Civil Law Reviewer - Jurado (2009)

CIVIL LAW REVIEWER By DESIDERIO P. JURADO Associate Justice, Court o f Appeals; Pre-Bar Reviewer-Civil Law, San Beda College of Law; Ateneo College of Law; UP College of Law; FEU College of Law

Twenty First Edition 2009

Philippine Copyright, 2009 by . DESIDERIO P. JURADO

ISBN 978-971-23-5284-3

No portion of this book may be copied or reproduced in books, pamphlets, outlines or notes, whether printed, mimeographed, typewritten, copied in different electronic devices or in any other form, for distribution or sale, without the written permission of the author except brief passages in books, articles, reviews, legal papers, and judicial or, other official proceedings with proper citation. Any copy of this book without the correspond­ ing number and the signature of the author on this page either proceeds from an illegitimate source or is in possession of one who has no authority to dispose of the same. ALL RIGHTS RESERVED BY THE AUTHOR

To the two thousand and thir­ teen loves of my life, Nena, my twelve children and my bar candidates, this book is affectionately dedicated.

PREFACE TO THE 2009 EDITION With a deep sense of pride, we are once more bringing out the revised edition of this book. This edition contains the most recent Supreme Court decisions on Civil Law, as recent as 2008. It likewise contains the recent bar questions up to 2007. Through the years, this Reviewer has remained to be a handy manual on Civil Law for the bar candidates, law professors, all lawyers actively engaged in the law practice and even judges. As was observed by our father, this Reviewer can even be used as a veiy convenient text for the Civil Law Review classes. We hope that somehow, this Reviewer shall continue to be of help to them. Just like the other books of Justice Jurado, this book is a “product of a hard discipline - the discipline of fine, unselfish scholarship,” one that is to be remembered as his masterpiece...a treasured legacy.” In closing, we wish to acknowledge the assistance of all those who have supported us, most specially our “Manong,” Mr. Juanito F. Fontelera, owner and publisher of the R e x B o o k S t o r e , our mother “Mama Nena” and our brother, Richard B. Jurado, for their encouragement and support. Quezon City, Philippines, August 23, 2008. By: JUSTICE ROLAND B. JURADO Associate Justice, Sandiganbayan; Former RTC Judge Branch 76, Malolos, Bulacan; Former MTC Judge, Branch 2, Malolos, Bulacan; Former Fourth Assistant City Prosecutor, Caloocan City; Professor of Law - FEU, UE, MLQU and SSC; BSC; Ll.B. (FEU) ATTY. ROSARIO JURADO-BENEDICTO Vice-President and Head, Bank of the Philippine Islands, Legal Services Division; Partner, Benedicto, Verzosa, Burkley & Associ-

3s; Former Corporate Secretary/Assistant Corporate Secretary and gal Officer of the Filinvest Group of Companies, and the Francisco del Rosario Group of Companies; Private Practitioner, Dizon, iculdo, Jurado, Jurado, Vitug and Associates; Former Professor, E.U. School of Business; Former Professor of San Sebastian Col*e of Law; A.B. and Ll.B. (U.P. Diliman) ATTY. RUDOLF PHILIP B. JURADO Private Practitioner, The Law Firm of R.P.B. Jurado; Former .rtner, Culvera, Waytan & Jurado Law Offices; Former Trial Lawr, Coronel Law Office; Professor, MLQU School of Law; Former ofessor U.E. College of Law and Lyceum College of Law; B.S.C., ,B. (U.E.) and ATTY. ROBERT B. JURADO Consultant, Housing and Urban Development and Coorditing Council (HUDCC); Private Practitioner; Former Director, gislative Bills and Index Services, Senate of the Republic of the lilippines and HUDCC; Former Consultant to the Office of the ce President of the Philippines; Former Trial Lawyer, Marbibi w Office, Electrical Engineering (N.U.); Ll.B. (F.E.U.)

PREFACE TO THE 1989 EDITION Law, including the Civil Law, is always changing. Since the last edition was published in 1986, many changes have been intro­ duced particularly on the subject of Persons and Family Relations and Succession with the passage of the Family Code. This edition incorporates these changes in the field and accounts for its size. Assistance to bar candidates, law professors and lawyers ac­ tively engaged in the practice of law was the objective of the 1986 edition. It is still the objective of this edition. Much of the inspira­ tion that went into this work came from our father — the hero, the Justice, the Professor and the author. Through our relationship with him, we have learned to hold the assurance that the disappoint­ ments which we experience, nay, even his departure, are actually blessings in disguise to draw us closer to God and to the ideals which our father committed himself in his lifetime, the love for the Civil Law being foremost among them. Such love shall always be remembered as a treasured legacy. We, the wife and the children of the late Justice Desiderio P. Jurado, are indebted to a number of persons for help with this edition. Preeminent among them are Justice Alicia V. Sempio-Diy of the Court of Appeals, Prof. A. Gutierrez and A. Buencamino. We are likewise thankful to all those who, in one way or the other, as­ sisted and gave us the support in the preparation of this edition. Quezon City, Philippines, July 1989. By ROLAND (Judge, Municipal Trial Court, Branch 2, Malolos, Bulacan; Former Fourth Assistant City Prosecutor, Caloocan City; Former Legal Consultant, Metro Manila Commission; Professor, San Sebastian College of Law; BSC; Ll.B. (F.E.U.); and ROSARIO (Manager, Legal Services Division,

Bank of the Philippine Islands); Attorney-at-Law, Leonen, Ramirez and Associates; Former Corporate Secretary and Legal Officer of the Filinvest Group of Companies and the Francisco V”. del Rosario Group of Companies; Former Professor, F.E. U. School of Business; AB; Ll.B. (U.P.). vii

I

PREFACE TO THE 1981-1982 EDITION It is with a sense of pride that we are again bringing out a new edition of this Reviewer. This edition now contains all of the most important deci­ sions, in summarized or modified form, of the Supreme Court on Civil Law, whether landmark, illustrative, or even abandoned, up to 1981. It also contains all of the most important bar questions, whether oft-repeated or off-beat, up to 1981. It also contains the salient features of the Child and Youth Welfare Code (P.D. No. 603, as amended), the Condominium Act (Rep, Act No. 4726), the Water Code of the Philippines (P.D. No. 1067), the Decree on Intellectual Property (P.D. No. 49), the Realty Installment Buyer Protection Act (Rep. Act No. 6552), the new House Rental Law (Batas Pambansa Big. 25) and other laws or decrees which have either repealed or modified provisions of the Civil Code of the Philippines or decisions of the Supreme Court. In the process, we have added hypothetical problems, not off-beat, which may help bar examiners in formulat­ ing reasonable and fair questions and problems which will really test the mettle of bar candidates. Additionally, we have included as appendices the bar questions of 1980 and 1981, some presidential decrees and some new decisions. With the above-mentioned additions and interpolations, this Reviewer has indeed become a handy manual on Civil Law not only for bar candidates and law professors but also for lawyers actively engaged in the practice of the law. As a matter of fact, many judges and law practitioners, who, at some time or another, once listened to our lectures on Civil Law, have told us that they are using it as a sort of guide for further research. It can even be used as a very convenient text for both Civil Law Review 1 and Civil Law Review 2 in the regular law course. In our case, we have been prescribing it as the basic text not only in our Pre-Bar review courses at the UP Law Center, Ateneo de Manila University, San Beda College of Law, Far Eastern University, University of Santo Tomas, Uni­ versity of Manila, Manila Review Center and others, but also in our Civil Law Review 1 & 2 courses at the Schools of Law of San

sda College, Far Eastern University, University of Santo Tomas, niversity of Manila, Lyceum of the Philippines, Philippine Law ;hool, Adamson University, San Sebastian College and others here we had the privilege to teach the subjects. Thus, once again we offer this Reviewer to the bar candidates ho are presently reviewing for the bar examinations as well as all lovers of Civil Law, be they judges, lawyers or students. We *ay and hope that it will continue to be of help to them. Manila, Philippines, March 25, 1982 D. P. JURADO

TABLE OF CONTENTS Pages PRELIMINARY TITLE...........................................................

1

Effect and Application of Laws...................................... Human Relations............................................................

1 33

BOOK I. - PERSONS Title I. - CIVIL PERSONALITY.......................................... CITIZENSHIP AND DOMICILE...................................

62 67

Title J. - MARRIAGE............................................................

69

Chapter 1 Chapter 2 Chapter 3

Requisites of Marriage................................ Marriages Exempt from the License Requirement................................................. Void and Voidable Marriages....................

69 82 87

Title I I - LEGAL SEPARATION......................................... Title III. - RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE.................................................. Title IV. - PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE..................................................

139

Chapter 1 General Provisions...... ................................ Chapter 2 Donations by Reason of Marriage............. Chapter 3 , System of Absolute Community................

139 143 151

Section 1 Section 2 Section 3 Section 4

Section 5

General Provisions.................................. What Constitutes Community Property............................................. Charges Upon and Obligations of the Absolute Community....................... Ownership, Administration, Enjoyment and Disposition of Community Property................... Dissolution of Absolute Community Regime............................................... 3d

120 135

151 152 153

155 156

Section 6

Chapter 4

Liquidation of the Absolute Community Assets and Liabilities...........................................

158

Conjugal Partnership of Gains..................

161

Section 1 Section 2 Section 3 Section 4 Section Section Section

Chapter 5

Chapter 6 Chapter 7

General Provisions.................................. Exclusive Property, of Each Spouse....... Conjugal Partnership Property............. Charges Upon and Obligations of the Conjugal Partnership...................... 5 Administration of the Conjugal Partnership Property....................... 6 Dissolution of Conjugal Partnership Regime............................................... 7 Liquidation of the Conjugal Partnership Assets and Liabilities........................................... Separation of Property of the Spouses and Administration of Common Property by One Spouse During the Marriage.......................................... Regime of Separation of Property............. Property Regime of Unions Without Marriage................ ................................

;le V. - THE FAMILY........................................................ Chapter 1 Chapter 2

161 165 173 187 193 196

197

201 207 208 214

The Family as an Institution..................... Family Home.............................................

214 215

tie VI. - PATERNITY AND FILIATION..... !...................

222

Chapter 1 Chapter 2 Chapter 3 Chapter 4

Legitimate Children........................................... 222 Proof of Filiation................................................. 230 Illegitimate Children.......................................... 238 Legitimated Children......................................... 241

tie VII. - ADOPTION......................................................... tie VIII. - SUPPORT.......................................................... tie IX. - PARENTAL AUTHORITY.................................. Chapter 1 Chapter 2 Chapter 3

General Provisions....................................... Substitute and Special Parental Authority................................................ Effect of Parental Authority Upon the Persons of the Children....................... xii

246 258 267 267 274 277

Chapter 4 Chapter 5

Effect of Parental Authority Upon the Property of the Children...................... ......280 Suspension or Termination of Parental Authority............................. .. 282

Title X. - EMANCIPATION AND AGE OF MAJORITY...................................................................... ......284 Title XI. - SUMMARY JUDICIAL PROCEEDINGS IN THE FAMILY LAW.........................................................286 Title XII. - FINAL PROVISIONS..............................................286 PROVISIONS OF THE CIVIL CODE AND P.D. NO. 603 AS AMENDED, WHICH HAVE NOT BEEN REPEALED BY THE FAMILY CODE..... 287 FUNERALS.............................................................................. ..... 287 CARE AND EDUCATION OF CHILDREN......................... ......288 USE OF SURNAMES....................................................................295 ABSENCE................................................................................ ......299 CIVIL REGISTER................................................................... ......301 BOOK II. - PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Title 1. - CLASSIFICATION OF PROPERTY................... ......308 Title II. - OWNERSHIP..............................................................327 Right of Accession........................................................... ......332 Quieting of Title.............................................................. ......362 Title III. - CO-OWNERSHIP......................................................364 Title IV. - SOME SPECIAL PROPERTIES....................... ......380 Title V - POSSESSION..............................................................385 Title VI. - USUFRUCT...............................................................406 Title VII. - EASEMENTS OR SERVITUDES.................... ......415 Title VIII. - NUISANCE.............................................................437 BOOK HI. - DIFFERENT MODES OF ACQUIRING OWNERSHIP GENERAL PRINCIPLES..............................................................442 Title I. - OCCUPATION.............................................................444 Law ................................................................................. ......446 Tradition.......................................................................... ......447 Title II. - INTELLECTUAL CREATION......................... .........449 Title III. - DONATION...............................................................453 xiii

Title IV. - SUCCESSION......... ............................................ Chapter 1 Chapter 2

490

General Provisions.... .................................. Testamentary Succession............................

490 497

Section 1, W ills........................................................... Wills in General........ ............................................. Testamentary Capacity and Intent............ .......... Forms of Wills, Witnesses, and Codicils.............. Revocation, Republication and Revival of Wills..................................................... Allowance and Disallowance of W ills.................. Section 2. Institution of Heirs-............................... Section 3. Substitution of Heirs......... ..................... Section 4. Testamentary Dispositions............ ........ Section 5. Legitime........ .......................................... Reserva Troncal...................................................... Distribution of Estate if There are Donations.... Section 6. Disinheritance..... ............,...................... Section 7. Legacies and Devises.............................

497 497 499 500

Chapter 3

522 530 538 547 554 558 573 592 600 607

Intestate Succession....................................

614

Section 1. General Provisions................................. Representation........................................................ Section 2 Order of Intestate Succession................

614 618 627

Chapter 4

Provisions Common to Testate and Intestate Successions............................ Accretion ................................................................ Capacity to Succeed By Will or By Intestacy............. ........................................... Acceptance and Repudiation.................................. Collation................................................................ Partition and Distribution.....................................

667 676 679 685

Title V. - PRESCRIPTION.......... ........................................

691

General Provisions................................................... Acquisitive Prescription.................................................. Extinctive Prescription................... ...............................

691 694 697

655 655

BOOK IV. - OBLIGATIONS AND CONTRACTS Title I. - OBLIGATIONS...................................................... General Provisions.......................................................... Nature and Effect of Obligations................................... xiv

700 700 ; 702

Kinds of Obligations.............. ........................................ 718 Pure and Conditional Obligations........................ 718 Obligations with a Period..................................... 729 Alternative and Facultative Obligations............. 738 Joint and Solidary Obligations............................. 742 Divisible and Indivisible Obligations................... 757 759 Obligations with a Penal Clause.......................... Modes of Extinguishing Obligations.................... 764 Payment or Performance.............................. 765 Loss of the Thing D ue.................................. 782 Remission....................................................... 786 Confusion or Merger..................................... 789 Compensation................................................. 790 Novation.......................................................795 Title II. - CONTRACTS................................... ....................

811

General Provisions.......................................................... Essential Requisites of Contracts................................. Consent.................................................................... Object..... ................................................................. Cause....................................................................... Form of Contracts........................................................... Reformation of Instruments.......................................... Defective Contracts......................................................... Rescissible Contracts...................................................... Voidable Contracts.......................................................... Unenforceable Contracts............................................... Void or Inexistent Contracts.............. ...........................

811 829 829 851 854 859 863 868 870 878 887 896

Title III. - NATURAL OBLIGATIONS........................ ....... Title IV. - ESTOPPEL........................................................... Title V. - TRUSTS............................... ................................ Title VI. - SPECIAL CONTRACTS..................................... Sal?s................................................................................. Title VII. - BARTER OR EXCHANGE............................... Title VIII. - LEASE.............. ................................................

911 913 918 929 929 1002 1003

General Provisions.......................................................... Lease of Rural and Urban Lands................................. Work and Labor Household Service............................. Contract of Labor............................ ...................... Contract for a Piece of Work................................ Common Carriers...................................................

1003 1004 1023 1023 1024 1026

Title IX. - PARTNERSHIP....................... ...........................

1041

XV

Title X. - AGENCY...:................................................................1065 Title XI. — LOAN........................................................................1091 Title XII. - DEPOSIT................................................................1099 Title XIII. - ALEATORY CONTRACTS............................. ....1104 Title XIV. - COMPROMISES AND ARBITRATIONS....... ....1109 Title XV. - GUARANTY............................................................1111 Title XVI. - PLEDGE, MORTGAGE AND ANTICHRESIS....................................................................1121 Pledge....................................... ...........................................1121 Real Estate Mortgage.........................................................1127 Antichresis...........................................................................1135 Chattel Mortgage.................... ’....................................... ....1139 Title XVII. - EXTRA-CONTRACTUAL OBLIGATIONS....

1147

Quasi-Contracts...................................................................1147 Quasi-Delicts.................................. ....................................1152 Title XVIII, - DAMAGES..,.......................................................1183 Title XIX. - CONCURRENCE AND PREFERENCE OF CREDITS.......................................................................1225 TRANSITIONAL PROVISIONS....................................... .........1231 REPEALING CLAUSE................................................................1233 APPENDIX A.

COMMON DISTINCTIONS IN CIVIL LAW............... ....1234

B.

REPUBLIC ACT NO. 9523........ ................................... ....1239

xvi

CIVIL LAW REVIEWER PRELIMINARY TITLE EFFECT AND APPLICATION OF LAWS (Arts. 1-18) (jL j) Define law. ANS: The term law, in its general sense (derecho), is defined as the science of moral laws based on the rational nature of man, which governs his free activity for the realization of his individual and social ends, and which by its very nature is demandable and re­ ciprocal. (1 Sanchez Roman 3.) In its specific sense (ley), it is defined as a rule of conduct, just, obligatory, promulgated by legitimate au­ thority, and of common observance and benefit. (Ibid.) ( 2. ) Define Civil Law. (1977) ANS: Civil law is defined as the mass of precepts which determines and regulates those relations of assistance, authority and obedience existing among members of a family as well as among members of a society for the protection of private interests. (1 Sanchez Roman 70.) [ 3. ) Define Civil Code. ANS: A Civil Code may be defined as a collection of laws, which regulates the private relations of the members of civil society, determining their respective rights and obligations, with reference to persons, things, and civil acts. (1 Tolentino>Civil Code, p. 10.) 4. What is the physical or mechanical composition of the Civil Code of the Philippines? (1977) ANS: The Civil Code of the Philippines consists of 2,270 articles which are divided as follows: (1)

Preliminary Title — Arts. 1-36. 1

1-18

PRELIMINARY TITLE

Effect and Application of Laws

(2) Book 1 — Persons — Arts. 37-51, NCC; Arts. 1-257, FC; ;s. 305-310, NCC; Arts. 356-396, NCC; and Arts. 407-413, NCC. (3) Book II — Property, Ownership, and its Modifications ^rts. 414-711. (4) >5.

Book III — Modes of Acquiring Ownership — Arts. 712-

(5) 51.

Book IV — Obligations and Contracts — Arts. 1156-

(6)

Transitional Provisions — Arts. 2252-2269.

(7)

Repealing Clause — Art. 2270.

What are the sources of the Civil Code of the Philiples? (1977) ANS: The sources of the Civil Code of the Philippines are: (1)

Civil Code of Spain of 1889;

(2) Codes and laws of other countries, such as Spain, the "ious states of the United States — especially California and aisiana, France, Argentina, Germany, Mexico, Switzerland, gland, and Italy; (3) Judicial decisions of the Supreme Courts of the Philiples, of various states of the United States, of Spain, and of other mtries; (4) Philippine laws or statutes, such as the Code of Civil Dcedure (Act No. 190), the Rules of Court, the Marriage Law (Act >. 3613), and the Divorce Law (Act No. 2710); (5)

Works of jurists and commentators of various nations;

(6)

Filipino customs and traditions; and

(7)

The Code Commission itself.

(Report o f the Code Commission, pp. 2-3.) / ^ 6. When do laws in the Philippines take effect? ANS: Laws shall take effect after 15 days following the mpletion of their publication either in the Official Gazette or in 2

PRELIMINARY TITLE Effect and Application of Laws

Arts. 1-18

a newspaper of general circulation in the Philippines, unless it is otherwise provided. (Exec. Order No. 200, dated June 18, 1987, which repealed Art. 2, NCC.) 7. When did the Spanish Civil Code take effect in the Philippines? ANS: The Spanish Civil Code took effect 20 days (“a los veinte dias”) after publication in the official newspaper in the Philippines. As to actual date of effectivity, there are two (2) views. According to the majority view, since it was published in the Gaceta de Manila on Nov. 17, 1889, therefore, it took effect on December 7, 1889. (Mij ares vs. Nery, 3 Phil. 196; Cosio vs. Pili, 10 Phil. 72; Insular Government vs. Aldecoa, 19 Phil. 505; Barretto vs. Tuazon, 59 Phil. 845.) According to the minority view, the date of effectivity is Dec. 8,1889. (Benedicto vs. De la Rama, 3 Phil. 43; Veloso vs. Fontanosa, 13 Phil. 79.) It is submitted that the first view is more in accordance with the rules of statutory construction. 8. When did the Civil Code of the Philippines take effect? Discuss. ANS: According to several cases decided by the Supreme Court (SC), the date of effectivity of the Civil Code of the Philippines is Aug. 30, 1950, which is one year after its publication in the Official Gazette as required by Art. 2 of the said Code. (Lara vs. Del Rosario, 94 Phil. 778; Raymundo vs. Penas, 96 Phil. 311; Camporedondo vs. Aznar, 102 Phil. 1055.) The above date of effectivity of the New Civil Code (NCC), as pinpointed by the SC, has been the subject of criticism by some of our leading commentators. It is, of course, clear that Art. 2 of the NCC expressly provides that the NCC of the Philippines shall take effect “one year after the completion of its publication in the Official Gazette.” Actually, it was published in a Supplement dated June, 1949, which accompanied the June, 1949 issue. However, the Editor of the said Official Gazette certified that “the June, 1949 issue of the Official Gazette with the Supplement thereto, was released for circulation on August 30, 1949.” Consequently, if the basis for computing the one-year period is the date of publication, then the date of effectivity would be June 30,1950. This was the view upheld by the majority of commentators. (See 1 Tolentino, Civil Code, p. 17.) 3

3.

1-18

PRELIMINARY TITLE Effect and Application of Laws

t if the basis for computing the period is the date of circulation, m the date of effectivity would be August 30, 1950. Evidently, hough the decisions are silent (see cases cited above), the SC has Dsen this basis. This, it seems, would be contrary to Sec. 11 of 3 Revised Administrative Code which declares that the date of blication of the Official Gazette is conclusively presumed to be the te indicated therein as the date of issue. 9. After a storm causing destruction in four (4) Central izon provinces, the executive and legislative branches of Le government agreed to enact a special law appropriating I billion for purposes of rehabilitation for the provinces. lview of the urgent nature of the legislative enactment, it provided in its effectivity clause that it shall take effect pon approval and after completion of publication in the fffcial Gazette and a newspaper of general circulation in le Philippines. The law was passed by Congress on July 1, )90, signed into law by the President on July 3, 1990, and ublished in such newspaper of general circulation on July , 1990 and in the Official Gazette on July 10, 1990. (a) As to the publication of said legislative enactment, * there sufficient observance or compliance with the equirements for a valid publication? Explain your answer. (b) When did the law take effect? Explain your nswer. (c) Can the executive branch start releasing and Lisbursing funds appropriated by the said law the day oliowing its approval? Explain your answer. (1990) ANS: (a) Yes, there is sufficient compliance. The law itself describes the requisites of publication for its effectivity, and all •equisites have been complied with. (Art. 2, NCC.) (b) The law takes effect upon compliance with all the :onditions for effectivity, and the last condition was complied with m July 10,1990. Hence, the law became effective on that date. (c) No. It was not yet effective when it was approved by Congress on July 1, 1990 and approved by the President on July 3, 1990. The other requisites for its effectivity were not yet complete at that time. 4

PRELIMINARY TITLE Effect and Application of Laws

Arts. 1-18

10. A and B are spurious children of X, born in 1945 and 1947, respectively. X died in 1955. Can A and B inherit from him? Would your answer be the same if X died the year after B’s birth? (1977) AN’S: If X died in 1955, A and B can inherit from him. This is, of course, based on the assumption that X had recognized them as his spurious children either voluntarily or compulsorily. If X had not recognized them, they cannot inherit from him. If X died the year after B’s birth, then A and B cannot inherit from him. The reason is that in such case, the right or capacity of A and B to inherit from X shall still be governed by the Spanish Civil Code. (Art. 2263, NCC.) Under the facts presented, X died prior to the effectivity (Aug. 30, 1950) of the NCC. Therefore, what is applicable is the Spanish Civil Code. Under said Code, spurious children cannot inherit. 11. Explain the rule that ignorance of the law excuses no one from compliance therewith (ignorantia legis neminem excusat). (1985) ANS: This rule or principle is a conclusive presumption of law which is embodied in Art. 3 of the NCC of the Philippines. It is based on expediency as well as public policy and necessity. Were it not for this rule, almost everybody would be able to relieve himself of any criminal or civil liability by claiming that he is ignorant of the law. It must be noted, however, that the rule refers only to mistakes with regard to the existence of a law rather than to mistakes with regard to the application or interpretation of a difficult or doubtful question of law or with regard to the effect of a certain contract or transaction. The latter may be the basis of possession in good faith (Art. 526, NCC.), or may render a contract voidable (Art. 1334, NCC.), or may give birth to a quasi-contract of solutio indebiti. (Art. 2155, NCC.) 12. ’ Is there any difference in their legal effect between ignorance of the law and ignorance or mistake of facts? (1996) ANS: Yes. The former does not excuse a party from the legal consequences of his conduct while the latter constitutes an excuse and is a legal defense. 5

3

.1-18

PRELIMINARY TITLE Effect and Application of Laws

'V134 What are the exceptions to the rule that laws shall ve no retroactive effect? (1977) ANS: The following are the exceptions to the rule that laws all have no retroactive effect: (1) When the law itself expressly provides for its retroactivity. rt. 4, NCC.) (2) When the law is penal insofar as it favors the accused who not a habitual criminal, even though at the time of the enactment such law final sentence has already been rendered. (Art. 22, wised Penal Code.) (3) When the law is procedural so long as it does not affect or ange vested rights. (Aguillon vs. Dir. of Lands, 17 Phil. 506.) (4) When the law creates new substantive rights. (Art. 2263, CC; Bona vs. Briones, 38 Phil. 276.) (5) When the law is curative in character in the sense that ie purpose for its enactment is to cure defects or imperfections in dicial or administrative proceedings. (6)

When the law is interpretative of other laws.

14. Private respondents were buyers on installment of nbdivision lots from Marikina Village, Inc., the subdivision eveloper. Notwithstanding the land purchase agreements it xecuted over said lots, the subdivision developer mortgaged tie lots in favor of the Petitioner PNB. Subsequently, the ubdivision developer defaulted and PNB foreclosed on the lortgage. As highest bidder, PNB became owner of the lots. Acting on suits brought by private respondents, HLURB uled that PNB, without prejudice to seeking relief against ifarikina Village, Inc., may collect from private respondents inly the remaining amortizations in accordance with the and purchase agreements they had previously entered nto with Marikina Village, Inc., and cannot compel private •espondents to pay all over again for the lots they had already sought from said subdivision developer. On March 10, 1992 ;he Office of the President invoking P.D. 957 concurred with ;he HLURB. May a buyer of a property at a foreclosure sale 6

PRELIMINARY TITLE Effect and Application of Laws

Arts. 1-18

dispossess prior purchasers on installment of individual lots therein, or compel them to pay again for their lots which they previously bought from the defaulting mortgagorsubdivision developer on the theory that P.D. No. 957, “The Subdivision and Condominium Buyers Protection Decree” is not applicable to the mortgage contract, the same having been executed prior to the enactment of P.D. No. 957? ANS: Normally, pursuant to Art. 4 of the NCC, “(l)aws shall have no retroactive effect, unless the contrary is provided.” However, it is obvious and undubitable that P.D. No. 957 was intended to cover even those real estate mortgages, like the one at issue here, executed prior to its enactment, and such intent must be given effect if the laudable purpose of protecting innocent purchasers is to be achieved. P.D. No. 957 did not expressly provide for retroactivity in its entirety, yet the same can be plainly inferred from the unmistakable intent of the law to protect innocent lots buyers from scheming subdivision developers. As between these small lot buyers and the gigantic financial institutions which the developers deal with, it is obvious that the law — as an instrument of social justice — must favor the weak. Despite the impairment clause, a contract valid at the time of its execution may be legally modified or even completely invalidated by a subsequent law. If the law is a proper exercise of the police power, it will prevail over the contract. Into each contract are read the provisions of existing laws and, always, a reservation of the police power as long as the agreement deals with a matter affecting the public welfare. Such a contract suffers a congenital infirmity, and this is its susceptibility to change by the legislature as a postulate of the legal order. (PNB vs. Office of the President, 67 SCRA 4, 252 SCRA 9.) 15. What are the exceptions to the rule that an act executed against provisions of mandatory or prohibitory laws shall be void? ANS: The following are the exceptions: (1) Where the law itself authorizes its validity. Examples — sweepstakes, horse racing. 7

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PRELIMINARY TITLE Effect and Application of Laws

(2) Where a marriage was solemnized by a person who does lave legal authority, but the party or parties believing in good i, that such person has the authority to do so, then the marriage did but the person who solemnized the same shall be criminally le. (3) Where the law itself authorizes its validity, but punishes violator. Example — A widow who remarries before the lapse ;00 days after the death of her husband is liable to criminal secution, but the marriage itself is valid. (4) Where the law merely makes the act voidable. Example — carriage celebrated through violence or intimidation or physical apacity or fraud is valid until it is annulled by a competent rt. (5) Where the law declares the act as void, but recognizes al effects as arising from it. Example — Children bora of void irriage are classified as illegitimate children entitled to the rights jvided for in Art. 176 of the Family Code (FC). I l6. Rights may be waived, (a) In what cases may waiver ; prohibited and declared null and void? (1977) (b) What e some instances where waiver is considered void? ANS: (a) Waiver is prohibited and may be declared null and ►id when (i) it is contrary to law, public order, public policy, morals * good customs; or (ii) when prejudicial to a third person with a ght recognized by law. (Art. 6, NCC.) (b) Waiver is considered void in such instances as: (i) aiver of future support; (ii) waiver of political rights; (iii) waiver of lture inheritance especially if the waiver is intended to prejudice reditors. 17. In case of silence, obscurity or insufficiency of the aw with respect to a particular controversy, what rules shall >e applied? (1961,1971,1977) ANS: If the law is silent, or is obscure or insufficient with respect to a particular controversy, the judge shall apply the custom }f the place, and in default thereof, the general principles ofiaw and justice. 8

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(18. What is the doctrine of stare decisis? ANS: The '‘doctrine of stare d ecisis(A rt. 8, NCC.) expresses that judicial decisions interpreting the law shall form part of the Philippine legal system. The rule follows the legal maxim — “legis interpretado legis vim obtinet” i.e., the interpretation placed upon the written law by a competent court has the force of law. The interpretation placed by the courts establishes the contemporaneous legislative intent of the law. The latter as so interpreted should constitute a part of the law as of the date the statute is enacted. Only when a prior ruling o f the court finds itself later overruled, and a different view is adopted, that the new doctrine may be applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith in accordance therewith under the rule of “lex prospicit, non respicit” (Pesca vs. Pesca} G.R. No. 136921, April 17,2001.) fl9,J What is meant by custom and what should first be established before such custom could be considered as a source of right? Illustrate. ANS: Custom may be defined as the juridical rule which results from a constant and continued uniform practice by the members of a social community, with respect to a particular state of facts, and observed with a conviction that it is juridically obligatory. (1 Tolentino, Civil Code, p. 39.) The custom must be proved as a fact, according to the rules of evidence. (Art. 12, NCC.) This fact, however, should possess the following requisites: (1) plurality of acts; (2) uniformity of acts; (3) general practice by the great mass of the people of the country or community; (4) continued practice for a long period of time; (5) general conviction that the practice is the proper rule of conduct; and (6) conformity with law, morals or public policy. (1 Tolentino, Civil Code, p. 39; 1 Manresa 82.) Illustration — X, a cochero in Manila, left his horse unattended while helping his passengers to unload their cargo. Frightened by passing vehicles, the horse galloped away, as a result of which the carretela struck a pedestrian causing injuries to the latter. Is the cochero negligent? HELD: The cochero is not negligent. His act is in 9

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lance with the custom of cocheros in the place. (Martinez us. htskirk, 18 Phil. 79.) 20. What are the different conflict-law-rules found in ^CC and the FC which sanction the operation of either ippine laws upon Filipinos residing or sojourning abroad reign laws upon foreigners residing or sojourning in the ippines? ANS: They are: (1) Art. 14, NCC — Although penal laws are obligatory upon rho live or sojourn in Philippine territory, nevertheless, this rule Lbject to the principles of public international law and to treaty ilations. (2) Art. 15, NCC — Laws relating to family rights and duties, ) the status, condition and legal capacity of persons are binding a Filipino citizens, even though living abroad. By implication, rule is also applicable to aliens. (3) Art. 16, par. 2, NCC — Testate and intestate succession, h.with respect to the order of succession, the amount of successional its and the intrinsic validity of testamentary provisions, shall regulated by the national law of the person whose succession is ier consideration. (4) Art. 17, pars. 1 and 2, NCC — The forms and solemnities contracts, wills and other public instruments shall be governed by i laws of the country where they are executed. However, when the ;s referred to are executed before diplomatic or consular officials of 5 Republic of the Philippines in a foreign country, the solemnities tablished by Philippine laws shall be observed in their execution. (5) Art. 21, FC — When either or both of the parties to a arriage contract are aliens, it shall be necessary, before they can cure a marriage license, to provide themselves with a certificate of gal capacity to contract marriage, to be issued by their respective plomatic or consular officials. (6) Art. 26, FC — All marriages solemnized outside the hilippines in accordance with the laws in force in the country where ley were solemnized, and valid there as such, shall also be valid in 10

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Arts. 1-18

this country, except those prohibited under Arts. 35(1), (4), (5) and (6), 36, 37 and 38, FC. (7) Art. 80, FC — In the absence of a contrary stipulation in a marriage settlement, the property relations of the spouses shall be governed by Philippine laws regardless of the place of the celebration of the marriage and their residence. (8) Art. 815, NCC — 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. (9) Art. 816, NCC — The will of an alien produces effect in the Philippines if made with the formalities prescribed by the law of the place in which he resides, or of his country, or of the NCC of the Philippines. (10) Art. 817, NCC — If an alien makes a will in the Philippines in accordance with the formalities prescribed by the laws of his country, it shall have the same effect as if executed according to the laws of the Philippines. (11) Art. 819, NCC — Joint wills executed by Filipinos in a foreign country shall not be valid in the Philippines. (12) Art. 829 —Revocation of awill done outside the Philippines, by a person who does not have his domicile in this country, is valid when it is done according to the law of the place where the will was made or according to the law of the place where the testator had his domicile at the time. (13) Art. 1039, NCC — Capacity to succeed is governed by the decedent’s national law. (14) Art. 1753, NCC — The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction, or deterioration. 21. Why are foreign decrees of divorce granted to Philippine nationals generally refused recognition by our courts? ANS: Foreign decrees of divorce (absolute) granted to Philippine nationals are generally refused recognition by our courts because of two (2) very fundamental reasons. They are: 11

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(1) In this jurisdiction, we adhere to the nationality theory. , Art. 15 of the NCC expressly provides that laws relating to y rights and duties, or to the status, condition and legal capacity rsons are binding upon citizens of the Philippines even though g abroad. A decree of divorce is certainly one that will affect or .ve the status and condition of the parties. (2) It is well-settled in this country that absolute divorce is ravy to public policy. The third paragraph of Art. 17 of the NCC ares that such a declaration of public policy cannot be rendered fective by a judgment promulgated in a foreign country. 22. Ana and Basilio, both Filipino citizens and of legal , were married in Antique but they never lived together. %subsequently left the Philippines and secured a divorce in ?ada, US in 1953 on the ground of extreme mental cruelty. 1955, Ana sought papal dispensation of the marriage and ;n married Carl, an American, in Nevada. She lived with a in California and begot children. She acquired American izenship in 1959. (1) Will the divorce decree obtained abroad be corded validity in the Philippines? What law supports ur answer? (2) What is the status of the marriage of Ana and Carl ider our laws? Reasons for your answer. (1978) ANS: (1) The divorce decree obtained abroad is not accorded ilidity in the Philippines. The following laws support this answer: (a) The NCC states that laws relating to family rights and duties, or to the status, condition and legal capacity of per­ sons are binding upon citizens of the Philippines, even though living abroad. (Art. 15, NCC.) Only relative divorce or legal separation, as a general rule, is recognized in the Philippines. (Art 55, et seq., FC.) Absolute divorce is recognized only among Muslims as provided for in the Islamic law on family relations. (P.D. No. 1083.) It is, therefore, clear that the divorce decree which affects the status and condition of Ana and Basilio, is not valid under Philippine laws.

