manifested to the third person. What happens to a contract entered into by one partner made, not only without the consent of the other but even against his will, if the third person acted in good faith and the transaction refers to matters within the business of the partnership? The contract cannot be annulled, without prejudice to the liability of the guilty partner. What is the reason for the above stated rule? The reason for this rule is the necessity of protecting third persons from fraud and deceit, of which they can be easy victims. Furthermore, the requirement of the previous approval by the other partner obviously refers to the execution of formal contracts in writing, and not to routine transactions, such as ordinary purchases and sales for a firm engaged in the business of buying and selling merchandise of all kinds, naturally come within the scope of the general authority of the manager of a business. What then is the duty of a third person dealing with a partnership requiring unanimity in the actuations of its managers? The rule that third persons are not required to inquire as to whether or not a partner with whom he transacts has the consent of all the managers, for the presumption is that he acts with due authority and can bind the partnership applies only when they innocently deal with a partner apparently carrying on in the usual way the partnership business. Because under Art. 1802, it is imperative that if unanimity is required it is essential that there be unanimity; otherwise, the act shall not be valid, that is, the partnership is not bound. It would be wise therefore if the third person could inquire whether or not unanimity is required, and if so, if such unanimity is present. This is for his own protection. Thus, it has been held that a sale by a partner of partnership assets without the consent of the other managers is not valid. II.

RIGHTS AND OBLIGATIONS OF PARTNERS AMONG THEMSELVES PROPERTY RIGHTS OF A PARTNER

193. What are the property rights of a partner? a. His rights in specific partnership property;

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b. His interest in the partnership; and c. His rights to participate in the management. (Art. 1810) As

regards specific partnership property, what relationship exists between and among the partners? A partner is a co-owner with his partners of specific partnership property. (Art. 1811) What are the incidents of this co-ownership? They are: a. A partner has an equal right with his partners to possess specific partnership property for partnership purposes; subject to any agreement between the partners; but he has no right to possess such property for any other purposes without the consent of his partners; b.

A partner cannot assign his right to specific partnership property for his personal purpose but he can assign it in connection with the assignment of the rights of all the partners in the same property for partnership purpose. c. A partners’ right in specific partnership property is not subject to attachment or execution for his personal obligations, but can be attached or subject to execution for a claim against the partnership. d. When partnership property is attached for a partnership debt, the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws. e. A partner’s right in specific partnership property is not subject to legal support. (Art. 1811) 196. What is the nature of a partner’s interest in the partnership? A partner’s interest in the partnership is his share in the profits and surplus. The partner’s interest in the partnership is his personal property. (Art. 1812) 197. What are the rights of a partner in a specific partnership property? (1) A partner has an equal right with is partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners; (2) A partner’s right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property; (Reason: It is hard to determine how much it exactly is until after liquidation) (3) A partner’s right in a specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner cannot claim any right under the homestead or exemption laws; (Reason) (4) A partner’s right in specific partnership property is not subject to legal support under Art. 291. What is the effect of this provision to the separate and distinct juridical personality of the partnership? This Article seems to be inconsistent with the idea of a separate juridical personality of the partnership. The partnership, as a juridical person, owns every property in the common patrimony. The social patrimony does not belong to the partners, but to the partnership itself. What is a partner’s interest in the assets of the partnership? A partner’s interest in the partnership is his share in the profits and

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surplus.The (Art. 1812)

partner’s interest in the partnership is his personal property.

What is a partner’s interest in the assets of the partnership? A partner has no individual property in any specific assets of the firm, but each partner’s interest in the partnership property is his share in the surplus after partnership debts are paid and partnership accounts have been settled. The interest of one partner in the assets of a partnership does not entitle him to any particular portion of such assets, but merely confers upon him a right to an accounting with other members of the partnership, and when affairs of the partnership are settled, such partner shall receive the share to which he is entitled. A partner, however, subject to agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes, but has no right to possess such property for his personal or other purposes without the other partner’s consent. One partner has no right to the exclusive possession and control of specific partnership property as against the other partner, until a balance of accounts is struck between him and his co-partner and the amount of his interest is ascertained. What constitutes a partner’s interest in the partnership? The interest of a partner in partnership property and business is the net balance found to be due him after payment of partnership debts and adjustment of partnership accounts between himself and his co-partner. Such interest is “property” and is susceptible of being seized under legal process, or of being sold and conveyed, as well as of being made liable for his separate debts. Is a partner’s interest in the partnership subject to attachment or execution for his personal debts? Yes, being his personal property, his interest in the partnership on due application to a competent court by any judgment creditor may be charged for the payment of the unsatisfied amount of the judgment debt with interest thereon. The court which issued the charging order may even: a. appoint a receiver of the debtor partner’s share of the profits, and any other money due or to fall due to him in respect of the partnership; b. make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require. (Art. 1814) May the interest so charged be redeemed and with what property shall it be redeemed? a. The interest charged may be redeemed at any time before foreclosure; or b. In case of sale directed by the court may be purchased without causing a dissolution. 1. With separate property, by any one or more of the partners; or 2. With partnership property, by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold. (Art. 1814) What other right may a partner whose interest has been so charged avail of? With respect to his interest in the partnership, he may avail himself of the exemption laws, after partnership debts have been paid. (Art. 1814) Can a partner assign his whole interest in the partnership to another without the consent of the other partners? Yes, because his interest in the partnership is his personal property. (Art.

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1813) Will the assignee become a partner? No, unless consented to by the other partners. (Art. 1813) The assignor is still the partner, with a right to demand accounting and settlement. What are the effects of conveyance by a partner of his interest in the partnership? If a partner conveys his whole interest in the partnership, either of two things may happen: 1) The partnership may still remain; or 2) The partnership may be dissolved. But such mere conveyance does not itself dissolve the firm; therefore, in general the partnership remains. In the absence of an agreement to that effect, the conveyance by a partner of his whole interest in the partnership does not dissolve the partnership. (Art. 1813) OBLIGATIONS OF PARTNERS TO THE PARTNERSHIP: What are the specifics obligations of a partner? a. Duty to contribute b. Duty to credit the firm c. Duty to pay damages caused by his fault d. Obligation to account for and hold as trustee unauthorized profits e. Obligation not to engage in another business What are the rules of the partners regarding the duty to contribute ? a. The contribution must be made at the time the partnership is entered into unless a different period is stipulated. b. No demand is needed to put the partner in default c. The partner must exercise due diligence in preserving the property to be contributed before he actually contributes the same. d. A partner who promises to contribute to the partnership becomes a promissory debtor of the partnership. What are the rules on the duty to deliver the fruits? a. If property has been promised, the fruits thereof should also be given. b. The fruits referred to are those arising from the time they should have been delivered, without a need of any demand. c. If a partner is in bad faith, he is liable not only for the fruits actually produced, but also for those that could have been produced. d. If money has been promised, interest and damages from the time he should have complied with his obligation should be given. e. No demand is needed to put the partner in default f. It is delivery, actual or constructive that transfers ownership What are the rules on the duty to warrant? a. The warranty in case of eviction refers to specific and determinate things already communicated. b. There is eviction whenever by final judgment based on a right prior to the sale or an act imputable to the partner, the partnership is deprived of the whole or a part of the thing purchased. When is a partner considered a debtor of the partnership? A partner is considered a debtor of the partnership for whatever he may have promised to contribute thereto. (Art. 1786) What is the remedy against a partner who fails to contribute?

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Action is one for collection because the defaulting partner is a debtor. What are the obligations of a partner with respect to his promise to contribute property? They are: a. To contribute the property at the beginning of the partnership or at the time stipulated. b. To answer for the warranty in case of eviction in the same cases and in the same manner as the vendor is bound with respect to the vendee; c. To be liable for the fruits thereof from the time the property should have been delivered without the need of any demand. (Art. 1786) How is appraisal made if the contribution is a property? Firstly, as prescribed in the contract and in the absence thereof, by experts chosen by partners and at the current price. If the capital or part thereof which a partner is bound to contribute consists of goods, how shall said goods be appraised? The appraisal must be made in the manner prescribed in the contract of partnership. In the absence of stipulation, it shall be made by experts chosen by the partners and according to current prices. Any subsequent change thereof shall be for the account of the partnership. (Art. 1787) After the goods have been contributed by the partner, will the risk of subsequent change in their value still be burdened by the latter? No, it is shifted to the partnership. What are the liabilities of the partner who has undertaken to contribute a sum of money and fails to do so? The partner becomes a debtor for the interest and damages from the time he should have complied with his obligation, without necessity of demand. (Art. 1788) What rule shall apply in the event a partner converts partnership money to his personal use? The partner shall be liable for the amount he may have taken from the partnership coffers with interest and damages from the time he converted the amount to his own use. (Art. 1788) What are the consequences if an industrial partner, without consent of the other partners, engages in another business? Or, May an industrial partner engage in business for himself? a. He can be excluded in the firm. b. The remaining partners can avail of the benefits said industrial partner earned plus damages. *The capitalist partners have the right to exclude him from the firm with damages; or *The capitalist partners can avail themselves of the benefits which the industrial partner may have obtained with a right to damages (Art. 1789) An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so. (Art. 1789) What if there is no competition between the business of the partnership and the industrial partner? or, Does this prohibition apply to a business the same as the business of the partnership? Still the industrial partner is liable because all his industry must be devoted to the partnership. The prohibition extends to any kind of business be it the same or different from the business of the partnership.

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How much is to be contributed in the partnership? The partners shall contribute equal shares to the capital of the partnership if there is no stipulation to the contrary. In case of imminent loss of the business of the partnership which partners are required to contribute additional capital to save the business of the partnership? The capitalist partners are under obligation to contribute additional capital to save the venture unless there is an agreement to the contrary (Art. 1791) What is the remedy in case a capitalist partner refuses to contribute additional fund when he is bound to do so? The capitalist partner who refuses to contribute additional capital to save the venture shall be obliged to sell his interest to the other partners. (Art. 1791) If a partner fails to contribute within a stipulated time what was promised, may partnership contract be rescinded? General rule, No, rescission is not the proper remedy; the remedy should collect what is owing. However if the defaulting partner is already dead, rescission is proper. Which partner is not bound to contribute additional fund despite imminent loss of the business of the partnership? The industrial partner is not bound to contribute additional fund because having contributed his entire industry he has nothing more to contribute. But if he is partly industrial and capitalist partner, as a capitalist partner he is bound to contribute additional fund unless there is an agreement to the contrary. (Art. 1791) What are the rules when there exists a credit to the firm and payment is made to a partner who is also a creditor of the same debtor? a. If the managing partner gives receipt to the firm, it is the firm’s credit that is extinguished. b. If managing partners gives receipt for his debt, amount collection shall be applied in proportion. c. By way of exception, of the creditor applies by way of application provided the debt to the partner is more onerous to the debtor. What are the requisites if a debt is collected where the debtor owes both a partner in his personal capacity and the partnership? a. Two debts from the same debtor b. Both debts are due and demandable c. Collecting partner is a managing partner, if not there is a basis for suspicion that the partner is acting for his own benefit. Also, he is in a position to give preference to his credit. What is the obligation of a partner who has received in whole or in part, his share of a partnership credit when the other partners have not collected their share and the partnership debtor thereafter becomes insolvent? The partner who has collected his share must bring to the partnership capital what he received even though he may have given a receipt for his share only. This rule applies whether the partner who receives his share is authorized to manage or not. (Art. 1793) If the partnership suffers loss or damage due to the fault or negligence of a partner, who shall be responsible? It is the very partner who by his fault or negligence caused loss or damage to the partnership. (Art. 1794)

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Can the partner who is responsible for the damage compensate them with the profits and benefits which he may have earned from the partnership by his industry? No. But the courts may equitably reduce his responsibility if through his extraordinary efforts in other activities of the partnership, profits may have been realized. (Art. 1794) Why are damages not offset by benefits? a. Partner has a duty to secure benefits, duty also not to be at fault. b. Since it is a duty, compensation takes place presuppose 2 persons who are reciprocally liable of each other. III. OBLIGATIONS OF PARTNERSHIP/PARTNERS TO THIRD PERSONS What is the rule regarding the liability of the partners for the contractual obligations incurred by the partnership? Or, How are partners including industrial ones liable for contractual obligations of the partnership? All the partners, including the industrial partners, are liable to creditors of the partnership for the obligations contracted in the name and for the account of the partnership. The debts and obligations of the partnership are, in substance, also the debts and obligations of each individual member of the firm. The liability to debtor (partners) is pro rata and subsidiary with all their property for contractual obligations of the partnership. (Art. 1816) What is meant by the term “pro rata” in the distribution of the partnership liability among the partners? Pro rata, as used in the law, must be understood to mean equally or jointly and not proportionately which is its literal meaning because pro-rating is based on the numbers of partners and not on the amount of their contributions to the common fund, subject to adjustment among the partners. The fact that a partner has left the country and the payment of his share of the liability cannot be enforced (Co-Pitco v. Yulo, 8 Phil 544.); or his liability was condoned by the creditor (Island Sales, Inc. v. United Pioneers Gen. Construction Co., 65 SCRA 554.) cannot increase the liability of the other partners.Pro-rata liability here, does not mean proportionate to the partner’s contribution but is understood to mean equally divided among the partners. What is meant by the subsidiary liability of the partners with regards to the partnership debts and obligations to third persons? The liability of the partners to the creditors of the partnership is subsidiary because they become liable only after all the partnership assets have been exhausted, unless a particular partner assumes a separate obligation to perform a partnership contract or make himself solidary liable on a partnership contract. It means that partnership assts first be exhausted for the payment of partnership obligations, before the partners shall become liable with their personal property. How do you reconcile the exception of an industrial partner from loss and his pro-rate liability for partnership contractual obligations? The exception of an industrial partner from loss is applicable only among the partners themselves, but the industrial partner is not exempt from partnership liability to third party creditors. The industrial partner is liable for his pro-rate share to the extent of his personal property after partnership assts have been exhausted. But the industrial partner can seek reimbursement for what he has paid from the other partners, for among themselves he shall be exempted from loss. When is a partnership contractual obligation incurred?