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(b) It is well-settled in this jurisdiction that absolute divorce is contrary to public policy. The NCC states that a declaration of public policy cannot be rendered ineffective by a judgment promulgated in a foreign country. (Art. 17, par. 3, NCC.) (2) The marriage of Ana and Carl is void under our laws for the following reasons: (a) Ana is still married to Basilio under Philippine laws. The decree of absolute divorce which she obtained in Nevada is not valid in the Philippines for the reasons stated above. Nei­ ther is the papal dispensation which she also obtained valid. Our law on marriage is found in the NCC. Papal dispensation is not recognized in said law. (b) True, the NCC provides that a marriage celebrated outside of the Philippines in accordance with the laws in force in the country where it is celebrated, and valid there as such, shall also be valid in this country. (Art. 26, FC.) But there are exceptions to this rule. The rule cannot be applied if the mar­ riage is bigamous, polygamous, or incestuous as determined by Philippine laws. The marriage of Ana and Carl is certainly bigamous as determined by Philippine laws. (Art. 41, FC.) (Note: Under Art. 26 of the FC, the exceptions to the rule are those prohibited tinder Arts. 35[1], [4], [5] and [6], 36, 37 and 38, FC. Hence, the general rule provided for in Art. 26 of the FC cannot herein be applied since the marriage of Ana and Carl is bigamous [Art. 35(4}, FC] and as such, is considered an exception thereto.)

23. X and Y, Filipino couple married in the Philippines, transferred their residence to Reno, Nevada, and resided bona fide there for 10 years. While there, they obtained an absolute divorce, which is valid by the laws of Reno, Nevada. Subsequently, they returned to the Philippines. May the absolute divorce be recognized in the Philippines? Reason. (1971) ANS: The absolute divorce cannot be considered as valid in the Philippines for the following reasons: (1) Absolute divorce is not recognized in the Philippines. According to Art. 15 of the NCC, laws relating to family rights and 13

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3 , or to the status, condition, and legal capacity of persons are ng upon citizens of the Philippines, even though living abroad.

(2) Well-settled is the rule in this jurisdiction that absolute ce is contrary to public policy. Pursuant to the third paragraph ■fc. 17 of the NCC, this declaration of public policy cannot be ered nugatory by the decree of absolute divorce obtained by X Y in Beno, Nevada. 24. X and Y, a Filipino couple, emigrated to the United ;es and established their residence in New York City. Y imitted adultery with Z, another Filipino, and X was able btain a divorce from Y. X returned to the Philippines and % ried A. Is the marriage valid? Reasons. (1973) ANS: The marriage between X and A is not valid for lack of il capacity on the part of X. From the viewpoint of Philippine s, X is still married to Y. Consequently, there is an impediment ds marriage to X pursuant to Arts. 2 and 35, par. 1, of the FC. Essentially, the real issue in the instant problem is: whether not the decree of absolute divorce obtained abroad is valid in 3 country. It is well-settled that such a decree is void from the {inning. The reasons are well known. In the first place, we adhere the nationality theory. Philippine laws shall be binding upon ipino citizens wherever they are with respect to family rights and ties as well as status, condition and legal capacity. This is clear m Art. 15 of the NCC. And in the second place, in this country, 3re is a declaration of public policy against absolute divorce. Such declaration of public policy cannot be rendered nugatory by the cree of absolute divorce obtained by X abroad. This is clear from e third paragraph of Art. 17 of the NCC. 25. H and W, both Filipino citizens are married. While ley were abroad, W, divorced H who subsequently died. Is rstill entitled to inherit from H? ANS: Yes. A Filipino husband or wife remains the lawful spouse f the other Filipino husband or wife inspite of a decree of divorce btained by the wife. Hence, W is still entitled to inherit from the usband as the latter’s surviving spouse despite the fact that she ras the one who divorced him. However, if the wife was already a 14

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foreigner at the time of the divorce, she ceased to be the lawful wife of the Filipino husband and loses her right to inherit from him as his surviving spouse. (Quita vs. Dandan, G.R. No. 124862, December 22, 1998.) (26. / Spouses, husband “H” and wife “W,” Filipinos, with a child; decided that “H,” a doctor, would go the U.S. to find employment there and then “W” would join him. When in the U.S., “H” wrote that to establish U.S. residence, he would have to obtain a divorce, marry an American girl, and once a U.S. resident, divorce his American wife and then remarry «W.” “W” agreed. Four (4) years later, “H,” now a U.S. resident and having divorced his American wife, returns to the Philippines and finds that his wife, “W,” has married a wealthy man in a ceremony celebrated in Hongkong and is happily living with him in Manila. A. Was the marriage and divorce obtained by “H” in the U.S. valid? Explain. B. Was the marriage of “W” in Hongkong valid? Explain. . C.

Could “H” obtain custody of the child? Explain.

D. Could “H” charge “W” with bigamy or adultery? Explain. (1981) ANS: A. Both divorce and marriage are not valid in the Philippines. The divorce is not valid for the following reasons: (1) We adhere to the nationality theory. The NCC declares that laws relating to family rights and duties, or the status, condition and legal capacity of persons are binding upon citizens of the Philippines even though living abroad. Divorce certainly affects the status and condition of persons. Since absolute divorce is not recognized in this country except among Muslims, therefore, the decree of absolute divorce obtained by “H” is not valid. (2) It is well-settled that absolute divorce is contrary to public policy. According to the NCC, this declaration of public policy cannot 15

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ndered ineffective by a judgment promulgated in a foreign *y.

The marriage of “H” to an American woman is not also valid. , we adhere to the principle of locus regit actum — marriage where celebrated is also valid in the Philippines. But excepted this rule are bigamous, polygamous and incestuous marriages itermined by Philippine law. Since the divorce obtained by “H” “W” is not valid in this country as stated above, the subsequent riage to an American woman is clearly bigamous as determined hilippine law. Therefore, the marriage is not valid. (Note: The above answers are based on Art. 26 of the FC and on decided cases.) B. Using the same line of reasoning, £W s ” marriage to ther man in Hongkong is not also valid. Since the decree of Dlute divorce obtained by her husband “H” in the U.S. is not valid .er Philippine law for the reasons stated above, her marriage in lgkong to another man is clearly bigamous as determined by lippine law. Therefore, it is not valid. (Note: The above answer is based on Art, 26 of the FC.) C. If the child is under 7 years old, “H” cannot obtain custody >r him. According to the law, no child under 7 years of age shall be )arated from the mother unless the court finds compelling reasons do so. However, if the child is already 7 years old or over, then it the best interest of the child that will be considered, taking into :ount the respective resources and the social and moral situations the contending parents. (Note: The above answer is based on Art. 213, par. 2t FC and on decided cases, notably Unson vs. Navarro, L-52242, November 17, 1980.) D. “H” can charge “W” with adultery but not with bigamy, ndoubtedly, all of the elements of adultery as defined and punished Lthe Revised Penal Code are present. It is different in the case of .gamy. Since the bigamy was committed outside of our territorial irisdiction, it is not triable by our courts. 16

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(Note: The above answer is based on the Revised Penal Code, specifically Art. 2 of said Code.) 27. A, an American, and P, a Filip in a, both domiciled in New York City, were there married. Because of incompatibil­ ity, they sought and obtained a divorce in Nevada. (1) May P remarry? (2) Would it make any difference if P were to marry an American or a Filipino? Explain. ANS: (1) P may remarry. Please note that the divorce obtained is valid not only as far as A is concerned but as to both parties, thus, capacitating P to remarry. (2) other alien.

P may remarry a Filipino, or an American or any

The above answer is based on the second paragraph of Art. 26 of the FC as amended by Executive Order No. 227 which provides that: “Where a marriage between a Filipino citizen and a for­ eigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law.” 28. A, a Filipino woman, and B, an American, were married and initially lived in Manila. They later established their domicile in Texas, of which state B is a citizen, and there obtained an absolute divorce in accordance with the laws of Texas. A afterwards returned to the Philippines and married C, a Filipino. Evaluate the validity of the divorce and the subsequent marriage of A, citing reasons. ANS: The decree of absolute divorce obtained by A and B in Texas is valid as to both parties, thus, capacitating A to remarry. Hence, the marriage of A to C is valid. (Note: The above answer ia based on the second paragraph of Art. 26 of the FC as amended by EO No. 227.) 17

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29. RD and BG, both Filipinos were married and lived Ytanila. They begot 2 children and after some years of rriage, RD, being a physician, went to the US. After staying re for 2 years, RD got attached to a Filipina nurse. He got uick divorce on the ground of desertion and then married ! Filipina nurse with whom he also begot 2 children. RD id intestate in an automobile accident in the US leaving luable properties in the Philippines both inherited by him un his parents as well as acquired during his marriage to }. How would BG and her 2 children and the Filipina nurse d her 2 children share in the estate of RD? Give reasons pyour answer. (1979) ANS: Before we can determine the shares of the claimants to e estate of RD, let us first determine what is the estate of RD and iat is the status of the claimants in relation to RD. Estate o f RD: As far as the properties acquired by RD during s marriage to BG are concerned, 1/2 thereof should be included in ls estate and 1/2 should be given to BG since they are conjugal in laracter. As far as the properties inherited by him from his parents re concerned, since they are exclusive or separate in character, they mst also be included in his estate. Status of the claimants: BG is the surviving spouse of RD. The .ecree of absolute divorce secured by RD in the US is not valid. ?he reasons are well-known. In the first place, we adhere to the lationality theory. Philippine laws shall be binding upon Filipino citizens wherever they are with respect to family rights and duties is well as status, condition and legal capacity. And in the second place, there is a declaration of public policy in this country against absolute divorce. Such a declaration of public policy cannot be rendered nugatory by the decree of absolute divorce secured by RD in a foreign country. Therefore, the marriage of RD to the Filipina nurse is not valid. It is bigamous under Philippine law. Hence, the nurse is not related to RD under our law of succession. It is different in the case of the 2 children. Being bom of a void marriage, they are classified as illegitimate children under Art. 165 of the FC and are, therefore, entitled to 1/2 of the legitime of a legitimate child as provided for in Art. 176 of the FC.

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Division of the estate ofRD: It is clear that only BG as surviving spouse, the two (2) legitimate children of RD and BG and the two (2) illegitimate children of RD will be able to inherit. The Filipina nurse cannot. Since RD died intestate, the proportions established under our law on legitime are applicable. In the instant case, the proportions will be 10 for BG; 10 for each of the legitimate children; and 5 for each of the illegitimate children. Stated in another way, the two (2) legitimate children shall be entitled to 1/2, or 1/4 each, of the entire estate of RD; BG shall be entitled to the same share as each of the legitimate children, or 1/4 of the entire estate; and the two (2) illegitimate children shall be entitled to the balance of 1/4, or 1/8 each, of the entire estate. 30. “E” and “F,” Filipino citizens, were married in the Philippines. Later, they separated. “E,” the husband, went to San Francisco, California, to live there permanently. He obtained a divorce in California from “F” on grounds of desertion and mental cruelty. Thereafter, he married “G,” a Filipina, who did not know that “E” was previously married. “E” and “G” had two (2) children “H” and “I.” They came back to the Philippines where “E” died. Discuss (1) the validity of the divorce obtained by “E” in California; (2) the validity of the marriage of “E” to “G”; and (3) the legal status of “H” and “I.” (1980) ANS: (1) The decree of absolute divorce obtained by “E” in California is not valid in the Philippines for the following reasons: (a) Absolute divorce is not recognized in the Philip­ pines. According to the NCC, laws relating to family rights and duties, or to status, condition, and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. (b) Well-settled is the rule that in the Philippines, abso­ lute divorce is contrary to public policy. According to the NCC, this declaration of public policy cannot be rendered nugatory by the decree of absolute divorce obtained by “E” in a foreign country. (2) The marriage of “E” to “G” is not valid. According to the NCC, it is void from the very beginning by reason of a prior 19

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sting marriage. From the point of view of Philippine law, since ecree of absolute divorce obtained by “E” in California is not , he is still married to “F.” (3) “H” and “I” are illegitimate children by legal fiction, -eason is that they are children bom of a marriage which is According to the FC, such children are classified as illegitimate ren. {Note: The above answers are based on Arts. 15,17, 41, and Art. 165, FC.)

31. Adrianus, a Greek, 17 years of age, before coming to ila, purchased an automobile in Rotterdam, Netherlands shipped it to Manila, through the Philippine Ships ipany. Under the laws of Greece, Adrianus is an adult juris), but a minor under the laws of Netherlands, bill of lading issued by the Philippine Ships Company npted the Company from liability for acts or omissions s seamen. The car was damaged in transit to Manila due te negligence of its seamen. Questions: (1) Does Adrianus 3 the capacity to contract? (2) May Adrianus hold the ippine Ships Company liable in Philippine courts for Lages to his car? Explain. ANS: (1) Adrianus has the capacity to contract. Art. 15 of the ' declares that Philippine laws relating to family rights and es, or to the status, condition and legal capacity of persons are ing upon citizens of the Philippines, even though living abroad, er this article, the converse proposition is impliedly accepted, egards aliens, matters relating to the status, condition and legal icity of persons shall be governed by their own internal law. (See mga, Private International Law, p . 59J Consequently, in the ant case, since Adrianus is a Greek citizen, and under the laws -reece, he is an adult (sui juris), as far as his capacity to enter a contract is concerned, it will be the laws of Greece that shall 3m, and not the laws of the Netherlands or of the Philippines. (2) Adrianus may hold the Philippine Ships Company le in Philippine courts for damages to his car. Art. 1753 of the 3 declares that the law of the country to which the goods are 20

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to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. Now, under Art. 1745 of the same Code, the stipulation in the bill of lading exempting the company from liability for acts or omissions of its seamen is contrary to public policy, and therefore, void. (Art. 1745, No. [5], NCCJ It is evident that Adrianus can now bring an action against the company for damages to his car. 32. How does the alien nationality of a person, residing in the Philippines, affect his rights (1) to marry, (2) to enter into contracts, (3) to inherit, (4) to dispose of his estate by will, and (5) to acquire real property located in the Philippines? ANS: The alien nationality of a person, residing in the Philippines, has the following effects with respect to his right: (1) To marry: Undoubtedly, an alien can get married in the Philippines, but the marriage with respect to its formal and intrinsic validity shall be governed by Philippine laws. However, as far as the requisite of a marriage license is concerned, since such license is essential for the validity of the marriage according to the Philippine laws (Art. 3, FC.) before it can be obtained, it is necessary for the alien to provide himself with a certificate of legal capacity to contract marriage, to be issued by his diplomatic or consular official. (Art. 21, FC.) (2) To contract: When it comes to entering into a contract, we must distinguish. As far as the formal validity of the contract is concerned, Philippine laws shall govern, assuming that it is executed in the Philippines (Art. 17, par. 1, NCC.); as far as the legal capacity of the resident alien is concerned, his national law shall govern, applying the nationality principle impliedly recognized in Art. 15 of the NCC; and as far as the intrinsic validity of the contract is concerned, the proper law of the contract (lex contractus) shall govern, which may be either the law voluntarily agreed upon by the contracting parties (lex loci voluntatis) or the law intended by them expressly or impliedly (lex loci intentionis). (3) To inherit: Undoubtedly, a resident alien can inherit. However, his legal capacity to inherit shall be governed by the national law of the decedent. (Art. 1039, NCC.) The same is also 21

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with respect to the order of succession and the amount of issional rights. (Art, 16, par. 2, NCC.) (4) To dispose o f his estate by will: We must distinguish, ir as the formal validity of the will is concerned, if the will is lted in the Philippines, the formalities prescribed by the law e Philippines or by his national law shall govern (Arts. 17, par. 7, NCC.); and, if the will is executed outside of the Philippines, ormalities prescribed by the law of the place where the will is uted or his national law or the law of the place where he resides ippines) or Philippine law shall govern. (Arts. 17, par. 1, 816, As far as the intrinsic validity of the will is concerned, the itor’s national law shall govern. (Art. 16, par. 2, NCC.) (5) To acquire real property: As to the right of alien residents :quire real property located in the Philippines, the Philippine stitution is explicit. Save in cases of hereditary succession, cannot acquire private lands. (Art. XIV, Sec. 14 of the 1973 ititution, now Art. XII, Sec. 7, 1987 Philippine Constitution.) ever, titles to private lands acquired by American citizens re July 3, 1974 shall be valid as against private persons. (Art. I, Sec. 11 o f the 1973 Constitution.) 33, Art. 16 of the NCC provides that “real property veil as personal property is subject to the law of the ntry where it is situated.” The same article provides that tamentary succession — shall be regulated by the national of the person whose succession is under consideration.” A British couple, during marriage, had acquired a Lse and lot in Quezon City, prior to 1935, worth P60,000. s realty had been purchased in the name of the husband ~ried to Jane Doe. Assume that under the British law: (a) lmunity of property does not exist; and (b) that a testator will his entire estate, wherever situated, to anybody he ases. Can the British husband validly devise the entire lty, say to Silliman University? Explain your answer. ANS: It is submitted that the British husband cannot devise entire house and lot in Quezon City to Silliman University. He 22

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Arts. 1-18

can devise only 1/2 thereof because that is his share in the realty. True, the second paragraph of Art. 16 of the NCC provides that tes­ tamentary succession shall be regulated by the national law of the person whose succession is under consideration. But then, the NCC is explicit. The same paragraph of said article also provides that this rule is applicable only to the order of succession, the amount of suc­ cessional rights and the intrinsic validity of testamentary provisions. Since under British law, community of property does not exist, and a testator can will his entire estate, wherever situated, to anybody he pleases, it is clear that the testamentary provision found in the testator’s will in the instant case, whereby he devised the house and lot in Quezon City to Silliman University is perfectly valid, but only with respect to his share in said realty. Now, what is the share of the testator in the realty? It is submitted that his share is only 1/2. This conclusion is supported by the first paragraph of Art. 16 of the NCC, which declares that real property is subject to the law of the country where it is situated. It is confirmed to a certain extent, at least by implication, by Art. 80(3) of the FC. Under Philippine law, it is undeniable that the realty is presumed to be conjugal in char­ acter. Hence, one-half thereof is the share of the husband and the other one-half is the share of the wife. It is, of course, true that the question of status of the subject property is a question involving the property relations between the husband and the wife. Consequently, the status or character of the property should be governed by British law. But it must be observed that British law has not been properly pleaded and proved. Therefore, pursuant to what Wharton calls the “processual presumption,” we can now say that British law is the same as the Philippine law. (See Collector o f Internal Revenue vs. Fisher, 110 Phil. 686.) Since under Philippine law, the system of conjugal partnership of gains governs, the testator in the instant case can only devise his one-half share in the realty. 34. To what law is real property as well as personal property subject? What law shall govern the forms and solemnities of contracts, wills, and other public instruments? ANS: Real property as well as personal property is subject to the law of the country where it is situated. (Art. 16, par. 1, NCC.) There are, however, two (2) exceptions to this rule under the NCC. 23

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3y are: (1) under the second paragraph of Art. 16 of the NCC ich declares that testamentary and intestate succession, both ;h respect to the order of succession, the amount of successional hts, and the intrinsic validity of testamentary provisions shall regulated by the national law of the decedent; and (2) under Art. in relation to Art. 74 of the FC, the property relations between sband and wife shall be governed by the marriage settlements jcuted before the marriage. The forms and solemnities of contracts, wills and other public truments shall be governed by the laws of the country in which ;y are executed. However, when the acts referred to are executed 'ore the diplomatic or consular officials of the Republic of the ilippines in a foreign country, the solemnities established by ilippine laws shall be observed. (Art. 17, pars. 1 and 2, NCCJ 35. What are the four (4) aspects of succession which e governed by the national law of the decedent if he is a reigner? ANS: The four (4) aspects of succession which are governed the national law of the decedent if he is a foreigner are: first, 3 order of succession; second, the amount of successional rights; '.rd, the intrinsic validity of testamentary provisions; and fourth, 3 capacity to succeed. (Arts. 16, par. 2, 1039, NCC; see Beilis vs. His, 20 SCRA 358.) 36. Louie and Angie, both Filipino citizens, were arried in Malolos, Bulacan on June 1, 1950. In 1960, Louie 3nt to the US, becoming a U.S. citizen in 1975. In 1980, ; obtained a divorce decree which became final under ilifornia law. Coming back to the Philippines in 1982, >uie married Lita, a Filipino citizen. In 2001, Louie, then »miciled in Los Angeles, California, died, leaving one child rAngie, and another one by Lita. He left a will which was :ecuted in Manila, under which he left his estate to Lita id his two (2) children and nothing to Angie. Lita files a petition for the probate of Louie’s will. Angie lestions the intrinsic validity of the will, arguing that her arriage to Louie subsisted despite the divorce obtained 24

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by Louie because said divorce is not recognized in the Philippines. For this reason, she claims that the properties left by Louie are their conjugal properties and that Lita has no successional rights. a. Is the divorce secured by Louie in California rec­ ognizable and valid in the Philippines? How does it affect Louie’s marriage to Angie? Explain. b. plain.

What law governs the formalities of the will? Ex­

c. Will Philippine law govern the order of succession, the amount of successional rights, the intrinsic validity of testamentary provisions and the capacity to succeed? (2002) ANS: (a) The divorce is recognizable in the Philippines. When Louie became an American citizen in 1975, his status, condition and legal capacity ceased to be governed by Philippine laws and became governed by the laws of the US. The divorce in effect ended the marriage between Louie and Angie, without annulling it from the beginning. (b) The forms and solemnities of wills are governed by the laws of the country in which they are executed (lex loci celebrationis). Therefore, the formalities of the will in this case is governed by Philippine laws. (Art. 17, NCC.) (c) The order of succession, the amount of successional rights, the intrinsic validity of testamentary provisions and the capacity to succeed will be governed by the laws of the US (where the decedent was domiciled at the time of his death), the national law of the decedent. (Art. 16, NCC.) 37. A, a citizen of Nevada, USA, died testate in Manila. In his will, he left the bulk of his estate to a grandchild resulting in the impairment of the legitime of his other heirs. The system of legitime is not recognized in Nevada. Is the disposition valid? ANS: The disposition is valid. This is clear from the provision of the second paragraph of Art. 16 of the NCC. Since the applicable law is the law of Nevada which does not recognize the system of 25

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gitime, therefore, A is free to dispose of his properties in favor ' any person not disqualified by his national law to inherit from m. (Phil. Trust Co. vs. Bohanan, 106 PhiL 997. To the same effect Beilis vs. Beilis, supra.) \ 38y A was considered a Chinese citizen under Nationalt China laws and a Japanese under the laws of Japan. He led in Manila, leaving properties in the Philippines. Before is death, he was domiciled in Japan. How should a Philipine Court adjudicate the successional rights to his estate? 977) ANS: The Philippine Court should adjudicate the successional ghts to A’s estate in accordance with Japanese law. This solution in conformity with the theory of effective nationality solution (re inflict of nationality laws) ordained by the Hague Convention. It obvious that A himself preferred Japanese law to Chinese law jcause he was not only a citizen but also a domiciliary of Japan, rue, we adhere to the nationality theory (Art. 16, par. 2, NCC), it here, the domiciliary theoiy merely comes to the rescue of the ationality theory. 39. Allan was born a Filipino but was a naturalized anadian citizen at the time of his death on November 1, )98. He left behind a last will and testament in which he equeathed all his properties, real and personal, in the hilippines to his acknowledged illegitimate Filipina aughter, Anita, and nothing to his two (2) legitimate Filipino 3ns, Arnold and Alton. The sons sought the annulment of the tst will and testament on the ground that it deprived them Ptheir legitimes but Anita was able to prove that there were o compulsory heirs or legitimes under Canadian law. Who lould prevail? Why? (2001) ANS: Anita should prevail because Art. 16 of the NCC provides lat intestate and testamentary succession shall be governed by the ational law of the person whose succession is und er consideration. 40. Suppose that the testator, who is a foreigner, ctually wanted to distribute his estate in accordance with hilippine laws, and so, in his will, there is a proviso to the 26

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effect that said estate shall be distributed in accordance with Philippine laws. Would such a proviso be valid? ANS: Such a proviso in the will would be void because it is contrary to the provision of Art. 16 of the NCC which explicitly declares that it will be the national law of the person whose succession is under consideration that will govern. (Beilis vs. Beilis, supra.) 41. Spouses Audrey O’Neill and W. Richard Guersey were American citizens who resided in the Philippines for thirty (30) years. They have an adopted daughter, Kyle Gu­ ersey Hill. In 1979, Audrey died leaving a will, where she be­ queathed her entire estate to Richard. The will was admitted to probate before the Orphan’s Court of Baltimore, Maryland, U.S.A. The court also named Atty. Alonzo Ancheta (petitioner) as ancillary administrator. In 1981, Richard married Cande­ laria Guersey-Dalaygon (respondent) with whom he has two (2) children. In 1984, Richard died, leaving a will, wherein he bequeathed his entire estate to respondent. In 1987, petition­ er filed in Special Proceedings No. 9625, a motion to declare Richard and Kyle as heirs of Audrey, which was granted by the trial court. Meanwhile, the petitioner/ancilliary admin­ istrator in Special Proceeding No. M-888 also filed a project of partition, wherein 2/5 of Richard’s undivided interest in the Makati property was allocated to respondent, while 3/5 thereof were allocated to Richard’s three (3) children. This was opposed by the respondent on the ground that under the law of the State of Maryland, “a legacy passes to the legatee the entire estate of the testator in the property subject of the legacy.” Since Richard left his entire estate to respondent, then his entire 3/4 undivided interest in the Makati property should be given to respondent. Is the respondent’s position correct? ANS: Yes, respondent is correct. The SC ruled in the case of Ancheta vs. Guersey-Dalaygon (G.R. No. 139868, June 8, 2006), that: It is undisputed that Audrey was an American citizen domiciled in Maryland, U.S.A. During the reprobate of her will, it was shown that at the time of her death, she was residing in the Philippines, but is domiciled in Maryland, U.S.A.; her Last Will and Testament was executed and probated before the Orphan’s Court in Baltimore, 27

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yland, U.S.A. Being a foreign national the intrinsic validity /udrey’s will, especially with regard to who are her heirs, is ;rned by her national, law, i.e., the law of the State of Maryland, rovided in Art. 16 of the NCC which provides that intestate and amentary succession, both with respect to the order of succession to the amount of successional rights and to the intrinsic validity stamentary succession, shall be regulated by the national law of person whose succession is under consideration, whatever may be nature of the property and regardless of the country wherein the property may be found. Art. 1039 of the NCC further provides , the “capacity to succeed is governed by the law of the nation of decedent.” Petitioner, as ancilliary administrator of Audrey’s estate was r-bound to introduce in evidence the pertinent law of the State [aryland. How can petitioner honestly presume that Philippine s apply when, as early as the reprobate of Audrey’s will before trial court in 1982, it was already brought to fore that Audrey a U.S. citizen, domiciled in the State of Maryland. Petitioner is nior partner in a prestigious law firm. Unfortunately, he failed erform his fiduciary duties. This is not a simple case of error of pnent or grave abuse of discretion, but a total disregard of the as a result of petitioner’s abject failure to discharge his fiduciary es. Respondent was thus excluded from enjoying full rights to the :ati property through no fault or negligence of her own. Audrey’s Richard’s wills should be distributed according to their respective 3, and not according to the project of partition. Consequently, the re Makati property belongs to the respondent. In any case, the SC noted that Audrey and Richard were srican citizens who owned real property in the Philippines, ough records do not show when and how the Guerseys acquired the :ati property. The Court ruled that if land is invalidly transferred n alien who subsequently becomes a citizen or transfers it to a ;en, the flaw in the original transaction is considered cured and title of the transferee is rendered valid. In this case, since the cati property had already passed on to the respondent who is a pino, then whatever flaw, if any, that attended the acquisition by Guerseys of the Makati property is now inconsequential, as the ctive of the constitutional provision to keep our lands in Filipino ds has been achieved. 28

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42. Gold was a citizen of State X under whose law an illegitimate child is not an intestate heir. Gold died in the Philippines without a will, leaving considerable properties in Manila. Can Octavio, an illegitimate son of Gold by a Filipino woman, legally claim inheritance by invoking the successional rights of an illegitimate children under Philippine law? (1974) ANS: Octavio cannot legally claim inheritance by invoking the successional rights of an illegitimate children under Philippine law. Under our NCC, there are 4 aspects of succession which are governed by the national law of the person whose succession is under consideration. They are: (a) the order of succession; (b) the amount of successional rights; (c) the intrinsic validity of testamentary provisions; and (d) the capacity to succeed. (Arts. 16, par. 2, 1039, NCC.) Whether we look at the instant case from the viewpoint of the order of intestate succession (Art. 16, par. 2, NCC.) or from the viewpoint of capacity to succeed (Art. 1039, NCC.), it is clear that it will be Gold’s internal or national law that will govern, and not Philippine law. Since under his national law, an illegitimate child is not an intestate heir, consequently, Octavio, who is an illegitimate child, cannot inherit from him. (43. j A, a citizen of California, USA, but domiciled in the Philippines, died testate in Manila, survived by two (2) illegitimate natural children, B and C. In his will, he left more than P500,000 to B and only P3,000 to C. It is admitted that under the Civil Code of California, the domiciliary law of the decedent shall govern questions involving the validity of testamentary provisions. C, who is contesting the validity of the disposition in favor of B, now contends that Philippine laws with respect to succession are applicable. Is this correct? ANS: Yes, this is correct. The doctrine of renvoi is applicable in the instant case. Although the NCC in Art. 16 states that the intrinsic validity of testamentary provisions shall be regulated by the decedent’s national law, nevertheless, the Civil Code of California declares that the decedent’s domiciliary law shall govern. Hence, the question shall be referred back to the decedent’s domicile. In other words, the laws of the Philippines with respect to succession shall 29

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3m. Consequently, in the partition of the estate, C shall be given are which must not be less than his legitime. (Aznar vs. Garcia, : r a 95.) ! 44J What is meant by renvoi? Has renvoi been accepted nesays that the internal law of X’s domicile shall govern and not law of Texas. So, the case is referred back (renvoi) to the internal of the Philippines. The Philippine court must, therefore, apply 3wn law as directed in the conflict of law rule of the state of the sdent. 30

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(Note: The above example is what is known as the doctrine of “single renvoi.” It must be noted, however, that the renvoi is not always a "referring back”; the reference may also be to the internal law of a third state. Thus, if X in the above problem was domiciled in France at the time of his death, the Philippine court, following the nationality principle, will refer the case to the internal law of Texas. But the conflicts rule of Texas, following the domiciliary principle, will in turn refer the case to the internal law of France. Therefore, the Philippine court, through Texas law, will apply French law. In such case, the reference is “across” rather than “back.” This doctrine is what is sometimes known as the “transmission theory.”) 45. “U,” an American citizen who used to stay in New York, married “V,” a Filipina. They lived in Manila. “U” died leaving a will disposing of his real and personal properties both in Manila and New York according to the laws of New York. The will was presented for probate in Manila. roceeds distributed to the creditors. The Baro Corporation was rty to said agreement. Clearly, the case at bar falls squarely in the purview of the principle of abuse of rights embodied in 19 of the NCC. True, this article contains essentially a mere ^ration of principles, yet such declaration is implemented by Art, . sequel of Art. 19, which declares that any person who willfully es loss or injury to another in a manner that is contrary to ils, good customs or public policy shall compensate the latter for lamages. This article, in turn, is implemented by Arts. 2217 and No. 10, which declare that moral damages may be recovered, by Arts. 2229, et seq., which declare that exemplary damages in the discretion of the court may be recovered. (Velayo vs. Shell \fthe Phil., 100 PhiL 186.) 52. What is the material distinction between damages injury? What is damnum absque injuria? Cite an instance re there can be damnum absque injuria. Discuss malice ad faith as the core of Art. 19 of the NCC. ANS: Injury is the invasion of a legal right while damage is oss, hurt or harm which results from the injury. Damages are 'ecompense or compensation awarded for the damage suffered. 5 , there can be damage without injury to those instances in h loss or harm was not the result of a violation of a legal duty, ich cases, the consequences must be borne by the injured person e; the law affords no remedy for damages resulting from an act h does not amount to a legal injury or wrong. These situations )ften called damnum absque injuria. An example of a situation where there can be damnum absInjuria is the case of the Heirs of Nala, etc. vs. Cabansag (G.R. .88, June 13, 2008) where a 400-square meter portion of the 36

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Arts. 19-36

property of Spouses Nila and the late Gene was transferred in the name of Gerry and his wife Liza (sister of the late Gene), with the agreement that the property will merely be held in trust by them for Gene’s children. Occupying a 50-square meter portion of the property was Chito who subsequently bought the said portion from Spouses Gerry and Liza on July 23, 1990. Chito received a demand letter from Atty. De la Cruz in behalf of Nila who thought that Chito was only renting the property and that the Spouses Gerry and Liza were only managing the rentals by virtue of the .implied trust be­ tween them and the late Gene. Hence, when the spouses failed to remit the rentals and claimed ownership of the property, Nila had to protect her and her children’s interest and asked her lawyer, Atty. de la Cruz, to send the demand letters to Chito. Chito then sued Nila and Atty. De la Cruz for damages. The SC ruled that Nila and Atty. de la Cruz are not liable. Chito’s claim for damages is apparently based on Art. 19 of the NCC setting the standards to be observed in the exercise of one’s rights and performance of one’s duties, viz., “to act with justice , give everyone his due and observe honesty and good faith.” But the SC ruled that the core of Art. 19 is malice or bad faith. He who alleges bad faith must prove the same. Bad faith does not simply connote bad judgment or simple negligence but a dishonest purpose or some moral obloquy and conscious doing of a wrong, or a breach of a known duty due to some motives or interest that partake of the nature of fraud. Malice connotes ill-will or spite, and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm. In this case, bad faith or malice could not be attributed to Nila since she was only trying to protect their interests over the property. It was only after Chito filed the case for damages that she learned that the spouses has surreptitiously sold a portion of the property to Chito. Nila was acting well within her rights when she instructed Atty. De la Cruz to send the demand letters. She had to take all the necessary legal steps to enforce her legal/equitable rights over the property occupied by Chito. One who makes use of his own legal right does no injury. Thus whatever damages Chito suffered should be borne solely by him. (See also the case of Aznar vs. Citibank, N.A. [Philippines], G.R. No. 164273, March 28, 2007.)

37

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53. Is breach of promise to marry actionable? ANS: In itself, mere breach of promise to marry is not nable. (Hermosisima vs. CA, 109 Phil. 629; Estopa vs. Piansay, 09 Phil. 640; Galang vs. CA, 4 SCRA 55; Tanjanco vs. CA, 18 4.994.) This is so, because: first, there is no law which allows or les a person to proceed against the promissor either for specific rmance or for damages; and second, the intent of Congress is ly against it. This is indicated by the fact that the chapter on ;h of promise to marry found in the original draft of the NCC jntirely eliminated. 54. In an action based on breach of promise to marry, t are the possible rights of the aggrieved party — (a) n there has been carnal knowledge? (b) when there has i no carnal knowledge? ANS: In this jurisdiction, mere breach of promise to marry has anding in civil law; in other words, in itself it is not actionable, aver, the breach of promise to marry may be accompanied by i act or event which would make,it actionable. Thus — (1)

When there has been carnal knowledge:

(a) And the carnal intercourse constitutes seduction as defined in the Revised Penal Code, the aggrieved party can re­ cover moral damages. (Art. 2219, No. 3, NCC.) (b) And the act of the defendant constitutes a tort in the sense that it is willful and that it is contrary to morals, good customs or public policy, the aggrieved party can recover moral damages. (Arts. 21, 2219, No. 10, NCC.) (c) And the woman becomes pregnant and subsequently delivers. Even assuming that she cannot recover moral damag­ es for the breach, nevertheless, she can recover compensatory damages for medical and hospitalization expenses as well as attorney’s fees. (Hermosisima vs. CA, supra.) (d) And the plaintiff had advanced money or property to the defendant upon the faith of the promise to marry, obvious­ ly, the former can recover the money or property on the ground 38

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that no person can enrich himself unjustly at the expense of another. (IbidJ (2)

When there has been no carnal knowledge:

When there has been no carnal knowledge, the only cases where the aggrieved party may have a possible right against the defendant would be: (a) if the latter’s act constitutes a tort under Art. 21 of the NCC; or (b) if the former had advanced money or property to the latter. In the first, such aggrieved party would be able to recover moral damages, while in the second, he would be able to recover the money or property advanced. 55. Is an act which is contrary to morals, good customs or public policy actionable? Explain. ANS: Yes, an act which is contrary to morals, good customs or public policy is actionable. This is clear from the provision of Art. 21 of the NCC, which declares that “any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage,” and from the provision of Art. 2219, No. 10, of the NCC, which declares that "moral damages may be recovered x x x for acts and actions referred to in Arts. 21, 26, 27, 28, 29, 30, 32, 34, and 35.” However, in order that the defendant can be held liable, it is essential that the following requisites must concur: (1) The defendant should have acted in a manner that is contrary to morals, good customs or public policy; (2)

The act should be willful; and

(3)

Damage or injury to the plaintiff.

56. H was married to a wealthy woman, W. Without any justifiable cause, W abandoned H and left for the US where she secured a decree of absolute divorce. Later, she got married again. Is there a right now for H to proceed against her for moral damages on the ground that her acts are contrary to morals, good customs and public policy? ANS: Yes, H has a right to proceed against W for moral damages on the ground that the acts of the latter are contrary to 39

I

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als, good customs and public policy. In Tenchaves vs. Escano (15 !A 355, 17 SCRA 674), a case with a factual setting similar to of the above problem, the SC held that the acts of the wife in not plying with her wifely duties, deserting her husband without justifiable cause, leaving for the US in order to secure a decree )solute divorce, and finally getting married again are acts which titute a willful infliction of injury upon the husband’s feelings manner contrary to morals, good customs or public policy for :h No. 10 of Art. 2219 of the NCC authorizes an award for moral ages. 57. X, a Chinese married to Y, became a close friend l and B because of the similarity of their family name, the pretext of teaching C, a daughter of A and B, how ray the rosary, he was able to win the love of the young and as a result, the two (2) conducted a clandestine love ir. When A learned of the love affair, the latter told X that nust never see C again. The affair, however, continued, later, C, who had been sent by her parents to live with brothers and sisters in Quezon City, disappeared, sequently, A and B brought this action to recover moral Lages against X based on Arts. 21 and 2219 of the NCC. the action prosper? Reasons. ANS: Yes, the action will prosper. In Cecilio Pe, et al. vs. Alfonso >SCRA 200), a case with similar facts, the Supreme Court held the defendant has committed an injury to C’s family in a manner rary to morals, good customs and public policy as contemplated ?t. 21 of the NCC and for which moral damages may be recovered ir Art. 2219 of the same Code. The circumstances under which .ed to win C’s affection cannot but lead to any other conclusion . that it was he who, through an ingenious scheme or trickery, ced the latter to the extent of making her fall in love with him. he pretext of teaching her how to pray the rosary, he was able equent the house of plaintiff. Because of this clever strategy, he able to win the love of the young girl and to have illicit relations her. The wrong he has caused her and her family is indeed easurable considering that he is a married man. Verily, he has nitted an act which is actionable under Art. 21 of the NCC. 40

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58, V and W, following their mutual promise of love, decided to get married and set September 4, 1954 as the big day. On September 2, V left a note for his bride-to-be postponing the wedding on the ground that his mother was opposed to the wedding. Thereafter, he was not heard of again. Subsequently, W brought an action against V for moral and exemplary damages plus attorney’s fees basing her action on Arts. 21, 2208, 2219 and 2232 of the NCC. Will the action prosper? ANS: Yes, the action will prosper. Ordinarily, a mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the necessary preparations and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs, for which the erring promissor must be held answerable in damages in accordance with Art. 21 of the NCC. When breach of promise to marry is actionable under Art. 21 of the NCC, such as in the instant case, moral damages may be awarded under Art. 2219(10) of the said Code. Exemplary damages may also be awarded under Art. 2232 of said Code. Since exemplary damages maybe awarded, attorney’s fees may also be awarded under Art. 2208 of said Code. (Wassmer us. Velez, 12 SCRA 648.) 59. The complaint alleges that: (1) from December 1957, M courted W, both being of adult age; (2) M expressed and professed his undying love and affection for W who also in due time reciprocated; (3) in consideration of M’s promise of marriage, W consented and acceded to M’s pleas for carnal knowledge; (4) regularly until December 1959, through his protestations of love and promise of marriage, M succeeded in having carnal access to W, as a result of which the latter conceived a child; (5) due to her pregnant condition, to avoid embarrassment and social humiliation, she had to resign her job; (6) due to defendant’s refusal to marry her, as promised, she has suffered mental anguish, besmirched reputation, wounded feelings, moral shock and social humiliation. Is W entitled to moral damages? ANS: The fact stands out that for one year, from 1958 to 1959 the plaintiff, a woman of adult age, maintained intimate sexual 41

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ions with defendant, with repeated acts of intercourse. Such uct is incompatible with the idea of seduction. Plainly, there is voluntariness and mutual passion; for had the plaintiff been ived, had she surrendered exclusively because of the deceit, artersuasions and wiles of defendant, she would not have again ed to his embraces, much less for one year without exacting rfulfillment of the alleged promises of marriage, and would have hort all sexual relations upon finding that defendant did not in­ to fulfill his promises. Hence, no case is made under Art. 21 of STCC. There can be no possible basis, therefore, for an award of il damages to W. (Tanjanco vs. CA, 18 SCRA 994J 60. “A” courted “B,” a beautiful 25-year old girl. Because Vs” persistence and repeated promises to marry her, she mitted her body to him. After “A” had satisfied his lust, he ime indifferent to the girl. Finally, he refused to comply i his promise notwithstanding her demands. “B” filed iction against “A” for moral, temperate and exemplary lages, alleging that she had been seduced by defendant’s e promises to marry her, and that she suffered “social liliation, mental anguish,' besmirched reputation, mded feelings and moral shock.” Is “B’s” action tenable? son. (1982) ANS: “B’s’'' action is tenable. It must be observed that “A’s” are clearly willful in character and, at the same time, contrary lorals, good custom and public policy. Under the NCC, she is tied to moral, temperate and exemplary damages. Of course, it -t be noted that breach of promise to marry is not actionable. 5is well-settled. But then, it must also be noted that “B’s” action tunded not on “A’s” breach of his promise to marry but on the or quasi-delict committed by him. It is clear that everything , he did, including his promise to marry “B,” were done precisely me purpose — to satisfy his lust. Under the NCC, such acts are onable. [Note: The above answer is based on Art. 21 of the NCC in relation to pertinent provision of the Code under the law on damages. If the bar candidate bases his or her answer on Tanjanco vs. CA, 18 SCRA 994, supra, he or she should properly be credited, provided that the conditions set forth in said case are presented.)

42

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61, Are interferences with the dignity, personality, privacy and peace of mind of a neighbor or any other person actionable? ANS: Yes they are actionable. This is clear from Art. 26 of the NCC, which provides: “Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: “(1) Prying into the privacy of another’s residence; “(2) Meddling with or disturbing the private life or family relations of another; “(3) Intriguing to cause another to be alienated from his friends; “(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition ” 62. The wife of a doctor ransacked her husband’s clinic and seized documents consisting of private correspondence between her husband and his alleged paramours, greeting cards, cancelled checks, diaries, her husband’s passport, and photographs, for use in a case for legal separation and for disqualification from the practice of medicine which she had filed against him. Are the documents admissible in evidence? ANS: No. The constitutional injunction declaring the privacy of communication and correspondence to be inviolable is no less applicable simply because it is the wife (who thinks herself aggrieved by her husband’s infidelity) who is the party against, whom the constitutional provision is to be enforced. The only exception is if there is a lawful order or when public safety or order requires otherwise, as prescribed by law. Any violation renders the evidence obtained inadmissible for any purpose in any proceeding. A person, by contracting marriage, does not shed his/her integrity or right to 43

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acy as an individual and the constitutional protection is ever lable to him or to her. (Zulueta vs. CA and Martin, G.R, No. 383, February 26, 1996, S.C. 2nd Div., J. Mendoza.) 63. Is alienation of affection, actionable? Explain. ANS: Yes, the actionable character of this tort is now recognized Lrt. 26 of the NCC. According to No. 2 of this article, meddling i or disturbing the family relations of another shall produce a se of action for damages, prevention and other relief. Among the lily relations protected is the relation between husband and wife; sequently, any willful interference with such relation resulting he alienation of the affection of the husband or the wife, whether h interference constitutes a criminal offense or not, would be ficient to produce a cause of action for damages. 64. Is the refusal or neglect of a public employee to "form his official duty actionable? Explain. ANS: Yes, the refusal or neglect of a public employee to perform official duty is actionable. This is clear from the provision of Art. of the NCC. However, in order that a public employee may be d liable under this article, the following requisites must concur: (1) There must be a refusal or neglect of public servant or ployee to perform his official duty; in other words, there must be lfeasance, not malfeasance or misfeasance; (2)

The refusal or neglect must be without just cause;

(3)

The duty must be ministerial, not discretionary; and

(4) The plaintiff must have suffered some material or moral is as a result. 65. Under Art. 32 of the NCC, any public officer or emoyee, or any private individual, who directly or indirectly istructs, defeats, violates or in any manner impedes or im> lirs the rights and liberties of another person is liable to e latter for damages. Suppose that the public officer hapms to be a judge and the obstruction, violation or impair­

44

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Arts. 19-36

ment was effected while he was exercising his functions as a judge, can he be held liable for damages? ANS: As a general rule, he cannot be held liable. This is clear from the provision of the last paragraph of Art. 32 of the NCC, which declares that “the responsibility set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute.” (Note: In Aberca, et ah vs. Ver, 160 SCRA 590, the SC ruled: “It is obvious that the purpose of Art. 32 of the NCC is to provide a sanction to the deeply cherished rights and freedoms enshrined in the constitution. Its message is clear. No man may seek to violate those sacred rights with impunity. In times of great upheaval or of social and political stress, when the temptation is strongest to yield — borrowing the words of Chief Justice Claudio Teehankee — to the law of force rather than the force of law, it is necessary to remind ourselves that certain basic rights and liberties are immutable and cannot be sacrificed to the transient needs or imperoua demand of the ruling power. The rule of law must prevail, or else liberty will perish. Seeking to justify the dismissal of plaintiffs complaint, the respondents postulate the view that as public officers, they are covered by the mantle of state immunity from suit for acts done in the performance of official duties. We find respondents’ invocation of the doctrine of state immunity from suit totally misplaced. The cases invoked by respondents actually involved acts done by officers in the performance of official duties within the' ambit of their power. The fact that respondents as members of the Armed Forces of the Philippines were merely responding to their duty cannot be construed as a blanket license or a roving commission untramelled by any constitutional restraint, to disregard or transgress upon the rights and liberties of the individual citizen enshrined in and protected by the constitution.) 66. ABC, Inc. has the exclusive franchise to sell and distribute official Boy Scout uniforms and supplies. ABC, Inc. was informed that DEF was selling Boy Scout paraphernalia. XYZ, an employee of ABC, Inc., together with constabulary men, entered DEF’s store and seized the Boy Scout paraphernalia therein without a warrant. ABC, Inc. filed a complaint for unfair competition against DEF. The 45

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mplaint was dismissed by the Provincial Fiscal. DEF then 3 d an action for damages. Is ABC, Inc. liable for damages ;hough it did not actually participate in the unlawful izure? ANS: Yes, ABC, Inc. may not have actually participated in i search, but it was indirectly responsible therefor. As early as ; case of Lim vs. De Leon (66 SCRA 299), the SC allowed for ; recovery of damages for violation of constitutional rights and srties from public officer or private individual under Art. 32 of the 1C. The wrong may be civil or criminal where malice or bad faith lot necessary. Art. 32 speaks of an officer and employee or person ectly or indirectly responsible for violation of the constitutional hts and liberties of another. It is not the actor alone who must swer for damages or injury caused to the aggrieved party. Art. 32 compasses within the ambit of its provisions those directly as well indirectly responsible for its violations. (MHP Garments, Inc. vs. , 236 SCRA 227, citing Aberca vs. Ver, 160 SCRA 590.) 67. Can a police officer who refuses or fails to render [ or protection in case of danger to life or property, be held ble? ANS: Yes, he can be held liable. According to Art. 34 of the NCC, len a member of a city or municipal police force refuses or fails ender aid or protection to any person in case of danger to life, or perty, such peace officer shall be primarily liable for damages, and city or municipality shall be subsidiarily responsible therefor.” 68. J(a) When the accused in a criminal action is [uittecl, can a civil action for damages for the same act or ission still be instituted by the aggrieved party? (b) What are the different instances where the NCC ints to the injured party a right to institute a civil action damages based on an act or omission which constitutes riminal offense but is entirely separate and independent m the criminal action? ANS: (a) This question requires a qualified answer. If the uittal of the accused is on the ground that his guilt has not been ved beyond reasonable doubt, a civil action to recover damages 46

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Arts. 19-36

based on the same act or omission may still he instituted. (Art. 29, NCC.) On the other hand, if the acquittal is on the ground that he did not commit the offense charged, or what amounts to the same thing, if the acquittal proceeds from a declaration in the final judgment that the fact from which the civil liability might arise did not exist, the subsequent institution of a civil action to recover damages is, as a general rule, no longer possible. (See Revised Rules on Criminal Procedure of 2000.) There are, however, two (2) exceptions to this rule. They are: first, where the civil action is based on an obligation not arising from the act or omission complained of as a felony (Arts. 31, 2177, NCC.); and second, where the law grants to the injured party the right to institute a civil action which is entirely separate and distinct from the criminal action. fArfs. 32, 33, 34 and 2176, NCC.) (b) The injured party has a right to institute a civil action to recover damages which is based on an act or omission which constitutes a criminal offense but is entirely separate and independent from the criminal action in the following cases: first, where the civil action is based on an obligation not arising from the act or omission complained of as a felony (Art. 31, NCC.), and second, where the law expressly grants to the injured party the right to institute a civil action which is entirely separate and distinct from the criminal action. (Arts. 32, 33, 34, NCC.) The second may be subdivided as follows: (1) Interference by public officers or employees or by pri­ vate individuals with civil rights and liberties (Art. 32, NCC.); (2)

Defamation (Arts. 33, NCC.);

(3)

Fraud (Ibid.);

(4)

Physical injuries (Ibid.); and

(5) Refusal or neglect of a city or municipal police officer to render aid or protection in case of danger to life or property. (AH. 34, NCC.) , “ \ \ , 69. 1What are the exceptions to the rule provided by the NCC that once the criminal action has been commenced, the civil action for damages arising from the offense charged shall be suspended until the final termination of the criminal action? (1988) 47

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ANS: The exceptions are as follows: (1) Where the civil action is based on an obligation not arising the act or omission complained of as a felony, such as when the s of the civil action is culpa contractual, culpa aquiliana, etc. s. 31, 2177, NCC.) l

(2) Where the law grants to the injured party the right to itute a civil action which is entirely separate and independent l the criminal action, such as when the action is based on: (a) rferences by public officers or employees or by private individuals i civil rights and liberties; (b) defamation; (c) fraud; (d) physical ries; or (e) refusal or neglect of a city or municipal police officer 3nder aid or protection in case of danger to life or property. (Arts. 33, 34, NCC.) (3) Where the question to be resolved in the civil action is udicial to the criminal action. (Art. 36, NCC.) , 70.' What is meant by a “civil action based on an igation not arising from a criminal offense” under Art. 31 he NCC? ANS: We all know that obligations may arise from law, tracts, quasi-contracts, criminal offenses, or quasi-delicts. (Art. '7, NCC.) Therefore, when Art. 31 of the NCC speaks of a civil ion based on an obligation not arising from a criminal offense, it Lply means a civil action based on an obligation arising from the r, a contract, a quasi-contract, or a quasi-delict. 71. A, a passenger in a bus operated by X Co., suffered “ions injuries as a result of an accident. An information s filed against B, driver of the bus, for serious physical uries through reckless imprudence. He was, however, quitted on the merits of the case because according to the Igment of acquittal, he was not negligent. Subsequently, A stituted an action against X Co. to recover damages. Will 3 action prosper? Reasons. (1988) ANS: If A can prove the negligence of B by preponderance of dence, the action will prosper. He can still recover damages from ) operator of the bus even if the driver had been acquitted in the minal action because it is clear that the action to recover damages is 48

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Arts. 19-36

based on culpa contractual and not on the act or omission complained of as a felony. (Bernaldez vs. Bohol Land Trans. Co., 7 SCRA 276.) According to Art. 31 of the NCC, when the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. 72. While delivering gasoline to a certain service sta­ tion, A and B, employees of X Co., left their truck without set­ ting its parking brake. As a consequence, the vehicle contin­ ued to move, resulting in the burning of the house of C. The two (2) were subsequently charged with the crime of arson through reckless imprudence, but were acquitted because negligence was not proved. C then brought an action against X Co. to recover damages. The latter, however, contends that since A and B had already been acquitted in the criminal case, therefore, it cannot now be held liable. Is this correct? Reasons. ANS: The defendant’s contention is not correct. The basis of the present action is a quasi-delict or culpa aquiliana. Under the law, when the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. (Art. 31, NCC.) This precept is confirmed by Art. 2177 of the NCC which declares that responsibility arising from a quasi-delict is entirely separate and distinct from civil liability arising from negligence under the Penal Code. It is, of course, wellsettled that in culpa aquiliana, the liability of an employer for a quasi-delict committed by an employee is direct and primary. (Arts. 2176, 2180, NCC; Standard Vacuum Oil Co. vs. Tan, 107 Phil. 109.) 73. What is meant by “independent civil actions” under Arts. 32, 33 and 34 of the NCC? ANS: The so-called “independent civil actions” under Arts. 32, 33 and 34 of the NCC refer to the civil actions based on certain criminal offenses, such as: (a) interferences by public officers or employees or by private individuals with civil rights or liberties; (b) defamation; (c) fraud; (d) physical injuries; or (e) refusal or neglect 49

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city or municipal police officer to render aid or protection in case anger to life or property. According to the Code, such civil action 11 proceed independently of the criminal prosecution, and shall lire only a preponderance of evidence. : 74. \ In independent civil actions, when the NCC declares t-the civil action shall proceed independently of the minal prosecution, and shall require only a preponderance evidence, does that mean that the civil action is no longer fed on the criminal offense but on some other source of igation, such as a tort or quasi-delict? Explain. ANS: The civil action is still based on the criminal offense lough it may also be considered as a civil action based on a tort quasi-delict provided that the complaint expressly so declares, s is due to the fact that the civil action is completely separate 1 independent from the criminal action and the fact that the act amission complained of as a felony may also be considered as a t or quasi-delict at the same time. 75. Distinguish the procedure in independent civil tions based on criminal offenses under Arts. 32, 33 and 34 the NCC, from the procedure in civil actions which are not lependent, based on other criminal offenses. ANS: The procedure in independent civil action may be itinguished from the procedure in other civil actions which are t independent in the following ways: (1) In civil actions which are not independent, if the civil action commenced ahead of the criminal action, upon the institution of e latter, the former is suspended. In independent civil actions the tion continues until it is terminated. (2) If the criminal action is commenced ahead of the civil tion and the injured party reserved his right to institute a civil tion separately, normally, such injured party shall have to wait r the termination of the criminal action before he can institute the /il action. In independent civil actions, he can institute the action en during the pendency of the criminal action. (3) If the criminal action is commenced without any reservaDn by the injured party of his right to institute a eivil action sepa50

r

PRELIMINARY TITLE Human Relations

Arts. 19-36

rately, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, and so, if the accused is acquitted in that he did not commit the offense charged, normally, the injured party can no longer institute a civil action to recover damages. In independent civil actions, it might still be possible for the offended party to bring a civil action against the offender provided that he bases it on an obligation arising from the law, or on a contract, or on a quasi-contract, or a quasi-delict. (Arts. 31, 2177, NCC.) 76. Can the civil case (on account of fraud) proceed independently of the criminal case for estafa without having reserved the filing of the civil action? ANS: Yes, under the Revised Rules of Criminal Procedure, effective Dec. 1, 2000, there is no more need for a reservation of the right to file the independent civil actions under Arts. 32, 33, 34 and 2176 of the NCC. According to Justice Herrera, the reservation and waiver referred to in Sec. 1 of Rule 111 pertains only to the civil action for the recovery of the civil liability arising from the offense charged. The changes in the Revised Rules pertaining to independent civil actions which became effective on December 1, 2000 may be given retroactive effect to actions pending and undetermined at the time of their passage. There are no vested rights in the rules of procedure. (DMPI Employees Credit Cooperative, Inc. vs. Velez, G.R. No. 129282, November 29, 2001.) 77. Can the subsidiary liability of an employer for libel committed by his employee be proceeded against thru an independent civil action under Art. 33 of the NCC pending the resolution of the criminal case? ANS: No. Art. 33 of the NCC contemplates an action against the employee in his primary civil liability. It does not apply to an action against the employer to enforce its subsidiary civil liability, because such liability arises only after conviction of the employee in the criminal case or when the employee is adjudged guilty of the wrongful act in a criminal action and found to have committed the offense in the discharge of his duties. Any action brought against the employer based on its subsidiary liability before the conviction 51

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3 employee is premature. (International Flavors and Fragrance I.], Inc. vs. Argos, et al., G.R. No. 130362, September 10, 2001.)

78. Does death of the accused pending appeal of his viction extinguish his civil liability? ANS: It depends. (i) The civil liability of the accused will not be extinguished ases of defamation, fraud and physical injuries. The claim for civil liability survives, notwithstanding the death he accused, if the same may also be predicated on a source of Lgation other than delict. Art. 1157 of the NCC enumerates the er sources of obligation from which the civil liability may arise: jaw; b) Contracts; c) Quasi-Contracts; d) Quasi-delicts. When civil liability survives, an action for recovery therefore y be pursued, but only by way of filing a separate civil action and jject to the Revised Rules on Criminal Procedure of 2000. (People Bayotas, 236 SCRA 239.) (ii) The civil liability of the accused will be extinguished if 3civil liability arises directly from and based solely on the offense nmitted or on the act complained of (e.g., rape). Sec. 4, Rule 111 of the Revised Rules in Criminal Procedure of 00 more specifically provides the following: “Sec. 4. Effect of death on civil actions. — The death of the accused after arraignment and during the pendency of the criminal action shall extinguish the civil liability arising from the delict. However, the independent civil action instituted un­ der Section 3 of this Rule or which thereafter is instituted to enforce liability arising from other sources of obligation may be continued against the estate or legal representative of the accused after proper substitution or against said estate, as the case may be. The heirs of the accused may be substituted for the deceased without requiring the appointment of an executor or administrator and the court may appoint a guardian ad li­ tem for the minor heirs. (Emphasis supplied)

52

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Arts. 19-36

“The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice. “A final judgment entered in favor of the offended party shall be enforced in the manner especially provided in these rules for prosecuting claims against the estate of the de­ ceased. If the accused dies before arraignment, the case shall be dismissed without prejudice to any civil action the offended party may file against the estate of the deceased.” 79. Rogelio Bayotas was convicted for the crime of rape in Roxas City. Pending appeal of his conviction, Bayotas died. Consequently, the SC, in its resolution of May 20,1992, dismissed the criminal aspect of the appeal. However, it required the Solicitor General to file its comment with regard to Bayotas* civil liability arising from his commission of the offense charged. The Solicitor General relied on the case of People vs. Sendaydiego (81 SCRA 120) expressing the view that the death of the accused-appellant did not extinguish his civil liability as a result of his commission of the offense charged. In its opposition, the counsel for the accused, invoking the ruling of the CA in People vs. Castillo and Ocfemia, (November 4,1959,56 O.G. No. 23, p. 4045), adopted by the SC in several cases, claims that the civil obligation in a criminal case takes root in the criminal liability and, therefore, civil liability is extinguished if the accused should die before final judgment is rendered. Decide on the case. ANS: After re-examining the jurisprudence which has evolved from the Castillo case to the Sendaydiego case, the SC reverted to the old ruling and held that: 1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based solely thereon. 53

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2. Corollarily, the claim for civil liability survives notwithnding the death of the accused, if the same may also be predi­ ed on a source of obligation other than delict. (L. Villegas vs. CA, I. No. 82562, April 11,1997.) 3. Where the civil liability survives, as explained in No. 2 >ve, an action for recovery therefore may be pursued but only by y of filing a separate civil action. This separate civil action may enforced either against the executor/administrator or the estate ;he accused, depending on the source of obligation upon which the ne is based as explained above. 4. Finally, the private offended party need not fear a feiture of his right to file this separate civil action by prescription, cases where during the prosecution of the criminal action and or to its extinction, the private offended party instituted together irewith the civil action. In such case, the statute of limitations on ? civil liability is deemed interrupted during the pendency of the minal case, conformably with provisions of Art. 1155 of the NCC, at should thereby avoid any apprehension on a possible forfeiture right by prescription. Applying the above set of rules to the case at bench, it was Id that the death of appellant Bayotas extinguished his criminal bility and the civil liability based solely on the act complained of, ., rape. (People vs. Rogelio Bayotas, G.R. No. 102007, September 2, 94.) This ruling was reiterated in Mansion Biscuit Corp. vs. CA} R. No. 94713, November 23,1995.) 80. X, a passenger in a jeepney owned by A and driven B, was injured when the jeepney collided with another epney owned by C and driven by D. Both B and D were ibsequently charged with the criminal offense of serious lysical injuries through reckless imprudence, (a) Since the ;tion for recovery of damages may be based either on culpa ‘iminal (Arfs. 200, et s e q R e v is e d Penal Code) or on culpa mtractual (Art. 1759, NCC) and culpa aquiliana (Arts. 2176 seq., NCC), must X select his cause of action, or may he avail ; both causes of action simultaneously or successively? (b) uppose that in the criminal case, B and D were acquitted on le ground that the real cause of the accident was the fact t

,

54

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Arts. 19-36

that a sand-and-gravel truck, owned by E and driven by F, bumped C’s jeepney from behind, may X still proceed against A and C for recovery of damages based on culpa contractual and culpa aquiliana? ANS: (a) X may select his cause of action or he may avail of both causes of action simultaneously or even successively. It is now beyond cavil that the act of B. and D gives rise to at least two (2) separate and independent liabilities. They are: first, the civil liability arising from crime (culpa criminal); and second, the liability arising from civil negligence (culpa contractual and culpa aquiliana). These two (2) concepts of fault are so distinct from each other that exoneration from one does not necessarily result in exoneration from the other. Adjectively and substantively, they can be prosecuted separately and independently of each other, although Art. 2177 of the NCC precludes recovery for damages twice for the same negligent act or omission. Thus, should there be varying amounts awarded in two (2) separate cases, the plaintiff may recover in effect only the bigger amount. If the plaintiff had already been ordered paid an amount in one case, and in the other case the amount adjudged is bigger, he shall be entitled in the second case only to the excess over the one fixed in the first case. But if he has already been paid a bigger amount in the first case, he may not recover anymore in the second case, (Elcano vs. Hill, 77 SCRA 98; Padua vs. Robles, 66 SCRA 485.) (b) X cannot proceed against A and C for recovery of damages. Whether we look at the case from the point of view of criminal negligence or of civil negligence or of independent civil actions, the end result would be the same. A and B cannot be held liable. The fact from which any possible liability of either A or C has already been declared by final judgment is inexistent. (Note: This answer is based upon Mendoza vs. Arrieta. Theo­ retically, however, under both Arts. 31 and 2177 of the NCC, X may proceed against A and C regardless of the consequences of the crimi­ nal action. As a matter of fact, this was the rule applied in Elcano. Is there a conflict then between Elcano and Mendoza? We do not think so. In Mendoza, what the SC merely declared is the fact that whether we look at the case from the point of view of criminal negligence or civil negligence or independent civil actions, the end result would be the same. To allow the complainant to proceed against the defendant would be a pure exercise in futility.) 55

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81. (a) Is there any exception to the rule regarding ependent civil actions? (b) B was charged by A with the criminal offense of ious physical injuries. During the trial, A was represented a private prosecutor. There was no reservation of the ht to institute a separate civil action. After trial, the court Ldered a decision acquitting B of the offense charged. Can iow institute a civil action against B to recover damages iccordance with Art. 33 of the NCC? ANS: (a) Yes, there is an exception. According to the SC in Roa De la Cruz (107 Phil. 8) and Azucena vs. Potenciano (5 SCRA ), when the offended party not only fails to reserve the right to a separate civil action but intervenes actually in the criminal : by appearing through a private prosecutor for the purpose of )vering indemnity for damages thereon, a judgment of acquittal s a subsequent action. •(b) A cannot institute an action against B to recover tiages in accordance with Art. 33 of the NCC. True, the rule is that :ases of defamation, fraud and physical injuries, an independent 1 action may be brought by the injured party, and that according he decided cases, a reservation of the right to institute a separate I action is not necessary, nevertheless, the act of the offended ty in intervening in the prosecution of the criminal case by ►earing therein through a private prosecutor will be deemed to be aiver of the civil action if he failed to make a reservation therefor. a vs. De la Cruz, supra.) 82. Are the above answers still applicable? ANS: It is submitted that they are still applicable insofar as the .1liability arising from the crime (culpa criminal) but not insofar ;he civil liability arising from the quasi-delict (culpa aquiliana). It st be observed that the act of B gave rise to two (2) separate and ependent liabilities — the civil liability arising from crime and civil liability arising from quasi-delict. These two (2) liabilities so distinct and independent from each other that exoneration ii one does not result in exoneration from the other. Therefore, ;he above problem, although A can no longer institute an action 56

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Arts. 19-36

against B for recovery of damages under Art. 33 of the NCC, he may still institute said action under Art. 2177 of the same Code. ( 83.) (a) What is a prejudicial question? What are its eleihents? What is its effect upon a criminal action? (1988) (b) An information for bigamy was filed against A upon complaint of B alleging that without his previous marriage having been dissolved, he contracted a second marriage with the latter. A, in turn, brought an action against B for the annulment of their marriage on the ground of violence and intimidation. Subsequently, he filed a motion to suspend the proceedings in the criminal case on the ground that the issue involved in the civil case is a prejudicial question. The judge denied the motion. Is this correct? ANS: (a) A prejudicial question is a question which arises in a case, the resolution of which is a logical antecedent of the issue involved in said case, and the cognizance of which pertains to another tribunal, (People vs. Aragon, 94 Phil. 357; Jimenez vs. Averia, 22 SCRA 1380.) The following are the elements: They are: first, that it must be determinative of the guilt or innocence of the accused in the criminal case; and second, jurisdiction to try said question must be lodged in another tribunal. (Ibid.) Please note, however, that Sec. 7, Rule 111 of the Revised Rules on Criminal Procedure of 2000 more specifically provides for the following: “Sec. 7. Elements of prejudicial question — The elements of a prejudicial question are: (a) the previously instituted civil action involves an is­ sue similar or intimately related to the issue raised in the sub­ sequent criminal action; and (b) the resolution of such issue determines whether or not the criminal action may proceed.” Its effect upon a criminal case is to suspend it if one has already been commenced. (Art. 36, NCC.) This is, of course, the reverse of the ordinary rule of procedure. The reason for this is that the resolution of the question is determinative of the guilt or innocence of the accused in the criminal case. 57

rts. 19-36

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(c) The order of the court denying the motion is not correct. A prejudicial question is one which arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal. In order to be prejudicial, it is therefore, necessary that the question must be determinative of the case before the court and that jurisdiction to try the same must be lodged in another court. These requisites are present in the case at bar. Should the question for annulment of the second marriage prosper on the ground that A’s consent thereto was obtained by means of force and intimidation, it is obvious that his act was involuntary and cannot be the basis of his conviction for bigamy. (Zapanta vs. Montesa, 4 SCRA 510. To the same effect — Merced vs. Diez, 109 Phil. 155.) (Note: Attention must be called to the case ofPrado vs. People [133 SCRA 602]. In this case, speaking through Justice Melencio-Herrera, the SC held that for a civil action to be considered prejudicial to a criminal case as to cause the suspension of the criminal proceedings until the final resolution of the civil, the following requisites must be present: [1] the civil case, involves facts intimately related to those upon which the criminal prosecution would be based; [2] in the resolution of the issue or issues raised in the civil action, the guilt or innocence of the accused would necessarily be determined; and [3] jurisdiction to try said question must be lodged in another tribunal. However, attention must likewise be called to the aforequoted Sec. 7, Rule 111 of the Revised Rules on Criminal Procedure of 2000.)

84. Is the resolution of the civil action for specific per­ formance, recovery of overpayment ofand damages, a prejuicial question sufficient to warrant the suspension of the rial of the criminal cases for violation of B.P. 22? ANS: No. For a civil action to be considered prejudicial to a riminal case as to cause the suspension of the criminal proceedings ntil the final resolution of the civil, the following requisites must be resent: (1) the civil case involves facts intimately related to those pon which the criminal prosecution would be based; (2) in the esolution of the issue or issues raised in the civil action, the guilt or inocence of the accused would necessarily be determined; and (3) iris diction to try said question must be lodged in another tribunal. 58

PRELIMINARY TITLE Human Relations

Arts. 19-36

The issue in the criminal cases for violation of B.P. 22 is whether the accused knowingly issued worthless checks. The issue in the civil action for specific performance, overpayment and damages is whether the debtor overpaid his obligations to his creditor. If after trial in the civil case, the debtor is shown to have overpaid respondent, it does not follow that he cannot be held liable for the bouncing checks he issued, for the mere issuance of worthless checks with knowledge of the insufficiency of funds to support the checks is itself an offense. (Sabandal vs. Tongco, G.R. No. 124498, October 5, 2001 .) 85. A, B and C are the heirs of X and Y who left a parcel of land. A was able to obtain a title over the lands, so B and C filed an action for declaration of nullity of the title and partition. They occupied a portion of the land without A’s knowledge and consent. Hence, they were sued for violation of P.D. 772, otherwise known as the Anti-Squatting Law. Before they were arraigned, they moved to suspend the criminal action on the ground of a prejudicial question. Is a partition case a prejudicial question to a criminal case for violation of P.D. 772? ANS: The motion should be granted on the ground of a prejudicial question. In the criminal case, the issue is whether B and C occupied a piece of land not belonging to them but to A and against the latter’s will. Whether or not the land they occupied belongs to them is the issue in the civil case they previously filed for the nullity of A’s title and for partition.. The resolution, therefore, of this question would necessarily be determinative of B’s and C’s criminal liability for squatting. In other words, whatever may be the ultimate resolution will be determinative of the guilt or innocence of B and C in the criminal case. Surely, if B and C are co-owners of the lot in question, they cannot be found guilty of squatting because they are much entitled to the use and occupation of the land as A. Ownership is, thus, the pivotal question. Since this is the question in the civil case, the proceedings in the criminal case must in the meantime be suspended. Prior to amendment, Sec. 5, Rule 111 of the Revised Rules on Criminal Procedure of 2000 provides that the two (2) 59

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jntial elements of a prejudicial question are: (a) the civil action )lves an issue similar or intimately related to the issue raised in criminal action; and (b) the resolution of such issue determines ither or not the criminal action may proceed. (Apa vs. Fernandez, No. 112381, March 20,1995, 242 SCRA 509, 513.) 86. A, under duress, married B, During the pendency he case for annulment filed by A, B married C. The Fiscal, >n the complaint of C, prosecuted B for bigamy. Can B cessfully interpose a prejudicial question to suspend the >secution of the bigamy charge? Give reasons. ANS: B cannot successfully interpose a prejudicial question to pend the prosecution of the bigamy charge. As held by the SC in pie vs. Aragon (94 Phil. 257), where the nullity of the marriage ue to the fault of the party who is accused of bigamy, such party ? not avail himself of his own malfeasance in order to defeat the on based on his criminal act. Otherwise, if he is permitted to do that would violate the principle that in order to obtain redress, a son must go to court with clean hands. 87. A was charged with bigamy at the instance of his t wife, B. Subsequently, his second wife, C, filed an action the annulment of her marriage to A on the ground of ce and intimidation. By way of defense, A, in turn, filed a rd-party complaint against his first wife, B, for annulment their marriage on the ground of force and intimidation. ;er, he filed a motion to suspend the criminal case on the >und that the question to be resolved in the civil case is judicial to the question of bigamy in the criminal case. 5 court denied the motion. Is this correct? ANS: The denial of the motion is correct. The situation here aarkedly different from the situation in the cases of Merced vs. z and Zapanta vs. Monteza. Here, when the accused was indicted bigamy, the fact that two (2) marriage ceremonies had been tracted appeared to be undisputable. This was followed by the iplaint filed by the second spouse for annulment of the marriage ;he ground of violence and intimidation. It was only later on when as defendant in the civil action, filed a third-party complaint 60

PRELIMINARY TITLE Human Relations

Arts. 19-36

against his first spouse for annulment of their marriage on the ground of force and intimidation. As a matter of law, parties to a marriage should not be permitted to judge for themselves its nullity, for the same must be submitted to the judgment of a competent court and only when the nullity of the marriage is so declared can it be held as void, and so long as there is no such declaration, the presumption is that the marriage exists. Therefore, he who contracts a second marriage before the judicial declaration of nullity of the first marriage assumes the risk of being prosecuted for bigamy. (Landicho vs. Relova, 22 SCRA 731.) 88. The husband filed a petition for nullity of marriage on the ground of psychological incapacity of his wife. In her answer the wife alleged it was her husband who abandoned the conjugal home and lived with another woman. The wife filed a criminal complaint for concubinage against her husband and his mistress. In order to forestall the issuance of a warrant of arrest, the husband filed a motion to defer criminal proceedings including the issuance of the warrant. He argued that the case for concubinage should be suspended until after the petition for nullity of marriage is decided, in order to avoid two (2) conflicting decisions. According to him, the trial court in the civil case might declare the marriage as valid by dismissing the complaint for concubinage, but in the criminal case, the trial court might acquit him because the evidence shows his marriage is void on the ground of psychological incapacity. Is this argument tenable? ANS: No, because even a subsequent pronouncement that his marriage is void from the beginning is not a defense in concubinage. Parties to the marriage should not be permitted to judge for themselves its nullity, for the same must be submitted to the judgment of the competent courts and only when the nullity of the marriage is so declared can it be held as void, and so long as there is no such declaration, the presumption is that the marriage exists for all intents and purposes. Therefore, he who cohabits with a woman not his wife before his marriage is judicially declared void, assumes the risk of being prosecuted for concubinage. (Beltran vs. People, G.R. No. 137567, SC, 2nd Div., J. Buena, June 20, 2000.)