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A partnership contractual obligation arises from a contract which is entered into in the name and for the account of the partnership, for apparently carrying on the ordinary business of the partnership, by a partner authorized by the partnership. (Art. 1818) What is the effect of a stipulation among the partners contrary to the pro-rata subsidiary liability of the partners? Such stipulation is valid and enforceable among the partners, but void and of no effect in so far as it affects the rights of third party creditors. and

Is an industrial partner exempted from liability to third persons for the debts of the partnership? No. The exemption of the industrial partner to pay losses relates exclusively to the settlement of the partnership affairs among the partners themselves and has nothing to do with the liabilities of the partners to third persons. An industrial partner therefore is not exempted from liability to third persons for the debts of the partnership. Neither on principle nor on authority can the industrial partner be relieved from liability to third persons for the debts of the partnership (Compania Maritima v. Munoz, 9 Phil. 326) In the absence of any agreement to the contrary, who shall act as agent of the partnership? Every partner is an agent of the partnership for the purpose of its business. (Art.1818) What is the mutual agency rule? Art 1818 provides for the mutual agency rule which states that, “every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.” Should a third person inquire on the restrictions imposed by the partnership upon a partner before dealing with the partnership through the said partner? No. Third persons are not bound to inquire into the existence of the restriction but may rely on the presumption that a partner may bind the partnership (Litton v. Hill & Coron, 67 Phil 509). However, no act of partner in contravention of a restriction or authority shall bind the partnership to persons having knowledge of the restriction (Art 1818, last par.) When can a partner bind the partnership? A partner binds the partnership when the following requisites are present: (a) When he is expressly authorized or impliedly authorized; (b) When he acts in behalf and in the name of the partnership. What are the instances of implied authorization of a partner to bind the partnership? The following: (a) When the other partners do not object, although they have knowledge of the act; (b) When the act is for “apparently carrying on in the usual way the business of the partnership.” (This is binding on the binding on the firm even if the partner was not authorized, provided that the third party is in good faith) When will the act of the partner not bind the partnership?

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a) When, although for “apparently carrying the usual way the business of the partnership,” still the partner has in fact no authority and the 3 rd persons know that the partner has no authority. b) When the act is not for apparently carrying on in the usual way of the partnership and the partner has no authority. How is partnership tort committed? A partnership tort is committed in any of the following ways: a. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership; b. Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; or c. Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. (Art. 1822; Art. 1823) Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act. (Art 1822 NCC) Who shall be charged liable for partnership tort? All partners are liable solidarily with the partnership for any penalty or damage arising from a partnership tort. (Art. 1824) Can the partnership be held liable for the wrongful act or omission of a partner even though the other partners did not participate in such act or omission? The law expressly provides that the partnership is liable for the wrongful act or omission of any partner acting in the ordinary course of the business of the partnership if loss or injury results thereby. This rule remains true even though the other partners did not participate in or ratify, or had no knowledge of the act or omission. What are the requisites for liability under Article 1822? The following are the requisites for liability under Article 1822: 1) The partner must be guilty of a wrongful act or omission; and 2) He must be acting in the ordinary course of business or with the authority of his co-partners even if the act is not connected with the business. What are the requisites prescribe by law in order that a partnership may be held liable to a third person for the act of one of the partners? It must be observed that the act of one of the partners for which a partnership may be held liable, may constitute either a contractual obligation (Art 1816, NCC) or an obligation arising from a criminal offense or a quasi-delict. (Arts 1822, 1823, 1824, NCC.) In the case of a contractual obligation, the following requisites must concur: 1) the contract must be entered into in the name and for the account of the partnership and under its signature; 2) the partner must be authorized to act for the partnership. (Art 1816, NCC) In the case of an obligation arising from a criminal offense or a quasi-delict, the only requisite prescribed by the law is that the act must be performed b y a partner inn the ordinary course of the business of the partnership with

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the authority of his co-partners. (Art 1822, NCC) When can the firm and the other partners not be held liable? a) If the wrongful act or omission was not done within the scope of the partnership business and for its benefit or with the authority of the copartners. b) If the act or omission was not wrongful c) If the act or omission, although wrongful, did not make the partner concerned liable himself. d) If the wrongful act or omission was committed after the firm had been dissolved and same was not in connection with the process of winding up. Based on the principle of mutual agency, is the partnership liable for torts committed by a partner? Based in the said principle, the partnership or every member of a partnership is liable for torts committed by one of the members acting in the scope of the firm business, although they do not participate in, ratify or have knowledge of such torts. Such liability is not dependent on the personal wrong of the individual member of the partnership against which the liability is asserted. What is the test to determine whether or not the other members of a partnership are liable as a joint tort-feasors together with the guilty partner? The test of the liability is based on a determination of the question whether the wrong was committed in behalf of and within the reasonable scope of business of the partnership. If it was so committed, the partners are liable as joint tort-feasor. Can the partnership be still held liable for the wrongful act of one of its partner even if the latter acted outside the agency or common business of the partnership? If the injury results from a wanton or willful act of one of the parties committed outside the agency or common business, then the person doing the act and causing the injury is alone responsible, unless the act which constituted the tort was authorized by the members of the partnership or subsequently ratified by them, the ac t itself having been done in their behalf and interest. (See 40 Am. Jur 261-262; Iron v. Sauve, 27 Wash (2 nd) 562) Art 1823 provides that the partnership is bound to make good the loss: 1) Where one of the partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; 2) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. Why does the law provide for solidary liability in cases falling under Art 1822 and 1823? The obligation of partners to third persons is solidary because the law protects the latter, who in good faith relied upon the authority of a partner, whether such authority is real or apparent. (Munasque v CA 139 SCRA 533) IV.

DISSOLUTION – Art. 1830 What are the three final stages of a partnership? The three final stages of a partnership are: (1) dissolution; (2) winding up; and (3) termination.

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The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business. (Art 1828, NCC) The winding up refers to the process of liquidating partnership affairs. Termination, in point of time, refers to that moment when partnership affairs are wound up. The partnership, although dissolved continue to exist and its legal personality is retained at which time it completes the winding-up of its affairs, including the partitioning and distribution of the net partnership assets to the partners. Define dissolution of partnership. Dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on the business of the partnership (Art. 1828) Dissolution is the change in the relation of the partners caused by any partners ceasing to be associated in the carrying on of the business. (Art 1828) It is that point in time when the partners cease to carry on the business together. It represents the demise of a partnership. (68 CJS 842) What is winding up? Winding up is the process of settling the business or partnership affairs after dissolution. What is termination? Termination is that point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. What is the principal significance of dissolution? The principal significance of dissolution is that, thereafter, no new partnership business should be undertaken, but affairs should be liquidated and distribution made to those entitled to the partners’ interest. (Testate Estate of Mota v. Serra, 47 Phil 464) Is the partnership terminated upon dissolution? Or, Does dissolution terminate the partnership? The dissolution of a partnership must not be understood to mean its extinguishment. The partnership continues until the winding up is completed. Thus dissolution refers to the change in partnership relation and not the actual cessation of the partnership business. No. On dissolution, the partnership is note terminated. The partnership continues to exist for the purpose of winding up of partnership affairs. (Art. 1829) What are the causes of dissolution of a partnership? Dissolution is caused: 1) Without violation of the agreement between the partners: (a) By the termination of the definite term or particular undertaking specified in the agreement; (b) By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified; (c) By the express will of all the partner 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; (d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners. 2) In contravention of the agreement between the partners where the circumstances do not permit dissolution under any other provision of this

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article, by the express will of any partner at any time. 3) 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. 4) When a specific thing, which a partner had promised to contribute to the partnership, perishes before the delivery, in any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired the ownership thereof: 5) By the death of any partner; 6) By the insolvency of any partner or of the partnership; 7) By civil interdiction of any partner; 8) By the decree of court under the following article (Art. 1830) Do the rights and powers of the partners and the existence of the partnership terminate upon dissolution? The term “dissolution” is thus descriptive of that change in the partnership relation which ultimately culminates in its termination. Dissolution is not in itself a termination of the partnership or of the rights and powers of the partners, for many of these persist during the winding up process which follows dissolution. (40 Am Jur. 291.) What is the effect of dissolution of the partnership? The dissolution of the partnership affects only future obligations of the business, and as to past transactions the partnership continues until it satisfies all its pre-existing obligations. Dissolution of partnership does not abrogate its contracts, which continue until performed or otherwise become operative. Dissolution has no effect on debts due from the partnership to third parties except that partners may not act for each other any further than may joint debtors. LIMITED PARTNERSHIP A. DEFINITION 1. Define a Limited partnership? A limited partnership is one formed by at least one general partner and one limited partner, but the limited partner as such shall not be bound by the obligations of the partnership beyond his capital contribution. (Art. 1843) 2. What are the characteristic features of a limited partnership? They are the following: 1. A limited partnership is formed by compliance with the statutory requirements; 2. There should be one or more general partners who manage the business and are liable after partnership assets have been exhausted to the extent of their personal property for obligations of the partnership; 3. There should be one or more limited partners who contribute to its capital, share in the profits, but do not take part in management and are not liable for the obligations of the partnership to the extent of their personal property. 4. The partnership debts are satisfied first form the partnership assets and subsidiarily from the personal property of the general partners. B. HOW LIMITED PARTNERSHIP IS FORMED/AMENDED 3. What are the requirements to form a limited partnership? They are as follows: 1. The partners must sign and swear to a certificate which shall state: a. The name of the partnership, adding thereto the word “Limited”; b. The character of the business; c. The location of the principal place of business;

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d. The name and place of residence of each member; general and limited partners being respectively designated; e. the term for which the partnership is to exist f. The amount of cash and a description of and the agreed value of the other property contributed by each limited partner; g. The additional contributions, if any, to be made by each limited partner and the times at which or events on the happening of which they shall be made; h. The time, if agreed upon, when the contribution of each limited partner is to be returned. i. the share of the profits or the other compensation by way of income which each of the limited partner shall receive by reason of his compensation; j. the right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the substitution. k. The right, if given, of the partners to admit additional limited partner; l. the right, if given, of one or more of the limited partners, as to contributions or as compensation by way of income, and the nature of such priority; m. The right, if given, of the remaining general partner or partners to continue the business on the death, civil interdiction, insanity or insolvency of a general partner; and n. The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution. 2. Filing for record the certificate in the office of the Securities and Exchange Commission. (Art. 1844) 4. Must the certificate of limited partnership contain all the requisites enumerated above? Not necessarily. What is required is substantial compliance in good faith with the above requirements. (Art. 1844) 5. What is the effect of non-compliance with the statutory provisions governing the formation of a limited partnership? The partnership formed is not a limited partnership but shall be considered a general partnership where all the partners are personally liable. 6.

When shall the certificate be amended? Any change in the partnership which does not bring about a dissolution will cause the amendment of the certificate as in the following cases:

1. The name of the partnership is changed; 2. A change in the amount or character of the contribution of any limited partner; 3. A persons is substituted as a limited partner; 4. An additional limited partner is admitted; 5. A new general partner is admitted; 6. A general partner retires, dies, becomes insolvent or insane, or is sentenced to a civil interdiction and the business is continued under an agreement to that effect stated in the certificate, or with the consent of all the partners; 7. The character of the business is changed; 8. There is a false or erroneous statement in the certificate; 9. The time stated in the certificate for the dissolution of the partnership or for the return of the contribution have been changed; 10.A time is fixed for the dissolution or for the return of a contribution, where originally no time has been specified in the certificate. (Art. 1864) 7.

What are the requisites for the amendment of the certificate? They are: 1. The amended certificate must contain the provisions required of any certificate of limited partnership. 2. The amended certificate must set forth clearly the change or changes made.

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3. The amended certificate must be signed and sworn to by all the partners including the substituted limited partner or the new limited partner or the new general partner as the case may be. 4. The amended certificate must be filed with the Securities and Exchange commission. (Art. 1865) 8.

In case of cancellation of the certificate who shall sign such? The writing to cancel the certificate must be signed by all the partners. (Art. 1865).

9.

Who shall execute the writing to either amend or cancel the certificate? It shall be the partner designated in the certificate. (Art. 1865)

10. What is the procedure to be taken by a partner who desires the cancellation or amendment of a certificate in the event the partner designated in the partnership to execute the writing refuse to do so? The person desiring the cancellation or the amendment of the certificate may petition the court to order such cancellation or amendment thereof. The Court then finding that the petitioner has the right to do so, shall order the Securities and Exchange Commission to record the cancellation or amendment of the certificate and in the latter case will order to be filed with the Securities and Exchange Commission a certified copy of the decree setting for the amendment. (Art. 1865) 11. When shall the certificate be considered amended or cancelled? The certificate is considered amended or cancelled upon filing for record with the Securities and Exchange Commission the following: 1. The writing either to amend or cancel the certificate signed by all the partners. 2. A certified copy of the order of the court in case the amendment was ordered by the court. (Art. 1865) C. RIGHTS AND OBLIGATIONS OF A LIMITED PARTNER 12. What are the rights of a purely limited partner in a limited partnership? A limited partner has the same rights as a general partner to: 1. Have the partnership books kept at the principal place of business of the partnership; 2. Have the right to inspect and copy any of them at a reasonable hour on a business day; 3. Have on demand true and full information of all things affecting the partnership; 4. have a formal accounting of partnership affairs whenever circumstances render it just and reasonable; 5. Have dissolution and winding up by decree of court; 6. And as a limited partner, he shall have the right to receive s share in the profits or other compensation by way of income stipulated for in the certificate provided, that after such payment is made whether from the property of the partnership or that of a general partner, the partnership assets are in excess of all liabilities of the partnership, except liabilities to limited partners on account of their contributions and to general partners; 7. To the return of his contribution as stipulated in the certificate; (Art. 1851) What are the similar rights of a limited partner to that of a general partner? These are:

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1. 2. 3. 4.

Right to have partnership books kept at principal place of business Right to inspect/copy books at reasonable hour Right to have on demand true and full info of all things affecting partnership Right to have formal account of partnership affairs whenever circumstances render it just and reasonable 5. Right to ask for dissolution and winding up by decree of court 6. Right to receive share of profits/other compensation by way of income 7. Right to receive return of contributions provided the partnership assets are in excess of all its liabilities 82.