61

Book I PERSONS Title I CIVIL PERSONALITY (Arts. 37-47) c \ \1. j , Define persons. ANS: In its juridical sense, a “person” may be defined as a being, ’sical or moral, real or juridical and legal, which is susceptible of its and obligations, or of being the subject of legal relations. (2 ichez Roman 110.) 2. How are persons classified? Distinguish one from other. ANS: Persons are classified into natural and juridical persons. •two (2) may be distinguished from each other as follows: (1) A natural person or human being has physical existence, >reas a juridical person exists only in contemplation of law. (2) A natural person is the product of procreation, whereas a dical person is the product of legal fiction. 3. What is meant by “juridical capacity” and “capacity ict”? Distinguish one from the other. (1996) ANS: “Juridical capacity" is the fitness to be the subject of .1 relations, while “capacity to act” is the power to do acts with .1 effect. (Art. 37, NCC.) The union of both is what is known as [ civil capacity.” They may be distinguished from each other as iws: 62

PERSONS Civil Personality

Arts. 37-47

(1) Juridical capacity is inherent in every natural person, and therefore, is not acquired, whereas capacity to act is not, and therefore, is acquired. (2) The former is lost only through death, whereas the latter may be lost through other means or circumstances. (3) The former cannot be limited or restricted, whereas the latter can be limited or restricted by certain circumstances. (4) The former can exist without the latter, but the existence of the latter always implies that of the former. (Art. 37, NCC; 2 Sanchez Roman 112-113.) 4. What are the circumstances which modify or limit capacity to act? ANS: The following circumstances, among others, modify or limit the capacity to act: age, insanity, imbecility, the state of being a deaf-mute, penalty, prodigality, family relations, alienage, absence, insolvency and trusteeship. The consequences of these circumstances are governed in the NCC, other codes, the rules of court, and in special laws. Capacity to act is not limited on account of religious belief or political opinion. A married woman, 18 years of age or over, is qualified for all acts of civil life, except in cases specified by law. (Art. 39, NCC.) 5.

What is meant by status?

ANS: The status of a person is the legal condition or class to which one belongs in society. (1 del Viso 32; 2 Sanchez Roman 110.) 6.

What is meant by civil personality?

ANS: Civil personality is merely the external manifestation of either juridical capacity or capacity to act. Consequently, it may be defined as the aptitude of being the subject of rights and obligations. (2 Sanchez Roman 114-147.) 7. When does civil personality begin in natural persons? ANS: Birth determines personality, but the conceived child shall be considered bom for all purposes that are favorable to it, 63

. 37-47

PERSONS Civil Personality

vided it be born later with the conditions specified in the following cle. (Art. 40, NCC.) This provision of the NCC is now superseded Art. 5 of P.D. No. 603, which declares that the civil personality he child shall commence from the time of his conception, for all poses favorable to him, subject to the requirements of Art. 41 of NCC. For civil purposes, the foetus is considered bom if it is alive at time it is completely delivered from the mother’s womb. However, le foetus had an intra-uterine life of less than 7 months, it is not med bom if it dies within 24 hours after its complete delivery a the maternal womb. (Art. 41, NCC.) . 8 .; Juana gave birth to a child who died 10 hours after rplete delivery. Did the child acquire personality? ANS: The child acquired a personality, unless it had an intra•ine life of less than 7 months. According to the NCC, “for civil poses, the foetus is considered born if it is alive at the time it is pletely delivered from the mother’s womb. However, if the foetus an intra-uterine life of less than 7 months, it is not deemed l if it dies within 24 hours after its complete delivery from the emal womb.” (Art. 41, NCC.) 9. W, pregnant wife of M, went to A’s medical clinic for rtion without the knowledge of her husband. When the er learned of the abortion, he brought an action against ising his claim upon the provision of Art. 2206 of the NCC, ch enumerates the damages recoverable in case of death sed by a crime or quasi-delict. Will the action prosper? sons. (2003) ANS: The action will not prosper. Art. 2206 of the NCC refers amages recoverable in case of death caused by a crime or a d-delict. It cannot, therefore, be applied to the case at bar. The on is evident. Only one with a juridical personality can die. Here unborn child never died because it never acquired a juridical onality. Art. 40 of the NCC expressly limits the provisional onality of a conceived child by imposing the condition that the I should be subsequently bom alive. In the instant case, the I was not alive when separated from its mother’s womb. (Geluz A, 2 SCRA 801.) 64

PERSONS Civil Personality

Arts. 37-47

10. Elated that her sister who had been married for 5 years was pregnant for the first time. Bianca donated P100,000.00 to the unborn child. Unfortunately, the baby died one hour after delivery. May Bianca recover the P100,000.00 that she had donated to said baby before it was born considering that the baby died? Stated otherwise, is the donation valid and binding? Explain. (1999) ANS: The donation is valid and binding, being an act favorable to the unborn child, but only if the baby had an intra-uterine life of not less than 7 months and provided there was due acceptance of the donation by the proper person representing said child. If the child had less than 7 months of intra-uterine life, it is not deemed bom since it died less than 24 hours following its delivery, in which case the donation never became effective since the donee never became a person, birth being determinative of personality. 11.

(a) How is civil personality extinguished?

(b) What is the effect if there is a doubt as to which of two (2) persons, who are called to succeed each other, died first? (c) What are the presumptions on survivorship under the Rules of Court? (d) When is the presumption given in Art. 43 of the NCC applicable? How about the presumptions on survivor­ ship? Illustrate. ANS: (a) Civil personality is extinguished by death. (Art. 42, NCC.) (b) If there is a doubt, as between 2 or more persons who are called to succeed each other, as to which of them died first, whoever alleges the death of one prior to the other, shall prove the same; in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other. (Art. 43, NCC.) (c) The presumptions on survivorship under the Revised Rules of Court are those provided for in Rule 132, Sec. 5(jj). They are as follows: “When two (2) persons perish in the same calamity, such as a wreck, battle, or conflagration, and it is not shown who 65

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PERSONS Civil Personality

died first, and there are no particular circumstances from which it can be inferred, the survivorship is presumed from the probabilities resulting from the strength and age of the sexes according to the following rules: 1. If both were under the age of 15 years, the older is presumed to have survived; 2. If both were above the age of 60 years, the younger is presumed to have survived; 3. If one be under 15 and the other above 60, the for­ mer is presumed to have survived; 4. If both be over 15 and under 60, and the sexes be dif­ ferent, the male is presumed to have survived; if the sexes be the same, then the older; 5. If one be under 15 or over 60, and the other between these ages, the latter is presumed to have survived.” (d) The presumption given in Art. 43 of the NCC is applicable e following requisites are present: 1st, there is no proof as to ;h of 2 persons died first; and 2nd, they are called to succeed l other. The presumptions on survivorship, on the other hand, applicable if the following requisites are present: 1st, there is >roof as to which of 2 persons died first; 2nd, they must have during a calamity; and 3rd, they are not called to succeed each r. Thus, if A and B, father and son, died during a conflagration, there is no proof as to who of them died first, Art. 43 of the NCC jrtainly applicable. There shall, therefore, be no transmission lccessional rights from one to the other. However, if there is no tionship between the two (2) other than, let us say, contractual, l as when A, a wealthy bachelor of 40, merely insured his life for >00,000 with B, a young woman of 21, as beneficiary, evidently, presumptions on survivorship are then applicable. In other is, A is presumed to be the survivor. 12. How are juridical persons classified? ANS: The following are juridical persons: (1)

The state and its political subdivisions (Art. 44, NCC.); 66

PERSONS Citizenship and Domicile

Arts. 48-51

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law (Ibid.); (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member (Ibid.); (4) The Roman Catholic Church. (Barlin vs. Ramirez, 7 Phil. 41; Roman Catholic Church vs. Placer} 11 Phil. 315.); (5) The estate of a deceased person. (Limjuco vs. Intestate Estate o f Pedro Fragante, 80 Phil. 776.) CITIZENSHIP AND DOMICILE (Arts. 48-51) 13. Who are citizens of the Philippines under the new Constitution? ANS: The following are citizens of the Philippines in accordance with the new Constitution: (1) Those who are citizens of the Philippines at the time of the adoption of this Constitution; (2) Those whose fathers or mothers are citizens of the Philippines; (3) Those bom before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; and (4) Those who are naturalized in accordance with law. (Art, TV, Sec. 1, Constitution.) 14. For the exercise of civil rights and the fulfillment of civil obligations, what is the domicile of natural and juridical persons? ANS: For the exercise of civil rights and the fulfillment of civil obligations, the domicile of natural persons is the place of 67

4 8 -5 1

PERSONS Citizenship and Domicile

•habitual residence. (Art 50, NCC.) When the law creating or prizing them, or any other provisions does not fix the domicile of 'ical persons, the same shall be understood to be the place where ■legal representation is established or where they exercise their :ipal functions. (Art. 51, NCC.)

Title I MARRIAGE Chapter 1 REQUISITES OF MARRIAGE (Arts. 1-26, FC) (1.

Define marriage.

ANS: Under the FC, marriage is a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within the limits provided by the FC. (Art 1, FC.) 2.

What are the two (2) aspects of marriage?

ANS: Marriage has two (2) distinct aspects. It may be under­ stood either as an act or as a status. It is an act by which a man and a woman unite for life, with the intent to discharge towards society and one another those duties which result from the relation of husband and wife. (Schouler, Law of Domestic Relationshiptpar. 11.) It is the civil status of one man and one woman, legally united for life, with rights and duties which, for the establishment of families and the multiplication and education of the species, are or from time to time may thereafter be, assigned by law to matrimony. (Bishop, Marriage, Divorce and Separation, Sec. 11.) 69

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3.

FAMILY CODE (Persons) Marriage Requisites of Marriage

Wbat are the essential requisites of a valid mar*

B?

ANS: No marriage shall be. valid, unless these essential Lsites are present: (1) Legal capacity of the contracting parties who must be a and a female; and (2) Consent freely given in the presence of the solemnizing ;r. (Art. 2, FC.) 4.

What are the formal requisites of marriage?

ANS: The formal requisites of marriage are: (1)

Authority of the solemnizing officer,

(2) A valid marriage license except in marriages of exceptional acter; and (3) A marriage ceremony which takes place with the :arance of the contracting parties before the solemnizing officer their personal declaration that they take each other as husband wife in the presence of not less than 2 witnesses of legal age. 3, FC.) 5. Two boys claimed to be the legitimate children of deceased. They did not present the marriage contract leir parents, but only a certification that records in the ricipality where the marriage was performed had been ;royed during the war. The wife testified as to the existence le marriage, as did two (2) family friends who themselves nded the wedding and who knew the couple and their dren. The brother and sister of the deceased, who denied wing the claimants, said their brother died single and lout issue, and because there was no marriage contract, alleged marriage was not proven. Is this correct? ANS: No. Although the marriage contract is considered lary evidence of marriage, failure to present it is not proof no marriage took place. Other evidence such as testimonies of Lesses may be presented to prove marriage. The presumption Lat a man and a woman deporting themselves as husband and 70

FAMILY CODE (Persons) Marriage Requisites of Marriage

Arts. 1-26

wife are in fact married and this can only be rebutted by cogent proof to the contrary, which is not obtaining in the abovecited case. (Balogbog vs. CA, G.R. No. 83598, SC 2nd Div., J. Mendoza, March 7 ,1997.) 6, While “X,” an Associate Justice of the Court of Appeals, was vacationing in Cebu City, he was requested to solemnize the marriage of Serge and Joan in the residence of Serge’s parents. “X” could not refuse the request of both the parents of the couple because they were his relatives. On the day set for the wedding, there were so many visitors at the residence of Serge’s parents so that “X” decided to solemnize the marriage at the kiosk of the public plaza located nearby. Is the marriage of Serge and Joan valid? Give your reasons. (1989) ANS: Yes, because the requirement that the marriage be solemnized in a particular or a public place is not an essential requisite of the law. 7. What are the effects of the following to a contract of marriage: (a) Absence requisites?

of

any

of

the

essential

or

formal

(b) Defect in any of the essential requisites? (c)

Irregularity in the formal requisites?

ANS: The effects are as follows: (a) The absence of any of the essential or formal requisites shall render the marriage void ab initio, except as stated in Art. 35(2) of the FC where marriage was contracted with either or both parties believing in good faith that the solemnizing officer had the legal authority to do so, (Art. 4, 1st par., FC.) (b) A defect in any of the essential requisites shall render the marriage voidable as provided in Art. 45 of the FC. (Art. 4, 2nd par., FC.) (c) An irregularity in the formal requisites shall not affect the validity of the marriage but the party or parties responsible for 71

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FAMILY CODE (Persons) Marriage Requisites of Marriage

irregularity shall be civilly, criminally and administratively le, (Art. 4, 3rd par., FC.) 8. What is the form prescribed by law for the marriage ;mony? ANS: No prescribed form or religious rite for the solemnization le marriage is required. It shall be necessary, however, for the racting parties to appear personally before the solemnizing er and declare in the presence of not less than two (2) witnesses gal age that they take each other as husband and wife. This aration shall be contained in the marriage certificate which 1 be signed by the contracting parties and their witnesses and sted by the solemnizing officer. In the case of a marriage in articulo mortis, when the party at point of death is unable to sign the marriage certificate, it shall ufficient for one of the witnesses to the marriage to write the e of said party, which fact shall be attested by the solemnizing sr. (Art. 6, FC.) 9.

Who may contract marriage?

ANS: Any male or female of the age of 18 years or upwards not ir any of the impediments mentioned in Arts. 37 and 38 of the may contract marriage. (Art. 5, FC.) 10. Paul, a 17-year old Filipino and a permanent dent in the US, married Jean, a 16-year old American in Vegas, Nevada. The parents of both gave their consent to marriage. The marriage is valid in Nevada. Is it also valid le Philippines? Give your reasons. (1989) ANS: No, the marriage is not valid. Under the FC, the law ires that the contracting parties are at least 18 years of age. ever, if the marriage took place before the effectivity of the FC, narriage will be valid since under the provisions of the NCC, a "iage valid in the place of celebration is valid in the Philippines pt bigamous, polygamous, and incestuous marriages as ranined by Philippine law. The minimum age under the old law for the male and 14 for the female. 72

FAMILY CODE (Persons) Marriage Requisites of Marriage

Arts. 1-26

( ll .i Is marriage by proxy, whether in the Philippines or abroadvalid? Explain. (1973) ANS: I distinguish. If the marriage by proxy is celebrated in the Philippines, it is void because of non-compliance with the formal but essential requisite of a marriage ceremony as prescribed in Art. 6 of the FC. Accordingly, it shall be necessary for the contracting parties to appear personally before the solemnizing officer and declare in the presence of not less than two (2) witnesses of legal age that they take each other as husband and wife. It is obvious that marriage by proxy is not allowed under this codal provision. However, if the marriage by proxy is celebrated abroad, Art. 26 of the FC is applicable. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited tinder Arts. 35(1), (4), (5) and (6), 36, 37 and 38 of the FC. It is clear that marriages by proxy fall within the purview of the general rule and not within the purview of the exceptions. 12. Robert and Evelyn, both Filipinos, met in Los Angeles, California. They agreed to get married on June 10, 1989. On June 7, 1989, Robert flew to New York due to an urgent business matter but intended to return to Los Angeles on June 9, 1989, in time for the wedding. The business emergency of Robert, however, lasted longer than he expected so that he failed to return to Los Angeles. In order not to postpone the wedding, Robert immediately called his brother Val who was also residing at Los Angeles to stand as his proxy at the wedding, which the latter did. Is the marriage of Robert and Evelyn valid in the Philippines? Give your reasons. (1989) ANS: If the marriage was performed in accordance with the laws of California and valid there, then the marriage is likewise valid in the Philippines. 13. Who may solemnize marriages? ANS: Marriages may be solemnized by: 73

1 - 2 6

FAMILY CODE (Persons) Marriage Requisites of Marriage

(1) Any incumbent member of the judiciary within the court’s diction; (2) Any priest, rabbi, imam, or minister of any church or ious sect duly authorized by his church or religious sect and itered with the civil registrar general, acting within the limits e written authority granted him by his church or religious sect provided that at least one of the contracting parties belongs to olemnizing officer’s church or religious sect; (3) Any ship captain or airplane chief only in the cases of ’iages in articulo mortis between passengers or members as tioned in Art. 31 of the FC; (4) Any military commander of a unit to which a chaplain signed, in absence of the latter, during a military operation, vise only in the cases of marriages in articulo mortis between ms within the zone of military operation, whether members of irmed forces or civilians, as mentioned in Art. 32 of FC; or (5) Any consul-general, consul or vice-consul in the case of 'iages between Filipino citizens abroad as provided in Art. 10 of i’C. (Art. 7, FC.) (Note: Whereas under Art. 56 of the NCC, marriages may be solemnized by mayors of cities and municipalities, under the FC, mayors are no longer authorized to solemnize marriages. However, in view of the Local Government Code which took effect on January, 1992, the duly elected Mayors of the cities and municipalities can again solemnize marriages, thus, reverting back to the old law. The term “Mayor” includes a Vice-Mayor who is the “Acting Mayor” or who is merely “acting as Mayor.”)

14. Explain the requirement of parental consent under present marriage law. Is the requirement indispensable he validity of the marriage? ANS: According to Art. 14 of the FC, in case either or both of :ontracting parties, not having been emancipated by a previous 'iage, are between the ages of 18 and 21, they shall, in addition to ither requirements, exhibit to the local registrar, the consent to ■marriage of their father, mother, surviving parent or guardian, rsons having legal charge of them, in the order mentioned. Such 74

FAMILY CODE (Persons) Marriage Requisites of Marriage

Arts. 1-26

consent shall be manifested in writing by the interested party, who personally appears before the proper local civil registrar, or in the form of an affidavit made in the presence of two (2) witnesses and attested before any official authorized by law to administer oaths. The personal manifestation shall be recorded in both applications for marriage license, and the affidavit, if one is executed instead, shall be attached to said applications, (Art. 14, FC.) Under our present FC (like the NCC), non-compliance with the requirement of parental consent will render the marriage voidable. (Art, 45[1], FC.) 15. Explain the requirement of parental advice under our present marriage law. Is this requirement indispensable for the validity of the marriage? ANS: According to Art. 15 of the FC, any contracting party between the age of 21 and 25 shall be obliged to ask their parents or guardian for advice upon the intended marriage. If they do not obtain such advice, or if it be unfavorable, the marriage license shall not be issued until after three (3) months following the completion of the publication of the application therefor. A sworn statement by the contracting parties to the effect that such advice has been sought, together with the written advice given, if any, shall be attached to the application for marriage license. Should the parents or guardian refuse to give any advice, this fact shall be stated in the sworn statement. (Art. 15, FC.) It is evident from the above provision that the requirement of parental advice is not indispensable for the validity of the marriage. Consequently, even if the contracting parties are able to secure a marriage license without the required parental advice and they got married even before the expiration of the three (3) months following the completion of the publication of the application for a marriage license, the marriage is perfectly valid, although the parties are criminally liable. 16. W got married to M when she was only 18 years of age. At the age of 19, she became a widow. One year later, she accepted the marriage proposal of X. Her parents, however, are violently opposed to the marriage. In securing the 75

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FAMILY CODE (Persons) Marriage Requisites of Marriage

rriage license so that the two (2) can get married, would >e necessary for W to secure the consent as well as the idee of her parents? ANS: It is submitted that both the consent and advice of W’s ents are necessary in order to secure a marriage license. In the case at bar, W, who had been previously emancipated i previous marriage, is only 19 years of age and under R.A. 6809 ental consent is required. The said provision is explicit, which lares that contracting marriage shall require parental consent il the age of 21. Therefore, W, in getting married to X is still nired to secure parental consent. It is also necessary for W to secure advice from her parents. 15 of the FC does not exempt a widowed person from this lirement. The reason for this is obvious. The basis is for the fare of the party concerned as well as the recognition of his or never ending obligation to honor his or her parents. However, le advice be unfavorable, the marriage shall not take place until r three (3) months following the completion of the publication of application for a marriage license. 17. When is marriage counselling for the issuance of larriage license required? What is the purpose of the uirement? Who will do the counselling? What is the effect ick of certificate of marriage counselling? ANS: Marriage counselling is required for the issuance of a riage license under the FC in cases where the parties need mtal consent or parental advice. If only one of the contracting ies need parental consent or parental advice, the other party t be present at the counselling. The purpose of the requirement is to enable the parties to find f they are compatible before they get married. The priest or minister of the church or religious sect to which 5arty concerned belongs, or a marriage counsellor accredited by proper government agency may do the counselling. The effect of lack of certificate of marriage counselling is the ? as the lack of parental advice. The issuance of the marriage se is suspended for three (3) months. (Art. 16, FC.) 76

FAMILY CODE (Persons) Marriage Requisites of Marriage

Arts. 1-26

18. Mr. Bradley Latta, an Australian national, married Josefina Vallar, a Filipino citizen last January, 1990. It appears that Mr. Latta was issued a certificate of legal capacity to contract marriage after the marriage which is not in accordance with Art. 21 of the FC which requires that "when either or both of the contracting parties are citizens of a foreign country, it shall be necessary for them before a marriage license can be obtained, to submit a certificate of legal capacity to contract marriage, issued by their diplomatic or consular officials.” The Australian Embassy claims that such a marriage is void from the beginning. Is this marriage contracted without certificate of legal capacity but with a marriage license void ab initio? ANS: The marriage contracted in the above problem is not a void marriage. Arts. 2 and 3 of the FC repealed Art, 53 of the NCC with respect to the requisites of marriage. Thus, under Arts. 2 and 3 of the FC, a marriage has essential and formal requisites. Moreover, under Art. 4 of the FC, any irregularity in the formal requisites of a marriage, one of which is a marriage license, will not affect the validity of the marriage. Thus, it has been held that the marriage under a license is not invalidated by the fact that the license was wrongfully or fraudulently obtained without prejudice to the prosecution of the parties (People vs. Belen, 45 O.G. Supl. No. 5, p. 88; Melchor vs. Melchor, 102 Neb. 790,169 N.W. 720.); and that the solemnizing officer does not have to investigate whether or not the license has been properly issued. (People vs. Janson, 54 PhiL 176.) It is the absence of an essential or formal requisite that will render the marriage void ab initio. It is worth observing that the law specifies what marriage are void from the beginning and the absence of a certificate of legal capacity to marry is not one of them. (Dept, o f Justice Opinion No. 50, s. 1991.) 19. What is the rule on marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized? Exceptions. (1992) ANS: Art. 26 of the FC retains the rule in Art. 71 of the NCC that all marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized, 77

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FAMILY CODE (Persons) Marriage Requisites of Marriage

valid there as such, shall also be valid in this country (the rule x loci celebrationis). The exceptions to the rule are the following: (1) If either or both parties did not have the legal capacity to narried (Art. 35[1], FC,); (2) The marriage is immoral for being bigamous or polygamous 35[4], FC.); (3) Consent of one party is lacking because of 'mistake as to dentity of the other (Art. 35[5], FC.); (4) Those subsequent marriages that are void under Art. 53 e FC (Art. 35[6], FC.); (5) One of the parties was psychologically incapacitated le time of the marriage to comply with the essential marital nations (Art. 36, FC.); (6)

The marriage is incestuous (Art. 37, FC.); or

(7)

The marriage is void by reason of public policy. (Art. 38,

20. What is the effect of divorce obtained abroad by an spouse from his or her Filipino spouse?

i

ANS: Under Art. 26 (second paragraph) of the FC, where a ino is married to a foreigner who thereafter obtained a valid ■ce abroad capacitating him or her to remarry, the Filipino se shall likewise have the capacity to remarry under Philippine (As amended by E.O. No. 227.) 21. Given a valid marriage between two (2) Filipino ens, where one party is later naturalized as a foreign en and obtains a valid divorce decree capacitating him sr to remarry, can the Filipino spouse likewise remarry ;r Philippine law? ANS: Order No. 227 was signed into law amending Arts. 26, 36 !9 of the Family Code. A second paragraph was added to Art. 26 iow provides that: 78

FAMILY CODE (Persona) Marriage Requisites of Marriage

Arts. 1-26

ART. 26 All marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Arts. 35 (1), (4), (5) and (6), 36, 37 and 38. Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law. (emphasis outs) On its face, the abovequoted provision does not appear to govern the situation presented by the case at hand. It seems to apply only to a valid mixed marriage, that is a marriage celebrated between a Filipino citizen and an alien. In the case of Republic vs. Orbecido III , G.R. No. 154380, October 5, 2005, the SC, citing the case of Quita vs. CA, ruled that taking into consideration the legislative intent and applying the rule of reason, Paragraph 2 of Art. 26 should be interpreted to include cases involving parties who, at the time of celebration of the marriage were Filipino citizens, but later on, one of them becomes naturalized as a foreign citizen and obtains a divorce decree. The Filipino spouse should be allowed to remarry as if the other party were a foreigner at the time of the solemnization of the marriage. To rule otherwise would be to sanction absurdity and injustice. Where the interpretation of a statute according to its exact and literal import would lead to mischievous results or contravene the clear purpose of the legislature, it should be construed according to its spirit and reason, disregarding as far as necessary the letter of the law. A statute may therefore be extended to cases not within the literal meaning of its terms, so long as they come within its spirit or intent. If we are to give meaning to the legislative intent to avoid the absurd situation, then the instant case must be deemed as coming within the contemplation of Paragraph 2 of Art. 26. The reckoning point is not the citizenship of the parties at the time of the celebration of the marriage, but their citizenship at the time a valid divorce is obtained abroad by the alien spouse capacitating the latter to remarry. 79

ts. 1-26

FAMILY CODE (Persons) Marriage Requisites of Marriage

22. When may a divorce decree obtained abroad be cognizcd in the Philippines? ANS: A divorce decree obtained abroad by a foreigner may be cognized in the Philippines, provided such decree is valid according the national law of the foreigner. However, the divorce decree id the governing national law of the alien spouse who obtained the vorce must be proved. Our Philippine courts do not take judicial itice of foreign laws and judgments. Both the divorce decree and the Ltional law of the foreigner must be alleged and proven according our law on evidence. Therefore, before a foreign divorce decree can recognized by our Philippine courts, the party pleading it must ove the divorce as a fact and demonstrate its conformity to the "eign law allowing it. Presentation solely of the divorce decree is sufficient. (Garcia vs. Recio, G.R. No. 138322, October 2, 2001.) 23. ws?

Can Philippine courts take judicial notice of foreign

ANS: Our Philippine courts cannot take judicial notice of 'eign laws. (Wild Valley Shipping Co., Ltd. vs. CA, G.R. No. 9602, October 6, 2000.) Like any other facts, they must be alleged d proved. Australian marital laws are not among those matters at judges are supposed to know by reason of their judicial function. Le power of judicial notice must be exercised with caution, and ery reasonable doubt upon the subject should be resolved in the gative. (Garcia vs. Recio, supra, October 2„ 2002.) 24. In 1989, Maris, a Filipino citizen, married her >ss Johnson, an American citizen, in Tokyo in a wedding remony celebrated according to Japanese laws. One year ter, Johnson returned to his native land, Nevada, and he lidly obtained in that state an absolute divorce from his ife, Maris. After Maris received the final judgment of divorce, she arried her childhood sweetheart Pedro, also a Filipino tizen, in a religious ceremony in Cebu City, celebrated cording to the formalities of Philippine law. Pedro later left r the U.S. and became naturalized as an American citizen, aris followed Pedro to the U.S. and after a serious quarrel, 80

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Maris filed a suit and obtained a divorce decree issued by the court in the state of Maryland. Maris then returned to the Philippines and in a civil ceremony celebrated in Cebu City according to the formalities of Philippine law, she married her former classmate, Vincent, likewise a Filipino citizen. (a) Was the marriage of Maris and Johnson valid when celebrated? Is their marriage still validly existing? Reasons. (b) Was the marriage of Maris and Pedro valid when celebrated? Is their marriage still validly existing now? Reasons? (c) Was the marriage of Maris and Vincent valid when celebrated? Is their marriage still validly existing now? Reasons. (d) At this point in time, who is the lawful husband of Maris? Reasons. (1992) ANS: (a) The marriage of Maris and Johnson was valid when celebrated because all marriages solemnized outside the Philippines (Tokyo) in accordance with the laws in force in the country where they are solemnized (Japan), and valid there as such, are also valid in the Philippines. Their marriage no longer subsists, because it has been dis­ solved by the absolute divorce validly obtained by Johnson which capacitated Maris to remarry. (Art. 26, FC.) (b) The marriage of Maris and Pedro was valid when celebrated because of the divorce validly obtained by Johnson which capacitated Maris to marry Pedro. The marriage of Maris and Pedro is still validly existing, because the marriage has not been validly dissolved by the Maryland divorce. (Art. 26, FCJ (c) The marriage of Maris and Vincent is void ab initio because it is a bigamous marriage contracted by Maris during the subsistence of her marriage with Pedro. (Arts. 35 and 41, FC.) The marriage of Maris and Vincent does not validly exit because Art. 26, FC does not apply. Pedro was not a foreigner at the time of 81

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marriage with Maris and the divorce abroad (in Maryland) was tiated and obtained not by the alien spouse, but by the Filipino >use. Hence, the Maryland divorce did not capacitate Maris to rry Vincent. (d) At this point in time, Pedro is still the lawful husband Vlaris because their valid marriage has not been dissolved by any id cause. (Art. 26, FC.)

Chapter 2 MARRIAGES EXEMPT FROM THE LICENSE REQUIREMENT (Arts. 27-34, FC) 25. What marriages are exempted from license requirent under the FC? ANS: Under the FC, there are certain marriages which are mpted from requiring a marriage license for their validity. In lieu l marriage license, the law merely requires that the solemnizing cer shall state under oath that he ascertained the qualifications :he contracting parties and found no legal impediment to the rriage. These marriages are: (1) Marriages in articulo mortis or at the point of death (Art. FC.); (2)

Marriages in remote places (Art. 28, FC.);

(3) Marriages between Muslims or among members of the nic cultural communities (Art. 33, FC.); I

(4)

Legal ratification of marital cohabitation (Art. 34, FC.);

(5) Marriages solemnized outside the Philippines where marriage license is required by the country where it was jmnized. No. 3 is governed by the Islamic Law on family relations ^odied in P.D. No. 1083. 82

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26. In order that a ship captain, airplane pilot or a military commander of a unit may solemnize a marriage, what requisites must concur? ANS: In order that a ship captain or airplane chief may solemnize a marriage, the following requisites must concur: (1)

The marriage must be in articulo mortis; and

(2) It must be solemnized while the ship is at sea or the plane is in flight or during stopovers at ports of call. (Art. 31, FCJ In the case of a commanding officer of an army unit, it is essential that the following requisites must concur: (1)

The marriage must be in articulo mortis;

(2)

It must be solemnized only in the absence of a chaplain;

(3)

The military commander must be a commissioned officer;

and (4) It must be solemnized within the zone of military operations. (Art. 32, FC.) ^ 27 What should a foreigner who was divorced do to obtain a marriage license in the Philippines? ANS: The foreigner must prove his legal capacity. If the mar­ riage was dissolved by divorce, he has to file a sworn statement as to how the marriage was dissolved and furnish the local civil reg­ istrar with the judgment. (Arts. 11, 13, FC.) He must register the same with the local civil registrar to bind third persons. Before a foreign judgment is given presumptive evidentiary value, the docu­ ment must first be presented and admitted in evidence. A divorce obtained abroad is proven by the divorce decree itself which is the best evidence of a judgment. (Rule 130, Sec. 3, Rules of Court.) The decree purports to be a written act or record of an act of an official body or tribunal of a foreign country. (Sec. 19, Rule 130.) Under Secs. 24 and 25 of Rule 132, a writing or document may be proven as a public or official record of a foreign country by either: (a) an official publication; or (b) a copy thereof attested by the officer having legal custody of the document. If the record is not kept in the Philippines, such copy must be: (a) accompanied by a certificate 83

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>sued by the proper diplomatic or consular officer in the Philippine >reign service stationed in the foreign country in which the record i kept; and (b) authenticated by the seal of his office. (Garcia vs. 'ecio, G.R. No. 138322, October 2, 2001.) 28. A and B were married without a marriage license ue to the pronouncement of the latter’s physicians that her lness was incurable and that she was going to die anytime, /hen she died one year afterwards, the validity of her Larriage was attacked on the ground that the marriage was ot a marriage in articulo mortis because she was able to 3cover from her illness, and that the person who solemnized le marriage did not execute an affidavit stating that the Larriage was celebrated in articulo mortis. Is the marriage alid? Reasons. ANS: It is submitted that the marriage is valid. The fact that was able to recover from her illness is not her fault. In order i classify the marriage as a marriage in articulo mortis, the law )es not require that the party who is at the point of death must e immediately after the celebration of the marriage. All that is jcessary is that the parties, including the person solemnizing the arriage, must be convinced that there was imminent danger of jath. Under the facts stated in the problem, this circumstance is irtainly present. As far as the affidavit is concerned, although it is ipposed to be substituted for the marriage license, nevertheless, must be observed that the execution thereof is a duty that is Idressed to the person solemnizing the marriage and not the ntracting parties. Failure to execute such affidavit should not, erefore, affect the validity of the marriage. Besides, the law is iplicit with regards to the. essential requisites of marriage, and rtainly, the execution of such affidavit is not one of them. (Loria . Felix, 104 Phil. 1.) 29. (a) Henry, killed his wife, Tess. twenty (20) months ter Tess died, Henry married Cita without the benefit of marriage license. After his death, his children with Tess ed an action to declare his second marriage void for lack ' marriage license. Cita contended that there was no need r a marriage license since they have been living together 84

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Arts. 27-34

as husband and wife for at least five (5) years prior to their marriage. Is the contention valid? ANS: The contention is not valid, because during the time of the cohabitation of Cita and Henry, the latter had a legal impediment to marry Cita. If a man and a woman have been living together as husband and wife without the benefit of a marriage for at least five (5) years, they are exempted from securing a marriage license to marry. But such law requires that their act of living together must be characterized by exclusivity and continuity. It also requires that they must have had no legal impediment to marry one another during the 5-year period of cohabitation immediately before the day of the marriage. Otherwise, if the 5-year period is computed without any distinction as to whether they were capacitated or not to marry, the law would then be sanctioning immorality and encouraging parties to have common-law relationships and placing them on the same footing with those who live faithfully with their spouse. The cohabitation should be in the nature of a perfect union that is valid under the law but rendered imperfect only by the absence of the marriage contract. In the case herein, Henry had a subsisting marriage at the time he began cohabiting with Cita. Hence, he could not have married Cita legally as he had legal impediment to marry her. Thus, the marriage is void for lack of marriage license. (Nirial vs. Norma Bayadog, G.R. No. 133778, March 14, 2000.) (b) Do the heirs of Henry and Tess have the personality to file a suit to declare the marriage of their father with Cita void even after Henry’s death? ANS: Yes, Henry and Tess have the personality to file such suit because a marriage that is void can even be questioned after the death of either party. The law is silent as to who can file a petition to declare the nullity of a marriage. The reason why the heirs can question the nullity of the marriage of Henry even after his death can be traced to the purposes of such declaration of nullity, like determination of heirship; legitimacy of a child, settlement of estate, dissolution of property regime. If the marriage of Henry and Cita can be declared void, then, the rights of his children to properties acquired during their coverture would likewise be adjudicated. (Nifial vs. Bayadog, supra.) Thus, if the marriage would be declared 85

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Did, the children of the first marriage would have better rights of lheritance than those in the void marriage. (Art. 176, FC.) 30. Distinguish between the manner of attacking a oid marriage from that of a voidable marriage. ANS: A voidable marriage cannot be assailed collaterally except l a direct proceeding. On the other hand, a void marriage can be ttacked collaterally. Hence, a void marriage can be questioned even ffcer the death of either party while a voidable marriage can be ss ailed only during the lifetime of the parties and not after the death f either, in which case the parties and their offspring will be left as 'the marriage had been perfectly valid. A void marriage confers no jgal rights upon the parties, as though no marriage had even taken lace. Its invalidity can be maintained in any proceeding in which le fact of marriage may be material, either direct or collateral, i any civil court between any parties at anytime, whether before r after the death of either or both the husband and the wife, and pon mere proof of the facts rendering such marriage void, it will be isregarded or treated as non-existent by the courts. It is not like a oidable marriage which cannot be collaterally attacked except in irect proceeding instituted during the lifetime of the parties so that pon the death of either, the marriage cannot be impeached and is lade good ab initio. (Ninal vs. Bayadog, supra.) 31. What are the requisites in order that Art. 34 of the 'C, regarding legal ratification of marital cohabitation, may pply? ANS: In order that Art. 34 of the FC regarding legal ratification f cohabitation may apply, the following requisites must concur: (1) The man and woman must have been living together as usband and wife for at least five (5) years before the marriage; (2) ther;

The parties must have no legal impediment to marry each

(3) The fact of absence of legal impediment between the arties must be present at the time of marriage, not during their -year cohabitation;

86

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(4) The parties must execute an affidavit stating that they have lived together for at least five (5)-years; and (5) The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage. (Manzano vs. Judge Sanchez, A.M. No. MTJ-00-1329, March 8, 2001.)

Chapter 3 VOID AND VOIDABLE MARRIAGES (Arts. 35-54, FC) 32.

Distinguish between void and voidable marriages.

ANS: Void and voidable marriages may be distinguished from each other in the following ways: (1) As to nature: A void marriage is inexistent from the time of its performance, whereas a voidable marriage is valid and binding until it is annulled by a competent court. (2) As to susceptibility of convalidation: A void marriage is not susceptible of convalidation, whereas a voidable marriage may be convalidated either by prescription or by cohabitation. (3) As to effect upon property: In a void marriage, the property relations between the parties are governed by the rules of coownership, whereas in a voidable marriage, the property relations are, as a general rule, governed by the rules on absolute community unless another system is agreed upon in marriage settlement. (4) As to effect upon children: In a void marriage, the children are considered illegitimate under Art. 165 of the FC (subject to exceptions), whereas in a voidable marriage, the children conceived before the decree of annulment are considered legitimate. (5) As to how marriage may be impugned: The defect of a void marriage may be attacked either directly or collaterally, whereas in a voidable marriage, a judicial declaration is necessary. (6) As to who may impugn marriage: The validity of a void marriage may be impugned by anyone who is directly affected, 87

-ts. 35-54

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

hereas the validity of a voidable marriage can be impugned only 3 a general rule by one of the contracting parties. (7) As to when marriage may be impugned: A void marriage ay be impugned even after the death of one of the contracting arties, whereas a voidable marriage can no longer be impugned iter the death of one of the contracting parties. (8) As to necessity o f judicial declaration: In void marriage, a dicial declaration is not necessary to establish its invalidity but for lrpose of remarriage, there must be judicial declaration of nullity, hereas in a voidable marriage, a judicial declaration is necessary. 33. What marriages are void? ANS: The following marriages are void: (1) Those contracted by any party below 18 years of age even ith the consent of parents or guardians; (2) Those solemnized by any person not legally authorized perform marriages unless such marriages were contracted with ther or both parties believing in good faith that the solemnizing fleer had the legal authority to do so; (3) Those solemnized without license, except those covered r the marriages exempted from license requirement; (4) Those bigamous or polygamous marriages not falling ider Art. 41 of the FC; (5) Those contracted through mistake of one contracting irty as to the identity of the other; (6) Those subsequent marriages that are void under Art. 53 the FC (Art. 35, FC.); (7) Those marriages contracted by any party who, at the time the celebration, was psychologically incapacitated to comply with e essential marital obligations of marriage, even if such incapacity scomes manifest only after its solemnization (Art. 36, FC, as nended by E.O. 227.); (8) Incestuous marriages, whether the relationship between e parties be legitimate or illegitimate (Art. 37, FC.); and 88

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Arts. 35-54

(9) Those which are declared void because they are contrary to public policy. (Art. 38, FC.) 34. Arnold, a Filipino, and Britney, an American, both residents of California, decided to get married in their local parish. Two (2) years after their marriage, Britney obtained a divorce in California. While in Boracay, Arnold met Jenny, a Filipina, who was vacationing there. Arnold fell in love with her. After a brief courtship and complying with all the requirements, they got married in Hongkong to avoid publicity, it being Arnold’s second marriage. Is his marriage to Jenny valid? Explain. (2006) ANS: Yes. The marriage will not fall under Art. 35(4) of the FC on bigamous marriages, provided that Britney obtained an absolute divorce, capacitating her to remarry under her national law. Consequently, the marriage between Arnold and Jenny may be valid as long as it was solemnized and valid in accordance with the laws of Hongkong [Art. 26, pars. 1 and 2, FC]. (Suggested Answers to the 2006 Bar Examination Questions, PALS) 35. What is the reason behind the rule that a void marriage must be declared void? ANS: The reason behind the rule is to do away with any continuing uncertainty on the status of the second marriage. 36. What are some of the reasons for which Art. 36 of the FC is considered as a ground for declaration of nullity of marriage? ANS: Art. 36 of the FC is considered as a ground for declaration of nullity of marriage for the following reasons: (1) The New Code of Canon Law itself (which took effect on November 27, 1983) provides the same ground for declaration of nullity of marriage. (2) Parties who have church-annulled marriages are given a cause of action to have their marriages declared void by the civil courts. 89

,s. 35-54

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

(3) Parties to marriages that exist in name only since they ve long been separated from each other because of the inability failure of one of the parties to perform the essential obligations marriage, are given additional remedy. Said essential marital ligation are more explicitly provided for in Art, 68 of the FC which ates that: “The husband and wife are obliged to live together, iserve mutual love, respect and fidelity, and render mutual help id support.” Thus, where the wife, W, not only left her husband, H, with horn she had lived for four (4) years, and her two (2) sons, A and , whom she had begotten by H, but even secured an absolute vorce/annulment of marriage and afterwards, got married again >another husband, X, in the United States, lived with him there [id begot two (2) sons, Y and Z, Art. 36 of the FC would be available 3 a remedy more particularly for the abandoned husband, H, who i entrapped by his marriage to W that actually exists in name only, learly in this case, W would be psychologically incapacitated to ^mply with any of the marital obligations of her marriage to H as rovided for in Art. 68 of the FQ. 37. Suppose that in the illustration given above, it is mown that at the time of marriage, W gave her free and oluntary consent to her marriage to H and that she knew ill the marital rights and obligations arising from such narriage. Will this be a ban to the action filed by H to declare he marriage void? ANS: The fact that W gave her free and voluntary consent to ler marriage to H will not be a bar to the action filed by H to declare ;he marriage void. Although W knew what marriage is, as well as ill the rights and obligations arising from such marriage, her will should be capable of fulfilling said marital rights and obligations. Relevant, therefore, to the issue of psychological incapacity is the question of fulfillment of a valid consent and not the question of whether the consent given to the marriage is defective or not. 38. Discuss the extent of authority of judges, justices and priests to solemnize marriages. ANS: The authority of the regional trial court judges and judges of inferior courts to solemnize marriages is confined to their territorial 90

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

Arts. 35-54

jurisdiction as defined by the SC. A priest who is commissioned and allowed by his local ordinance to marry the faithful is authorized to do so only within the area or diocese or place allowed by his Bishop. An appellate court Justice or a Justice of the Supreme Court has jurisdiction over the entire Philippines to solemnize marriages, regardless of the venue, as long as the requisites of the law are complied with. However, judges who are appointed to specific jurisdictions, may officiate in weddings only within said areas and not beyond. Where a judge solemnizes a marriage outside his court’s jurisdiction, there is a resultant irregularity in the formal requisite laid down in Art. 3, FC which while it may not affect the validity of the marriage, may subject the officiating official to administrative liability. (Aranes vs. Occafio, April 11, 2002J 39. Give other examples of psychological incapacity under Art. 36 of the FC. ANS: It is significantly noted that the FC has not given any examples of psychological incapacity so as not to limit the application of its Art. 36 and has, thus, given the judges of our courts enough room for interpretation of the provisions on a case-to-case basis. However, psychological incapacity to discharge the essential marital obligations may be made manifest in such instances (without being limited to the following) where: (1) The husband/wife refuses to dwell with and subsequently leaves the husband without fault on the part of the latter; (2) cause;

The husband/wife leaves the spouse without any justifiable

(3) The husband/wife refuses to have sex with the spouse (Chi Ming Tsoi vs. CA, G.R. No. 119190, January 16, 1997.); (4)

The wife refuses to have children;

(5) There is unbearable jealousy on the part of either party, hence, making the common life of the parties unbearable; (6) Immaturity or where there is lack of rational judgment and responsibility as when the husband refuses to support the family; (7) The husband or the wife cannot shoulder the heavy responsibility of being a parent. 91

ts. 35-54

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

(8) There is consistent lying and paranoid jealousy. Consisnt lies and fabrications made by a spouse sufficiently satisfy the lidelines in the declaration of nullity due to psychological incaicity. “A person unable to distinguish between fantasy and reality >uld similarly be unable to comprehend the legal nature of the arital bond, much less its psychic meaning, and the correspondg obligations attached to marriage including parenting.” (Justice mte O. Tinga, SC decision, March 2006.) Mere showing of “irreconcilable differences” and “conflicting rsonalities” in no wise constitutes psychological incapacity. epublic vs. CA, 268 SCRA 198.) Sexual infidelity per se, does not constitute psychological capacity within the implementation of the FC. It must be shown at the unfaithfulness of the other spouse is a manifestation of a ^ordered personality which makes him/her completely unable to scharge the essential obligations of the marital state and not merely e to his/her ardent wish to have a child of his/her own flesh and tod. (Carating-Siayngco vs. Siayngco, G.R. No. 158896, October , 2004.) Psychological incapacity cannot likewise be presumed m abandonment. It is not enough to prove that a spouse failed to set his responsibility and duty as a married person; it is essential it he must be shown to be incapable of doing so due to some rchological, not physical, illness. (Republic vs. Quintero-Hana.no, 1. No. 149498, May 20, 2004.) At best, such circumstances as :ual infidelity or perversion or abandonment are grounds for legal >aration and do not by themselves consitute psychological incarity within the contemplation of the FC. Neither would emotional maturity and irresponsibility be equated with psychological apacity. (Dedel vs. CA, G.R. No. 151867, January 29, 2004.) Researches and findings in psychological disciplines as well as decisions of church tribunal may give persuasive effect or serve as de to the interpretation of the term “psychological incapacity.” 40.

(a) What is the concept of psychological incapac(b) How may it be established?

ANS: (a) “Psychological incapacity” refers to no less than lental (not physical) incapacity that causes a party to be truly 3gnitive of the basic marital covenants that concomitantly must 92

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Arts. 35-54

be assumed and discharged by the parties to the marriage which, as so expressed by Art. 68 of the FC, includes their mutual obligations to live together, observe love, respect and fidelity and render help and support. This psychological condition must exist at the time the marriage is celebrated. (Santos vs. CAet al., G.R. No. 112019, January 4,1995.) It is a malady so grave and so permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume. These marital obligations are those provided under Arts. 68 to 71, 220, 221 and 225 of the FC. (b) Psychological incapacity, as a ground for declaring the nullity of a marriage, may be established by the totality of evidence presented. There is no requirement, however, that the respondent should be examined by physician or a psychologist as a condition sine qua non for such declaration. (Marcos vs. Marcos, G.R. No. 136490, October 19, 2000J 41. Is a physician’s examination required in establish­ ing psychological incapacity as a ground for declaration of nullity of marriage? ANS: A physicians’ examination is not required if the totallity of evidence presented sufficiently establishes psychological incapacity. It is enough that the three (3) basic requirements mandated by the Court in Santos vs. Court of Appeals, that psychological incapacity be characterized by: (i) gravity; (ii) juridical antecedence; and (iii) incurability be present. The above guidelines do not require that a physician examine the person to be declared psychologically incapacitated as the root cause may be “medically or clinically identified.” What is important is the presence of evidence that can adequately establish the party’s psychological condition. For if the totality of evidence presented is enough to sustain a finding of psychological incapacity, then actual medical examination of the person concerned need not be resorted to. (Rep. vs. CA & Molina> 268 SCRA 198.) 42. Leouel and Julia are the parents of 6-year-old Leouel Santos, Jr. The child had been in the custody of Julia’s 93

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FAMILY CODE (Persons) Marriage Void and Voidable Marriages

ents since the child’s release from the hospital after birth. May 18, 1988, Julia left for the U.S.A. to work as a nurse pite Leouel’s pleas to dissuade her. Julia’s promise to irn home upon the expiration o f her contract in July 1989 3 not fulfilled. In 1990, Leouel, who underwent training gram in America, tried desperately to locate Julia but his >rts were of no avail. Having failed to get Julia to come rie Leouel filed with the Regional Trial Court a complaint Annulment of Marriage under Art. 36 of the FC. Will the action for annulment of marriage under A r t 36 he FC prosper? (1996) ANS: No, the action will not prosper. In Santos vs. CA, a case h similar facts, the SC held that the phrase “psychological incaity” under Art. 36 of the FC was not meant to comprehend all pose cases of psychoses as extremely low intelligence, immaturity I like circumstances mentioned by some ecclesiastical authorii. Art. 36 of the FC cannot be taken and construed independently but must stand in conjunction with, existing precepts in our law marriage. Thus correlated, psychological incapacity should refer 1 0 less than a mental incapacity that causes a party to be truly agnitive of the basic marital covenants that concomitantly must assumed and discharged by the parties to the marriage which, as expressed by Art. 68 of the FC, include their mutual obligations to i together, observe love, respect and fidelity and render help and >port. There is hardly any doubt that the intendment of the law } been confined to the meaning of psychological incapacity to the st serious cases of personality disorders clearly demonstrative of utter insensitivity or inability to give meaning and significance ;he marriage. This psychological condition must exist at the time smarriage is celebrated. (Santos vs. CA, supra.) Mere showing of irreconcilable differences and conflicting •sonalities does not constitute psychological incapacity. It is not >ugh to prove that the parties failed to meet their responsibilities d duties as married persons. It is essential that they must be )wn to be incapable of doing so due to some psychological (not ysical) illness. (Republic vs. CA and Molina, G.R. No. 108763, bruary 13,1997.)

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The SC, in the abovestated case of the Republic vs. CA and Molina, and as reiterated in Florence Malcampo-Sin vs. Sin, G.R. No. 137590, March 24, 2001, laid down the guidelines in the interpretation and application of Art. 36 of the FC for the guidance of the bench and the bar which are as follows: 1. The burden of proof to show the nullity of the marriage belongs to the plaintiff. Any doubts should be resolved in favor of the existence and continuation of the marriage and against its dissolution and nullity. 2. The root cause of the psychological incapacity must be: (a) medically or clinically identified, (b) alleged in the complaint, (c) sufficiently proven by experts, and (d) clearly explained in the decision. (In the case of Republic vs. Quintero-Hanano, G.R. No. 149498, May 20, 2004, the Court ruled that Art. 36 requires that the incapacity must be psychological — not physical, although its manifestations and/or symptoms may be physical. The evidence must convince the Court that the parties, or one of them, was mentally or physically ill to such an extent that the person could not have known the obligations he was assuming, or knowing them, could not have given valid assumption thereof. The psychological incapacity must be characterized by: [a] gravity; [b] juridical antecedence; and [c] incurability.) 3. The incapacity must be proven to be existing “at the time of the celebration” of the marriage. 4. Such incapacity must also be shown to be medically or clinically permanent or incurable. 5. Such illness must be grave enough to bring about the disability of the party to assume the essential obligations of marriage. 6. The essential marital obligations must be those embraced by Arts. 68 up to 71 of the FC as regards the husband and wife, as well as Arts. 220, 221 and 225 of the same Code in regard to parents and their children. Such non-complied marital obligations) must also be stated in the petition, proven by evidence and included in the text of the decision.

95

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7. Interpretations given by the National Appellate Matrimoial Tribunal of the Catholic Church in the Philippines, while not mtrolling or decisive, should be given great respect by our courts. 8. The trial court must order the prosecuting attorney or seal and the Solicitor General to appear as counsel for the State. 43. Gemma filed a petition for the declaration of nullity Pher marriage with Arnell on the ground of psychological icapacity. She alleged that after two (2) months of their larriagc, Arnell showed signs of disinterest in her, neglected er and went abroad. He returned to the Philippines after iree (3) years but did not even get in touch with her. Worse, ley met several times in social functions but he snubbed er. When she got sick, he did not visit her even if he knew Fher confinement in the hospital. Meanwhile, Arnell met an ecident which disabled him from reporting for work and aiming a living to support himself. Will Gemma’s suit prosper? Explain. (2006) ANS: No, Gemma’s suit will not prosper. Even if taken as true, ie grounds, singly or collectively, do not constitute “psychological capacity.” In Santos vs. CA, G.R. No. 112019, January 4, 1995, ie SC clearly explained that “psychological incapacity must be Laracterized by (a) gravity, (b) juridical antecedence, and (c) curability” (Ferraris vs. Ferraris, G.R. No. 162368, July 17, 2006; hoa vs. Choa, G.R. No. 143376, November 26, 2002). The illness ust be shown as downright incapacity or inability to perforin ie’s marital obligations, not a mere refusal, neglect, difficulty or uch less, ill-will. Moreover, as ruled in Republic vs. Molina, G.R. o. 108763, February 13, 1997, it is essential that the husband is capable of meeting his marital responsibilities due to psychological id not physical illness (Antonio vs. Reyes, G.R. No. 155800, March ), 2006; Republic vs. Quintero-Hamano, G.R. No. 149498, May 20, )04). Furthermore, the condition complained of did not exist at the ne of the celebration of marriage. (Suggested Answers to the 2006 ir Examination Questions, PALS) 44. Art. 36 of the FC provides that a marriage conacted by any party who, at the time of the celebration, was 96

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psychologically incapacitated to comply with the essential marital obligations of marriage, shall be void. Choose the spouse listed below who is psychologically incapacitated. Explain. (2.5%) a)

Nagger

b)

Gay or Lesbian

c)

Congenital sexual pervert

d)

Gambler

e)

Alcoholic (2006)

ANS: The best answers are B and C. To be sure, the existence and concealment of these conditions at the inception of marriage renders the marriage contract voidable (Art. 46, FC). They may serve as indicia of psychological incapacity, depending on the degree and severity of the disorder (Santos vs. CA, G.R. No. 112019, January 4, 1995). Hence, if the condition of homosexuality, lesbianism or sexual perversion, existing at the inception of the marriage, is of such a degree as to prevent any form of sexual intimacy, any of them may qualify as a ground for psychological incapacity. The law provides that the husband and wife are obliged to live together, observe mutual love, respect and fidelity (Art. 68, FC). The mandate is actually the spontaneous, mutual affection between the spouses. In the natural order it is sexual intimacy which brings the spouses wholeness and oneness. (Chi Ming Tsoi vs. CA, G.R. No. 119190, January 16,1997). Alternative Answer: None of them are necessarily psychologically incapacitated. Being a nagger, etc., are at best only physical manifestations indicative of psychological incapacity. More than just showing the manifestations of incapacity, the petitioner must show that the respondent is incapacitated to comply with the essential marital obligations of marriage and that it is also essential that he must be shown to be incapable of doing so due to some psychological, not physical illness. (Republic vs. Quintero-Hamano, G.R. No. 149498, May 20, 2004)

Alternative Answer: A congenital sexual pervert may be psychologically incapaci­ tated if his perversion incapacitates him from discharging his marital

97

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obligations. For instance, if his perversion is of such a nature as to preclude any normal sexual activity with his spouse. (Suggested An­ swers to the 2006 Bar Examination Questions, PALS)

i

45. Who can file the action to declare the marriage void the ground provided for in Art. 36 of the FC?

ANS: Either the husband or the wife can file the action to clare the marriage void, including even the psychologically capacitated. 46. What is the status of children born under Art. 36 of e FC? ANS: Under Art. 54 of the FC, children conceived or bom fore the decree of nullity of marriage are classified as legitimate, dldren born of the subsequent marriage under Art. 53 of the same de are likewise classified as legitimate. 47. What marriages are incestuous and void from the ginning, whether the relationship between the parties be ^itimate or illegitimate? ANS: The following marriages are incestuous and void from i beginning, whether the relationship between the parties be itimate or illegitimate: (1)

Between ascendants and descendants of any degree; and

(2) Between brothers and sisters, whether of the full or half od. (Art. 37, FC.) 48. What marriages are void for reasons of public licy? ANS: The following marriages are void from the beginning for sons of public policy: (1) Between collateral blood relatives, whether legitimate or gitimate, up to the fourth civil degree; (2)

Between step-parents and step-children;

(3)

Between parents-in-law and children-in-law;

(4)

Between the adopting parent and the adopted child; 98

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(5) Between the surviving spouse of the adopting parent and the adopted child; (6) Between the surviving spouse of the adopted child and the adopter; (7) adopter; (8)

Between an adopted child and a legitimate child of the Between adopted children of the same adopter; and

(9) Between parties where one, with the intention to marry the other, killed that other person’s spouse, or his or her own spouse. (Art. 38, FC.) {Note: Under the FC, the following can now marry: [1]

Brother-in-law and sister-in-law;

[2]

Stepbrother and stepsister;

[3]

Guardian and ward;

[4]

Adopted and illegitimate child of the adopter;

[5]

Adopted son of the husband, and adopted daughter of the

wife;

[6] Parties concubinage.)

who

have

been

convicted

of adultery

or

49. Amor gave birth to Thelma when she was 15 years old. Thereafter, Amor met David and they got married when she was 20 years old. David has a son, Julian, with his exgirlfriend Sandra. Can Julian and Thelma get married? (2007) ANS: If the marriage was solemnized during the effectivity of the NCC, the marriage between stepbrother and stepsister is void (Art. 80[7]). However, under the FC, this marriage may be valid (Art. 38, FC). (Suggested Answers to the 2007 Bar Examination Questions, PALS) 50. Is a marriage between a father-in-law and his daughter-in-law or between a mother-in-law and her son-inlaw valid? How about a marriage between an adopted son and an adopted daughter of the same adopting parents? 99

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ANS: These questions require a qualified answer. If the .rriages were celebrated before the effectivity of the FC, both .rriages are valid. Under the NCC, such marriages are neither void ' voidable. On the other hand, if the marriages were celebrated er the effectivity of the FC, both marriages are void for reasons of blic policy. (Art. 38, [3] and [8], FC.) 51. (a) If a person is convicted of killing his or her [>use, can he or she still get married? (b) A was convicted of killing B, husband of C. Can jet married to C? ANS: (a) Under Art, 80, No. 6 of the NCC, if a person is Lvicted of killing his or her own spouse, he or she is absolutely qualified from getting married. This is the only instance under s old law where a person is absolutely disqualified from getting rried. The reason for this is that such conviction reveals complete ral perversion, thus, disqualifying him or her from contracting yther marriage. However, Art. 38(9) of the FC improves Art. 80(6) :he NCC by stating expressly that the act of one party of killing or her own spouse or the other party’s spouse was “with the ention to marry the other,” which requirement does not appear Art, 80(6) of the NCC. In other words, a simple homicide, not mected with the marriage, would not bar such marriage. In fact, he surviving spouse of the victim of the homicide agrees to marry ! killer, the former is deemed to have forgiven the latter, who on part can make reparation for his crime to the widow and children lis victim. Moreover, under Art. 38(9) of the FC, there is no need conviction in a criminal case of the guilty party. The fact of the ling committed by one of the parties to the marriage can be proved a. civil case. Under Art. 80(6) of the NCC, however, conviction in a minal case is necessary. (b) It depends. If the killing was for the purpose of noving B as an obstacle to A’s marriage to C, then the answer is if not, then the answer is yes. 52. Does the action or defense for the declaration of solute nullity of marriage prescribe? ANS: The action or defense for the declaration of absolute llity of marriage does not prescribe. (Art. 39, FC, as amended by L No. 8533.) 100

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53. When may the absolute nullity of a previous marriage be invoked? ANS: The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void. (Art. 40, FC.) 54. When is a marriage subsequently contracted by a person during the lifetime of his or her spouse merely voidable? ANS: Such a marriage is merely voidable when before the celebration of the subsequent marriage, the prior spouse had been absent for four (4) consecutive years and the present spouse had a well-founded belief that the absent spouse was already dead; or in case of disappearance where there is danger of death under the circumstances set forth in Art. 391 of the NCC, the prior spouse had been absent for only two (2) years. When contracting the subsequent marriage, the present spouse must have instituted a summary proceeding for the declaration of presumptive death of the absent spouse. (Art 41, FC.) Failure of the present spouse to institute a summary proceeding for the declaration of presumptive death shall render the subsequent marriage void. Such neglect or ignorance of the law shall result in a bigamous, and therefore void, marriage. (Navarro vs. Domagtoy, July 19, 1996; Republic vs. Nolasco, G.R. No. 94053, March 17, 1993.) 55. How shall the subsequent marriage referred to in Art. 41 of the FC covering absent spouses be automatically terminated? ANS: The subsequent marriage referred in Art. 41 of the FC shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio. A sworn statement of the fact and circumstance of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed. (Art. 42, FC.) 101

*-ruwiL>Y CODE (Persons) * Marriage Void and Voidable Marriages

56. A seaman met a woman in England. He asked her to live with him on board the vessel and the woman consented. They finally got married two (2) years thereafter. The man had to go back to work, leaving his wife in the province, but she also left the place. He was informed about it, so when he came back, he inquired from his friends the whereabouts of his wife, but they had no news about her. He sent letters to the former place of work of the woman, but to no avail. He went to court and asked for the judicial declaration of presumptive death of the woman or to annul his marriage to her. Will the action prosper? ANS: The action will not prosper. The seaman failed to conduct a search for his missing wife with such diligence as to give rise to well founded belief that the absent spouse is already dead. The investigation allegedly conducted by him in his attempt to ascertain her whereabouts is too sketchy to form the basis of a reasonable or well founded belief that she was already dead. The alleged letters he sent to his wife which were returned to him unreceived but which he lost under unspecified circumstances cannot justify his failure to locate her. Neither is his assertion that he inquired from his friends as to her whereabouts considering that he did not even identify them. His suspicion that she was already dead cannot be based on the fact that she had been absent. The circumstances of her departure make it very difficult to record the claimed belief that she was dead a well founded one. Spouses should not be allowed, by the simple expedient that one of them left the conjugal home and never to return again, to circumvent the laws on marriage which is not an ordinary but a special contract of permanent union. (Republic vs. Nolasco, supra J 57. (a) If there is a prior existing marriage of A and B, but it is void, can anyone of A and B just get married? (b) Is that void marriage a legal impediment to marry once again? ANS: (a) A and B cannot just get married. The present rule requires that there is a need to have a void marriage to be declared void. Art. 39, FC provides that the action or defense for the declaration of absolute nullity of a previous marriage shall not orescribe. Furthermore, the absolute nullity of a previous marriage nay be invoked for purposes of remarriage on the basis solely of a 102

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final judgment declaring such previous marriage void. (Art. 40, FC.) It is clear that even if a marriage is void, it must be declared void first because the parties cannot decide for themselves the invalidity of their marriage. It must be submitted to the judgment of the competent courts. Only when the nullity is so declared can it be held as void. So long as there is no such declaration, the presumption is that the marriage exists. Therefore, he who contracts a second marriage before the judicial declaration of nullity of the first marriage assumes the risk of being prosecuted for bigamy. (Wiegel vs. Sempio-Diyf 143 SCRA 499; Atienza vs. Brillantes, Jr., March 29, 1995; Cariho vs. Carino, 351 SCRA 127.) (b) Since there is a need for a prior declaration of nullity of a void marriage, that void marriage can be considered a legal impediment to contract a subsequent marriage because of the presumption of its validity prior to its declaration of nullity. Furthermore, the absolute nullity of a marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring the previous marriage void. (Art. 40, NCC.) 58. What are the effects of termination of the subse­ quent marriage referred in Art. 42 of the FC covering absent spouses? ANS: The termination of the subsequent marriage referred in Art. 42 of the FC shall produce the following effects: (1) The children of the subsequent marriage conceived prior to its termination shall be considered legitimate; (2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse; (3) Donations by reason of marriage shall remain valid, except that if the donee contracted the marriage in bad faith, such donations made to said donee are revoked by operation of law; 103

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FAMILY CODE (Persons) Marriage Void and Voidable Marriages

(4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable; and (5) The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession. (Art. 43, FC.) 59. What are the effects of termination of the sub­ sequent marriage referred in Art. 42 of the FC where both spouses of the subsequent marriage acted in bad faith? ANS: If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and all donations by reason of marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law. (Art. 44, FC.) 60. What marriages are voidable? ANS: The following marriages are voidable: (1) Those where one or both parties were between the ages of 18 or over but below 21 at the time of marriage, and the marriage was solemnized without the consent of the parents, guardian or person having substitute parental authority over the party, in that order, unless after attaining the age of 21, such party freely cohabited with the other and both lived together as husband and wife; (2) Those where either party was of unsound mind at the time of marriage, unless such party after coming to reason, cohabited with the other as husband and wife; (3) Those where the consent of either party, at the time of marriage, was obtained by fraud, unless such party afterwards, with full knowledge of the facts constituting the fraud, freely cohabited with the other as husband and wife; (4) Those where the consent of either party, at the time of marriage, was obtained by force, intimidation or undue influence, unless the same having disappeared or ceased, such party thereafter freely cohabited with the other as husband and wife; (5) Those where either party was, at the time of marriage, physically incapable of consummating the marriage with the other, and such incapacity continues and appears to be incurable; 104

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(6) Those where either party was, at the time of marriage, afflicted with a sexually-transmissible disease found to be serious and appears to be incurable. (Art. 45, FC.) 61. What is the test which must be applied in order to determine whether or not a person is physically incapable of consummating the marriage with the other? ANS: The test is not the capacity to reproduce, but the capacity to copulate. (Sarao vs. Guevarra, CA, Off. Gaz. 263.) Consequently, physical incapacity as a ground for the annulment of marriage refers to impotency or the inability to perform the sexual act, and not sterility or the inability to procreate. (Menciano us. San Jose, 89 Phil. 63; Jimenez vs. Canizares, 109 Phil. 273.) 62. What requisites must concur in order that physical incapacity will serve as a ground for the annulment of a marriage? ANS: The following requisites must concur in order that physical incapacity will serve as a ground for the annulment of marriage: (1) That either party was, at the time of the marriage, physically incapable of consummating the marriage with the other; (2)

That such incapacity continues;

(3)

That it appears to be incurable; and

(4) That, at the time of the marriage, it was unknown to the other party. (Art. 45[5], FC.) 63. A and B were married in 1988. At the time of their marriage, B was aware that A was impotent. Can she now ask for the annulment of the marriage? Reasons. ANS: It is submitted that B cannot ask for the annulment of the marriage. We believe that in addition to the requisites expressly stated in Art. 45(5) of the FC, in order that marriage may be annulled on the ground of physical incapacity or impotency, another requisite should be added — that is, at the time or marriage, such 105

\ Arts. 35-54

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

physical incapacity was unknown to the other party. This is so for the following reasons: (1) Under No. 5 of Art. 45 of the FC, the law declares that the person who can bring the action for annulment of the marriage on the ground of physical incapacity is the injured party. Now, if B was aware that A was impotent at the time of the celebration of their marriage, how can we say that she is the injured party? (2) Besides, the equitable principle of estoppel is applicable here. When a party to a marriage contract is aware that she is getting married to a man who is impotent, it is clear that she is renouncing copulation, which is purely a personal right. (3) Furthermore, sexual intercourse is not the only end or purpose of marriage. There are other purposes. This is clearly indicated by the fact that there is no maximum age requirement imposed by our law. Consequently, even when one of the parties has already reached that age when copulation is no longer possible, the marriage is still valid. By parity of reasoning, i^he same can be applied to the marriage of B to A. We are, of course, aware of the other view which holds that the marriage in the instant case can be annulled. Those who advocate this view maintain that this can be implied from a comparison between the provisions of No. 2 and that of No. 6 of Art. 91 of the NCC which was repealed by the FC. According to them, analyzing these provisions., there is a clear implication that even where one of the parties is aware of the impotency of the other, he or she can still institute an action for annulment of the marriage. It is, however, submitted that these provisions refer only to those cases when damages are recoverable and can have no bearing on the question regarding the voidable character of marriages. 64. The day after John and Marsha got married, John told her that he was impotent. Marsha continued to live with John for two (2) years. Is Marsha now estopped from filing an annulment case against John? (2007) ANS: No, Marsha is not estopped from filing an annulment case against John on the ground of impotency under Art. 45(5) of the FC. Unlike the other grounds for annulment of voidable marriages which are subject to ratification by continued cohabitation, the law 106

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does not allow ratification under Art. 45(5). (Suggested Answers to the 2007 Bar Examination Questions, PALS) 65. Gigi and Ric, Catholics, got married when they were 18 years old. Their marriage was solemnized on August 2, 1989 by Ric’s uncle, a Baptist Minister, in Calamba, Laguna. He overlooked the fact that his license to solemnize marriage expired the month before and that the parties do not belong to his congregation. After 5 years of married life and blessed with 2 children, the spouses developed irreconcilable differences, so they parted ways. While separated, Ric fell in love with Juliet, a 16 year-old sophomore in a local college and a Seventh-Day Adventist. They decided to get married with the consent of Juliet’s parents. She presented to him a birth certificate showing she is 18 years old. Ric never doubted her age much less the authenticity of her birth certificate. They got married in a Catholic church in Manila. A year after, Juliet gave birth to twins, Aissa and Aretha. (1) What is the status of the marriage between Gigi and Ric — vialid, voidable or void? Explain. ANS: Even if the Minister’s license expired, the marriage is valid if either or both Gigi and Ric believed in good faith that he had the legal authority to solemnize marriage. While the authority of the solemnizing officer is a formal requisite of marriage, and at least one of the parties must belong to the solemnizing officer’s church, the law provides that the good faith of the parties cures the defect in the lack of authority of the solemnizing officer. (Art. 35 par. 2, Family Code; Sempio-Diy, p. 34; Rabuya, The Law on Persons and Family Relations, p. 208.) The absence of parental consent despite their having married at the age of 18 is deemed cured by their continued cohabitation beyond the age of 21. At this point, their marriage is valid. (See Art. 45, FC.) (2) What is the status of the marriage between Ric and Juliet — valid, voidable or void? ANS: The marriage between Juliet and Ric is void. First of all, the marriage is a bigamous marriage not falling under Article 41 107

I Arts. 35-54

FAMILY CODE (Persons) Marriage Void and Voidable Marriages

[Art. 35(4) FC]. A subsisting marriage constitutes a legal impediment to re-marriage. Secondly, Juliet is below eighteen years of age. The marriage is void even if consented to by her parents [Art. 35(1), FC]. The fact that Ric was not aware of her real age is immaterial. (3) Suppose Ric himself procured the falsified birth certificate to persuade Juliet to marry him despite her minority and assured her that everything is in order. He did not divulge to her his prior marriage with Gigi. What action, if any, can Juliet take against him? Explain. ANS: Juliet can file an action for the declaration of nullity of the marriage on the ground that he willfully caused loss or injury to her in a manner that is contrary to morals, good customs and public policy [Art. 21, NCC]. She may also bring criminal actions for seduction, falsification, illegal marriage and bigamy against Ric. (4) If you were the counsel for Gigi, what action/s will you take to enforce and protect her interests? Explain. ANS: I would file an action to declare the marriage between Juliet and Ric null and void ab initio and for Ric’s share in the coownership of that marriage to be forfeited in favor and considered part of the absolute community in the marriage between Gigi and Ric [Arts. 148 & 147, FC]. I would also file an action for damages against Ric on the grounds that his acts constitute an abuse of right and they are contrary to law and morals, causing damages to Gigi (See Arts 19, 20, 21, NCC ). (Suggested Answers to the 2006 Bar Examination Questions, PALS) 66. itation?”