What are other rights available to a limited partner? He has also the right to have dissolution and winding up by decree of the court. 13. When shall a limited partner be held liable as a general partner? If the limited partner, in addition to the existence of his rights and powers as a limited partner, takes part in the control of the business, meaning takes part in management, he shall be liable as a general partner (Art. 1848) 14. What are the rights and liabilities of a person who is both a general and limited partner in the same partnership? He has the same rights and powers and subject to the same restrictions of a general partner, as though the partnership is not a limited partnership, hence, he is liable with his separate property for the obligations of the partnership. His only right as a limited partner is as regards his contribution. As regards his contribution he is entitled to the same right like the other limited partners to have a return of his contribution as though he was purely limited partner. (Art. 1853) 15. What are the liabilities of a limited partner to the partnership? A limited partner is: 1. Liable for the difference between what he has actually contributed and what he is supposed to contribute as stated in the certificate; 2. Liable for any unpaid contribution which he agreed in the certificate to make at a future time; (Art. 1858) AGENCY: Define Agency. By the 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. (Art. 1868) What are the characteristics of the contract of agency? They are: 1. Consensual – because the contract is perfect by mere consent. 2. Principal – because it can stand alone, it does not need another contract for it to exist. 3. Nominate – because it has a specific name under the Civil Code 4. Unilateral (it is without compensation) – because it creates obligations only on one party – the agent. 5. Bilateral (if it is with compensation) – because it creates a reciprocal rights and obligations. 6. Preparatory – because it is a means for entering into further contracts. Distinguish Agency from Partnership. An agent does not act for himself but for his principal, while a partner acts for himself and for the other partners and for the partnership. Distinguish Agency from Loan An agent may be given funds by the principal to advance the latter’s

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business, while a borrower is given money for purposes of his own, and he must generally return it, whether or not his own business is successful. A lot however depends on the intent of the parties. Distinguish Agency from Negotiorum Gestio. In both there is representation. But in Agency the representation is conferred while in Negotioum Gestio the Negotiorum Gestor acts not only without the authority of the owner but also without his knowledge. The agent acts according to the express will of the principal, while the gestor acts according to the presumed will of the owner. Agency is a contract while Negotiorum Gestio is a quasi-contract. Distinguish Agency from Lease of Service. The agent represents the principal, the lessor of service does not represent his employer. The agent exercises discretionary powers, the employee or lessor of service exercises ministerial powers. Distinguish Agency to Sell from Sale. In agency to sell ownership to the goods is not transferred to the agent, while in sale ownership is transferred to the buyer. The agent accounts for the price to the principal, while the buyer is directly responsible for the price. How is agency created? Agency may be: 1. Express – the agent is given actual authority by the principal either orally or in writing. 2. Implied: a. from the acts of the principal; or b. from his silence or lack of action; or c. his failure to repudiate the agency knowing that another person is acting on his behalf without authority. (Art. 1869) In what form shall the contract of agency be entered into? As a general rule, agency may be oral, unless the law requires a specific form. (Art. 1869) In what form shall the agent accept the agency? Acceptance by the agent may be: 1. Express; or 2. Implied from: a. his acts which carry out the agency; or b. his silence or inaction according to the circumstances. (Art. 1870) What are the way whereby the principal may announce the appointment of an agent? The announcement may be either: 1. By special information – that is the principal especially informs another that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent with respect to the person who received the special information; or 2. By public advertisement – in which case the agent is considered as such with regards to any person. (Art. 1873) In what form shall a contract of agency be entered into? s a general rule agency can be oral or written, but where the agency is for the sale of a piece of land or any interest therein, the authority of the agent should be in writing otherwise the sale is void. (Art. 1874) As to scope of business how is agency classified? Agency is classified into:

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1. 2.

General agency; and Special agency. (Art. 1876)

What is general agency? The agency is general when it comprises all the business of the principal. When is agency special? Agency is special when it covers only one or more specific transactions. (Art. 1876). As to the extent of the power conferred how is agency classified? It is classified into: 1. Agency couched in general terms; and 2. Agency couched in specific terms. What acts may the agent perform if his agency is couched in general terms? An agency couched in general terms comprise only acts of administration, even if the principal should state that he withholds no power of that the agent may execute such acts as he may consider appropriate, or even though the agency should authorized a general and unlimited management. (Art. 1877). State the acts for which a special power of attorney is needed. Special powers of attorney are needed 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 judgement, to waive objections to the venue of an action or to abandon a prescription already acquired. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

To waive any obligation gratuitously. To enter into any contract by which ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration. To lease any real property to another person for more than one year. To bind the principal to render some service without compensation; To bind the principal in a contract of partnership; To obligate the principal as a guarantor or surety; To create or convey real rights over immovable property; To accept ore repudiate an inheritance; To ratify or recognize obligations contracted before the agency; Any other act of strict dominion (Art. 1878)

If an agent is given a special power to sell the property belonging to his principal has he also the same power to mortgage the same? No. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (Art. 1879) Does a special power to compromise imply the power to submit to arbitration? No. A special power to compromise does not authorize submission to arbitration. (Art. 1880) In compromise it is the agent who agrees to some concessions but in arbitration it is a third person who acts as arbitrator. While it is true that the principal may have trust in the agent’s judgment in the compromise, he may have not trust in third person who the agent may

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have trusted. What are the requisites to be followed so that the principal will be bound to third persons with whom the agent has contracted? They are: 1. The agent must act within the scope of his authority 2. The agent must act in the name or on behalf of the principal. What are the effects if the agent acts in his name? 1. The principal has no right of action against the persons with whom the agent has contracted; 2. The third persons likewise have no right of action against the principal; 3. The agent is the only one directly bound in favor of the third persons with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. (Art. 1893) 4. The principal has a right to demand from the agent damages for his failure to comply with the agency. (Art. 1884) What are the obligations of the agent? They are the following: 1. To carry out the agency; 2. To answer for the damages which through his nonperformance the principal may suffer; 3. To finish the business already begun on the death of the principal, should delay entail any danger. (Art. 1884) 4. To advance the necessary funds should there be a stipulation to do so; (Art. 1886) 5. To act in accordance with the instructions of the principal . (Art. 1887) 6. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal (Art. 1888) 7. To answer for damages to the principal should he prefer in case of conflict, his own interests to those of the principal (Art. 1889) 8. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency. (Art. 1891) 9. To pay interest on funds he has applied to his own use. (Art. 1896) 10. To answer for his fraud or negligence. (Art. 1909) Is the principal bound by the acts of the agent which are within the scope of his authority but in violation of the instructions of the principal? The principal is bound so long as the agent’s acts are within the scope of his authority, because a third persons dealing with the agent is only bound to investigate the authority of the agent but is not duty bound to investigate the instructions of the principal.. The instructions concern only the agent and the principal, hence if the agent violates said instructions he will be liable to the principal for any loss or damage resulting therefrom. (Art. 1887) In case an agent has been empowered to borrow money, can he himself be the lender? Yes, he can be the lender but at the current rate of interest. There is no prejudice in this case upon the principal since the same rate of interest is to be paid whoever is the lender, be the agent or any other person (Art. 1890) If the agent has been authorized to lend money at interest, can the agent himself be the borrower? No, unless there is consent from the principal on the ground that while the agent maybe a good lender he may not be a good borrower. (Art. 1890) When does an agent who acts as such incur personal liability? The agent who acts as such incurs personal liability: 1. When the agent expressly binds himself; and 2. When the agent exceeds his authority. (Art. 1897)

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Who shall be bound by the contract entered into by an agent who acts in the name of the principal and within the scope of his authority? It is the principal. The agent has no liability. In case the agent acts in the name of the principal but in excess of his authority and the principal does not ratify the contract, can the third party hold the agent personally liable? The third party can hold the agent personally liable, but if the third party is aware of the limits of the powers of the agent, the contract shall be void. As a rule the agent is not bound unless the agent undertakes to secure the principal’s ratification. (Art. 1898) As to third persons when is an act of an agent deemed to be within the scope of his authority? So far as third persons are concerned, an act is deemed to haven performed within the scope of the agent’s authority, if such act is within 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. (Art. 1900) Who is a commission agent? A commission agent is one who is authorized to buy or sell for the principal personal property and for which purpose said personal property is placed in his possession. What is the obligation of the commission agent who handles goods of the same kind and mark belonging to different owners? The commission agent shall distinguish them by countermarks and designate the merchandise respectively belonging to each principal. (Art. 1904) Can the commission agent sell on credit? The commission agent cannot sell on credit without the express or implied consent of the principal (Art. 1905) What is the liability of the commission agent who sells on credit without the express or implied consent of the principal? 1. He is liable to the principal for the cash price of the goods’ 2. But the commission agent shall be entitled to the interest or benefit, which may result from the credit sale. (Art. 1905) What is the obligation of the commission agent who is authorized by the principal to sell on credit? The commission agent must furnish the principal with a statement of the names of the buyers. If he fails to do so the sale shall be considered to have been on cash basis insofar as the principal is concerned. (Art. 1906) Who is a Guarantee Commission agent or a “del credere” agent? A guarantee commission is one who receives on a sale, in addition to the ordinary commission, another called a guarantee commission, in which case he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. (Art. 1907) Enumerate the obligations of the principal. They are: 1. To comply with all the obligations which the agent may have contracted within the scope of his authority. (Art. 1910) 2. To advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, he must reimburse the agent, even if the business or undertaking was not successful, provided if the agent is free from all

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3.

fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. (Art. 1912) To indemnify the agent for all damages which the execution of the agency may have caused the latter, without fault or negligence on his part. (Art. 1913).

Is the principal bound by the obligations incurred by the agent in excess of his authority? The principal shall not be bound unless he ratifies it expressly or impliedly. (Art. 1910) What is the remedy of the agent I the case where the principal does not reimburse the agent for the funds advanced by him and for the damages the agent has suffered in the execution of the agency? The agent may retain I pledge the things which are the object of the agency until the principal effects the reimbursement. (Art. 1914) When shall the principal be held solidarily liable with the agent? Even when the agent has exceeded his authority, the principal is solidairly liable with the agent if the former allowed the latter to act as though he had full powers. (Art. 1911). Under what circumstances shall two or more principals be held solidarily liable to the agent? Under the following circumstances: 1. There are two or more principals; 2. The two or more principals have appointed the agent for a common transaction. (Art. 1915) Under what cases shall the principal be not liable for the expenses incurred by the agent? Under the following: 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. 3.

What the expenses were due to the fault of the agent. When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof. When it was stipulated that the expenses would be borne by the agent, or that the later would be allowed only a certain sum. (Art. 1918)

4.

How is agency extinguished? 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. (Art. 1919) Is agency generally revocable? Yes. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. (Art. 1920) When shall the revocation of the agency not prejudice third persons? 1. If the agency has been entrusted for the purpose of contracting with

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specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (Art. 1921) 2.

If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation, though notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. (Art. 1922)

Give instances of implied revocation of the agency. 1. 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. (Art. 1923) 2.

The agency is revoked if the principal directly manages the business entrusted tot eh agent, dealing directly with third persons. (Art. 1924)

When is agency irrevocable? 1. If a bilateral contract depends upon the agency; 2. Where the agency is a means of fulfilling an obligation already contracted; 3. Where a partner is appointed manager of a partnership in the contract of partnership and his removal from management is unjustifiable. (Art. 1927) What is meant by an agency coupled with an interest? An agency is coupled with an interest if: 1. the agency is created not only for the interest of the principal but also for the interest of a third person; or 2. the agency is created for the mutual interest of both the principal and the agent. An agency coupled with an interest cannot be revoked by the sole will of the principal. Can the agent withdraw from the agency at any time? Like the principal who can generally revoke the agency at will, the agent likewise may withdraw from the agency at any time, by giving due notice to the principal. However, if the principal should suffer any damage by reason of the withdrawal, the agent must indemnify him, unless the withdrawal of the agent is based upon the impossibility of continuing the performance of the agency without grave detriment to himself. (Art. 1928) What is the obligation of the agent after his withdrawal from the agency? The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had the opportunity to take the necessary steps to meet the situation. (art. 1929) When does death of the principal not revoke the agency? The agency shall remain in full force and effect even after the death of the principal if: 1. 2.

the agency was constituted in the common interest of the principal and the agent; or the agency was constituted in the interest of a third person who has accepted the stipulation in his favor. (Art. 1930)

How does death of the principal affect the validity of the acts of the agent who was not aware of the death of the principal? 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

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him in good faith. (Art. 1931) Does death of the agent extinguishes agency? Yes, but his heirs must notify the principal thereof, and in the meantime adopt such measure as the circumstances may demand in the interest of the principal. (Art. 1932) VII. SALES •

CONTRACT OF SALE FROM CONTRACT TO SELL:

•

1. In a contract of sale, title passes to the vendee upon the delivery of the thing sold, while in Contract to sell, by agreement, ownership is reserved in the vendor and is not to pass until full payment of the price; 2. In contract of sale, nonpayment is a negative resolutory condition; while in contract to sell, full payment is a positive suspensive condition; 3. In contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; while in contract to sell, title remains in the vendor, and when he seeks to eject the vendee because of noncompliance by such vendee with the suspensive condition stipulated, he is enforcing the contract and not resolving it. EMPTIO SPERATAE AND EMPTIO SPEI: 1. emptio res speratae is the sale of a thing having a potential existence; while emptio spei is the sale of a hope or expectancy; 2. in ERS, the uncertainty is with regard to the quantity and quality but not with regard to the existence of the thing; in ES, the uncertainty is with regard to the existence of the thing; 3. In ERS, the contract deals with a future thing; in ES, the contract deals with a present thing which is the hope or expectancy; 4. In ERS, the sale is subject to the condition that the thing should exist, so that if it does not, there is no contract for lack of an essential requisite; in ES, the sale produces effects even though the thing itself does not come into existence, since the subject matter is the hope itself.

•

BARTER – “if the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. Is such intention does not clearly appear, it shall be considered a barter if the value of the thing given as part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale.” Such that, if the cash added to the thing traded is more than the value of such thing, the contract is a sale; if less, the contract is a barter.

•

A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory of the promise is supported by a consideration distinct from the price.

•

Who between the vendor and the vendee must bear the risk of loss after the contract of sale has been perfected, but before the thing sold has been delivered? If the object of a contract is lost before delivery, it is the vendor who is still the owner and must bear the loss and not the vendee. This is in conformity

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with the principle of res perit domini. The owner of the thing must bear the risk of loss. •

EARNEST MONEY’ “Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.” Earnest money is part of the purchase price advanced by the vendee to the vendor as a token of the perfection of the contract.

•

SALE OF PERSONAL PROPERTY BY INSTALLMENT, remedies of the vendor 1. exact fulfillment of the obligation should the vendee fail to pay; 2. cancel the sale, should the vendee’s failure to pay cover two or more installments; 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In the last case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (Art. 1474) A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances (Art. 1486)

•

A contract executed by an agent without authority to sell is not void but simply unenforceable.

•

The acceptance and encashment by the owner of a check representing the purchase price of his property sold through his agent constitute ratification of the contract of sale and produces the effects of an express power of agency.

•

In a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded.

•

An option to buy or a promise to sell is different and distinct from the right to repurchase that must be reserved by means of stipulations to that effect in the contract of sale.

•

A contract of sale is consensual in nature and is perfected upon the mere meeting of the minds. When there is merely an offer by one party without acceptance by the other, there is no contract. Possession along with ownership is transferred to the vendee by virtue of the notarized deed of conveyance.

• •

If the deed of sale is void, then the action for the declaration of the contract’s nullity is imprescriptible. An action for reconveyance of the property on a void contract does not prescribe.

•

Under a pacto de retro sale, title to and ownership of property are immediately vested in the vendee a retro, subject only to the resolutory condition that the vendor repurchases it within the stipulated period.