What is the so-called “Doctrine of Triennial Cohab­

ANS: As opposed to the general rule in favor of potency, the socalled “Doctrine of Triennial Cohabitation” is the doctrine applied in England and by some U.S. courts which declares the presumption that the husband is impotent should the wife still remain a virgin after living together with the husband for three (3) years. Tb,e husband will have to overcome this presumption. (Tompkins vs. Tompkins, 92 N.J. e.g., 113 Atl. 599.)

108

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67. What is relative impotency? Give example. ANS: Relative impotency is where a person is impotent with respect to his or her spouse but not with another woman or man. Under the FC, relative impotency may be invoked as a ground for annulment of marriage in view of the physical incapability of one party to consummate said marriage with the other. An example is where a man may not be able to have penile erection with his wife but can have penile erection with another woman. 68. A seeks to annul his marriage to B on the ground that the orifice of the latter’s genitals or vagina was too small to allow the penetration of a male organ for copulation. When B did not answer, the court ordered the physical examination of B to determine her physical capacity for copulation, but she refused. After hearing, without the presence of B, the court issued an order annulling the marriage. Is this order correct? ANS: Whether the wife is really impotent cannot be deemed to have been satisfactorily established because from the commencement of the proceeding until the entry of the decree she had abstained from taking part therein. Although her refusal to be examined or failure to appear in court shows indifference on her part, yet from such attitude the presumption arising out of the suppression of evidence could not arise or be inferred, because women of this country are by nature coy, bashful and shy and would not submit to a physical examination unless compelled to by competent authority. This the court may not do without doing violence to or infringing upon her constitutional right. A physical examination in this case is not self­ incrimination. She is not charged with any offense. She is not being compelled to be a witness against herself. “Impotency being an abnormal conditions should not be presumed. The presumption is in favor or potency.” (Jimenez vs. Canizares, 109 Phil. 273.) 69. What are the different circumstances or cases of fraud which will serve as a ground for the annulment of a marriage? ANS: Any of the following circumstances shall constitute fraud which will serve as a ground for the annulment of a marriage: 109

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(1) Non-disclosure of the previous conviction by final judgment of the other party of a crime involving moral turpitude; (2) Concealment by the wife of the fact that at the time of the marriage, she was pregnant by a man other than her husband; (3) Concealment of a sexually-transmissible disease, regard­ less of its nature, existing at the time of the marriage; or (4) Concealment of drug addiction, habitual alcoholism, 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, FC.) 70. A and B were sweethearts. B became pregnant. Knowing that A was preparing for the bar examinations, C, a lawyer and close relative of B, threatened A with the filing of a complaint for immorality in the SC, thus, preventing him from taking the examinations unless he marries B. As a consequence of the threat, A married B. Can the marriage be annulled on the ground of intimidation? Reasons. ANS: No, the marriage cannot be annulled on the ground of intimidation under Art. 45 of the FC. In order that the marriage may be annulled, the threat must be unjust or illegal. Here the threat is to enforce one’s claim, which is just or legal, through competent authority. (Ruiz vs. Atienza, CA, 40 Off. Ga. 1903.) 71. The plaintiff, a first year law student, met the defendant in March, 1968. After several meetings, they became engaged on September 19, 1968 and were married on November 28,1968. After living maritally for only 88 days, the defendant gave birth to a child of 9 months on February 23, 1969. As a result, the plaintiff abandoned the defendant and then filed a suit for annulment of marriage alleging that his consent to the marriage was secured by the assurance of the defendant that she was a virgin. Decide the case. (1975) ANS: The marriage cannot be annulled for the following reasons: (a)

The law is explicit. According to the law, no misrepre­ 110

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Arts. 35-54

sentation or deceit as to character, health, rank fortune or chastity shall constitute such fraud as will give grounds for annulment of marriage. (Art. 46, 2nd par., FC.) So, even assuming that the plain­ tiff was really convinced (which is, of course, incredible considering the fact that defendant was already in an advanced stage of preg­ nancy) that the defendant was a virgin at the time of their marriage because of the latter’s assurance, nevertheless, there would still be no fraud which will be a ground for annulment. (b) Even assuming that the annulment is based on the fact that at the time of the marriage, defendant was pregnant by a man other than her husband, there would still be no ground because the law is again explicit. There should have been a concealment of such fact. (Art. 46[2]s FC.) Here, there can be no possibility of concealment. Defendant was already about 6 months pregnant at the time of the marriage. At such an advanced stage of pregnancy, concealment would be impossible. (Buccat vs. Buccat, 72 Phil. 19.) (Note: A distinction should be made between the case of a woman who was already 3 or 4 or even 5 months pregnant at the time of marriage and one who was already 6 or 7 months pregnant. In the former, concealment is possible. Therefore, the marriage can be annulled by reason of fraud. In the latter, concealment is not possible. The reason for this is that when a woman is already 6 months pregnant, according to medical authorities, the enlargement of her abdomen, is above and no longer below the umbilicus. (Aquino vs. Delizo, 109 Phil. 2 1 .)

72. In actions for annulment of a voidable marriage, who are the parties who may commence the action and within what period? ANS: The action for annulment of marriage must be commenced by the parties and within the periods as follows: (1) For causes mentioned in Article 45(1) of the FC, by the party whose parent or guardian did not give his or her consent, within 5 years after attaining the age of 21; or by the parent or guardian or person having legal charge of the minor, at any time before such party has reached the age of 21; (2) For causes mentioned in Art. 45(2) of the FC, by the sane spouse, who had no knowledge of the other’s insanity; or by any 111

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FAMILY CODE (Persons) Marriage Void and Voidable Marriages

relative or guardian or person having legal charge of the insane, at any time before the death of either party, or by the insane spouse during a lucid interval or after regaining sanity. (3) For causes mentioned in Art. 45(3) of the FC by the injured party, within 5 years after the discovery of the fraud; (4) For causes mentioned in Art. 45(4) of the FC, by the injured party, within 5 years from the time the force, intimidation or undue influence disappeared or ceased;

I

i

(5) For causes mentioned in Art. 46(5) and (6) of the FC, by the injured 'party within 5 years after the marriage. (Art. 47, FC.) 73. In all cases of annulment or declaration of absolute nullity of marriage, what are the reasons for the intervention of the trial fiscal of the court or prosecuting attorney at the trial?

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ANS: In all cases of annulment or declaration of absolute nullity of marriage, the court shall order the prosecuting attorney or fiscal assigned to it to appear on behalf of the state to take steps to prevent collusion between the parties and to take care that evidence is not fabricated or suppressed.

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In the said cases, no judgment shall be based upon a stipulation of facts or confession of judgment. (Art. 48, FC.) 74. What rules regarding the support of the spouses and the custody and support of their common children shall apply during the pendency of the action for annulment of marriage or declaration for nullity of marriage? ANS: The rules applicable during the pendency of the action for annulment of marriage or declaration for nullity of marriage are as follows: (1) During the pendency of the action for annulment of marriage or declaration of nullity of marriage, and in the absence of adequate provision in a written agreement between the spouses, the court shall provide for the support of the spouses and the custody and support of their common children. (Art. 49, FC.) The spouses and the children shall be supported during the pendency of the case from the properties of the absolute community or conjugal partnership. After 112

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final judgment granting the petition for annulment or declaration of nullity thereof, the obligation of support between the spouses ceases. (Art. 198, FC.) (2) As to custody of the children, the court shall give para­ mount consideration to the moral and material welfare of the said children. The court shall take into account all relevant consider­ ations, especially the choice of the children over 7 years of age as to the parent with whom they would like to remain unless the parent chosen is unfit. (Arts. 49 and 213, FC.) Under Art. 213, 2nd par. of the FC, no child under 7 years old shall be separated from the mother, unless the court finds compelling reasons to order otherwise. Art. 17 of P.D. No. 603 (The Child and Youth Welfare Code) which states that no child under 5 years old shall be separated from his mother, unless the court finds compelling reasons to do so, has thus been repealed and the FC has reverted back to Art. 363 of the NCC. The Court shall also provide for appropriate visitation rights of the other parent. (Art. 49, FC.) 75. What rules shall be applied in the liquidation of the absolute community of conjugal partnership properties of the annulled marriage? ANS: The effects of termination of marriage provided for in pars. (2), (3), (4), and (5) of Arts. 43 and 44 of the FC covering absent spouses shall also apply in proper cases to marriages which are declared void ab initio or annulled by final judgment under Arts. 40 and 45 of the FC. Hence, in the liquidation of the absolute community or conjugal partnership properties of the annulled marriage, the following rules shall apply: (a) The share in the net profits of the party who acted in bad faith shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage, or in default of children, the innocent spouse. (b) Donations by reason of marriage shall remain valid, except that if the donee contracted the marriage in bad faith, such donations made to said donee shall be revoked by operation of law. 113

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(c) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable. (d) The spouse who contracted the marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate or intestate succession. (Art. 43, [2], [3], [4] and [5], FC.) (e) The children of the subsequent marriage conceived prior to its termination shall be considered legitimate, and their custody and support in case of dispute shall be decided by the court in a proper proceeding. (f) If both spouses acted in bad faith, donations by reason of marriage and testamentary dispositions made by one in favor of the other shall be revoked by operation of law. (Art. 44, FC.) Please note that the rules in Arts. 147 and 148 of the FC on “Property Regime of Unions Without Marriage” would apply where marriage is declared void ab initio. All creditors of the spouses as well as of the absolute community on the conjugal partnership shall be notified of the proceedings for liquidation. (Art. 50, 3rd par., FC.) 76. What issues shall be provided in the final judgment of annulment or declaration of nullity of marriage, unless previously adjudicated in a previous judicial proceedings? ANS: Unless previously adjudicated in a previous judicial proceedings, the final judgment of annulment or declaration of nullity of marriage shall provide for the following issues: (a) The liquidation, partition and distribution of the properties of the spouses. In the proceedings for liquidation, all creditors of the spouses as well as of their absolute community or conjugal partnership shall be notified and allowed to intervene to protect their interests. (b)

The custody and support of the common children.

(c) The delivery of presumptive legitimes of the common children. (Art. 50, FC.) 77. How shall the conjugal dwelling and the lot on which it is situated be adjudicated in case the final judgment 114

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of annulment or declaration of nullity of marriage provide for the partition of the properties of the spouses? Cite an example. ANS: In the partition of the properties of the spouses, the conjugal dwelling and the lot on which it is situated shall be adjudicated in accordance with Arts. 103 and 129 of the FC. (Art. 50, last par., FC.) (a) The conjugal dwelling shall be adjudicated to the spouse with whom the majority of the common children should choose to remain. (Art. [6], FC.) (b) Children below 7 years are deemed to have chosen the mother, unless the court decides otherwise. (Art. 102, [6], FC.) (c) In case there is no majority of the common children, the court shall decide, taking into account the best interests of the children. (Art. 129, [9], FC.) 78. In case of partition of the net profits of the absolute community or conjugal properties between the spouses, a) how shall the value of the presumptive legitimes of their common children be computed? b) in what forms shall such legitimes be delivered to the common children? c) who may ask for the enforcement of the judgment of partition? d) how shall the delivery of the presumptive legitimes of the children be considered? ANS: (a) In the partition of the net profits of the absolute community or conjugal properties between the spouses, the value of the presumptive legitimes of their common children shall be computed as of the date of the final judgment of the trial court. (b) The presumptive legitimes of the children shall be delivered in cash, property, or sound securities, unless the parties have already provided for such matters and their agreement has been approved by the court. (c) The children or their guardian, or the trustee of their property, may ask for the enforcement of the judgment of partition. (d) The delivery of the presumptive legitimes prescribed shall in no way prejudice the ultimate successional rights of the 115

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children accruing upon the death of either or both of the parents; but the value of the properties already received under the decree of annulment or absolute nullity shall be considered as advances on their legitimes. (Art. 51, FCJ 79. Where shall the judgment of annulment or absolute nullity of marriage, the partition and distribution of the properties of the spouses, and the delivery of the children’s presumptive legitimes be recorded to affect third persons? ANS: The judgment of annulment or absolute nullity of marriage, the partition and distribution of the properties of the spouses, and the delivery of the children’s presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third person. (Art 52, FCJ 80. If the final judgment of annulment or declaration of absolute nullity of the marriage is not recorded in the civil registry, what is the effect on the subsequent marriage of either of the former spouses? ANS: If the final judgment of annulment or declaration of absolute nullity of the marriage is not recorded in the civil registry, the subsequent marriage of either of the former spouses shall be null and void. It is only after complying with all the requirements of Art. 52 of the FC that either spouse may marry again. (Art 53, FC.) 81. Under the “Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages” (A.M. No. 02-11-10-SC, March 15, 2003) which governs peti­ tions for declaration of absolute nullity of void marriages and annulment of voidable marriages under the FC: (a) When shall the Decree of Declaration of Absolute Nullity or Annul­ ment of Marriage be issued by the Court? (b) What is the best evidence to prove declaration of absolute nullity or to serve as notice to third persons concerning the properties of petitioner and respondent, as well as the properties or presumptive legitime delivered to their common children? 116

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ANS: (a) The court shall issue the Decree after: (1) Registration of the entry of judgment granting the petition for declaration of nullity or annulment of marriage in the Civil Registry where the marriage was celebrated and in the Civil Registry of the place where the Family Court is lo­ cated; (2) Registration of the approved partition and distribu­ tion of the properties of the spouses in the proper Register of Deeds where the real properties are located; and (3) The delivery of the children’s presumptive legitimes in cash, property or sound securities- (Sec. 22, A.M. No. 021810-SC.) (b) The Decree in the Civil Registry where the marriage was registered, the Civil Registry of the place where the Family Court is situated, and in the National Census and Statistics Office is the best evidence. (Sec. 23, A.M. No. 02-11-10-SC.) 82. The marriage of H and W was annulled by the competent court. Upon finality of the judgment of nullity, H began looking for his prospective second mate. He fell in love with a sexy woman, S, who wanted to be married as soon as possible, i.e., after a few months of courtship. As a young lawyer, you were consulted by H. (a) How soon can H be joined in lawful wedlock to his girlfriend, S? Under existing laws, are there certain requisites that must be complied with before he can remarry? What advice would you give H? (b) Suppose that children were born from the union of H and W, what would be the status of said children? Explain your answer. (c) If the subsequent marriage of H to S was contracted before compliance with the statutory condition for its validity, what are the rights of the children of the first marriage (i.e., of H and W) and of the children of the subsequent marriage (of H and S)? (1990) ANS: (a) H, or either spouse for that matter, can many again after complying with the provisions of Art. 52 of the FC, namely, 117

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there must be a partition and distribution of the properties of the spouses, and the delivery of the children’s presumptive legitimes, which should be recorded in the appropriate civil registry and registries of property. H should be so advised. (b) The children born from the union of H and W would be legitimate children if conceived or born before the decree of annulment of the marriage (under Art. 45 of the FC) has become final and executory. (Art. 54, FC.) (c) The children of the 1st marriage shall be considered legitimate children if conceived or born before the judgment of annulment of the marriage of H and W has become final and executory. Children conceived or born of the subsequent marriage shall likewise be legitimate even if the marriage of H and S be null and void for failure to comply with the requisites of Art. 52 of the FC. (Art. 53, FC.) As legitimate children, they have the following rights: (1) To bear the surnames of the father and the mother in conformity with the provisions of the NCC on Surnames; (2) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of this Code on Support; and (3) To be entitled to the legitime and other successional rights granted to them by the NCC. (Art. 174, FC.) 83. Where there are no properties of the spouses which could be the subject of liquidation, partition and distribution and consequently, no legitimes are to be delivered to the common children, is there a need for recording of the judgment in the appropriate civil registry and registries of property to comply with Art. 52 of the FC? ANS: The general rule is that the judgment of annullment or absolute nullity of the marriage, the liquidation, 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 to comply with Art. 52 of the FC. However, there is no need for recording thereof in the appropriate registries of property 118

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where there are no properties that would be subject of liquidation, partition and distribution and neither are there presumptive legitimes that could be delivered to the common children. Logically, our governing laws do not require such judgment to be furnished and recorded in the registry/ies of property. 84. State the rules enunciated in Art. 54 of the FC regarding the classification of: (a) Children conceived or born before the judgment of annulment or absolute nullity of the marriage under Art. 36 of the FC has become final and executory. (b) Children conceived or born of the subsequent marriage under Art. 43 of the FC which is considered hull and void due to failure to comply with the requirement to record judgment of annulment or of absolute nullity of the marriage in the appropriate civil registry. ANS: (a) Children conceived or bom before the judgment of annulment of marriage or absolute nullity of marriage under Art. 36 of the FC shall be considered legitimate. This is because voidable or annullable marriages are valid until annulled. (b) Children conceived or born of the subsequent marriage under Art. 53 of the FC shall likewise be legitimate although said subsequent marriage is null and void.

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Title II LEGAL SEPARATION (Arts. 55-67, FC) 1. Define Divorce. What are the different kinds of divorce? ANS: Divorce is the.dissolution or partial suspension by law of the marital relation; the dissolution being termed divorce from the bond of matrimony, or a vinculo matrimonii; the suspension being known as divorce from bed and board, or a mensa et thoro. (Bishop, Marriage and Divorce, Vol. 2, Sec. 225.) There are 2 kinds of divorce; first, absolute divorce, or a vinculo matrimonii, which is the separation of the spouses for a cause authorized by law by a judgment of a competent court whereby the marriage tie is dissolved leaving the parties free to contract a new marriage; and second, relative divorce, or a mensa et thoro, which is the separation of the spouses from bed and board for a cause authorized by law by the judgment of a competent court but the marriage tie subsists and the parties are not allowed to marry again. (Keezer, Marriage and Divorce, p. 296.) Under the NCC, relative divorce is known as legal separation. 2.

Is absolute divorce recognized in the Philippines?

ANS: Under the NCC, absolute divorce is not recognized. However, for a period of 20 years from June 17, 1949, absolute divorce in accordance with Mohammedan customs and practices is recognized for Mohammedans residing in non-Christian provinces. (Sec. 1, Rep. Act No. 394.) This law, in turn, is now superseded by the Muslim Code of Personal Laws, wherein absolute divorce in accordance with Muslim customs and practices is also recognized. 120

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3. Distinguish Legal Separation from Separation of Property. ANS: Legal Separation and Separation of Property may be distinguished from each other in the following ways: (1) In legal separation, there is suspension of the common life of the husband and wife covering their persons and properties; while in separation of property, there is suspension only of the property relations of the husband and wife. Hence, the husband and wife may still be living together. However, their absolute community of property or conjugal partnership is dissolved. (2) Legal separation cannot be granted on mere stipulation of facts, or confession of judgment or agreement of the parties. (Art. 60, FC.) On the other hand, separation of property can be effected by agreement of the spouses during the marriage subject, however, to court approval. If done prior to marriage, separation of property can be effected through the marriage settlement. (Arts. 134 and 136, FC.) (3) Legal separation necessarily involves separation of property, but there may be separation of property of the spouses without legal separation as they may still be actually living together. 4.

Distinguish Legal Separation from Separation De

Facto.

ANS: Legal Separation and Separation De Facto may be distinguished from each other in the following ways: (1) Only by. decree of court can legal separation be effected while in separation de facto, the spouses can separate from each other at any time without need for a court order. (2) Dissolution of the absolute community of property or conjugal partnership of the spouses necessarily results from legal separation. The share of the guilty spouses in the net profits of the absolute community of property or conjugal partnership is forfeited. Neither can said guilty spouses inherit from the innocent spouses. In separation de facto, the husband and wife are still heirs of each other, their property relations remain, no matter how guilty 121

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one party is, unless the innocent party disinherits the guilty party in his or her will. 5. Distinguish Legal Separation from Annulment of Marriage. ANS: Legal Separation and Annulment of Marriage may be distinguished from each other in the following ways: (1) >The marriage is not defective in legal separation. The marriage is defective in annulment of marriage. (2) In legal separation, the grounds arise only after the marriage. In annulment of marriage, the grounds must exist at the time of or before the marriage. (3) In legal separation, the spouses are still married to each other and cannot therefore, remarry. In annulment of marriage, the spouses can marry again as the marriage is set aside. (4) In legal separation, there are 10 grounds for legal separation while in annulment there are only six (6) grounds. 6. Who and when may the petition for legal separation be filed? What are the grounds for legal separation? ANS: A petition for legal separation may be filed only by the husband of the wife, as the case may be, within five (5) years from the time of the occurrence of any of the following grounds for legal separation: (1) Repeated physical violence or grossly abusive conduct directed against the petitioner, a common child, or a child of the petitioner; (2) Physical violence or moral pressure to compel the petitioner to change religious or political affiliation; (3) Attempt of respondent to corrupt or induce the petitioner, a common child, or a child of the petitioner, to engage in prostitution, or connivance in such corruption or inducement; (4) Final judgment sentencing the respondent to imprison­ ment of more than 6 years, even if pardoned; (5)

Drug addiction or habitual alcoholism of the respondent; 122

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(6)

Arts. 55-67

Lesbianism or homosexuality of the respondent;

(7) Contracting by the respondent of a subsequent bigamous marriage, whether in the Philippines or abroad; (8)

Sexual infidelity or perversion;

(9)

Attempt by the respondent against the life of the petitioner;

or (10) Abandonment of petitioner by respondent without justifiable cause for more than one year. (Sec. 2[a], Rule on Legal Separation, A.M. No. 02-11-11-SC, March 15, 2003.) For purpose of this Article, the term "child” shall include a child by nature or by adoption. (Art. 55, FC.) 7. What are the defenses which are available to the defendant in actions for legal separation? ANS: The defendant in actions for legal separation may avail himself of the following defenses: (1) Condonation, or the act of the innocent spouse in forgiving the offender subject to the condition that the offense shall not be repeated. (2) Consent, or that where the aggrieved party has agreed to the commission of the offense or act complained of. (3) Connivance, or the act of one spouse in consenting to the commission of the offense or act constituted the ground for legal separation by the other. (4) Mutual guilt, or where both parties have given ground for legal separation. (5) Collusion, or agreement between two (2) spouses by virtue of which one of them will commit or appear to commit or be represented as having committed an offense which constitutes a ground for legal separation. (6) Prescription of action, or where the action was not filed within 5 years from the time of the occurrence of the cause. (Art. 56, FC.) 123

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The Court shall deny the petition for legal separation on any of the aforementioned defenses. (Sec. 16, Rule on Legal Separation, A M No. 02-11-11-SC, March 15, 2003.) 8. Saul, a married man, had an adulterous relation with Tessie. In one of the trysts, Saul’s wife, Cecile, caught them in flagrante. Armed with a gun, Cecile shot Saul in a fit of extreme jealousy, nearly killing him. Four (4) years after the incident, Saul filed an action for legal separation against Cecile on the ground that she attempted to kill him. (1) case?

If you were Saul’s counsel, how will you argue his

AN'S: As the counsel of Saul, I will argue that an attempt by the wife against the life of the husband is one of the grounds enumerated by the FC for legal separation and there is no need for criminal conviction for the ground to be invoked (Art. 55, par. 9, FC). (2) If you were the lawyer of Cecile, what will be your defense? As the counsel of Cecile, I will invoke the adultery of Saul. Mutual guilt is a ground for the dismissal of an action for legal separation (Art. 56, par. 4, FC). The rule is anchored on a wellestablished principle that one must come to court with clean hands. (3) (2006)

If you were the judge, how will you decide the case?

If I were the judge, I will dismiss the action on the ground of mutual guilt of the parties. The Philippine Constitution protects marriage as an inviolable social institution (Art. XV, Sec. 2, 1987 Constitution). An action for legal separation involves public interest and no such decree should be issued if any legal obstacle thereto appears on record. This is in line with the policy that in case of doubt, the court shall uphold the validity and sanctity of marriage. (Brown vs. Yambao, G.R. No. L-10699, October 18,1957). (Suggested Answers to the 2006 Bar Examination Questions, PALS) 9. Which of the following remedies, i.e., (a) declaration of nullity of marriage, (b) annulment of marriage, (c) 124

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legal separation, and/or (d) separation of property, can an aggrieved spouse avail of — (i) If the wife discovers after the marriage that her husband has “AIDS.” (ii) If the wife goes abroad to work as a nurse and refuses to come home after the expiration of her 3-year contract there. (iii) If the husband discovers after the marriage that his wife has been a prostitute before they got married. (iv) If the husband has a serious affair with his secretary and refuses to stop notwithstanding advice from relatives and friends. (v) If the husband beats up his wife every time he comes home drunk. (2003) ANS: (i) Since AIDS is a serious and incurable sexuallytransmissible disease, the wife may file an action for annulment of the marriage on this ground whether such fact was concealed or not from the wife, provided that the disease was present at the time of the marriage. The marriage is voidable even though the husband was not aware that he had the disease at the time of marriage. (ii) If the wife refuses to come home for three (3) months from the expiration of her contract, she is presumed to have abandoned the husband and he may file an action for judicial separation of property. If the refusal continues for more than one year from the expiration of her contract, the husband may file the action for legal separation under Art. 55(10) of the FC on the ground of abandonment of petitioner by respondent without justifiable cause for more than one year. The wife is deemed to have abandoned the husband when she leaves the conjugal dwelling without any intention of returning. (Art. 101, FC.) The intention not to return cannot be presumed during the 3-year period of her contract. (iii) If the husband discovers after the marriage that his wife was a prostitute before they got married, he has no remedy. No misrepresentation or deceit as to character, health, rank, fortune or chastity shall constitute fraud as legal ground for an action for the annulment of marriage. (Art. 46 FC.) 125

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(iv) The wife may file an action for legal separation. The husband’s sexual infidelity is a ground for legal separation. (Art. 55, FC.) She may also file an action for judicial separation of property for failure of her husband to comply with his marital duty of fidelity. (Arts. 135[4], 101, FC.) (v) The wife may file an action for legal separation on the ground of repeated physical violence on her person. (Art. 55[1], FC.) She may also file an action for judicial separation of property for failure of the husband to comply with his marital duty of mutual respect. (Arts. 135[4], and 101, FC.) She may also file an action for declaration of nullity of the marriage if the husband’s behavior constitutes psychological incapacity existing at the time of the celebration of marriage. (Answers to 2003 Bar Examination Questions, UPLCJ 10. H instituted an action for legal separation against his wife, W, on the ground of adultery. It was, however, established during the trial that after H’s discovery of his wife’s infidelity, he still had sexual intercourse with her twice. Will such fact bar the granting of the decree of legal separation? Reasons. ANS: Yes. The act of H in having sexual intercourse with W inspite of his knowledge of the tatter’s infidelity is an act of implied condonation. Such act of condonation shall bar the granting of a decree of legal separation in conformity with Art. 56 of the FC. (Ginez vs. Bugayong, 100 Phil. 616.) 11. A and B, husband and wife, entered into a contract whereby they agreed that they shall live separately; that they are free to look for another mate; and that they should never prosecute each other for adultery or concubinage. Subsequently, on January 1,1987, A started cohabiting with M, and on September 1, 1987, the latter gave birth to a child who was recorded as the child of A. On September 1,1992, B who was aware of A’s cohabitation with M way back in 1987, filed a complaint for legal separation against A. (a) Will the action prosper? (b) Assuming that the complaint was filed in time, would that make a difference in your answer? ANS: (a) The action will not prosper. B became cognizant of her husband’s act of adultery as far back as January, 1987. She 126

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instituted the complaint only on September, 1992. Art. 57 of the FC provides that “an action for legal separation shall be filed within 5 years from the time of the occurrence of the cause.” It is clear that the complaint in the case at bar was filed out of time. (b) Even assuming that the complaint was filed in time, the action will not prosper. Art. 56 of the FC specifically provides that legal separation may be claimed only by the innocent spouse, provided that there has been no condonation or consent to the adultery. Here, the condonation and consent are not only implied but expressed. Having consented to and/or condoned the defendant’s offense in writing, plaintiff is undeserving of the court’s sympathy. (Matubis vs, Praxedes, 109 Phil. 709J 12. If a man commits several acts of sexual infidelity, particularly in 2002, 2003, 2004, 2005, does the prescriptive period to file for legal separation run from 2002? (2007) ANS: Every act of sexual infidelity committed by the man is a ground for legal separation under Art. 55(8) of the FC (Tolentino, Civil Code, 1990 ed., 321). Hence, the prescriptive period begins to run upon the commission of each act of infidelity. (Suggested Answers to the 2007 Bar Examination Questions, PALS) 13. May the court issue a decree of legal separation based upon facts stipulated by the spouses? If so, why? If not, why not? State the effect of such decree of legal separation. ANS: The court cannot issue a decree of legal separation based upon the facts stipulated by the spouses. This is the mandate of Art. 60 of the FC which declares that no decree of legal separation shall be based upon a stipulation of facts or a confession of judgment. The reason behind the law is obviously to prevent collusion. Such decree of legal separation based upon a stipulation of facts, if promulgated, shall be void and of no effect. 14. A caught his wife, B, having illicit relations with P on June 18, 1955. He then told her that he will file an action against her for legal separation which the latter agreed provided that no criminal charges shall be filed against her. The complaint for legal separation was filed on July 5, 1955. 127

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B defaulted. When questioned by the fiscal, B signified her conformity to the legal separation. Is there a confession of a judgment in this case which would justify the dismissal of the case in accordance with Art. 60 of the FC? (1973) ANS: Art. 60 of the FC does not exclude as evidence any admission or confession made by the defendant outside of the court. It merely prohibits a decree of separation upon a confession of judgment. Confession of judgment usually happens when the defendant appears in court and confesses the right of plaintiff to judgment or files a pleading expressly agreeing to the plaintiffs demand. This did not occur in the instant case. Yet, even supposing that the statement of defendant constituted a confession of judgment, inasmuch as there is evidence of adultery independently of such statement, the decree may and should be granted, since it would not be based on her confession, but upon evidence presented by the plaintiff. What the law prohibits is a judgment based exclusively or mainly on defendant’s confession. Otherwise, if a confession can defeat the action ipso facto, any defendant, who opposes the separation, will immediately confess judgment, purposely to prevent it. (Ocampo vs. Florenciano, 107 PhiL 35.) 15. tion?

What are the effects of a decree of legal separa­

ANS: The effects of a decree of legal separation are as follows: (1) The spouses shall be entitled to live separately from each other, but the marriage bonds shall not be severed; (2) The absolute community or the conjugal partnership shall be dissolved and liquidated but the offending spouse shall have no right to any share of the net profits earned by the absolute community or the conjugal partnership, which shall be forfeited in accordance with the provisions of Art. 43(2) of the FC; (3) The custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Art. 213 of the FC; (4) The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession. Moreover, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law (Art. 63, FC.); 128

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(5) The innocent spouse may revoke the donations made by him or her in favor of the offending spouse, as well as the designation of the latter as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable, following the date the decree became final. The revocation of the donations shall be recorded in the registries of property in the places where the properties are located. Alienations, liens and encumbrances registered in good faith before the recording of the complaint for revocation in the registries of property shall be respected. The revocation of or change in the designation of the insurance beneficiary shall take effect upon written notification thereof to the insured. The action to revoke the donations herein must be brought within five (5) years from the time the decree has become final. (Art. 64, FC.) (Note: There is no prescriptive period for the innocent spouse to revoke insurance policies in favor of the guilty spouse. As long as the policy is effective, the innocent spouse may revoke the same.)

16. separation?

What are the effects of filing of petition for legal

ANS: The effects of filing of petition for legal separation are as follows: (1) The spouses are entitled to live separately from each other. The wife can already have a residence of her own separate from her husband’s residence. (2) The husband has no more rights to have sexual intercourse with his wife and if he forces himself upon her, he can be charged criminally. (3) The court shall designate the husband or the wife to manage the absolute community or conjugal partnership property in the absence of an agreement between the spouses. (4) The court may designate a third person to administer the properties of the spouses. The administrator appointed by the court shall have the same powers and duties as a guardian under the Rules of Court and 129

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therefore, cannot alienate or encumber any property of the spouses without court authority. (Art. 61, FC.) Under the “Rule on Provisional Orders” (A.M. No. 02-11-12SC, March 15, 2003), if a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the court may, upon application of the aggrieved party under oath, issue a provisional order appointing the applicant or a third person as receiver or sole administrator of the common property subject to such precautionary conditions it may imposed. The receiver or administrator may not dispose of or encumber any common property or specific separate property of either spouse without prior authority of the court. The provisional order issued by the court shall be registered in the proper Register of Deeds and annotated in all titles of properties subject of the receivership or administration. 17. In 1953, C brought an action for legal separation against her husband, A alleging that they were married in 1934, that the latter abandoned her in 1943, that they acquired properties during their marriage, and that she discovered her husband cohabiting with a Chinese woman, B, in 1949. She prayed for the issuance of a decree of legal separation, which would order that A shall be deprived of his share of the conjugal partnership profits. In his answer, A counterclaimed for the declaration of nullity ab initio of his marriage with C, on the ground of his prior and subsisting marriage, celebrated according to Chinese Law, with B. In 1969, during the pendency of the case, C died in a vehicular accident. As a consequence, the lower court dismissed the case. From this order, X, father and only heir of C, appealed to the SC. The issues are as follows: (1) Does the death of the plaintiff before final decree, in an action for legal separation, abate the action? (1979) (2) If it does, will abatement also apply if the action involves property rights? ANS: (1) An action for legal separation which involves nothing more than the bed-and-board separation of the spouse is purely 130

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personal. The FC recognizes this in its Art. 56 by allowing only the innocent spouse (and no one else) to claim legal separation; and in its Art. 66 by providing that the spouses can, by their reconciliation, stop or abate the proceedings and even rescind a decree of legal separation already rendered. Being personal in character, it follows that the death of one party to the action causes the death of the action itself — actio personalis moritur cum persona. (2) Even if the action involves property rights, the abatement will still apply. A review of the effects of a decree of legal separation and the corresponding rights arising therefrom as enumerated in Art. 63 of the FC shows that they are solely the effects of the decree of legal separation; hence, they cannot survive the death of the plaintiff if it occurs prior to the decree. By their very terms, they are vested exclusively in the persons of the spouses, and by their very nature and intent, they are non-assignable or intransmissible. A further reason is that these rights are mere effects of a decree of legal separation, their source being the decree itself. Without the decree, such rights do not come into existence, so that before the finality of the decree, these claims are merely rights in expectation. If death supervenes during the pendency of the action, no decree can be forthcoming, death producing a more radical and definitive separation; and the expected consequential rights and claims would necessarily remain unborn. (Lapuz Sy us. Eufemio, 43 SCRA 177.) 18. PB, a good for nothing gigolo, married RH, a rich old maid who inherited considerable properties from both her deceased parents. Even after the marriage, PB continued his philandering ways. When RH caught him having scandalous relations with a.nother woman, they had a terrible quarrel. So RH filed an action for legal separation. After the evidence for both parties had already been submitted but before the court had rendered a decision, RH died in an automobile accident leaving no heirs but her husband and another spinster sister. PB then moved for the dismissal of the action so the only sister of RH filed an opposition thereto and prayed that she be substituted for RH contending that if the action were to be dismissed, PB would be able to inherit a sizeable sum from the estate of the deceased. Should the opposition and prayer for substitution be sustained? (1979) 131

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ANS: The opposition and prayer for substitution cannot be sustained. An action for legal separation which involves nothing more than the bed-and-board separation of the spouses is purely personal. The PC recognizes this. Being personal in character, it follows that the death of a party to the action causes the death of the action. Even if the action involves property rights, the abatement will still apply. A review of the effects of legal separation and the corresponding rights thereunder shows that they are solely the effects of legal separation; hence, they cannot survive the death of the plaintiff if it occurs prior to the decree. (Lapuz Sy vs. Eufemio, 43 SCRA 1771.) 19. The husband was granted a decree of legal separation on the ground of adultery on the part of the wife. May the wife inherit from the husband. (a)

By intestate succession?