•

An equitable mortgage has been defined “as one which although lacking in some formality, or form or words, or other requisites demanded by a statue, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law.”

•

R.A. No. 6552 otherwise known as the “Realty Installment Buyer Protection Act” recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon

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nonpayment of an installment by the buyer, which cancellation may be done outside the court particularly when the buyer agrees to such cancellation provided that such cancellation by the seller must be in accordance with Sec. 3(b) of R.A. No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the property. . A demand letter is not the same as the notice of cancellation or demand for rescission by a notarial act required under said law. •

Between two transactions concerning the same parcel of land, the registered transaction prevails over the earlier unregistered right. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights, except where the second buyer registers in good faith the second sale ahead of the first.

•

A contract of sale may either be absolute or conditional – one form of conditional sale is what is now popularly termed as a “Contract to Sell” where ownership or title is retained until the fulfillment of a positive suspensive condition normally the payment of the purchase price in the manner agreed upon.

EFFECT OF SALE ON THE SELLER I.

GENERAL OBLIGATIONS: A. To preserve the thing with the proper diligence of a good father of a family (Art. 1163). a. Deterioration, loss or improvement (Theory of Risks) 1. If the title has passed, the risk is upon the buyer, whether there has been actual delivery or not. B. To deliver the thing sold with its accessions and accessories (Art. 1537) a. FORM (MANNER OF DELIVERY) 1. Physical or Real (Art. 1497) 2. Constructive i. Real Property: by public instrument. aa. Provided no actual impediment to physical delivery (e.g. when a third party is in lawful possession) or contrary stipulation exists. bb. Registration contract is binding ii.

Except: registered property (Act 496). is the operative act of transfer (but the between the parties).

Personal Property aa. Delivery of the keys (Art. 1498, par. 2) bb. Common agreement (Art. 1499) cc. By negotiable document of title (Arts. 1513,

1514). iii. Incorporeal property (Art. 1501) : By execution of a public instrument, delivery of title, or the exercise by the vendee of his rights with the vendor’s consent. (Quasi-tradition). 3. (Art. 1500) C. 1496) and

De Consituto (constitutum possessorium): By retention of the thing by seller under another right subordinate to the right of the buyer.

Transfer of Ownership to the Buyer a. Generally ownership is transferred upon delivery to (Art. 1477, acceptance by the buyer (Art. 1585) express or implied.

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1. (Art. disposal of 2. is 3. 4. b. par. 2-5),

Where the buyer refuses to accept without justification 1588) title passes when the goods are placed at the the buyer. Delivery to the carrier is delivery to the buyer unless title reserved (Art. 1523, par.1) In sales ‘F.A.S.” In sales “C.I.F.” or ‘F.O.B.”

When delivery does not transfer title: 1. In “delivery on approval, trial or satisfaction” (Art. 1502, title passes – i. Upon the buyer’s signifying approval or

acceptance; ii. of the fixed (or 2. so that

3. agent of the bill of to the lien of attached (1503, acceptance; if the should return the bill of

Upon the buyer’s doing an act signifying adoption contract; iii. Upon the retention by the buyer beyond the time reasonable time) without notice of rejection. In case of Express reservation of title in the seller, made title does not passi. Until payment (Art. 1478) ii. Until fulfillment of the condition (1503, par.1) notwithstanding delivery Implied reservation of title arises wheni. Goods are deliverable to the order of the shipper or (Art. 1503, par. 2) aa. But where goods are deliverable to the order buyer or his agent and the seller retains the lading (Art. 1503, par. 3) title passes subject the seller for security purposes. ii. If a bill of lading is transmitted with a draft par.4), in which case title passes upon draft is dishonored, the buyer lading iii.

But if the bill provides that the goods are deliverable to the buyer, or the order of the buyer, of it is indorsed in blank, the bill transfers title to the buyer for value and without notice that the draft was not honored. 4.

Sale to two different persons by the same seller

5.

When the seller is not the owner (Art. 1505): The buyer better title, except in cases of:

has no

i.

Estoppel of the owner to deny the seller’s title (Art.

ii. iii.

Recording laws; Statutory power to sell or order of the court to the (to sell) Sales in merchat’s stores, fairs, or markets aa. Compare this with the rule that possession of movables in good faith is equivalent to 559 bb. When the seller has a voidable title (Art. sale is good if bough for value before the seller’s title is

1438) officer iv. title. Art. 1506), the and without notice avoided.

DOCUMENTS OF TITLE TO GOODS DEFINED (Art. 1636, No.1): “…any document

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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… the possessor of the document to transfer or receive, either by indorsement or delivery, goods represented by such document.” TIME AND PLACE OF DELIVERY: a. TIMEi. As stipulated. ii. If there is no stipulation, at a reasonable time and hour (which is a question of fact) (Art. 1521) b. PLACE – i. As stipulated or established by usage (Art. 1521) ii. In the absence of stipulation or usage: 1. At the place of business or residence of the seller 2. If the thing (specific) was elsewhere, and the parties knew it, where the thing was at the time of sale (applying the rule of Art. 1251). a. The possessor (if a third person) must acknowledge holding the goods for the buyer. 3. If it is stipulated that the seller will send the goods to the buyer (Art. 1523); a. The seller must arrange the transportation, on reasonable terms, to the place of business or residence of the buyer (par.2) b. The seller must insure the goods if stipulated or required by usage; c. Otherwise, the seller must give notice so that the buyer may insure. If no notice is given, the goods travel at the seller’s risk (par.3) II. Delivery to the carrier is deemed as delivery to the buyer (but carrier must acknowledge holding the goods for the buyer) (Art. 1523) A. Unless the contrary intent appears, or title is reserved, expressly of impliedly, or stoppage in transit is exercised. B. Subject to the seller’s duty to notify the buyer under Art. 1523 for insurance purposes. III.

Expenses of delivery are borne by the seller (Art. 1247) (Art. 1521, last par.)

A. In sales, “C.I.F”, the price includes insurance and freight to the place of destination but goods travel at the risk of the buyer B. In sales “F.O.B.” (free on board) or “F.A.S” (free alongside ship) the goods are delivered at the specified place at no expense to the buyer, and title to the goods is presumed to pass at that place. RIGTHS OF THE UNPAID SELLER OF GOODS I.

Definition of “unpaid seller” (Art. 1525, par.1) A.

An unpaid seller is onea. To whom the whole price has not been paid or tendered; or b. Who has been conditionally paid by a negotiable instrument which has been dishonored. (Art. 1525)

B.

An unpaid seller may be onea. Whose goods are in his possession and property in the goods has not passed to the buyer; or

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b. Whose goods are in his possession but property in the goods has passed to the buyer; or c. Whose goods has not passed to the buyer but property in the goods has not passed to the buyer; or d. Whose goods are not in his possession and property in the goods has passed to the buyer. II.

Rights of an unpaid seller (Art. 1526) A. A Lien on the goods or right to retain them (Art. 1526, par.1) a. When the lien exists: 1. Cases (Art. 1527) when it arises – i. Where the sale is without stipulation as to credit; ii. Where the sale is on credit, but the term credit has expired. iii. When the buyer becomes insolvent 2. It may be exercised notwithstanding the seller’s possession as agent or bailee for the buyer (Art. 1527, par.2) 3. Effect on the right if there has been partial delivery: i. The lien may be exercised on the remainder (Art. 1528) aa. Exception: aaa. When by such partial delivery, the intention was to waive the lien or right of retention (Art. 1528) b. When the lien is lost. 1. Instances (Art. 1529) i. When the seller delivers the goods to the carrier or other bailee for transmission to the buyer without reserving the ownership in the goods. ii. When the buyer or his agent lawfully obtains possession of the goods; iii. By waiver thereof. 2.

Effect of a judgement for the price of goods obtained by

the seller i. B.

The lien is not lost (Art. 1529, par. 2)

Right to stop in transit (Art. 1626 No.2) (Stoppage in transit). a.

Requisites for the exercise. 1. The buyer is or becomes insolvent (Art. 1526, No. 2 and Art. 1530). i. When the buyer is said to be insolvent: See Art. 1636, No.2 (does not require judicial proceedings). 2. The goods are in transit (Art. 1530) i. When goods are deemed to be in transit – aa. From the time they are delivered to the carrier or bailee for transmission to the buyer until the buyer takes delivery bb. If the buyer rejects them and the carrier continues in possession. ii. When goods are no longer in transit (See Art. 1531, par.4) aa. bb.

If the buyer or his agent obtains deliver; If at destination the carrier or bailee holding them for the

cc.

If the carrier or bailee wrongfully withholds possession from the buyer.

acknowledges buyer;

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b.

How stoppage in transit is exercised (Art. 1532): 1. By obtaining actual possession of the goods (Art. 1532,

par.1); 2.

By giving notice of the claim (Art. 1532, par.1). i. To whom must notice be given – aa. To the person in actual possession of the

goods; bb. ii. the

1532, iii.

To his principal.

Obligation of the carrier or bailee in possession of goods. aa. To re-deliver the goods to the seller. aaa. If the goods are covered by negotiable document of title – aa. The document must be surrendered (Art. par.2). Obligation of the seller. aa. To pay the expenses of deliver (art. 1532, par.2)

CONDITIONS AND WARRANTIES I. Conditions (precedent) A. Upon failure of the conditions (Art. 1545): the party whose obligation is dependent upon it need not perform. II.

Warranties (stipulations promissory): Kinds – A. Express (Art. 1546): affirmation of fact inducing the buyer to purchase in reliance thereon. B. Implies (Arts. 1547 and 1562): that the seller has a right to sell; that there are no hidden defects or encumbrances; that the goods are of merchantable quality and fit for a known purpose. a. A statement of the seller’s opinions is not warranty, unless he is an expert and was relied upon. (Art. 1546) III.

Warranty Against Eviction. A. Requisites – a. Eviction (dispossession) of the buyer (Art. 1548) (this is applicable to a judgement debtor in judicial sales unless the judgement provides otherwise, Art. 1552). 1. The vendee is deprived of the qhole or a material part of the thing purchased. 2. By a final judgment (Art. 1557) (the buyer need not appeal, Art. 1549) 3. Based on a right anterior to the sale, including – i. Adverse possession completed before the sale (Art. 1550) ii. Sale for tax delinquency not notified to the buyer (Art. 1551). b. There has been no express waiver by the buyer with knowledge of the risk (Art. 1554). c. The seller (vendor) is duly summoned in the suit against the buyer (Art. 1558) and made a co-defendant (Art. 1559). (See Rule 9, sec. 1, Rules of Court). B.

Effect of the warranty (Art. 1555) a. The seller in good faith must – 1. Return the value (not the price) at the time of eviction;

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2.

Return the income or fruits that the buyer had to

3. 4.

Costs of the suit; and Expenses of the contract.

surrender; plus

b. The seller in bad faith is subject to the liabilities of the seller in good faith under – 1. The rules of the preceding paragraph ( par.a); 2. Plus payment of damages, interest and ornamental expenses (useful expenses are to be recovered from the party causing the eviction, not from the seller). c. remedies are –

Loss of an important part (Art. 1556) (partial Eviction). The 1.

C.

Indemnity OR rescission, at the buyers’ option.

Waiver of warranty against eviction by the buyer (vendee):

Warranty against Redhibitory (Hidden, Physical) Vices (of movables). A. Requisites – The vices must be – a. Not visible or could not be known to the buyer, even if an expert (Art. 1561); b. They must be serious (as to render the thing unfit) (Art. 1561) because of the implied warranty of quality (Art. 1562) or of fitness for a purpose known to the seller; Except: Sales under a patent or trade name (Art. 1563) where no implied warranty exists. c. There were not known to the buyer; d. They existed prior to the sale; e. They must be notified to the seller within a reasonable time from discovery (Art. 1586) f. Action must be within 6 months (Art. 1571) or 40 days (from delivery) in case of animals (Art. 1577) prescription). g. No stipulation against the warranty has been agreed B.

The vice need not be known to the vendor (Art. 1566).

C.

Effects of warranty against defects or vices: a. The vendee may elect between (Art. 1567) – 1. Withdrawal from the contract; or 2. Reduction of the price (with damages in case of bad faith) b.

If the thing is lost due to hidden vice (Art. 1568) 1. If the Vendor is aware of the vice: He must – i. Return the price (not the value); and ii. Refund the expenses of the contract; and iii. Pay damages. 2. If the Vendor is not aware of the vice: He must – i. Return the price with interest; and ii. Refund expenses.

c.

If the thing is lost by fortuitous event or by the fault of the buyer

– 1. less the 2.

If the vendor is in good faith: He must return the price value when lost. If the vendor is in bad faith: He must – i. Return the price less the value; and ii. Pay damages.

OBLIGATIONS OF THE BUYER

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I. To Accept Delivery: A. If there was no previous examination, the buyer must have a reasonable opportunity to examine (Art. 1584, par. 1 & 2). a. The seller must allow the buyer to examine, if the buyer so demands. b. Except in case of a stipulation that the goods are not to be delivered by the carrier unless paid for (C.O.D.) (the buyer is not entitled to an examination unless the contract or usage to the contrary permits examination) (Art. 1584, par. 3). B. Unjustified refusal of the buyer to accept does not bar transfer of title (and risk) (Art. 1588). 2. But the seller may make consignation (Art. 1256). C. The buyer justifiably refusing to accept need not return the thing (Art. 1587) but only has to notify the seller. II.

Payment of Price and Interest: A. time and Place (Art. 1528): a. According to stipulation (unless the buyer loses the benefit of the period). b. At the time and place of delivery, if there is no contrary stipulation, B.

Suspension of payment by the buyer (Art. 1590) after delivery. a. Grounds – 1. Actual disturbance of possession or ownership; or 2. Reasonable ground to fear a disturbance caused by – i. Vindicatory action; ii. Foreclosure of mortgage (which grounds are

exclusive) b. disturbance;

There is no right to suspend payment if: 1. The stipulation provides for payment despite risk of or 2. The vendor cause the disturbance to cease; or 3. The Vendor gives security for the return of the price; or 4. The disturbance is by mere act of trespass.

C.

Payment of Interest on the Price: )Art. 1598). This duty arises – a. Even before default, if – 1. The stipulation so provides; or 2. The thing produces fruits which pertain to the buyer under Article 1164. b. seller’s tender reciprocal obligations). D.

After default (moratory interest) from the time of the or performance (art. 1169, last par. on

Legal Guaranties for Payment of the Price: a. Suspension of delivery (retention) by the seller – 1. In cash sales, if the payment is not tendered (art.

1524); 2. the term buyer is insolvent (Art. c. d. is unpaid must be such, not as bailee for

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In sales on credit, if the buyer loses the benefit of under Art. 1198 (art. 1536) or the 1527). Seller’s lien on the goods in his possession (Art. 1526). Stoppage in transit, if the buyer is insolvent and the price (Art. 1530). 1. When goods are in transit (Art. 1531): the goods in the possession of the carrier as the buyer. 2. How stoppage is made (Art. 1532)

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i. ii.

Resuming actual possession, Giving opportune notice to the carrier or

bailee. 3.

Effect of notice on the carrier or bailee Art. 1532,

par. 2) i.

the surrendered to the e.

The carrier or bailee must redeliver, unless negotiable receipt issued is not carrier or bailee. Resale of goods (Art. 1533) (without bringing an action). 1. The remedy is applicable in case of i. Perishable goods; or ii. Express reservation in the event of default;

or iii. of the or made 2.

3.

The buyer at resale acquires good title against the buyer, but not against the holder in negotiable document of

4.

Effect on the seller: i. He is not accountable for the profit. ii. He may sue for damages due to the breach.

original due course of a title (Art. 1535).

f.

Default for an unreasonable time on the part buyer, Provided: the seller has a lien stoppage in transit. Procedure in Resale (See p. 54). i. Resale may be public or private. ii. Notice to the buyer is not essential. iii. The seller is to exercise reasonable care and judgment iv. The seller cannot buy directly or indirectly.

Rescission of Transfer of Title 1. In case of goods (corporeal movables) – i. Extrajudicial rescission (Art. 1534), if – aa. Expressly reserve, or bb. The buyer is in default for an un reasonable time in paying the

price. Aaa.

Notice ( or some other overt required (otherwise rescinded) to the

Bbb.

Failure to give notice is relevant the question of default unreasonable time;

act) is transfer of title is not but need not be communicated buyer; on for an and cc. in ii.

Judicial (Art. 1191), if – aa.

The buyer fails to accept at the time, without just

bb.

The buyer fails to tender the price receipt, if no period was 1593).

stipulated reasons. upon stipulated (Art.

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The seller has a lien or made stoppage transit (Art. 1534)

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No notice or demand is required (Art. 1534) the goods have not been 1597)

unless delivered. (See Art. 2. pay rescission, (pacto comisorio).

In case of real property (Art. 1592). The buyer may until given judicial or notarial demand for despite a stipulation to the contrary

Exceptions: i. reserved by ii. price, may sue if he price is not yet iii. contract to 3.

The rule does not apply where title was the seller In case of danger of loss of the thing and after delivery (Art. 1591), the seller immediately for rescission even due. Neither does the rule apply to a mere sell

Action for the Price and Damages

I.

Action for the price (of personal property) (art. 1595). A. Grounds – a. After ownership has passed, and price is not paid, if no period for payment was given. b. Failure to pay, where it is stipulated to be payable irrespective of delivery or transfer of title, although title has not passed. 1.

Defense of the buyer: i. That the seller at any time before judgment, manifested

either – aa. bb.

Inability to perform; or Intention not to perform.

c.

Refusal of the buyer to accept delivery of the goods, if: 1. The goods were offered and refused; and 2. The goods can not readily be resold; and 3. The buyer did not notify repudiation before the goods were placed in a fully deliverable state ; and 4. The seller notifies the buyer that he holds the goods as bailee for the buyer. Then the seller may treat the goods as the buyer’s and sue for the price. II.

Action for damages for non-acceptance (Art. 1596) of the goods A. Grounds – a. The buyer’s wrongful failure to accept and pay (the goods maybe resold) b. The buyer’s repudiation or countermand before the goods are placed in a deliverable state. B. Measure of damages a. Generally – 1. The loss naturally and directly resulting (in the ordinary course) from the breach. b. When there is an available market – 1. The difference between the contract price and the market price at the time when acceptance should be made. i. market price

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If no time was fixed for acceptance, then the at the time of refusal.

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c.

When repudiation is made or notified before the seller complete preparations for fulfillment – 1. 2.

The liability is for expenses incurred, and The profit the seller would have obtained under the

contract. III.

Action for Total Rescission (Art. 1597) by the seller (against the buyer) A.

IV.

Buyer’s Action for Seller’s Specific Performance (Art. 1598). A. B.

V.

Requisites: a. The goods were not delivered. b. The buyer either – 1. Repudiates; or 2. Manifests inability to perform; or 3. Commits breach of contract; c. The seller gives notice of his election to rescind.

The seller has no option to retain the goods by paying damages. The judgment may be absolute or conditional as the court deems fit.

Buyer’s Action for Breach of Warranty (Art. 1599). (express or implied) A.

Buyer’s choices: a. To accept or keep the goods and set off damages against the

price; b. c. d.

To accept the goods and sue for damages; To refuse or return the goods and sue for damages; To rescind the contract, refuse or return the goods and recover

the price B. asking for par.2) C.

The options are alternative, but the buyer may ask for rescission after specific performance, if the latter is impossible (Art. 1191, The buyer can not rescind, if – a. He knew of the breach of warranty when he accepted the goods;

or b.

He fails to notify the seller in due time of the election to rescind;

c.

He fails to return the goods in substantially the same condition, 1. Unless the deterioration was due to the breach of

or warranty. D. of the

goods as

Effects of Buyer’s Election to Rescind (Art. 1599, par.4) a. The buyer ceases to be liable for the price upon tender or return goods. b. He may recover the price paid – 1. Concurrently with the return, or 2. Immediately after the tender. c. If the seller refuses to accept the return; the buyer holds the bailee. In which case, the buyer – 1. Has a lien on the goods to secure repayment of the price;

and 2. has

Has a right of stoppage in transit and resale, as the seller under Article 1526.

E.

Loss in Case of Breach of Warranty of Quality (Art. 1599, par.5) a. The liability consists in the difference in value at the time of delivery and the value if the warranty were not broken.

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1. I.

Causes of Extinguishment – A. General causes (Art. 1231) – a. Payment or performance b. Loss of the thing due c. Condonation or remission d. Confusion or merger e. Compensation f. Novation g. Annulment h. Rescission i. Fulfillment of the resolutory condition j. Prescription B.

II.

Unless special circumstances show greater damage.

Special Causes – a. Redemption. 1. Conventional 2. Legal

Article 1600 applies to perfected as well as consummated sales.

I.

Concept. A. Defined: Conventional redemption shall take place when the 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 B.

the

Nature: Conventional redemption is – a. An accidental element (must be stipulated); b. An express condition; c. A potestative resolutory condition d. A real right and enforced against a third person climing under purchaser

II. Conventional redemption includes transactions presumed to be equitable mortgages. A. Equitable mortgage defined – one in which although it lacks some formality, form of words or other requisites, prescribed by a statute, show the intention of the parties to charge a real property as security for a debt and contains nothing impossible or contrary to law. B.

The following are presumed to be equitable mortgages – a.

Contracts of sale with right to repurchase in the following cases – (Art.

1602) (1) (2) (3) (4) (5) (6)

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When the price of a sale with right to repurchase is unusually inadequate; When the vendor remains in possession as lessee or otherwise; When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; When the purchaser retains for himself a part of the purchase price; When the vendor binds himself to pay the taxes on the thing sold; In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any

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b.

other obligation. Contracts of absolute sale in the cases mentioned in Art. 1602 (Art.

1604) c. When a transaction purporting to be a contract of sale with right to repurchase is of doubtful interpretation (Art. 1603) 1. A stipulation that in case of failure of the vendor-a-retro as lessee to pay rentals, the lease shall automatically terminate and the right of ownership of the vendee shall become absolute – is valid, not contrary to law nor oppressive. It is a clause common to “pacto de retro” and has received court sanction 2. Although “pactum commissorium” ( a stipulation for automatic vesting of title over the security in the creditor in case of the debtor’s default) is void, such a clause in a contract is conclusive proof that it is a mortgage and not a sale with pacto de retro C.

Effect when the transaction is deemed an equitable mortgage. a.

are laws. (Art. b.

Fruits, money or other benefit received as rents by the vendee considered as interest which shall be subject to the usury 1602, last par) the apparent vendor may ask for the reformation of the

instrument. III.

Period of Repurchase or Redemption. A.

Where no period is agreed upon – a. Four years from the date of the contract (Art. 1606, par.1) B. When a period is agreed upon – (which includes a stipulation of redemption “at any time”) a. Within the period stipulated, which cannot exceed 10 years (Art. 1606, par.2) C. The period may be extended to 30 days after final judgment was rendered in a civil case claiming that the contract was a true sale with right to repurchase (Art. 1606, par.3) a. Pendency of litigation suspends the period of redemption b. The thirty day extension is applicable even should the case be filed after the expiration of the redemption period, if the parties dispute its nature as a pacto-de-retro sale with the allegation that it does not express their true agreement. D. The period during which vendor cannot redeem when added to the period of permitted redemption, must not total more than 10 years. (Rosales vs. Ryes, 25 Phil 495) E. vs.

Redemption period was not extended by the enemy occupation (Rivero Rivero, 80 Phil 802)

F.

Rulings on the period within which to make a repurchase – a. The legal period of 4 years may be extended by stipulation, provided that the new period stipulated does not exceed 10 years. b. A stipulation that the vendor cannot redeem the property until after 3 years should be construed to allow redemption within 4 years, after the lapse of the 3 years, counted from such lapse. c. An agreement granting the vendor the right to repurchase when he “ has established a certain business” is not a period. In such a case the vendor may redeem within 4 years.

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d.

Where there is an agreed period, the period in excess of 10

years is void e. A stipulation granting the vendors the right to redeem “at any time the vendors have the money” should be construed to allow redemption within 10 years f. The stipulation period of redemption is suspended by the filing of an action brought in good faith relating to the validity of a sale with pacto-deretro (it being claimed to be an equitable mortgage) and again commences to run only after decision declaring it to be a sale has become final g. Where the courts are functioning regularly, the redemption term is not suspended or extended by war. IV.

Who may redeem or exercise the right of redemption – A.

The vendor in whose favor the right is reserved. The following are included – a. When the vendors are co-owners selling jointly and in the same contract an undivided immovable. 1. Right of each co-owner. i. To redeem only his share (Art. 1612, par.1) 2. Right of the vendee. i. He may compel all the co-owners to redeem the whole (Art. 1613). Also when the whole property is adjudicated to the vendee in partition (Art. 1611) b. separately

When a co-owner sells his share of an undivided immovable (Art. 1614). 1. Right of the vendor-co-owner i. He may only redeem his share (Art. 1614) ii. He cannot be compelled to redeem the whole (Art.

1614) B.

Heirs of the vendor (Art. 1612, par.2) a. Right of each heir. 1. Each can redeem only the part which he may have

acquired. b.

Right of the vendee 1. He may compel all the heirs to redeem the whole (Art.

1613) NOTE: The rule of the Code in one sale, one redemption; except in case of death of the buyer a retro. C. of the V.

Creditors of the vendor (Art. 1610) a. Requisite – 1. The creditors must have already exhausted the properties vendor (Art. 1610)

From whom or against whom may redemption be made – A. The vendee B. The heir or heirs of the vendee – a. If there is more than one heir (Art. 1615); 1. Against each of the heirs for his respective share. i. Exception: a. When the thing sold is awarded to only one

heir C.

Every possessor whose right is derived from the vendee (Art. 1608) a. Without prejudice to the provisions of the Mortgage Law and Act

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No. 496

(Land Registration Act)

VI.

Obligations of the vendor-a-retro A. The vendor’s obligations are (Art. 1616): a. To return the price of the sale b. To return the expenses of the contract and y other legitimate payments made by reason of the sale c. To reimburse the necessary and useful expenses made on the thing sold, after their amount is determined. B.

Effect of the vendor’s failure to comply with his obligation – a. General rule: Ownership consolidates in the vendee b. Exception: 1. When the subject matter consists of real property (Art.

1608) i. of a

Requisites – aa. Consolidation of ownership must be by virtue judicial order, after hearing the vendor.

VII. Obligations of the vendee-a-retro A. To return the thing sold free from all charges and mortgages constituted by the vendee (Art. 1618) 1. Exception: i. Lease contracts in good faith and according to custom, which must be respected. VIII. Rights of the vendee-a-retro A. To compel the vendor or a part of an undivided immovable to redeem the whole property upon the vendee acquiring the entire immovable (Art. 1611) in partition proceedings. B.

To be subrogated to the vendor’s rights and actions (Art. 1609)

IX

Rules on pro-rating of fruits existing at the time of redemption. A. If there are visible fruits at the time of the execution of the sale – a. No reimbursement or pro-rating (Art. 1617, par. 1) is required. – i. If indemnity for fruits was paid by the vendee when the sale was executed (Art. 1617, par.1) B. If no visible fruits at the time of the sale existed – a. Fruits must be pro-rated (Art. 1617, par.2). 1. Share of the vendee: i. That portion corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale. I.

LEGAL REDEMPTION Concept. A. Defined. (See Art. 1619) B. Alienation must be by – a. Sale b. Dation in payment c. Other transactions whereby ownership is transferred by onerous title (Art. 1619) C. Distinguished from Pre-emption a. Legal Redemption 1. The right is born after the sale 2. It rescinds the contract and leaves without effect a sale that has been perfected and consummated 3. The action is directed against the purchaser. b.

Pre-Emption

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1. 2. 3. D.

The right is born before the sale. The contract of sale does not yet exist The action is directed against the prospective vendor

The rules are applicable to both movables and immovables

II.

Instances by Co-owners A. Redemption by Co-owners a. Purpose – to end indivision or at least reduce the number of coowners, keeping strangers out of the co-ownership b. Requisites 1. Co-ownership must exist 2. There must be alienation of the shares of all other coowners or any of them 3. Alienation must be to a stranger, not a co-owner 4. Alienation to said stranger must be before partition c. Who may exercise redemption – 1. A co-owner (Art. 1620) i. Effect if two or more co-owners desire to redeem: aa. They may only do so in proportion to the share they may respectively have in the thing owned in common (Art. 1620, par.2) d. Obligation of the redemptioner – 1. To pay the price of the sale (Art. 1620, par.1). i. Exception: aa. When the price is grossly excessive – aaa. To pay only a reasonable price (Art. 1620, par.1 e. Co-

Legal Redemption by Co-heirs (Art. 1088) is a variety of this by owners

B.

Redemption by Adjoining Owners. a. Instances – 1. Rural lands. i. Purpose: To favor the development of rural property in the interest of agriculture ii. Requisites: aa. Both adjoining tenements are rural bb. There must be alienation cc. Area of the land alienated does not exceed one hectare dd. Tenements must be adjacent without solution of surface of continuity. Aaa. Tenements separated by brooks, ravines, roads, etc. are not included (Art. 1621, par.2 ee. The vendee must own some other rural land iii.