(b) By will? Reasons. (1982) ANS: (a) The wife in the instant case cannot inherit from her husband by intestate succession. According to the law, the offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession. (b) It depends. If the will was executed prior to the legal separation, it is clear that in effect the wife cannot inherit from her husband. According to the law, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law. However, if the will was executed subsequent to the legal separation, undoubtedly, the wife will then be able to inherit from her husband. The reason is obvious. There is a tacit or implied pardon. (Note: The above answers are based on No. 4 of Art. 63 of the FC. The last part regarding tacit pardon is based on Art. 1033 of the NCC

by analogy.) 20. What does the FC require the spouses to do should they reconcile during the pendency of the legal separation 132

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proceedings or even after the finality of the decree of legal separation? ANS: If the spouses should reconcile, the corresponding joint manifestation under oath duly signed by them shall be filed with the court in the same proceeding for legal separation. (Art. 65, FC.) 21. What are the effects of reconciliation of the spouses? ANS: The effects of reconciliation of the spouses are as follows: (1) The legal separation proceedings, if still pending, shall thereby be terminated in whatever stage; and (2) The final decree of legal separation shall be set aside, but the separation of property and any forfeiture of the share of the guilty spouse already effected shall subsist, unless the spouses agree to revive their former property regime. The court order containing the foregoing shall be recorded in the proper civil registries. (Art. 66, FC.) 22. What steps shall be done by the reconciling spouses who have agreed to revive their former property regime to effect such agreement? ANS: If the spouses agree to revive their former property regime, they shall execute an agreement under oath and specify the following: (1) regime;

The properties to be contributed anew to the restored

(2) Those to be retained as separate properties of each spouses; and (3) The names of all their known creditors, their addresses and the amount owing to each. (Art. 67, FC.) The spouses should then submit to the court the abovementioned agreement of revival together with the motion asking for its approval. The motion shall be submitted in the same proceeding for legal separation. Copies of the agreement and the motion shall 133

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FAMILY CODE (Persons) Legal Separation

be furnished the creditors named therein. After due hearing, the court shall, in its order, take measure to protect the interest of creditors and such order shall be recorded in the proper registries of property. The recording of the order in the registries of properly shall not prejudice any creditor not listed or not notified, unless the debtor spouse has sufficient separate properties to satisfy the creditor’s claim. (Art. 67, FC.)

134

Title III RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE (Arts. 68-73, FC) 1. What are the personal obligations of spouses to each other? ANS: The personal obligations of the spouses to each other are: (1)

To live together;

(2)

To observe mutual love, respect, and fidelity; and

(3)

To render mutual help and support. (Art. 68, FC.)

2. Who shall fix the family domicile? In case of disagreement, who shall decide? ANS: The husband and wife shall fix the family domicile. In case of disagreement, the court shall decide. The court may exempt one spouse from living with the other if the latter should live abroad or there are other valid and compelling reasons for the exemption. However, such exemption shall not apply if the same is not compatible with the solidarity of the family. (Art. 69, FC.) 3. Who shall be responsible for the support of the family? How shall the expenses for such support and other conjugal obligations be paid? ANS: The spouses are jointly responsible for the support of the family. The expenses for such support and other conjugal obligations shall be paid from such properties in the order as follows: (1)

From the community property or conjugal property, 135

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(2)

From the income or fruits of their separate properties;

(3)

From the separate properties of the spouses. (Art. 70,

FC.) 4. Who has the right and duty to the management of the household? Who shall pay for the expenses incurred for such management? ANS: The management of the household shall be the right and duty of both spouses. The expenses for such management shall be paid in accordance with the following order provided for in Art. 70 of the FC. (1)

First, from the community property or conjugal property;

(2) Second, from the income or fruit of their separate properties; (3) 71, FC.)

Third, from the separate properties of the spouses. (Art.

5. H and W are husband and wife. Without any justi­ fiable cause, W abandoned the conjugal home. Can H ask a competent court to order W to return to the conjugal home under pain of contempt? ANS: No, the court cannot order W to return to the conjugal home under pain of contempt. The doctrine in this jurisdiction, which is now well-settled, is that the obligation of cohabitation of husband and wife is not enforceable by contempt proceedings. (Arroyo vs. Vasquez de Arroyo, 42 Phil. 54; Atilano vs. Chua, 103 Phil. 255; Tenchavez vs. Escano, 15 SCRA 355, 17 SCRA 674.) The reason for this is that cohabitation or jus consurtium is a purely personal obligation — an obligation to do. To compel the wife to comply with such obligation would be an infringement of her personal liberty. As the Supreme Court in Tenchavez us. Escano has so aptly stated it — “in private relations, physical coercion is barred under the old maxim — Nemo potest preciso cogi ad factum.” Consequently, if H really wants his wife to return to the conjugal home, the only thing that he could do under the circumstances would be to ask the court to admonish her to return on the ground that under the law, husband and wife are obliged to live together. (Art. 72, FC.) 136

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6. In the above problem, what are the other remedies which are available to H? ANS: As held by the SC, actually, under the NCC (certain provisions of which were repealed by the FC) there are economic sanctions which are available to a spouse against a consort who unjustifiably deserts the conjugal abode. In the first place, such deserting spouse can be denied support. This right is expressly recognized in Art. 127 of the FC. And where the wealth of the deserting spouses renders this remedy illusory, there is no cogent reason why the court may not award moral damages, as it may in cases of breach of other obligations to do intuito personae even if in private relations, physical coercion is barred under the old maxim "Nemo potes preciso cogi ad factum ” As it is, the refusal of the wife to perform her wifely duties, her denial of consortium and her desertion of her husband would certainly constitute a willful infliction of injury upon her husband’s feelings in a manner which is contrary to morals, good customs and public policy for which Arts. 21 and 2210(10) of the NCC authorize an award for moral damages. Thus, where the wife not only abandoned her husband without any justifiable cause, but even secured an absolute divorce in the United States, and afterwards, got married again, it was held that the husband can recover moral damages. (Tenchavez vs. Escano, supra.) 7. May a spouse exercise any legitimate profession, occupation, business or activity without the consent of the other? On what grounds may a spouse object to such exercise? And in case of disagreement, who shall decide on such objection? ANS: Either spouse may exercise any legitimate profession, occupation, business or activity without the consent of the other. The latter may object only on valid, serious, and moral grounds. In case of disagreement, the court shall decide whether or not: (1)

The objection is proper, and

(2) Benefit has accrued to the family prior to the objection or thereafter. (Art. 73, FC.)

137

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8. What properties shall be liable for the transactions of the spouse who acted without the consent of the other? ANS: It depends. If the benefit has redounded to the family prior to the objection, the absolute community or conjugal partnership properties shall be liable for the obligations resulting from the transactions of the spouse who acted without the consent of the other. This is because such benefits in the form of profits or income have become part of the absolute community or conjugal partnership properties. However, if the profits or income have accrued after the objection, the resulting obligations shall be enforced against the separate properties of the spouse who has not obtained consent. But the rights of the creditors who acted in good faith in transacting with the spouse who acted without the consent of the other spouse shall not be prejudiced in their rights. Thus, they may go after and hold liable the absolute community or conjugal partnership properties or the separate properties of the spouse with whom the creditors contracted. (Art. 73, FC.)

138

Title IV PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE Chapter 1 GENERAL PROVISIONS (Arts. 74-81, FC) 1.

What is meant by marriage settlement?

ANS: A marriage settlement is defined as a contract entered into by persons who are about to be united in marriage for the purpose of fixing the condition of the conjugal partnership with regard to present and future property. (9 Manresa 106.) 2. What shall govern the property relations of the spouses? ANS: The property relations between husband and wife shall be governed in the following order: (1)

By marriage settlements executed before the marriage;

(2)

By the provisions of the NCC as amended by the FC; and

(3)

By the local customs. (Art. 74, FC.)

3. What economic system may be agreed upon by the future spouses in the marriage settlement? ANS: The future spouses may in the marriage settlement agree upon: (1) the regime of absolute community, or (2) conjugal partnership of gains, or (3) complete separation of property, or (4) any other regime. In the absence of marriage settlements, or when the regime agreed upon is void, the system of absolute community of property as established in the FC shall govern. (Art. 75, FC.) 139

f I

Arts. 74-81

4. contracts.

FAMILY CODE (Persons) Property Relations Between Husband and Wife General Provisions

Give the essential features of each of the above

ANS: The essential features of the above contracts are: (1) Conjugal partnership of gains. That there are certain properties which still belong to each of the spouses exclusively and over which they exercise exclusive ownership and administration; that all the fruits of such properties, the income from the work or industry of both spouses during the marriage, and those which they acquire during the marriage by onerous title with conjugal funds shall be placed in a common fund, which shall be divided equally between them or their heirs upon the dissolution of the marriage; that the husband, as a rule, shall administer such conjugal properties; that, as a rule, such conjugal properties shall be liable only for debts contracted by the husband which have redounded to the benefit of the family, and not for ante-nuptial debts, or even for debts contracted during the marriage which have not redounded to the benefit of the family; that such conjugal properties shall be liable for the expenses of the marriage, and that, as a rule, the husband cannot alienate or encumber such conjugal properties without the consent of the wife. (Arts. 105-133, FC.) (2) Absolute community o f property. That all property of the spouses, with certain specified exceptions, belong to both husband and wife jointly; that ante-nuptial debts of either spouse shall not be paid from the community, unless the same have redounded to the benefit of the family; that debts contracted by both spouses or by one of them with the consent of the other shall be paid from the community; and that neither spouse may alienate or encumber any community property without the consent of the other. (Arts. 88-104, FC, Report of the Code Commission, p. 48.) (3) Complete separation of property. That the separation of property may refer to present or future property or both; that sepa­ ration may be total or partial; that in the latter case, the proper­ ty not agreed upon as separate shall pertain to the partnership of gains; and that each spouse shall proportionately bear the family expenses. {Arts. 143-146, FC, Report o f the Code Commission, pp. 48-49.) (4) Any other system or regime. The future spouse may agree on any other kind of economic regime. The only limitation is that 140

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the agreement must not be contrary to law, morals, good customs, public order, or public policy. 5. Suppose “A” and “B” in their marriage settlement expressly reject the absolute community regime as estab­ lished by the FC but not agree on any system to govern their property relationship during the marriage. What system will apply? (1972) ANS: Since, undoubtedly, the property relations of “A” and “B” cannot be governed by the system of absolute community because in their marriage settlement they expressly rejected it, it is clear that Art. 74 of the FC is not applicable. We must now determine their intention as to what system shall govern. (Art. 74[1], FC.) For this purpose, the contemporaneous and subsequent acts of the parties shall be principally considered. (Art. 1371, NCC.) If their intention cannot be ascertained, then we must apply the local custom of the place. (Art. 74, FC.) In the absence of custom, the rules on coownership shall govern. 6. Erasmo married a rich woman, Flora, who brought into the marriage substantial assets. When Flora died, Eras­ mo claimed one-half of the said assets on the strength of a public instrument executed by Erasmo and Flora during their marriage whereby all their separate properties were converted into conjugal properties. Is Erasmo’s claim valid? (1974) ANS: Erasmo’s claim is not valid for the following reasons: (a) As a rule, the property relations of husband and wife cannot be modified during the marriage. It can only be done in the marriage settlement entered into by the future spouses before the celebration of their marriage. The only exception to this rule is in case of judicial separation of property during the marriage under Arts. 66, 67, 128, 135 and 136 of the FC. (Art. 76, FC.) Since the instrument executed by Erasmo and Flora during their marriage does not fall within the purview of the exception, it is null and void; (b) To sustain Erasmo’s claim would provide an indirect way of circumventing the ban against donations between spouses during their marriage as provided for in Art. 87 of the FC; 141

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(c) Furthermore, to sustain Erasmo’s claim would open the door to the possible commission of fraud by the spouses. If one or both of them had incurred either antenuptial debt or debts during the marriage which have not redounded to the benefits of the family and for which the partnership cannot be held liable, all that they will have to do would be to enter into a similar arrangement in order to defraud their creditors. 7. What is the form required of marriage settlements and any modification made therein as to effect the parties thereto? As to effect third persons? ANS: The marriage settlements and any modifications thereof must be in writing, signed by the parties and executed before the celebration of the marriage. They shall not prejudice third persons unless they are registered in the local registry where the marriage contract is recorded as well as in the proper registries of property. (Art. 77, FC.) 8. What is essential for the validity of marriage settlements entered into by a minor who according to law may contract marriage? How about if the party executing the settlement is under civil interdiction or is subject to any other disability? ANS: A minor who according to law may contract marriage may also enter into marriage settlements but they shall be valid only if the persons designated in Art. 14 of the FC (the parent, guardian or persons having legal charge of the minor) to give consent to the marriage are made parties to the agreement, subject to the provisions of Title IX (Parental Authority) of the FC. (Art. 78, FC.) For the validity of any marriage settlements executed by a person upon whom a sentence of civil interdiction has been pronounced or who is subject to any other disability, it shall be indispensable for the guardian appointed by a competent court to be made a party thereto. (Art. 79, FC.) Hence, where the judicial guardian of the person under civil interdiction or under disability (e.g., deaf-mutes, spendthrifts or insolvents, but not insanes who, even with the consent of their parents or guardians, cannot contract marriage) does not sign the marriage settlement as a party thereto, the marriage settlement is void. 142

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9. What law shall govern the property relations of the spouses regardless of the place of celebration of their marriage and residence? Exceptions. ANS: In the absence of a contrary stipulation in the marriage settlements, the property relations of the spouses shall be governed by the Philippine laws, regardless of the place of the celebration of the marriage and their residence. This rule shall not apply: (1) where both spouses are aliens; (2) with respect to the extrinsic validity of contracts affecting property not situated in the Philippines and executed in the countiy where the property is located; and (3) with respect to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a foreign country whose laws require different formalities for their extrinsic validity. (Art. 80, FC.) (Note: Under Art. 124 of the NCC, it is the husband’s national law that governs the property relations where the spouses are of dif­ ferent nationalities. Said provision was repealed by Art. 80 of the FC. Hence, the property relations of the spouses shall be governed by Phil­ ippine laws where one party is a Filipino and the other is an alien.)

10. What is the effect upon the stipulations made in the marriage settlements if the marriage should not take place? ANS: Everything stipulated in the settlements or contracts in consideration of a fixture marriage, including donations between the prospective spouses made therein shall be rendered void if the marriage does not take place. However, stipulations that do not depend upon the celebration of the marriage shall be valid. (Art. 81, FC.)

Chapter 2 DONATIONS BY REASON OF MARRIAGE (Arts. 82-87, FC) 11. riage?

What is meant by donations by reason of mar­

ANS: Donations by reason of marriage are those which are made before its celebration, in consideration of the same, and in favor of one or both of the future spouses. (Art. 82, FC.) 143

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FAMILY CODE (Persons) Property Relations Between Husband and Wife Donations by Reason of Marriage

12. Distinguish between donations marriage and ordinary donations.

by

reason

of

ANS: Donations by reason of marriage and ordinary donations are distinguished from each other in the following ways: (1) As to acceptance. In the first, express acceptance is not necessary, whereas in the second, as a general rule, express acceptance is necessary. (2) As to extent. In the first, both present and future properties may be donated, whereas in the second, only present properties may be donated. (3) As to revocation. The grounds for revocation of the first are found in Art. 86 of the FC and are different from the grounds for revocation of the second which are found in the law or donations. It is to be noted that Art. 83 of the FC which provides that the form of donations propter nuptias follows those of ordinary donations established in Title III of Book III of the NCC repealed Art. 127 of the NCC which provides that the form of donations propter nuptias shall be governed by the Statute of Frauds. 13. X had been taking care of 6 until the latter finally reached womanhood and got married to A, Prior to the marriage, A executed a deed of donation, wherein he stated that: (a) if there are children bom during the marriage, the properties referred to as well as those required during the conjugal union shall be donated to such children, who shall inherit in equal shares; (b) but if there are no children, and he should die before his wife, 1/2 of such properties shall be given to his brothers and sisters; or (c) if there are no children, and his wife should die before him, 1/2 of such properties shall be given to those who reared his wife. About 9 months after the marriage, B died without issue. This action now is an action commenced hy X against A to enforce the terms of the donation. Will the action prosper? ANS: The action will not prosper. The donation cannot be considered as a donation propter nuptias, because, assuming that it was made in consideration of the marriage, still it was not made in 144

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favor of the wife, but rather in favor of those who had reared her. That does not place it within the purview of Art. 82 of the FC. Assuming that it is a donation inter vivos, it cannot be considered valid and effective because it was never accepted by the donee either in the same instrument of donation or in a separate document as required by law. (Art. 749, NCC.) Assuming that it is a donation mortis causa, it cannot be also considered valid and effective for the reason that a donation to take effect after the death of the donor is equivalent to a disposition or bequest of property by last will, and therefore, it should be executed in accordance with the formalities prescribed by law for the execution of wills. (Art. 728, NCC.) Moreover, in the present case, the donor is still alive, and naturally, even assuming that the donation is valid, still the time and occasion have not yet arrived for considering its operation and implementation. (Serrano vs. Solomon, 105 Phil. 998.) 14. What are the requisites for a valid donation propter nuptias? ANS: For a donation propter nuptias to be valid, the donation must be: (1)

Made before the celebration of the marriage;

(2)

Made in consideration of the marriage; and

(3)

Made in favor of one or both of the future spouses.

15. What properties may be donated by reason of marriage? ANS: If the donor is a person other than one of the future spouses, the rule is that he can donate only present property, and not future property, subject to the limitations provided by law for ordinary donations. (Art. 751, NCC.) If the donor is one of the future spouses, he or she can donate either present or future property or both, subject to the following limitations: “If the future spouses agree upon a regime other than the absolute community of property, they cannot donate to each other in their marriage settlements more than one-fifth of the present property. Any excess shall be considered void. 145

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FAMILY CODE (Persons) Property Relations Between Husband and Wife Donations by Reason of Marriage

Donations of future property shall be governed by the provisions on testamentary succession and the formalities of wills.” (Art. 84, FC.) 16. What rules govern the form of donation propter nuptias? ANS: The form of donation propter nuptias is governed by the rules on ordinary donations established in Title III of Book III of the NCC (on donations), insofar as they are not modified by the subsequent provisions of the FC on donations by reason of marriage. (Art. 83, FCJ (Note: Art. 83 of the FC repealed Art. 127 of the NCC which provides that the Statute of Frauds shall regulate the form of donations propter nuptias.)

17. What is the effect of donations by reason of marriage of property which is subject to encumbrances? ANS: Donations by reason of marriage of property subject to encumbrances shall be valid. In case of foreclosure of the encumbrance and the property is sold for less than the total amount of the obligation secured, the donee shall not be liable for the deficiency. If the property is sold for more than the total amount of said obligation, the donee shall be entitled to the excess. (Art. 85, FC.) (Note: Art. 85 of the FC changed the rule provided for in Art. 131 of the NCC where the donor in a donation propter nuptias is required to release from mortgages and other encumbrances, the property donated. This is with the exception of easement, unless the contrary is stipulated.)

18. When is a donation by reason of marriage revocable by the donor? ANS: A donation by reason of marriage is not revocable, save in the following cases where the donor may revoke said donation. (1) If the marriage is not celebrated, or judicially declared void ab initio except donations made in the marriage settlements which shall be governed by Art. 81 of the FC; 146

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(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 specified by the provisions of the NCC on donations in general. (Art. 86, FC.) 19. Being engaged to marry “B,” “A” executes a formal donation of a piece of land in a public instrument in favor of his prospective wife, who duly accepted it. The marriage did not take place and the creditors of the donor sued the donee M B” and have its value applied to the payment of their credit, claiming that a donation in consideration of marriage becomes ab initio void if the marriage is not celebrated, for lack of consideration or causa. Decide with reasons. (1972) ANS: Assuming that the donation in the instant case is a donation by reason of marriage as defined in Art. 82 of the FC, the claim of the creditors that a donation in consequence of marriage becomes ab initio void if the marriage is not celebrated for lack of consideration or causa is certainly not correct. Art. 86 of the FC declares that a donation by reason of marriage is not revocable save in certain cases. Among such cases is the non-celebration of the marriage. From this it is clear that although the marriage is really a consideration of the donation, yet the fact of its celebration is not necessary in order to give birth to the donation. In other words, even if the marriage is not celebrated, the donation in the instant case is still valid, although revocable in character. Hence, the non-celebration of the marriage is merely a resolutory condition which will entitle the donor to ask for the revocation of the donation. (Solis vs. Barroso, 53 Phil. 912.) Consequently, if “A” does not bring an action against “B” for the revocation of the donation within the statutory period of prescription, the donation would be forever valid. 147

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20. A donation propter nuptias of a parcel of land was given by X to Y. They were subsequently married but the marriage was annulled on the complaint of Y upon her discovery that X has been previously married. X now files a suit for revocation of the donation. Decide the case with reasons. (1973) ANS: The suit for revocation for the donation propter nuptias will not prosper. True, the marriage of X and Y was annulled at the instance of the donee but it must be noted that Y, the donee, did not act in bad faith. If anybody acted in bad faith, it was X, the donor. Under No. 3 of Art. 86 of the FC, it is clear that the donation in the instant case can be revoked only if the marriage is annulled, and the donee acted in bad faith. 21. Are donations made by either spouse in favor of the other, directly or indirectly, during the marriage valid? ANS: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. (Art. 87, FC.) (Note: Art. 87 of the FC repealed Art. 134 of the NCC which provides that such donations made directly between the spouses or even indirectly where one of the spouses donate to the children whom the other spouse had by another marriage, or to persons of whom the other spouse is a presumptive heir at the time of the donation, are merely voidable at the instance of the donor’s heirs within 5 years after the donor’s death. [Art. 1149, NCC].)

22. H donated to his wife, W, an automobile which the latter insured for P3,000 with X Insurance Co. Subsequently, the automobile was totally destroyed in an accident. X Insurance Co., however, refused to pay the value of the policy on the ground that W did not have an insurable interest in the automobile because said automobile was donated by her husband to her, and under Art. 87 of the FC, such a donation is void. Is this contention correct? Reasons. 148

FAMILY CODE (Persons) Property Relations Between Husband and Wife Donations by Reason of Marriage

Arts. 82-87

ANS: The contention of X Insurance Co. is not correct for the following reasons: (1) The Company has no right to question the validity of the donation on the ground that, at the time when such donation was made, it did not bear a relation to the donor or to the property itself in such a way that the transfer interfered with its rights or interest. It has always been the constant doctrine in this jurisdiction that only a person who is directly prejudiced by the donation at the time when it was made can subsequently question its validity. (Cook vs. McMicking, 27 Phil. 10; Harding vs. Commercial Union Ass. Co., 34 Phil. 464.) (2) Even assuming that the Company can invoke Art. 87 of the FC, yet it has not been shown that the donation does not fall within the purview of the exception provided or in the article itself. Moderate donations made on the occasion of a family rejoicing are excepted from the application of the prohibition. However, whether or not a donation of an automobile is moderate will have to depend upon the financial circumstances of the donor. (Harding vs. Commercial Union Asso. Co., 38 Phil. 464.) 23. The records show that A and B, both single, were living together as husband and wife being married. It was a while living together that A donated a house and lot to B. Subsequently, the heirs of A brought an action against B for the recovery of the property donated on the ground that the donation is void under Art. 87 of the FC. Will the action prosper? (1971) ANS: The action will prosper. While apparently, the prohibition stated in Art. 87 of the FC is applicable only to donations made between husband and wife who are legally married, in reality, according to the Court of Appeals in the case of Buenaventura vs. Bautista, CA (50 Off. Gaz. 3679) the prohibition (and this includes that found in Art. 134 of the NCC) is applicable to acts of liberality between common-law husband and common-law wife during the period of their cohabitation for the following reasons: (1) The reason behind the law that the donation was probably due to undue or improper pressure and influence is also true with greater force in extra-marital relations; and 149

Arts. 82-87

FAMILY CODE (Persons) Property Relations Between Husband and Wife Donations by Reason of Marriage

(2) So long as marriage remains the cornerstone of our family law, reason and morality demand that the disabilities which are attached to marriage should likewise be attached to extra-marital relations. (Buenaventura vs. Bautista, CA, 50 Off. Gaz. 3679.) (Note: Now, it is expressly provided in Art. 87 of the FC that the prohibition shall also apply to persons living together as husband and wife without a valid marriage).

24. In 1956, X donated a parcel of land to his commonlaw-wife, A. In 1962, the two (2) got married. Afew months after the marriage, X died intestate. He was survived by his wife, A and his sister, Y. Subsequently, Y brought an action against A for the recovery of the property which X had donated to the latter in 1956. She contends that the prohibition of donations between spouses during the marriage is also applicable to common-law relationship. Will the action prosper? (1977) ANS: The action will prosper but only with respect to one-half of the property. As held by the CA in a 1954 decision (Buenaventua vs. Bautista, 50 Off. Gaz. 3679.), the prohibition of donations between spouses during the marriage is applicable to common-law relationship for the following reasons: The reason behind the law that the donation was probably due to undue and improper influence is also true with greater force in extra-marital relations. Besides, so long as marriage remains the cornerstone of our family law, reason and morality demand that the disabilities which are attached to marriage should likewise be attached to extra-marital relation. In addition to these reasons, there is another reason. That which is within the spirit of the law is as much a part of it as that which is written; otherwise, the basic purpose of the provision would not be attained. The lack of validity of the donation made by X to A, however, does not mean that entire property shall be given to Y. Because of her marriage to X in 1962, A is entitled to one-half of the property and the plaintiff, as the surviving sister, to the other half. (Art. 1001, NCC; Matabuena vs. Cervantes, 38 SCRA 284.)

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

Arts. 88-90

Chapter 3 SYSTEM OF ABSOLUTE COMMUNITY Section 1. GENERAL PROVISIONS (Arts. 88-90, FC) 25. When shall the system of absolute community of property between spouses commence? ANS: The absolute community of property between spouses shall commence at the precise moment that the marriage is celebrated. Any stipulation, expressed or implied, for the commencement of the community regime at any other time shall be void. (Art. 88, FC.) 26. What is the distinction between the regime of absolute community of property and conjugal partnership of gains? ANS: The distinction between the regime of absolute community of property and conjugal partnership of gains is that in the regime of absolute community of property, the spouses are co-owners of all the properties they brought into the marriage, each spouse losing ownership thereto, as well as those acquired by each or both of them during the marriage (excluding those enumerated in Art. 92 of the FC), which entire mass of properties, the spouses or their heirs will divide equally upon the dissolution of the marriage; while in the conjugal partnership of gains, only the net profits of the partnership are divided between the spouses. 27. Can waiver of rights, interests, shares and effects of the absolute community of property be made during the marriage? ANS: As a general rule, no waiver of rights, interest, shares and effects of the absolute community of property during the marriage can be made in order, among others, to avoid undue influence exerted by one spouse upon the other. An exception, however, is in case of judicial separation property. When the waiver takes place upon a judicial separation of property, or after the marriage has been dissolved or annulled, the same should appear in a public instrument and should be registered 151

Arts. 91-93

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

in the local civil registry where the marriage contract is recorded as well as the proper registry of property as provided in Art. 77 of the FC. The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits. (Art. 89, FC.) 28. What rules shall apply to the absolute community of property between the spouses in all matters not provided for in the chapter of the FC on the system of absolute community of property? ANS: The provisions on co-ownership shall apply to the absolute community of property between the spouses in all matters not provided for in the Chapter of the FC on the system of absolute community. (Art. 90, FC.) Section 2. WHAT CONSTITUTES COMMUNITY PROPERTY (Arts. 91-93, FC) 29. Under the system of absolute community of proper­ ties, what properties are included in the community? What properties are excluded? ANS: Unless otherwise provided in the Chapter of the FC on the system of absolute community or in the marriage settlements, the community property shall consist of all the properties owned by the spouses at the time of the celebration of the marriage or acquired thereafter. (Art. 91, FC.) The following properties, however, are excluded: (1) Property acquired during the marriage by gratuitous title by either spouse, and the fruits as well as the income thereof, if any, unless it is expressly provided by the donor, testator or grantor that they shall form part of the community property; (2) Property for personal and exclusive use of either spouse; however, jewelry shall form part of the community property; and (3) Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage, and the fruits as well as the income, if any, of such property. (Art. 92, FC.) 152

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

Arts. 94-95

30. What presumption is applied as to the nature of property acquired during marriage? ANS: Property acquired during the marriage is presinned to belong to the community, unless it is proved that it is one of those excluded therefrom. (Art. 93, FC.) Section 3. CHARGES UPON AND OBLIGATIONS OF THE ABSOLUTE COMMUNITY (Arts. 94-95, FC) 31. What are the obligations for which the absolute community of property is liable? ANS: The absolute community of property shall be liable for: (1) The support of the spouses, their common children, and legitimate children of either spouse; however, the support of illegitimate children shall be governed by the provisions of the FC on support; (2) All debts and obligations contracted during marriage by the designated administrator-spouse for the benefit of the community, or by both spouses, or by one spouse with the consent of the other; (3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefited; (4) All taxes, liens, charges and expenses, including major or minor repairs, upon the community property; (5) All taxes and expenses for mere preservation made during marriage upon the separate property of either spouse used by the family; (6) Expenses to enable either spouse to commence or complete a professional or vocational course, or other activity for self-improvement; (7) Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family; 153

Arts. 94-95

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

(8) The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or other activity for self-improvement; (9) Ante-nuptial debts of either spouse other than those falling under paragraph (7) of this enumeration; the support of illegitimate children of other spouse; and liabilities incurred by either spouse by reason of a crime or a quasi-delict, in case of absence or insufficiency of the exclusive property of the debtor-spouse, the payment of which shall be considered as advances to be deducted from the share of the debtor-spouse upon liquidation of the community; and (10) Expenses of litigation between the spouses unless the suit is found to be groundless. If the community property is insufficient to cover the foregoing liabilities, except those falling under paragraph (9), the spouses shall be solidarily liable for the unpaid balance with their separate properties. (Art. 94, FC.) 32. “A” the husband, contracted a personal obligation that did not redound to the benefit of the family. May the absolute community of property be held liable for the obligation? Explain. (1972) ANS: While it is true that the FC in its Art. 94(2) and (3) does not include debts during the marriage by either spouse which have not redounded to the benefit of the debtors’ family, it is submitted that the provision of Art. 122 of the FC is applicable by analogy. Hence, the absolute community of property can be held liable even though the obligations of “A” had not redounded to the benefit of his family, but subject to the following requisites: 1st, the lack or insufficiency of the exclusive property of “A”; and,2rcd, the satisfaction of the basic obligations under Art. 94 of the FC. Once the payment has been made, “A” becomes a debtor of the absolute community. At the time of the liquidation of the assets, he shall be charged for what has been paid. Commentators hold the view that such debts should be included for the following reasons: 1st, if the assets can not be held liable, creditors who have extended credit relying on the existence of such assets would be unduly prejudiced; and 2nd, debts contracted during the marriage are certainly more pressing than 154

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

Arts. 96-98

those contracted before such marriage. It is, however, necessary, as a matter of justice, that all or most of such conjugal assets should have been acquired through the effect or industry of the spousedebtor. Otherwise, Art. 122 of the FC shall be applied literally and the absolute community of property cannot then be held liable. 33. An individual, while single, purchases a house and lot in 1990, and borrows money in 1992 to repair it. In 1995, such individual is married while the debt is still being paid. After the marriage, is the debt still the responsibility of such individual? (2007) ANS: No. Under Art. 94(7) of the FC, ante-nuptial debts of either spouse shall be considered as the liability of the absolute community of property insofar as they have redounded to the benefit of the family. (Suggested Answers to the 2007 Bar Examination Questions, PALS) 34. Are the winnings of either spouse in gambling, community property or separate property? ANS; Any winnings during the marriage in any game of chance, betting, sweepstakes, or any other kind of gambling, whether permitted or prohibited by law, shall form, part of the community property. However, whatever may be lost therefrom shall be borne by the loser and shall not be charged to the community. (Art. 95, FC.) Section 4. OWNERSHIP, ADMINISTRATION, ENJOYMENT AND DISPOSITION OF COMMUNITY PROPERTY (Arts. 96-98, FC) 35. Who shall be the administrator of the community property? ANS: The administration and enjoyment of the community property shall belong to both spouse jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for a proper remedy, which must be availed at within 5 years from the date of the contract implementing such decision. 155

Arts. 99-101

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. Notwithstanding this, the law provides that the transaction shall, nonetheless, be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Art. 96, FC.) 36. How may a spouse dispose of his of her interest in the community property? ANS: Either spouse may dispose by will of his or her interest in the community property. (Art. 97, FC.) 37. May a spouse donate any community property? Exception. ANS: Neither spouse may donate any community property without the consent of the other. However, either spouse may, without the consent of the other, make moderate donations from the community property for charity or on occasions of family rejoicing or family distress. (Art. 98, FCJ Section 5. DISSOLUTION OF ABSOLUTE COMMUNITY REGIME (Arts. 99-101 of FC) 38. When does the absolute community terminate? ANS: The absolute community terminates: (1)

Upon the death of either spouse;

(2)

When there is a decree of legal separation;

(3)

When the marriage is annulled or declared void; or 156

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

Arts. 99-101

(4) In case of judicial separation of property during the marriage under Arts. 134 to 138 of the FC. (Art. 99, FC.) 39. What is the effect of a separation in fact between husband and wife upon the regime of absolute community? ANS: The separation in fact between husband and wife shall not affect the regime of absolute community, except that: (1) The spouse who leaves the conjugal home or refuses to live therein, without just cause, shall not have the right to be supported; (2) When the consent of one spouse to any transaction of the other is required by law, judicial authorization shall be obtained in a summary proceeding; (3) In the absence of sufficient community property, the separate property of both spouses shall be solidarily liable for the support of the family. The spouse present shall, upon proper petition in a summary proceeding, be given judicial authority to administer or encumber any specific property of the other spouse and use the fruits or proceeds thereof to satisfy the tatter’s share. (Art. 100, FC.) 40. ment.

Distinguish separation de facto from abandon­

ANS: Separation de facto is the cessation of the cohabitation or common life of the husband and wife under the same roof. Said spouses might still be providing for their mutual duty of support, and their duty to support and maintain the children; while abandonment, is not mere separation in fact. It implies an intention not to return to the conjugal home and to stop complying with the obligation to the family. 41. What are the remedies of the present spouse in case of abandonment by the other spouse? ANS: If a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the aggrieved spouse may petition the court: (1) for receivership; (2) for judicial 157

Arts. 102-104

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

separation of property; or (3) for authority to be the sole administrator of the absolute community, subject to such precautionary conditions as the court may impose. The obligations to the family mentioned in the preceding paragraph refer to marital, parental or property relations. (Art 101, 1st and 2nd pars., FC.) 42. When is a spouse presumed to have abandoned the other spouse and the family and to have no more intention of returning to the conjugal dwelling? ANS: A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without any intention of returning. The spouse who has left the conjugal dwelling for a period of 3 months or has failed within the same period to give any information as to his or her whereabouts shall be prima facie presumed to have no intention of returning to the conjugal dwelling. (Art. 101, 3rd par., FC.) Section 6. LIQUIDATION OF THE ABSOLUTE COMMUNITY ASSETS AND LIABILITIES (Arts. 102-104, FC) 43. What procedure shall apply in the liquidation of the absolute community assets and liabilities after the dis­ solution of the absolute community regime? ANS: Upon dissolution of the absolute community regime, the following procedures shall apply: (1) An inventory shall be prepared, listing separately all the properties of the absolute community and the exclusive properties of each spouse. (2) The debts and obligations of the absolute community shall be paid out of its assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties in accordance with the provisions of the second paragraph of Art. 94 of the FC. 158

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

Arts. 102-104

(3) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. (4) The net remainder of the properties of the absolute • community shall constitute its net assets, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements, or unless there has been a voluntary waiver of such share as provided in FC. For purposes of computing the net profits subject to forfeiture in accordance with Arts. 43', (2) and 63, (2) of the FC, the said profits shall be the. increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution. (5) The presumptive legitimes of the common children shall be delivered upon partition, in accordance with Art. 51 of the FC. (6) Unless otherwise agreed upon by the parties, in the partition of the properties, the conjugal dwelling and the lot on which it is situated shall be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of 7 years are deemed to have chosen the mother, unless the court has chosen otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interest of said children. (Art. 102, FC.) 44. What rules are applied with respect to the liqui­ dation of the community property in case of termination of marriage by the death of one of the spouses? ANS: The rules to be applied with respect to the liquidation of the community property in case of termination of marriage by death of one of the spouses are as follows: (1) Upon the termination of the marriage by death, the community property shall be liquidated in the same proceeding for the settlement of the estate of the deceased. (2) If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the community property either judicially or extrajudicially within one (1) year from the death of the deceased spouse. (Art. 103,1st and 2nd pars., FC.) 159

Arts. 102-104

FAMILY CODE (Persons) Property Relations Between Husband and Wife System of Absolute Community

45. What are the effects if the community property is not liquidated upon the lapse of one (1) year from the death of the deceased spouse? ANS: The following are the effects if upon the lapse of one (1) year from the death of the deceased spouse, no liquidation of community property is made: (1) Any disposition or encumbrance made by the surviving spouse of community property shall be void. (Art. 103, 2nd par., last sentence, FC.) (2) Should the surviving spouse contract a subsequent marriage without complying with the foregoing requirement, that is, liquidate the community property within one year from the death of the deceased spouse, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage. (Art. 103, 3rd par., FC.) (Note: In the absence of the prescription for a regime of complete separation of property to govern the property relations of the subsequent marriage, there would be a resulting merger of the community properties of the first marriage with the absolute community of the second marriage, to the prejudice of the heirs of the first deceased spouse. To prevent this, the FC prescribes a regime of complete separation of property in the second marriage.)