I.

Who may exercise the right – aa. Order of preference aaa. Co-owners (Art. 1623, par.2) bbb. Adjoining owners (Art. 1621, par.3) Preference (secondary order) A. The owner of the adjoining land of smaller area B. If the areas are the same, the first to request redemption 2. Urban lands (Art. 1622) i. Requisites aa. Both adjoining tenements are urban bb. The tenement being redeemed was bough

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merely cc. situated practical purpose dd. ee.

for speculation The major portion of the tenement is so that it can not be used for any within a reasonable time. There is alienation The tenements are adjacent

ii.

Who may exercise the right – aa. Order of preference aaa. Co-owners (Art. 1623, par.2) bbb. Adjoining owners (Art. 1622, par.1) I. Effect if two or more adjoining owners desire to exercise the right: A. Preference is given to the adjacent owner whose intended use of the land in question appears best justified (Art. 1622, par.3) iii. days prospective vendor b. to

Other rights available to the adjoining owner aa. Pre-emption (Art. 1623) –exercised within 30 from notice in writing by the

Obligation of the Redemptioner 1. To pay a reasonable price. 2. To notify the prospective vendor and vendee of his desire redeem

III.

Procedure in Redemption A. When to exercise the redemption – a. Within 30 days from the notice in writing by the vendor B. Requisite for the Registration of the Sale in the Registry of Property a. It must be accompanied by an affidavit of the vendor that he has given written notice to all possible redemptioners. C. Special Rules: a. Legal Redemption requires no previous notice of intention to redeem b. Tender of the price is not a condition precedent to redemption IV.

Other cases of legal redemption –

a. b. rights to a c. (5) years patent d. real e. taxes f.

Redemption by the debtor in the sale of a credit in litigation (Art. 1634) Redemption by co-heirs in case of a sale by an heir of his hereditary stranger before partition Redemption by the application, his widow, and legal heirs within five from the conveyance of lands under a homestead or free Redemption within one year by a judgment debtor or redemptioner of property sold under execution Redemption by the owner of the property sold for delinquent realty Redemption within one (1) year by the mortgagor in sales under – 1. Extra-judicial foreclosure 2. Judicial foreclosures by – i. The Rehabilitation Finance Corporation ii. The Philippine National Bank iii. Banks within the purview of the General Banking Act.

ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS I. Concept: “A contract, unilateral or bilateral, onerous or lucrative, commutative or aleatory, whereby a person transmits to another his right or rights against a third party, whether or not an equivalent for the transmission is received from the transferee.”

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A. While the Code treats of assignment of credits as a variety of sales the fact is that the assignment may be effected in a variety of ways; by sale, by barter, by donation or even by testament. The assignment is a transfer entirely different from the transaction originating it. II.

Essential requisites and formalities. A. These depend in each case upon the contract of act giving rise to the assignment. a. Assignment of real rights upon immovable property, done by way of donation, requires a public instrument b. Assignment by way of legacy requires a probated will c. Assignment of choses in action by sale or onerous contract, if involving P500 or more, is unenforceable inter partes, and comes under the Statute of Frauds (a written memorandum is required) d. Assignment of a negotiable instrument requires indorsement or delivery. B.

As against third persons (but not the debtor of the credit assigned) an assignment of a credit, right or action shall produce no effect unless it appears in a public instrument, or the instrument is recorded in the registry of property, in case the assignment involves real property (Art. 1625) a.

III.

The consent of the debtor of the assigned credit is not required for the validity of the assignment: but the assignment is not fully effective against the debtor until he is notified thereof or has actual knowledge of the assignment; i.e., the debtor until then is not bound to pay the assignee.

Effect of a valid assignment. A.

It transfers title to the assigned credit to the assignee, even if the debtor is unaware thereof. a. The assignment includes all accessory rights, such as guaranty, pledge, mortgage or preference (Art. 1672)

B.

The assignee takes the credit subject to all defenses acquired by the debtor before notice or knowledge of the assignment a. Hence, the debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation b. The debtor may set up compensation of credits acquired after assignment but before notice thereof (Art. 1198) unless the debtor agreed to the assignment (when he cannot compensate) c. Any compromise or release of the assigned claim made by the assignor before notice, will be valid against the assignee and discharge the debtor. 1. Is recording sufficient notice? Yes, provided the recording is requires (not merely permitted) by law.

C.

Warranty by the Assignor a. The assignor in good faith shall be responsible for the existence and legality of the credit at the time of sale, unless it should have been sold as doubtful. 1. Doubtfulness of the credit assigned must expressly appear; it is not presumed b.

The assignor in good faith, does not answer for the solvency of the debtor unless-

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1. 2. or 3.

VI.

Expressly stipulated The insolvency of the debtor was know to him personally The insolvency of the debtor was prior to the sale and of common knowledge (Art. 1628)

c.

Where the solvency of the debtor is warranted by the assignor, his liability lasts only – 1. One year after the assignment, if the debt was already matured 2. One year after maturity, if the debt matures after assignment (Art. 1629) Compare this with partition between co-heirs (liability for solvency lasts 5 years (Art. 1095)

d.

Recovery on the warranty 1. The assignor in good faith must return the price received plus expenses of the contract and payments on account thereof. (Art. 1628) 2. The assignor in bad faith: all of the above plus damages (Art. 1628)

Special assignments. A. Sale of Inheritance (Estate) a. If without enumeration of the items composing it, the vendor only answers for his character as heir (Art. 1630) b. The vendor shall reimburse the vendee for the fruits obtained or anything received from the inheritance sold (Art. 1632) if the contrary is not stipulated c. The vendee shall reimburse the vendor for – 1. All that vendor paid on account of the estate debts; 2. Credits that the vendor had against the estate (Art. 1633) B.

Sale of rights, rents or products for a lump sum a. The vendor answers for the legitimacy of the whole in general b. There is no warranty of individual items, unless there is eviction of the whole or of the part of greater value (Art. 1931)

C.

Sale and Redemption of litigious credits a. Concept of litigious credit – A credit is considered in litigation from the time the complaint concerning the same is answered. (Art. 1634, par.2) b. Effect of sale – 1. Legal redemption by the debtor – Requisites: i. The debtor must reimburse the assignee for – aa. The price the assignee paid bb. Judicial costs incurred by him cc. Interest on the price from the day it was paid ii. 2.

The right must be exercised within thirty days from the date the assignee demands payment from him

Excepted from the rule are sales (or assignments) made

to: i. ii. iii.

I.

A co-heir or co-owner of the right assigned A creditor in payment of the credit The possessor of a tenement or piece of land which is subject to the right in litigation assigned. (Art. 1635)

Nature and characteristics

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A. B.

Defined (See Art. 1638) Characteristics – of barter: a. Consensual –perfected by consent b. Bilateral – involving reciprocal prestations c. Onerous – consisting in an exchange of equivalent values d. Nominate – having a special designation e. Principal – capable of existing alone f. Commutative – fulfillment being determined in advance

C.

Requisite – a. The things must belong to the respective parties. Hence – 1. If one of the parties should prove that the other did not own the thing promised and given, he cannot be compelled to deliver what he offered, but shall be entitled to damages (Art. 1639) 2.

D.

In case of eviction, the injured party may ask fori. Recovery – provided: aa. The thing remains in the possession of the other party, and bb. Without prejudice to third persons who acquired rights in good faith ii. Or only indemnity for damages (Art. 1640)

The provisions on sale are suppletory (Art. 1641) a. But barter is not subject to ceiling price laws.

VIII. QUASI-CONTRACTS LOAN:  Loan is a real contract because the delivery of the thing loaned is necessary for the perfection of the contract. There are two kinds: Commodatum (hiram) and Mutuum (utang)  Characteristics: 1. It is gratuitous if a consideration is paid then it is a lease; 2. Its purpose is the temporary use of the thing loaned 3. In the use of the thing, the bailee it does not include the fruits unless there is a stipulation to the contrary 4. Bailee need not be the owner of the subject matter but he must have possessory interest over the thing 5. The death of the bailor or the bailee extinguishes the contract of loan. It is thus personal in character  The bailee is liable for ordinary expenses for the use and the preservation of the thing loaned.  A bailee is not liable for loss pr damage of the thing loaned due to fortuitous event. Exceptions: 1. When the bailee devotes the thing to a different purpose; 2. When the bailee keeps it longer than the period stipulated or after the accomplishment of the use for which the commodatum was constituted; 3. If the thing loaned was delivered with an appraisal of its value unless there is an express stipulation to the contrary 4. If the bailee lends the thing loaned to a third person who is not a member of his household

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5. If the bailee, being able to save the thing loaned or his own property of similar nature, chose to save the latter  the bailor has the obligation to allow the bailee to use the thing loaned for the duration or the period stipulated or until the accomplishment of the purpose for which the commodatum was constituted. The bailor can demand the thing loaned when: 1. his has an urgent need of the thing loaned, during which time the commodatum shall be suspended; 2. in cases of precarium – there is precarium when: a. b. c.

if the duration of the contract has not been stipulated; if the use or the purpose of the contract has not been stipulated; if the use of the thing is merely tolerated by the bailor

 the bailor may also demand the return of the thing loaned when the bailee has committed any act of ingratitude  MUTUUM - is a contract whereby one of the parties delivers to another money or other consumable thing with the understanding that the same amount of the same kind and quality shall be paid. • • •

•

In mutuum, ownership is transferred to the borrower It may be gratuitous or onerous it is a loan for consumption The legal rate of interest has been raised to 12% and this rate applies only to loans or forbearance of money, goods or credit and court judgments thereon. Court judgments for damages arising from injury to persons and loss of property which does not involve a loan is at the rate of 6% per annum. Where the interest rate is not expressly stipulated, the loan shall earn 12% per annum.

 DEPOSIT • A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and returning the same. • It is a real contract because the contract is not perfected unless there is the delivery of the subject matter. • Distinctions between Extrajudicial and Judicial deposit: 1. E. is constituted by the will of the contracting parties while J deposit is constituted by court order e.g. attachment of the property 2. E. deposit refers to movable property while J deposit refers to either to movable or immovable property; 3. The purpose of E. deposit is the safekeeping of the thing deposited while in J deposit, it is to secure or protect the owner’s right; 4. E. deposit is generally gratuitous while J. deposit is always onerous; 5. In E. deposit the depositary is obligated to return the thing deposited upon demand by the depositor, while in J. deposit, the thing shall be delivered only upon order of the court.  GUARANTY • Is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.

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•

Characteristics: 1. 2. 3. 4.

•

It is an accessory contract It is subsidiary and conditional Unilateral The guarantor must be a person distinct from the principal debtor

Guaranty and Suretyship 1. G. is only secondarily liable; while a S. is primarily liable and is not entitled to the benefit of excussion or exhaustion of the properties of the principal debtor 2. Liability of the Guarantor depends upon an independent agreement to pay the obligation if the primary party fails to do so. The Surety is a regular party to the undertaking; 3. The guarantor binds himself to pay only when the principal debtor cannot pay; the surety assumes liability as a regular party to the undertaking and thus undertakes to pay if the principal debtor does not pay. 4. The Guarantor is an insurer of the debtor’s solvency. The S. is an insurer of the debt

• • •

The guarantor’s liability cannot exceed the principal obligation; A guaranty is generally gratuitous unless there is a stipulation to the contrary BENEFIT OF EXCUSSION – the guarantor has the right to the benefit of excussion before he can be compelled to pay. Exceptions: 1. If the guarantor has expressly renounced the excussion 2. If the guarantor has bound himself solidarily with the debtor. This would be a case of suretyship 3. In case of the debtor’s insolvency 4. When the guarantor has absconded or cannot be sued within the Philippines unless he left a manager or representative 5. If it may be presumed that an execution on the debtor’s property will not satisfy the obligation 6. If the guarantor does not set up the benefit of exhaustion and fails to point out to the creditor available property of the debtor within the Philippines 7. If he is a judicial bondsman and sub-surety 8. Where a pledge or mortgage has been given by the guarantor as a special security 9. If the guarantor fails to interpose it as a defense before judgment is rendered against him

•

BENEFIT OF DIVISION – guarantor is likewise entitled to the benefit of division. Where there are several guarantors of only one debtor for the same debt. The guarantor’s liability, in this case, is merely joint and they are not liable beyond the shares which they respectively bound themselves to pay.

 PLEDGE • Is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.

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•

Characteristics: 1. Real contract- perfected by the delivery of the thing pledged by the debtor (pledgor) to the creditor (pledge) or to a third person by agreement; 2. Accessory contract 3. Unilateral contract which creates an obligation only on the part of the creditor to return the thing pledged upon the fulfillment of the principal obligation 4. Subsidiary contract – the obligation incurred does not arise until the fulfillment of the principal obligation to which it secures

•

Essential requirements: 1. The pledge is constituted to secure the fulfillment of a principal obligation 2. The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged 3. The person(s) constituting the pledge or mortgage have the free disposal of their property or that they are legally authorized for the purpose

•

•

The pledge has not right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner. But the pledge can apply the fruits , income, dividends or interest, if owing and thereafter to the principal of his credit (Art. 2132) unless there is a stipulation to the contrary.

•

Pledgor cannot ask for the return of the thing pledged until the principal obligation is fully paid including interest due thereon and expenses incurred for its preservation. But the pledgor is allowed to substitute the thing pledged which is in danger of destruction or impairment with another thing of the same kind and quality.

•

The sale of the thing pledged extinguishes the principal obligation whether the price is more or less than the amount due. 

If the price of the sale is more than the amount due the creditor, the debtor is not entitled to the excess unless there is a contrary stipulation;



If the price of the sale is less than the principal amount due, the creditor is NOT entitled to recover the deficiency. A contrary stipulation is void. (Art. 2115)

A pledge renouncing a pledge, in a statement in writing, extinguishes the pledge and the pledgee becomes a depositary. Neither the acceptance by the pledgor or the owner, nor the return of the thing pledged is necessary for the pledge to renounce or abandon the pledge.

 REAL MORTGAGE • Characteristics: 1. REALTY AS SUBJECT MATTER – only real property or alienable rights and interest therein may be the subject matter of real estate mortgage. Even the rights of a mortgage or other encumbrances may be the object of another mortgage. (Art. 2124)

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2. REAL RIGHT – a mortgage lien is a real right and as such it is good and binding against the whole world and may be enforced by real action against all persons who may have existing rights or interest in the same property, it registered prior to the mortgage. 3. ACCESSORY OBLIGATION – the consideration of the mortgage is the same as that of the principal obligation it secures. 4. INDIVISIBILITY – even though the debt secured may be divided among the debtors, or creditors or their successors-in-interest, the mortgage shall remain as one and indivisible, unless there have been several things given in mortgage and each of them guarantees only a determinate portion of the obligation. In the latter case, the creditor may claim from the third person in possession of the mortgaged property, the payment of the aprt of the credit secured by the property which said third person possess. 5. INSEPARABILITY – the mortgage lien and the property affected are inseparable so that whoever may subsequently acquire title to the mortgaged property is bound by the terms of the mortgage, whether the transfer be with or without the consent of the mortgagee. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. 6. RETENTION OF POSSESION – the mortgagor retains possession of the mortgaged property inasmuch as a mortgage is a mere lien and title to the property does not pass to the mortgagee. •

MORTGAGE DISTINGUISHED FROM ANTICHRESIS:

1. AS TO POSSESSION – if the property given in security, the debtor retains it in case of mortgage; the creditor takes over it in case of Antichresis; A mortgage coupled with the delivery of the land to the creditor becomes an antichresis 2. WITH RESPECT TO FRUITS – in A M., the creditor does not gather or receive them; in a., the creditor generally receives them with the obligation to apply them to the payment of interest due and, if any still remain, to the principal obligation; 3. In A. the creditor is obliged to pay for the taxes and charges upon the estate; in M. it is the debtor who pays •

REAL ESTATE MORTGAGE DISTINGUISHED FROM CHATTEL MORTGAGEaside from the subject matter, another difference is in the formality required for their constitution. REM is required to be constituted by means of a public instrument, CM may be constituted in a private document only provided the latter is accompanied with an Affidavit of Good Faith.

•

A stipulation forbidding the owner from alienating the immovable mortgaged shall be void (Art. 2130)

•

The mortgagee has the right to alienate or assign to a third person, in whole or in part, his mortgage credit. The transfer of the mortgage credit does not affect the debtor unless he is notified of it. If the

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debtor pays to the original mortgagee in ignorance of the assignment, he will be released from debt. •

REDEMPTION BY MORTGAGOR: 1. the EQUITY OF REDEMPTION is the right of the mortgagor after the judgment in foreclosure proceedings, within a period of not less than 90 days before the sale or confirmation of the sale, to pay into the court the amount of the judgment debt. 2. RIGHT OF REDEMPTION – is the right of the mortgagor, after the sale of the mortgage property, to redeem the property by paying to the purchaser in the sale or to the sheriff who made the sale, the amount paid by him, with interest, within one year from the sale. There is no right of redemption, only equity of redemption, in judicial foreclosure under the Rules of Court. The right of redemption is provided in (1) foreclosure by banks or banking institutions as provided in their charters or in the General Banking Act; and (2) extrajudicial foreclosures under Act No. 3135, as amended.

•

CLAIM FOR DEFICIENCY – the mortgagee has the right to claim for deficiency resulting from the price obtained in the sale of the property at public auction and the outstanding obligation at the time of the foreclosure proceedings. The right to claim payment of deficiency after foreclosure of real mortgage prescribes in ten (10) years. CHATTEL MORTGAGE:

-

•

SUBJECT MATTER- only personal property including equity in shares of stock; growing crops even if they ate ‘ungathered products” they are considered personal property that may be the subject matter of a chattel mortgage; vessels

•

SALE OF CHATTEL MORTGAGE without consent of the mortgagee – Article 319, par. 2 of the Revised Penal Code provides – any mortgagor who shall sell or pledge personal property already pledged or mortgaged under the Chattel Mortgage Law without the consent of the mortgagee written on the back of the mortgage and noted on the record thereof in the Office of the Register of Deeds of the province or city where such property is located incurs criminal liability.

•

AFFIDAVIT OF GOOD FAITH – “We severally swear that the foregoing mortgage is made for the purpose of securing the obligations specified in the condition thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose of fraud.”

the Affidavit of Good faith is required to be appended to such mortgage and recorded therewith The absence of such affidavit vitiates a mortgage as against creditors and subsequent encumbrances; unenforceable as against third persons. The chattel mortgage may, however, be valid as between the parties even in the absence of the affidavit of good faith.

-

•

REAL MORTGAGE AND CHATTEL MORTGAGE REGISTRATION

– A deed of mortgage covering registered land is considered registered from the time the same is recorded in the entry book; in case of a Chattel mortgage, however, the document must be recorded in the chattel

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mortgage register. In the firt, entry in the Day Book is sufficient; while in chattel mortgage, there must be entry, not only in the Day Book but also in the Chattel Mortgage Register. •

FORECLOSURE OF CHATTEL MORTGAGE- it is a condition precedent that before foreclosure may be resorted to, it is necessary that there be a violation of the condition of the chattel mortgage and that at least 30 days shall have elapsed since then. (Sec. 14, CML)

•

EFFECT OF FORECLOSURE – when the foreclosure is validly confirmed by the court, title in the property rests upon the purchaser and the confirmation retroacts to the date of the sale. All rights of the mortgagor in the property terminates and is vested in the purchaser.

•

DEFICIENCY- Chattel mortgage creditor may maintain an action for deficiency. ANTICHRESIS:

•

“By the contract of antichresis the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing and thereafter to the principal of his credit.” Art. 2132.

•

COMPARED WITH PLEDGE AND MORTGAGE – like pledge and mortgage, antichresis is a real right and an accessory contract, which cannot exist without a valid principal obligation. It is not essential in antichresis that the property pass to the possession of the creditor or a third person. But it differs from pledge in that it refers to immovable property , and from mortgage in that the creditor has the right to receive the fruits of the thing, although their application is determined by law.

•

Antichresis compared with pledge – 1. 2. 3.

•

•

Antichresis is a consensual contract in the sense that it can be perfected without delivery of the thing pledged. As to subject matter, only real property or immovable may be the object of A; in pledge, it is movable or personal property’ to constitute a valid pledge, it is indispensable that the possession of the property be held and retained by the creditor or someone else designated by common consent; in Antichresis, the contract may still subsist even if the possession of the thing given in security is returned to the debtor, as when the creditor desires to be exempt from the obligation to pay its taxes and other expenses necessary for its preservation.

RIGHTS OF THE CREDITOR IN ANTICHRESIS: 1. the right to the fruits and income of the thing; 2. the right to retain the thing until the debt is paid; 3. the right to have the thing sold upon non-payment at maturity; 4. the right of preference to the proceeds of the sale of the thing When a contract of loan with security does not stipulate the payment of interest but provides for the delivery to the creditor by the debtor of the real property constituted as security for the payment thereof, in order that the creditor may administer the same and avail himself of the fruits, without stating that said fruits are to be applied to the payment of interest, if any, and afterwards to that of the principal of the credit, the contract shall be considered to be one of mortgage and

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not antichresis. •

Payment of interest shall be specified in writing which is essential for the validity of the contract of Antichresis.

•

The creditor, unless there is a stipulation to the contrary, is obliged to pay the taxes and charges upon the estate. He is also bound to pay the expenses necessary for its presevation and repair. The sum spent for these purposes shall be deducted from the fruits. If the fruits are not sufficient to cover the taxes and charges, the deficiency shall be borne by the creditor, unless otherwise stipulated.

•

EFFECT OF NON-PAYMENT OF DEBT – the creditor in antichresis cannot by mere possession of the real property which he received by virtue of an antichresis acquire ownership over the same for failure of the debtor to pay the debt within the stipulated time, any agreement to the contrary being void. The debtor cannot recover the enjoyment and use of the real property given in antichresis thereon, the creditor being entitled to ask the courts that the said real property be sold to satisfy his credit.

ix. quasi-delicts A. ELEMENTS OF QUASI DELICT/TORTS 1. Act or omission 2. Damage or injury is caused to another 3. Fault or negligence is present 4. There no pre-existing contractual relation between the parties 5. Causal connection between damage done and act/omission B. DISTINGUISHED FROM OTHER SOURCES OF OBLIGATION: CONTRACT QUASI DELICIT Vinculum Juris Contract Negligent act/omission (culpa, imprudence) Proof needed Defense available

Preponderance of evidence

Exercise of extraordinary diligence (in contract of carriage), force Majeure Pre-existing There is precontract existing contract Burden of a Contractual party. proof Prove the ff.: 1. Existence of a contract 2. breach

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DELICIT Act or omission committed by means of dolo (deliberate, malicious, in bad faith) Preponderance of Proof beyond evidence reasonable doubt Exercise of diligence of good father of a family in the selection and supervision of employees No pre-existing No pre-existing contract contract Victim. Prove the Prosecution. ff.: Accused is 1. damage presumed 2. negligence innocent until 3. casual the contrary is connection proved. between negligence and damage done

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C. CIVIL LIABILITY IN QUASI-DELICIT vs. DELICIT Difference Quasi- delict Liability of employer Solidary Reservation Civil aspect of the quasi requirement delict is impliedly instituted with criminal action, but under 2000 Crimpro Rules it is independent and separate Effect of judgement of Not a bar to recover civil acquittal in a criminal damages EXCEPT when case involving same judgement pronounces act/omision that the negligence from which damage arise is non-existence

Delict Subsidiary Civil aspect is impliedly instituted with criminal action

Not a bar to recover civil damages

D. WHAT MUST BE PROVED 1. Negligence- in action for quasi-delict, plaintiff must prove negligence of defendant Exception: a. In cases where negligence is presumed or imputed by law- this is only rebuttable/presumption juris tantum. b. Principle of res ipsa loquitur (the thing speaks for itself)- grounded on the difficulty in proving through competent evidence, public policy considerations 2. Damage/ injury 3. Causal connection between negligence and damage (to be actionable)Defendant’s negligence must be the proximate cause of injury sustained by the plaintiff to enable plaintiff to recover. Thus, if plaintiff’s own conduct is the cause of the injury there can be no recovery. If plaintiff’s negligence is only contributory- he is considered partly responsible only, may still recover from defendant but must be reduced by the courts in proportion to his own negligence. Concept of proximate cause- the adequate and efficient cause which in the natural order of events and under the particular circumstances surrounding the case, would naturally produce the event. E. DEFENSES: 1. Contributory negligence- the theory here is that the plaintiff was also negligent together with the defendant; to constitute a defense, proximate cause of injury or damage must be the negligence of defendant. 2. Concurrent negligence- the theory here is that both parties are equally negligent; the courts will leave them as they are; there can be no recovery 3. Doctrine of last clear chance- even though a person’s own acts may have placed him in a position of peril and an injury results, the injured is entitled to recover if the defendant through the exercise of reasonable care and prudence might have avoided injurious consequences to the plaintiff. This defense is available only in an action by the driver or owner of the other vehicle involved.

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Elements: a. A plaintiff was in a position of danger by his own negligence b. Defendant knew of such position of the plaintiff c. Defendant had the least clear chance to avoid the accident by exercise of ordinary care but failed to exercise such last clear chance and d. Accident occurred as proximate cause of such failure Who may invoke: plaintiff Inapplicable to: 1. Joint tortfeasors 2. Defendants concurrently negligent 3. As against 3rd persons 4. EMERGENCY RULE- a person is not expected to exercise the same degree of care when he is compelled to act instinctively under a sudden peril because a person confronted with a sudden emergency may be left with no time for thought and must make a speedy decision upon impulse or instinct * applicable only to situations that are sudden and unexpected such as to deprive actor of all opportunity for deliberation * but action must still be judged by the standard of the ordinary prudent man * absence of foreseeability 5. DOCTRINE OF ASSUMPTION OF RISKVolenti non fit injuria * Intentional exposure to a known danger * One who voluntarily assumed the risk of an injury from a known danger cannot recover in an action for negligence or an injury is incurred * plaintiff’s acceptance of risk (by law/contract/nature of obligation) has erased defendant’s duty so that his negligence is not a legal wrong *Applies to all known danger 6. DUE DILIGENCE- diligence is required by law/contract/ depends on circumstances of persons, places, things. 7. FORTUITOUS EVENT- no person shall be responsible for those events which cannot be foreseen, or which through foreseen were inevitable Exception: assumption of risk 8. DAMNUM ABSQUE INJURIA- a principle that involves damage without injury, therefore no liability is incurred; there is no legal injury 9.

LAW- specific provision of law.

10. EXERCISE OF DILIGENCE OF GOOD FATHER OF FAMILY IN SELECTION AND SUPERCVISION OF EMPLOYEES 11. PRESCRIPTION Injury to right of plaintiff/quasi delict – 4 years Defamation - 1 year When no specific provision, must be counted from the day they may be brought 12. PROSCRIPTION AGAINST DOUBLE RECOVERY- Responsibility for fault or negligence under quasi delict is entirely separate and distinct from civil

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action arising from the RPC but plaintiff cannot recover damages 2x for same act or omission of the defendant. 13.

ACT OR OMISSION IS NOT THE PROXIMATE CAUSE OF THE DAMAGE

14.

OTHER GROUNDS- MOTION TO DISMISS a. Lack of jurisdiction over person of defendant b. Lack of jurisdiction over subject matter c. Venue improperly laid d. Plaintiff has no legal capacity to sue e. There is another action pending between same parties for same cause f. Cause of action is barred by prior judgment /statute of limitations g. Pleading asserting claim states no cause of action h. Claim set forth in pleading has been paid, waived, abandoned, extinguished i. Claim is unenforceable under the provision of statute of fraud j. Condition precedent for filling claim has not been complied with

F. PERSONAL LIABLE QUASI-DELICT 1. TORTFEASOR- whoever by act or omission causes damage to another, there being no fault or negligence is obliged to pay for the damage done (art 2176) 2. PERSONS VICARIOUSLY LIABLE- the obligation imposed in 2176 is demandable not only for one’s own act or omission but also for those persons for whom one is responsible (art 2180) VICARIOUS LIABILITY- law on imputed negligence; a person who himself is not guilty of negligence is made liable for conduct of another Reason: 1. Public policy- deeper pocket/capacity to pay 2. Violation of duty on account of relationship- he is negligent a.) PARENTS- the father, and incase of his death or incapacity the mother are responsible for the damage caused by: i.

Minor children

ii.

Who live in their company

Note: Father and mother shall jointly exercise parental authority over common children. In case of disagreement, father’s decision shall prevail (art 211). b.) GUARDIANS- guardians are liable for damages caused by the minor or incapacitated persons who are i.

Under their authority and

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ii.

Live in their company

c.) OWNERS AND MANAGER OF ESTABLISHEMENT/ENTERPRISE- owners and managers of establishment or enterprise are responsible for damages caused by their employees i. In the service of the branches in which he latter are employed OR ii. in occasion of their function d.) EMPLOYERS- employers shall be liable for damages caused by their employees and household helpers i.

Acting w/in the scope of their assigned task

ii. even though the former are not engaged in any business or industry (unlike in RPC- subsidiary liability of employer attaches in case of insolvency of employer for as long as the employer is engaged in business/industry) Defenses available to employers: i. Exercise of due diligence in election and supervision of employees of

ii. act/omission was made outside working hours and in violation company’s rules and regulations

e.) STATE- the state is responsible when it acts through a special agent, but not when the same is caused by an official to whom task doe properly pertains in which case art 2176 is applicable f.) SCHOOLS, ADMINISTRATOR, TEACHER- teachers or heads of establishments of arts and trades shall be liable for damages caused by their: i.

Pupils, students and apprentices

j.

ii. as long as they remain in their custody

Note: Family code, art 218- The school, its administration and teachers or the individual, entity or institution engaged in child care shall have special parental authority and responsibility over the minor child under their supervision, instruction or custody( authority and responsibility shall apply to all authorized activities whether inside or outside the premises or the school, entity, or institution). Family code, art 219- those given the authority and responsibility shall be solidarily and principally liable for damages caused by act/omission of the unemancipated minor; parents, judicial guardian or person exercising substitute parental authority over said minor shall be subsidiarily liable. DIFFERENCE BETWEEN ARTICLES 218 AND 2180 ART 218 ART 2180 School, admin, teachers engaged in child Teachers, head of establishment in Arts care are made expressly liable and Trades are made expressly liable Liability of school, admin, teachers is No such express solidary nor subsidiary solidary and parents are made liability is stated subsidiary liable Students involved must be minor Students involved not necessarily minor Issues:

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1. Whether or not schools are liable?Gen rule: schools are not liable as partly defendants exception: a.) FC 218- schools are expressly made liable b.) St. Francis case rule- school’s liability as employer c.) PSBA case ruling- school has liability based on contract So thatIf culprit is a teacher, follow St. Francis ruling (sue school as employer)

a.)

b.) If culprit is a stranger, follow PSBA ruling (sue school based on contract) c.)

If culprit is a student- apply 2180

2. Does 2180 apply to school of Arts and Trades only? No. applies to all including academic institution per weight of jurisprudence based on obiter of Justice JBL Reyes in the Exconde case 3. Base of liability of teacher- principle of loco parentis (stand in place of parents) 4. So long as they remain in their custody

3.

•

Not literal anymore; before: boarding and living with teacher due to peculiar characteristic of trade and arts school

•

As long as they are in the protective supervisory capacity of teacherspecial parental authority

PERSONS EXPRESSLY MADE LIABLE BY LAW (even without fault) a. PROSSESSOR OF AN ANIMAL OR WHOEVER MAKES USE OF THEM EVEN IF THE ANIMAL IS LOST OR ESCAPED Except: 1. Force majeure 2. Fault of the injured or damaged person b. OWNER OF MOTOR VEHICLE- in motor vehicle mishap, the owner is solidarily liable with the driver if: 1. He was in the vehicle and 2. Could have through due diligence prevented the misfortune c. MANUFACTURERS & PROCESSORS OF FOODSTUFFS, DRINK, TOILET ARTICLES & SIMILAR GOODS- they are liable for death and injuries caused by any noxious or harmful substances used although no contractual relations exists between them and the consumers d.

DEFENDANT

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IN

POSSESSION

OF

DANGEROUS

WEAPONS

OR

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SUBSTANCES SUCH AS FIREARMS AND POISON- there is a prima facie presumption of negligence on the part of defendant if death or injury results from such possession Exception: The possession or use thereof is indispensable in his occupation or business e. PROVINCES, CITIES AND MUNICIPALITIES- shall be liable for damages for the death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings and other public works under their control or supervision f. PROPRIETOR OF BUILDING OR STRUCTURE- responsible for the damages resulting from any of the ff: i.

Total or partial collapse of building or structure if due to lack of necessary repairs

ii.

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

iii.

By excessive smoke, which may be harmful to persons or property

iv.

By falling of trees situated at or near highways or lanes, if not caused by force majeure

v.

By emanations from tubes, canals, sewers or deposits of infectious matter constructed without precautions suitable to the place

g. ENGINEER, ARCHITECT OR CONTRACTOR- if damage of building or structure is caused by defect in construction which happens within 15 years from construction; action must be brought within 10 years of collapse h. HEAD OF FAMILY THAT LIVES IN A BUILDING OR PART THEREOF- liable for damages caused by things thrown or falling from the same G.

SPECIAL TORTS 1. Art 19, 20, 21 (catch-all provision) a. ABUSE OF RIGHTS (Art 19) i.

ELEMENTS: There is a legal right or duty

ii.

Which is exercised in bad faith For the sole intent of prejudicing or injuring another

b. GENERAL SANCTION (Art. 20) -

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i.

ELEMENTS: In the exercise of his legal right or duty

ii. Willfully or negligently causes damage to another c. CONTRA BONUS MORES (Art 21) i.

ELEMENTS: There is an act which is legal

ii.

But which is contrary to morals, good custom, public order or public policy

iii.

And it is done with intent to injure

2.

UNJUST ENRICHMENT- Arts. 22, 23, 2142 & 2143

3.

OSTENTATIOUS DISPLAY OF WEALTH- Art. 25; thoughtless extravagance for pleasure or display during a period of public want or emergency

4.

VIOLATION OF RIGHT OF PRIVACY AND FAMILY RELATIONS Art. 26- every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The ff. acts though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: i. prying into the privacy of another’s residence

5.

ii.

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

iii.

intriguing to cause another to be alienated from his friends

iv.

vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition

DERELICTION OF OFFICIAL DUTY OF PUBLIC OFFICERS May be brought by any person suffering from material or moral loss because a public servant refuses of neglects, without just cause to perform his official duty (art 27). REQUISITES: a. Defendant is a public officer charged with the performance of a duty in favor of the plaintiff b. He refused or neglected without just cause to perform such duty (ministerial) c. Plaintiff sustained material or moral loss as consequence of such non- performance d. The amount of such damages, if material

6. UNFAIR COMPETITION- unfair competition in agricultural, commercial, or industrial enterprises or in labor through the use of force, intimidation, deceit. Machination , or other unjust, oppressive or high-handed method (Art 28) 7. MALICIOUS PROSECUTION ELEMENTS:

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a. That the defendant was himself the prosecutor/ he instignated his commencement b. That it finally terminates in his acquittal c. That in bringing it the prosecutor acted without probable cause and d. That he was actuated by legal malice , that is, by improper and sinister motive 8. VIOLATION OF RIGHTS AND LIBERTIES OF ANOTHER PERSON 9. NUISANCE a. DEFINITION- any act of , omission, establishment, condition of property, or anything else which: i.

injures or endangers the health or safety to others, or

ii.

annoys or offends the senses, or

iii.

shock, defies, or disregards decency or morality, or

iv.

obstructs or interferes with the free passage of any public highway or streets, or any body of water

v.

hinders or impairs use of property

b.

KINDS: NUISANCE PER SE- denounced as nuisance by common law or by statute NUISANCE PER ACCIDENS- those which are in their nature not nuisances, but may become so by reason of their locality, surroundings, or the manner in which they may be conducted, managed, etc. PUBLIC- affects a community or neighborhood or any considerable number of persons REMEDIES AGAINST PUBLIC NUISANCES: 1. Prosecution under the RPC or any local ordinance 2. Civil action 3. Abatement, without judicial proceeding WHO MAY AVAIL OF REMEDIES: 1. Public officers 2. Private persons- if nuisance is specially injurious to himself, the ff. steps must be made: i. the

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demand be first made upon owner or possessor of property to abate the nuisance ii. that such demand has been rejected iii. that the abatement be approved by the district health officer and executed with the assistance of local police

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iv.

that the value of destruction does not exceed P3,000

PRIVATE- one that is not included in the foregoing definition; affect an individual or a limited number of individuals only REMEDIES AGAINST PRIVATE NUISANCES: (1) Civil action (2) Abatement, without judicial proceedings WHO MAY AVAIL OF REMEDIES: (1) Public officers (2) Private persons- if nuisance is specially injurious to himself; the ff. steps must be made: i.

demand be first made upon owner or possessor of the property to abate the nuisance

ii.

That such demand has been rejected

iii.

that the abatement be approved by the district health officer and executed with the assistance of local police

iv.

that the value of destruction does not exceed P3,000

c. DOCTRINE OF ATTRACTIVE NUISANCE- a class of cases within the general rule that one is liable for the injury resulting to another from failure to exercise the degree of care commiserate with the circumstances o

The attractiveness of the premises or of the dangerous instrumentality to children of tender years is to be considered as an implied invitation, which takes the children who accepted it out of the category of a trespasser and put them in the category of invitees towards whom the owner of the premises or instrumentality owes the duty of ordinary care

IX. DAMAGES Kinds of Damages: (MENTAL) MORAL EXEMPLARY NOMINAL TEMPERATE ACTUAL LIQUIDATED 1. ACTUAL/COMPENSATORY- adequate compensation for a) The value of loss suffered b) Profits which oblige failed to obtain Exception: a. provided by law b. by stipulation

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WHAT MUST BE DONE TO COLLECT ACTUAL DAMAGES: 1.) Plead or allege the loss GENERAL DAMAGE- natural, necessary and logical consequences of a particular wrongful act which result in injury; need not be specifically pleaded because the law itself implies or presumes that they resulted from the wrongful act SPECIAL DAMAGES- damages which are the natural, but not the necessary and inevitable result of the wrongful act; need to be pleaded 2.) Pray for the relief that claim for loss be granted 3.) Prove the loss WHEN LOSS NEED NOT BE PROVED: 1.) Liquidated damages previously agreed upon, liquidated damages take the place of actual damages except when additional damages incurred 2.) If damages other than actual are sought 3.) Loss is presumed (ex: loss of a child or spouse) 4.) Forfeiture of bonds in favor of the government for the purpose of promoting public interest or policy (ex: bond for temporary stay of alien) CONTRACTS AND QUASI CONTRACTS 1. Damages in case of good faitha. Natural and probable consequence of breach of obligation and b. Parties have foreseen or could have reasonably foreseen at time obligation was constituted 2. Damages in case of bad faith a. It is sufficient that damages may be reasonably attributed to the nonperformance of the obligation • •

CRIMES AND QUASI CRIMES Defendant is liable for all damages that are natural and probable consequence of the act/omission complained of Not necessary that damages have been foreseen or could have been reasonably foreseen a) VALUE OF LOSS SUFFERED- destruction of things, fines or penalties, medical and hospital bills, attorney’s fees, interests, cost of ligation Damages recoverable: 1.) Medical and hospital bills 2.) Loss or impairment of earning capacity (in case of physical disability) 3.) Damages for death a) Minimum amount: P50,000 b) Loss of earning capacity unless deceased had permanent physical

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disability not caused by defendant so that deceased had no earning capacity at time of death c) Support, if deceased was obliged to give support (for period not more than 5 years) d) Moral damages 4.) Attorney’s fees- as a general rule, attorney’s fees (other than judicial costs) are not recoverable, except: a) Stipulation between parties b) When exemplary damages are awarded c) When defendant’s act/omission compelled plaintiff to litigate with 3rd persons or incur expenses to protect his interest d) Malicious prosecution e) Clearly unfounded civil action or proceeding against plaintiff f) Defendant acted in gross and evident bad faith in refusing to satisfy plaintiff’s just and demandable claim g) Legal support actions h) Recovery of wages of household helpers, laborers and skilled workers i) Actions for indemnity under workmen’s compensation and employer liability laws j) Separate civil action to recover civil liability arising from crime k) When double judicial costs are awarded 5.) Judicial costs 6.) Interest- discretionary on part of the court WHEN DAMAGES MITIGATED: 1.) Contributory negligence 2.) In contracts, quasi-contracts and quasi-delicta. Plaintiff has contravened the terms of contract b. Plaintiff derived some benefit as result of contract c. In case where exemplary damages are to be awarded, that the defendant acted upon the advise of counsel d. That the loss would have resulted in any event e. That since the filing of action, the defendant has done his best to lessen the plaintiff’s loss or injury 3. MORAL DAMAGES-(PBMF-MWSS) ]

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a. Physical suffering b. Besmirched reputation c. Mental anguish d. Fright e. Moral shock f. Wounded feelings g. Social humiliation h. Serious anxiety Notes: • Sentimental value of real or personal considered in adjudicating moral damages

property may be

• The social and economic/financial standing of the offender and the offended party should be taken into consideration in the computation of moral damages • Moral damages is awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of defendant’s culpable action and not intended to enrich a complainant at the expense of defendant IN WHAT CASES MAY MORAL DAMAGES BE RECOVERED (enumeration not exclusive): a. Criminal offense resulting in physical injuries b. Quasi-delicts causing physical injuries c. Seduction, abduction, rape or other acts of lasciviousness d. Adultery and concubinage e. Illegal or arbitrary detention or arrest f. Illegal search g. Libel, slander or other form of defamation h. Malicious prosecution i.

Acts mentioned in art 309 of the RPC relating to disrespect of the dead and interference with the funeral

j.

Acts and actions referred to in arts 21,26, 27, 28, 29, 30, 32, 34, and 35

k. The parents of the female seduced , abducted, raped or abused l.

Spouse, descendants, ascendants and brother and sisters for acts mentioned in art 309

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m. Art 2220- in cases of willful injury to property or breaches of contract where defendant acted fraudulently or in bad faith 3. NOMINAL DAMAGES- adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him ELEMENTS: a. Plaintiff has a right b. Right of plaintiff is violated c. Purpose is not to identify but vindicate or recognize right violated 4. TEMPERATE OR MODERATE DAMAGES-more than nominal but less than compensatory where some pecuniary loss has been suffered but its amount can’t be proved with certainty due to the nature of the case REQUISITES: a. Some pecuniary loss b. Loss is incapable of pecuniary estimation c. Must be reasonable 5. LIQUIDATED DAMAGES- those agreed upon by the parties to a contract, to be paid in case of breach thereof WHEN LIQUIDATED DAMAGES MAY BE EQUITABLY REDUCED: a. Iniquitous or unconscionable b. Partial or irregular performance 6. EXEMPLARY OR CORRECTIVE DAMAGE- imposed by way example or correction for the public good, in addition to the moral, temperate, liquidated to compensatory damages.

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THE BARRISTERS’ CLUB OFFICERS: Virgel Amor Vallejos (Chancellor)

Seychelles June M. Doringo (Secretary)

Janilet Mishelle R. Carillo (Treasurer)

Art Miguel B. Sanlao and Angelito Velasquez Jr. (Business Managers)

Rachelle May Gallego (PRO)

Paul Dean Mark Pila

(SSG Representative)

Brenda Filipinas Danganan (Ex-officio)

Atty. Isagani Calderon

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(Adviser)

Atty. Reynaldo U. Agranzamendez (Dean,College of Law)

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