46. What procedure shall apply in the liquidation of community properties of two (2) or more marriages con­ tracted by the same person before the effectivity of the FC carried out simultaneously? ANS: In the absence of an agreement of all the heirs as to how the said properties shall be divided, the following procedure shall be applied: (1) First, the determination of the respective capital, fruits and income of each community upon such proof as may be considered according to the rules of evidence. (2) In case of doubt as to which community the existing properties belong, the same shall be divided between or among the different communities in proportion to the capital and duration of each. (Art. 104, FC.) 160

FAMILY CODE (Persons) Property RelationB Between Husband and Wife Conjugal Partnership of Gains

Arts. 105-108

Chapter 4 CONJUGAL PARTNERSHIP OF GAINS Section 1. GENERAL PROVISIONS (Arts. 105-108, FC) 47. Define conjugal partnership of gains. ANS: By means of the conjugal partnership of gains, 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 they have agreed on another manner of division in their marriage settlements. (Art. 106, FC.) 48. Distinguish between conjugal partnership and system of absolute community. ANS: A conjugal partnership and a system of absolute community may be distinguished from each other in the following ways: (1) As to basis: In the conjugal partnership of gains, the exclusive properties of the spouses are kept entirely separate and distinct from the benefits which they acquired during the marriage. This system is not primarily based on mutual trust and confidence between spouses and does not enhance the presumption of solidarity between them, whereas in the system of absolute community all properties acquired by the spouses even before marriage become community property. The basis is essentially trust and confidence between the spouses which will, thus, foster unity between them. (2) As to retention o f property: In the conjugal partnership, each spouse retains his/her properties acquired prior to the marriage but the fruits and income of such properties form part of the conjugal properties during the marriage, whereas in the system of absolute community, the spouses do not retain any property acquired before marriage and all properties they own at the time of marriage become part of the community property. 1 6 1

Arts. 105-108

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

(3) As to dissolution: In the conjugal partnership, the exclusive properties of the spouses are returned upon the dissolution of the partnership and the spouses or their heirs equally divide only the net profits of the partnership, while in the system of absolute community, there are no exclusive properties of the spouses to be returned and upon the dissolution of the community property, the spouses or their heirs equally divide the net remainder of the properties of the absolute community. (4) As to method of liquidation: In the conjugal partnership, liquidation will entail identification and return of exclusive properties of the spouses, while in the system of absolute community, it would be easier to liquidate the community property since its net remainder is merely divided equally between the spouses or their heirs. 49. Distinguish between conjugal partnership and an ordinary partnership. ANS: A conjugal partnership and an ordinary partnership may be distinguished from each other in the following ways: (1) As to creation: A conjugal partnership is created by operation of law, whereas an ordinary partnership is created by agreement of the parties. (2) As to the laws which govern: Conjugal partnerships are, as a rule, governed by law, whereas ordinary partnerships are, as a rule, governed by the stipulation of the parties. (3) As to juridical personality: A conjugal partnership has no juridical personality, whereas an ordinary partnership has a juridical personality which is separate and distinct from that of the partners. (4) As to purpose: The primary purpose of the conjugal partnership is to regulate the property relations of husband and wife during the marriage, whereas that of the ordinary partnership is speculation or gain. (5) As to management: In conjugal partnerships, as a general rule, the husband is the administrator or manager, whereas in ordinary partnerships, all of the partners are managers unless one or more of them are appointed as managers in the articles of partnership. 1 6 2

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 105-108

(6) As to division of profits: In conjugal partnerships, the shares of the spouses in the profits are equal unless there is an agreement to the contrary in the marriage settlements, whereas in ordinary partnerships, the shares of the partners in the profits shall depend upon their agreement and in default thereof, shall be in proportion to their respective contributions. (7) As to disposition of shares: In conjugal partnerships, the share of each spouse cannot be disposed of even with the consent of the other, whereas in ordinary partnerships, the share of a partner may be disposed of. (8) As to dissolution: The grounds for the dissolution of a conjugal partnership are different from the grounds for the dissolution of an ordinary partnership. 50. ownership?

How does the conjugal partnership differ from co-

ANS: Conjugal partnership and co-ownership distinguished from each other in the following ways:

may be

(1) As to creation: Conjugal partnership is created by operation of law, whereas co-ownership is created by law, contract, succession, fortuitous event, or occupancy. (2) As to purpose: The primary purpose of conjugal partnership is to regulate the property relations of husband and wife during the marriage, whereas the primary purpose of co-ownership is the common enjoyment of the thing or right owned in common. (3) As to management: In Conjugal partnership, the management is vested, as a general rule, in the husband, whereas, in co-ownership, the management is vested in the co-owners who represent the controlling interest. (4) As to division of profits: In conjugal partnership, the share of the spouses in the profits are equal unless there is an agreement to the contrary in the marriage settlement, whereas in co-ownership, the shares of the co-owners in the profits or benefits shall be proportional to their respective interests. (5) As to disposition of shares: In conjugal partnership, the spouses cannot dispose of their shares even with the consent of the 163

Arts. 105-108

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

spouses, whereas, in co-ownership, the co-owners can dispose of their shares even without the consent of the other co-owners. (6) As to power to demand partition: In conjugal partnership, the spouses can not demand the partition of the conjugal partnership property save by virtue of a judicial order, whereas in co-ownership, each co-owner may demand at any time the partition of the thing owned in common. (7) As to effect of death: In conjugal partnership, if one of the spouse dies, the partnership is dissolved, whereas in co-ownership, if one of the co-owners dies, the existence of the co-ownership is not affected. (8) As to dissolution: The grounds for the dissolution of conjugal partnership are different from the grounds for the dissolution of co-ownership. 51. When does the regime of conjugal partnership of gains govern the property relations between the husband and wife during the marriage? ANS: The regime of conjugal partnership of gains governs the property relations between the husband and wife during marriage in the following cases: (1) Where the future spouses agree in the marriage settlements that the regime of conjugal partnership of gains shall govern their property relations during marriage with Chapter 4 of the FC having supplementary application. (2) Where conjugal partnerships of gains were already established between spouses before the effectivity of the FC, without prejudice to vested rights already acquired in accordance with the NCC or other laws as provided in Art. 256 of the FC. (Art. 105, FC.) 52. What rules on the system of absolute community are likewise applicable to the conjugal partnership of gains? ANS: The rule provided in Art. 88 of the FC as to the com­ mencement of the system of absolute community at the precise mo­ ment the marriage is celebrated, as well as the rule in Art. 89 of the FC as to waiver of rights, interests, shares and effects of the system 164

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 109-115

of absolute community during the marriage by either spouses are likewise applicable to the conjugal partnership of gains. (Art, 107, FC.) 53. What rules shall govern the conjugal partnership? ANS: The conjugal partnership shall be governed by the rules on the contract of partnership in all matters that are not in'conflict with a) what are expressly determined in the Chapter on conjugal partnership of Gains of the FC, or b) what are expressly determined by the spouses in their marriage settlements. (Art. 108, FC.) Section 2. EXCLUSIVE PROPERTY OF EACH SPOUSE (Arts. 109-115, FC) 54. What properties are considered exclusive properties of each spouse? ANS: The following shall be the exclusive property of each spouse: a.

b.

By direct acquisition: (1)

That which is brought to the marriage as his or her own. (Art. 109[1], FC); and

(2)

That which each acquires during the marriage by gratuitous titles. (Art. 109[2], FC.)

By substitution: (3)

That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses, and (Art. 109[3], FC,)

(4)

That which is purchased with exclusive money^ of the wife or of the husband. (Art. 109[4], FC.)

55. What is meant by the capital of the husband and paraphernal property? ANS: When we speak of the capital of the husband, we refer to any property which is brought by the husband to the marriage 165

Arts. 109-115

FAMILY CODE (Persona) Property Relations Between Husband and Wife Conjugal Partnership of Gaina

as his own, or which he acquires during the marriage by lucrative title, or which is acquired by right of redemption, by barter or by exchange with other property belonging exclusively to him or which is purchased with his exclusive money. When we speak of paraphernal property, we refer to any property which is brought by the wife to the marriage as her own or which she acquires during the marriage by lucrative title, or which is acquired by right of redemption or by barter or by exchange with other property belonging exclusively to her, or which is purchased with her exclusive money. (Art. 109, FC.) 56. Under the CC of 1889, there was a certain property known as dowry given by the parents of the bride to the bridegroom. How would you distinguish between this property and paraphernal property? ANS: The dowry and paraphernal property may be distinguished from each other in the following ways: (1) A dowry is always constituted as such, whereas para­ phernal property refers to all property of the wife not constituted as dowry. Consequently, paraphernal property is the presumption, whereas dowry is the exception. (2) The ownership of the dowry may remain with the wife or be transferred to the husband, whereas the ownership of the paraphernal property always remains with the wife. (3) The administration of the dowry is always vested in the husband, whereas the administration of the paraphernal property is vested in the wife, unless she transfers it to her husband or to a third person in the form prescribed by law. (4) The dowry cannot be alienated or encumbered by the wife without the consent of her husband, whereas the paraphernal property may be alienated or encumbered by the wife without the consent of her husband. (5) The fruits of the dowry property can be held liable even for purely personal obligations of the husband, whereas the fruits of the paraphernal property can be held liable only for obligations of the husband which have redounded to the benefit of the family. 166

! FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 109-115

(5 Sanchez Roman 706, 9 Manresa 479-480, Tolentino, CC, pp. 338339.) 57. To whom does the ownership, administration, and usufruct of the paraphernal property belong? ANS: Ownership — The ownership belongs to the wife. (Arts. 109,110, FC.) Administration — The administration belongs to the wife, unless she delivers the same to the husband or even to a third person by means of a public instrument empowering him to administer it and which instrument is recorded in the registry of property of the place where the property is located. (Art. 110, FC.) Usufruct — The usufruct belongs to the conjugal partnership. Consequently, the fruits of the property shall be subject to the payment of the expenses of the marriage. (Art. 117, FC.) 58. W, living separately from her husband, H, executed a public instrument conveying all of her paraphernal property in trust to A, empowering the latter to collect all of the rents. When she tried to register the instrument, the Register of Deeds refused to register the same on the ground that since the rents of the paraphernal property are conjugal, therefore, marital consent is necessary for registration. Is this correct? Reasons. ANS: This is not correct. While it is true that fruits of paraphernal property are conjugal said fruits can be reached only after liquidation. The wife is the administrator of the paraphernal property. Consequently, while the fruits are unliquidated, they should continue under her management because they are liable for all expenses of administration and preservation. The husband’s marital consent is not necessary for registration. 59. H and W, husband and wife, bought a fishpond from X for P48,000, payable in three (3) equal installments. The first installment was paid with funds belonging exclusively to W, while the second and third installments were paid with funds which the two (2) had borrowed from Y. In securing 167

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the loan from Y, the couple used as security several parcels of land belonging exclusively to W. What is the status of the fishpond? Reasons. ANS: The fishpond in the instant case is partly paraphernal and partly conjugal. It must be observed that the amount borrowed by H and W from Y is conjugal in character and not paraphernal. While it is true that the security is paraphernal, nevertheless, that does not affect the status of the amount borrowed. In securing the loan, the spouses were acting for the benefit of the conjugal partnership and not for the benefit of either of them. Consequently, since 1/3 of the purchase price of the fishpond was paid with paraphernal funds and 2/3 were paid with conjugal funds, it is clear, applying the provisions of Arts. 109(4) and 117(1) of the FC, that 1/3 undivided share of such fishpond is paraphernal and the other 2/3 conjugal. (Castillo us. Pasco, 11 SCRA 103.) 60. W, wife of H, inherited from her father P500,000 in cash. With this money, she constructed a house on a lot which was her exclusive property. Is the house conjugal or paraphernal? Reasons. ANS: The house is paraphernal. This is so because it was constructed on a lot belonging to the wife with the amount which such wife had inherited from her father, and under the law, property which a spouse acquires, during the marriage, by lucrative title is considered the exclusive property of such spouse. (Art. 109[2), FC.) 61. The wife during the marriage sold under pacto de retro her paraphernal property consisting of a house and lot. A few weeks later, she died. The husband thereupon repurchased the property with his exclusive capital. Question: To whom will the property belong, to the husband or to the heirs of the wife? Reasons. ANS: The property belongs to the heirs of the deceased wife. It must be noted that Art. 190 of the FC declares that property acquired during the marriage by right of redemption is exclusive property. Obviously, this provision presupposes that the right of redemption belongs to the spouse exercising it. This is so, because the status or character of the property acquired by right of redemption is determined, not by the status or character of the source of the funds 168

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used for redeeming said property, but by the status or character of the right itself. If the right belongs to either of the spouses, the property redeemed is separate; if the right belongs to the conjugal partnership, the property redeemed is conjugal. In the instant case, since it was the deceased wife who has sold her paraphernal property with right of repurchase, it is evident that the right to repurchase belongs to her alone. Consequently, the property now belongs to her heirs. However, in the liquidation of the conjugal partnership resulting from her death, the husband should be reimbursed the amount advanced by him in redeeming the property. (Santos vs. Bartolome, 44 Phil. 76.) 62. W, before her marriage to H, bought a Honda Civic automobile. One year after the marriage, H traded the automobile plus P50,000 taken from the conjugal funds with a new Toyota Innova automobile valued P900,000. Afterwards, W died. Is the new automobile conjugal or paraphernal? Reasons. ANS: The new automobile is conjugal. While it is true that under the law, property acquired during the marriage by exchange with other property belonging to one of the spouses is considered the exclusive property of such spouse (Art. 109[3], FC.), it is undeniable that this provision is applicable only when the transaction by which the property was acquired is barter and not sale. In the above problem, the contract is in reality, a contract of sale with the automobile which is traded in constituting a part of the purchase price, (Art. 1468, NCC.) Consequently, the new Toyota Innova automobile is classified as property acquired by onerous title during the marriage at the expense of common fund, and under the law (Art. 117[1], FC.),'such property is conjugal. (See Abella de Diaz vs. Erlanger & Galinger, 59 Phil. 326.) In the liquidation, however, the conjugal partnership shall reimburse to the estate of W the value of the automobile which was traded in, 63. Is the money received by the husband as repurchase price of a land sold to him a retro before marriage, conjugal property? ANS: No. This is so because, according to the law, property acquired by right of redemption or by exchange with other property 169

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belonging to only one of the spouses is exclusive property and not conjugal property. (Art. 109[3], FC.) 64. May either spouse during the marriage transfer the administration of his or her exclusive property to the other? How? ANS: Yes. Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place where the property is located. (Art. 110, FC.) 65. W, during her marriage to H, transferred the administration of her paraphernal property to the latter. Can W alienate said paraphernal property without the consent of H? ANS: Yes, even without securing the consent of H, W can alienate her paraphernal property. Notwithstanding the transfer of administration over W’s paraphernal property to H, W still retains ownership of her paraphernal property. (Art. 110} FC; Rodriguez vs. De la Cruz, 8 Phil. 665.) In the event W alienates her paraphernal property, the administration over the same by H automatically terminates and the proceeds of the alienation shall be turned over to W, the owner-spouse. (Art. 112, FC.) 66. Can W be restrained by injunction from selling her paraphernal property during her marriage to H considering that such sale would deprive the conjugal partnership of the fruits of the paraphernal property? ANS: Since under Art. 110 of the FC, W retains ownership of her paraphernal property during her marriage to H, W cannot be restrained by injunction from selling her paraphernal property even if such sale would deprive the conjugal partnership of its fruits. (Perez vs. De Perez, 109 Phil. 64.) 67. During the marriage of W to H, W inherited from her mother a parcel of land. To secure W’s loan from A, W mortgaged in favor of A the land without securing the consent 170

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of H. Is the consent of H required for the mortgage of the parcel of land in favor of A? In the event of court litigation with regard to the parcel of land, is the appearance of H necessary? ANS: Since the parcel of land is the paraphernal property of W, W can mortgage the property in favor of A without securing the consent of H. W, provided she is of age, can mortgage and may even encumber, alienate or otherwise dispose of her exclusive property without the consent of the other spouse, H. W can appear alone in court to litigate with regard to the same. (Art. I l l , FC.) 68. State a) whether property donated or left by will to the spouses jointly is conjugal or exclusive, and b) the manner of disposing the property between the spouses. ANS: Property donated or left by will to the spouses jointly is exclusive of the spouses since each of the spouses acquired the property by lucrative or gratuitous title. (Art. 109[2], FC.) Where the donation or the will designates the determinate shares of the spouses in the property, then each donee-spouse shall own his or her pertinent share exclusively and in accordance with the designation. In the absence of the designation of determinate shares, then each spouse will own share and share alike, without prejudice to the right of accretion when proper. (Art. 113, FC.) 69. Where there is an onerous donation to either H or W, who shall bear the payment of the amount of charges imposed by the donor, the conjugal partnership of gains or the exclusive property of the donee-spouse? ANS: Where the donation is onerous, the property donated is still considered to be the exclusive property of the donee-spouse. Hence, the amount of the charges shall be borne by the exclusive property of the donee-spouse and whenever payment for the charges have been advanced by the conjugal partnership of gains, the doneespouse should reimburse the conjugal partnership of gains for the amount advanced upon liquidation of the partnership. (Art. 114, FCJ

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70. What rules shall govern the retirement benefits, pensions, annuities, gratuities, usufructs and similar ben­ efits? ANS: Retirement benefits, pensions, annuities, gratuities, usu­ fructs and similar benefits shall be governed by the rules on gratu­ itous or onerous acquisitions as may be proper in each case. (Art. 115, FC.) Hence, if they are gratuitous, such benefits are generally considered to be the exclusive properties of the spouse, and if they are onerous, they are generally considered to be conjugal proper­ ties. In the case of GSIS vs. Montesclaros, (G.R. No. 146494, July 14, 2004), the Court ruled that the process is in Sec. 18 of P.D. No. 1146 prohibiting the dependent spouse from receiving survivorship pension if the latter married the pensioner within three (3) years before the pensioner qualified for the pension, is unconstitutional because it is discriminatory, denies equal protection of the law and violates the due process clause. The surviving spouse of a government employee is entitled to receive survivor’s benefits under a pension system, more particularly where the pensioner has contributions through monthly salary deductions, and are, therefore, onerous acquisitions. Since -retirement benefits are property the pensioner acquired through labor, such benefits are conjugal property. However, statutes sometimes require that the spouse should have married the employee for a certain period before the employee’s death to prevent sham marriages contracted for monetaiy gains. This is, however, discriminatory and arbitrary. Thus, under the implementing rules of R.A. No. 8291, the surviving spouse who married the member immediately before the member’s death is still qualified to receive survivorship pension unless the GSIS proves that the surviving spouse contracts the marriage solely to receive the benefit. 71. H died in 1945. Among the properties which he left was a gratuity from the Philippine government after the liberation of the Philippines consisting of three (3) months pay. This gratuity was claimed by the widow, W, and by his brothers and sisters. W contended that the gratuity is conjugal property, while the brothers and sisters insisted that it is the exclusive property of H. Decide. ANS: The gratuity in this particular case is the exclusive property of H. This is so because, in reality, a gratuity is given by the 172

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donor out of pure liberality. Consequently, it constitutes property acquired by lucrative title, and under the law, such property is the exclusive or separate property of the beneficiary. The fact that the gratuity consists of three (3) months pay does not affect the character of the property since the three (3) months pay is merely a basis for computing the amount of gratuity. (Mendoza vs. Dizon, 77 PhiL 533.) The result would be different in the case of a pension. While a gratuity is an act of bounty or pure liberality on the part of the donor, a pension is given to the recipient for services rendered. Con­ sequently, a pension must necessarily be classified as conjugal prop­ erty. (Art. 117, FC; Bowers vs. Roxas, 69 PhiL 636; Eclar vs. Eclar, CA, 40 Off. Gaz. No. 18, p. 86; Mendoza vs. Dizon, 77 PhiL 533.) 72. Prior to marriage with W, H purchased a life annuity for P500,000. It was stipulated with the insurance company that H would be receiving a monthly pension of P2,500 for as long as H lives. Is the life annuity conjugal or exclusive? ANS: The right to the annuity itself is at all times considered to be H’s exclusive property. However, the pensions which the insurance company was giving H during the marriage are conjugal. Should W subsequently die, such pensions which H will receive from the time of W’s death will again become H’s exclusive property. 73. H, before her marriage with W, was given by his friend, A, the usufruct over a rice plantation for five (5) years. Two years thereafter, H married W. Is the usufruct conjugal or exclusive? ANS: The right to the usufruct itself is H’s exclusive property. However, the harvests of the rice plantation during marriage are conjugal. Should W subsequently die, such harvests will again become H’s exclusive property. Section 3. CONJUGAL PARTNERSHIP PROPERTY (Arts. 116-120, FC) 74. What properties are considered conjugal? ANS: The following are conjugal partnership property 173

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(a)

(b)

By direct acquisition: (1)

Those obtained from labor, industry, work or pro­ fession of either or both spouses. (Art. 117[2], FC.)

(2)

The fruits, natural, industrial or civil, due or received during marriage from the common property, as well as the net fruits from the exclusive property of each spouse. (Art. U7[3], FC.)

(3)

The shares of either spouse in the hidden treasure which the law awards to the finder or owner of the property where the treasure is found. (Art. 117[4], FC.)

(4)

Those acquired through occupation such as fishing or hunting. (Art. 117[5], FC.)

(5)

Livestock existing upon the dissolution of the partnership in excess of the number of each kind brought to the marriage by either spouse. (Art. 11716], FC.)

(6)

Those which are acquired by chance, such as winnings from gambling or betting. However, losses therefrom shall be borne exclusively by the loserspouse. (Art. 117[7], and Art. 123, FC.)

By substitution: (1)

(c)

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Those acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses. (Art. 117[1], FC.)

By presumption: (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, FC.)

In the case of Ching vs. Court o f Appeals (G.R. No. 124642, February23,2004), the Court ruled that all properties acquired during 174

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Arts. 116-120

the marriage are presumed belong to the conjugal partnerships, unless it is proved that it pertains exclusively to the husband or to the wife. Citing Tan vs. Court o f Appeals, the Court held that it is not even necessary to prove that the properties were acquired with funds of the partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be conjugal in nature. 75. H purchased from a company a brand new Nissan Exalta using conjugal funds. H bought the car for the use of his wife, W and so, H registered the car in W’s name. Is the Nissan Exalta conjugal or exclusive? ANS: Although the car was acquired for the use of W and was registered in her name, the money invested for its purchase came from conjugal funds. The car having been acquired during marriage and at the expense of the common fund is, thus, conjugal. In the case of Joaquino vs. Reyes (G.R. No. 154645, July 13, 2004), the Court held that the fact that the property was bought during the marriage rise to the presumption that it is conjugal. Moreover, it was established that the payment came from conjugal funds. 76. W purchased a parcel of land in Ayala, Alabang with conjugal funds. She subsequently caused the registration of the sale in her own name. Is the land registered with the registry of deeds in the name of W her paraphernal property? ANS: No. Notwithstanding the registration of the land in the name of W, the money invested for its purchase came from conjugal funds. The parcel of land having been acquired during marriage and at the expense of the common fund is, thus, considered conjugal. In the case of Villanueva vs. CA (G.R. No. 143286, April 14, 2004), the Court ruled that if the properties are acquired during the marriage, the party is that they are conjugal. The burden of proof is on the party claiming that they are not conjugal. This is counter­ balanced by the requirement that the properties must first be proven to have been acquired during the marriage before they are presumed conjugal. Further, all properties acquired by the spouses during the 175

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FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

marriage, regardless in whose name the property is registered, are presumed conjugal unless proves otherwise. The presumption is not rebutted by the mere fact that the certificate of title of the property or the tax declaration is in the name of one of the spouses only. Art. 116 of the FC expressly provides that the presumption remains even if the property is “registered in the name of one or both of the spouses.” 77. Nicolas and Eusebia got married on 7 October 1926. Nicolas subsequently cohabited with Pacita. During cohabitation of Nicolas with Pacita, Nicolas acquired certain properties and places his status as single. Determine the nature of said properties. ANS: In the case of Villanueva vs. CA(G.R. No. 143286Justice Carpio, First Division, April 14, 2004), the Court held that whether a property is conjugal or not is determined by law and not by the will of one of the spouses. No unilateral declaration by one spouse can change the character of conjugal property. The clear intent of Nicolas in placing his status as single is to exclude Eusebia from her lawful share in the conjugal property. The law does not allow this. The cohabitation of a spouse with another person, even for a long period, does not sever the tie of a subsisting previous marriage. Otherwise, the law would be giving a stamp of approval to an act that is both illegal and immoral. What petitioners fails to grasp is that Nicolas and Pacita’s cohabitation cannot work to the detriment of Eusebia as the legal spouse. The marriage of Nicolas and Eusebia continued to exist regardless of the fact that Nicolas was already living with Pacita. Hence, all property acquired from 7 October 1926, the date of Nicolas and Eusebia’s marriage, until 23 November 1996, the date of Eusebia’s death, are still presumed conjugal. Petitioners have neither claimed nor proved that any of the subject properties was acquired outside or beyond this period. 78. W, wife of H, while riding as a passenger in a taxicab, was severely injured when the taxicabs collided with a passenger bus. In a civil action which she instituted against the operator of the passenger but whose driver was at fault, she was awarded P2,000 as compensatory damages for hospital and medical expenses and for loss of earning 176

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capacity, and P4,000 as moral damages. State whether such damages are conjugal or paraphernal. Reasons. ANS: We must distinguish. The compensatory damages are conjugal because it is the conjugal partnership which really suffered in this case. The moral damages, on the other hand, are paraphernal. (See Lilius vs. Manila Railroad Co., 62 Phil. 56.) 79. In an action for damages against Pan-Am, A, as principal plaintiff, with his wife, B, and his daughter, C, as co-plaintiffs, were awarded moral and exemplary damages as well as attorney’s fees. The action was based on a breach of contract of carriage coupled with a quasi-delict. Are such damages conjugal or separate property? Reasons. ANS: Such damages are conjugal property. In the first place, the awards were made in favor of A, B and C collectively. There was no individual or specific award in favor of any of the plaintiffs. Consequently, the damages are presumed to be conjugal. (Art. 116, FC.) In the second place, the action is based mainly on the breach of a contract of carriage. When said contract of carriage was perfected with the purchase of three plane tickets from Pan-Am, the presumption is that the money invested for purchasing the tickets was conjugal in character. Hence, the provision in Art. 117 of the FC is applicable. The rights arising from the contract of carriage and the resultant damages awarded by reason of the breach of such rights are classified as properties acquired during the marriage by onerous title at the expenses of the partnership. Therefore, the damages awarded are conjugal. (Zulueta vs. Pan-American World Airways, 49 SCRA 1.) (Note: In Zulueta vs. PanAmerican World Airways, while waiting for the result of the appeal, Mr. and Mrs. Zulueta, for reasons of their own, separated from each other. Mrs. Zulueta then entered into a compromise agreement with Pan-Am wherein she settled for P50,0Q0. A motion to dismiss the case insofar as Mrs. Zulueta is concerned was, therefore, filed. The motion, however, was denied on the ground that a wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law. In a motion for reconsideration, the doctrine in Lilius vs. Manila Railroad, [62 Phil. 56], that the moral damages awarded to Mrs. Lilius are paraphernal was invoked. The Supreme Court ruled that the Lilius case is different.

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In that case, the award was given to a young and beautiful woman by reason of a scar — in consequence of an injury resulting from an automobile accident which disfigured her face and fractured her left leg, as well as caused a permanent deformity. In the Zulueta case, the basis of the action is breach of contract coupled with a quasi-delict. Besides, the damages of Mrs. Zulueta were merely incidental to the humiliation to which Mr. Zulueta was subjected.)

80. In 1950, H insured his life with his estate as beneficiary. In 1952, he got married to W, and in 1956, he died. The records show that the premiums on the insurance policy for 1950 to 1952 when H got married to W were paid out of the exclusive funds of H, while those from 1952 to the time of IPs death in 1956 were paid out of the conjugal funds. W now claims that the proceeds of the insurance policy are conjugal. Is this contention correct? Reasons. ANS: There are different views which have been advanced to answer the above question. They are: (1) The contention of W is correct only with respect to that part of the proceeds of the insurance policy which is covered by the premiums paid out of conjugal funds, but not with respect to that part which is covered by the premiums paid out of the exclusive funds of the insured. The character or nature of the proceeds of the insurance policy will, therefore, depend upon the character of the source of the premiums that were paid. If the premiums were paid out of conjugal funds, the proceeds must also be conjugal; if they were paid out of exclusive funds of the insured, the proceeds must also be classified as the exclusive or separate property of the insured; and if they were paid partly out of conjugal funds and partly out of exclusive funds of the insured, the proceeds must also be partly conjugal and partly capital. (See Bank of the P.I. vs. Posadas, 56 Phil. 215.) (2) There are exponents of the view, however, that since the insurance policy was obtained prior to the marriage of H to W, the proceeds of the insurance policy should be classified as the exclusive or separate property of the insured, H, although the premium payments come from the conjugal funds. But then, the insured should refund the conjugal partnership for the premium payments made. It is submitted that the 1st view is more logical.' 178

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81. W, prior to her marriage, rented out her paraphernal building to A. A then paid W three (3) years advanced rental. Two years thereafter, W got married to H. Are the rental payments conjugal or paraphernal? ANS: The rental payments for the first two (2) years are classified as W’s paraphernal property. However, the payments corresponding to the last year falling due during W’s marriage to H are classified as conjugal. (Art. 117[3], FC.) 82. H, while working on a parcel of land belonging to his wife, W, discovered a box containing some valuable jewels. Assuming that the ownership of the jewels is not known, to whom do they belong? Reasons. ANS: The jewels belong to the conjugal partnership. While it is true that under Art. 438 of the NCC, 1/2 of the hidden treasure which is discovered by chance on the property of another shall belong to the finder and the other 1/2 shall belong to the owner of the property on which it is found, nevertheless, under Art. 117(4) of the FC, the share in the hidden treasure which the law awards the finder or owner of the property belongs to the conjugal partnership. 83. Are the winnings of either spouses in gambling conjugal or separate property? Discuss. (1972) ANS: The winnings shall form part of the conjugal partnership property. Art. 117(7) of the FC provides that those which are acquired by chance, such as winnings from gambling or betting are conjugal partnership properties. However, losses therefrom shall be borne exclusively by the loser-spouse. Likewise, Art. 123 of the same Code provides that whatever may be lost during the marriage in any game of chance, or in betting, sweepstakes, or any other kind of gambling permitted or prohibited by law, shall be borne by the loser and shall not be charged to the conjugal partnership but any winnings therefrom shall form part of the conjugal partnership property. 84. W, single, bought a parcel of a land in Batangas from A for P500,000. A contract was executed between them which already vested upon W full ownership of the property, 179

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FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains i

although payable in monthly installments for a period of four (4) years. One year after the execution of the contract, W got married to H. Thereafter, subsequent installments were paid from the conjugal partnership funds. Is the land conjugal or paraphernal? Reasons.

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ANS: The land is paraphernal. This is so because ownership thereof was acquired and already vested upon W before her marriage. Consequently, it is classified as property brought to the marriage as her own, and under the law, such property is paraphernal. (Art. 109[1], FC.) However, upon the liquidation of the conjugal partnership properties, W must reimburse the conjugal partnership for the monthly installments paid from the partnership funds. (See Lorenzo vs. Nicolas, 91 Phil. 686.) 85. Will the land in the above question be classified as paraphernal property of W where her ownership thereof vested only upon full payment of the purchase price during marriage? ANS: No. The land shall be considered conjugal property of W and H. Art. 118 of the FC provides that where property is bought on installments paid partly from exclusive funds of either or both spouses and partly from conjugal funds, said property belongs to the buyer or buyers if full ownership was vested before the marriage and to the conjugal partnership if such ownership was vested during the marriage. Since ownership was vested upon W only during marriage, the land belongs to the conjugal partnership. However, upon liquidation of the conjugal partnership properties, the conjugal partnership must reimburse W for the monthly installments she paid before her marriage. 86. A obtained a loan in the amount of P200,000 from W prior to W’s marriage to H a year later. Said loan was agreed to be payable for three (3) years by way of monthly installments. Are the installment payments made by A to W during her marriage to H her paraphernal property? ANS: We must distinguish. The installments falling due on the principal of the loan even if paid during the marriage is classified as the paraphernal property of W who is the creditor of A. However, 180

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interests falling due during the marriage on the principal shall belong to the conjugal partnership. This is so because interests are fruits of the loan extended by W and under Art. 117(3) of the FC, net fruits due or received during the marriage from the exclusive property of each spouse are classified as conjugal partnership property. 87. What rule is applicable where improvements are made on separate property of either spouse at the expense of the conjugal partnership or through efforts of either or both spouses? ANS: Art. 120 of the FC is the applicable rule. According to the said rule, the ownership of improvements, whether for utility or adornment, made on the separate property of the spouses at the expense of the partnership or through the acts or efforts of either or both spouses shall pertain to the conjugal partnership, or to the original owner-spouse, subject to the following: (a) When the cost of the improvement made by the conjugal partnership and any resulting increase in value are more than the value of the property at the time of the improvement, the entire property of one of the spouses shall belong to the conjugal partnership, subject to reimbursement of the value of the property of the owner-spouse at the time of the improvement; (b) When the cost of the improvement made by the partnership and any resulting increase in value are less than the value of the property at the time of the improvement, the entire property shall be retained in ownership by the original owner-spouse, likewise subject to reimbursement of the cost of improvement. In either case of (a) or (b), the ownership of the entire property shall be vested only upon reimbursement of the value of the property to the owner-spouse or of the cost of improvement to the partnership, as the case may be. Reimbursement shall be made at the time of the liquidation of the conjugal property. 88. H and W, husband and wife, constructed a P400,000 house on a P I00,000 lot belonging to W. The funds used for the construction belonged to the conjugal partnership. Two years later, the partnership was dissolved by the death of W. By then, the value of the house and lot had gone up to 181

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P700,000. In the liquidation of the conjugal partnership properties, to whom shall you adjudicate the house and lot? Explain your answer. ANS: Since the cost of the house made by the conjugal partnership on the lot of W and the resulting increase in the value of the whole property are more than the value of the lot of W, the entire property shall become conjugal and should, therefore, be adjudicated to the conjugal partnership. This is so by virtue of the provision of Art. 120 of the FC. It must be observed, however, that as far as the lot is concerned, its conversion from paraphernal to conjugal property is subject to the suspensive condition that its value shall be reimbursed to the estate of W at the time of liquidation of the conjugal partnership. Consequently, before we can say that the property has already been converted into conjugal property, it is essential that the conjugal partnership shall pay P100,000 to the estate of W. (Vda. de Padilla vs. Paterno, 113 Phil. 656.) 89. Suppose that in the above problem, the house was destroyed prior to dissolution of the conjugal partnership by virtue of the death of W, will the lot still be considered conjugal? ANS: No, the lot would be paraphernal. In other words, the provision of Art. 120 of the FC is applicable only if the building is still existing at the time of the liquidation of the conjugal partnership. Consequently, if such building is destroyed before such liquidation, the provision is no longer applicable, in which case the lot is still paraphernal. (Cornejo vs. Flores, 84 Phil. 284; Vda. de Padilla vs. Paterno, 113 Phil. 656.) 90. A and B, a year after marriage, built a residential house worth P500,000 on a land worth P200,000 belonging to the latter as her paraphernal property, using conjugal funds for its construction. Their marital life proving unhappy, they agreed to separate. Neither took the trouble to obtain judicial separation. Sometime later, a big fire reduced the house to ashes. Upon the death of B (the wife) there was a liquidation of the conjugal partnership. A, the surviving spouse, contended that the lot should form part of the conjugal estate. The heirs of B, the deceased wife, claimed 182

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that after the house was burned, rendering the lot vacant once more, it reverted to its status of being paraphernal. Decide the case with reasons.

i i ! ; ’ i ■

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ANS: A’s contention that the lot should form part of the conjugal estate is not correct. Under Art. 120 of the FC, B retains her right to the ownership of the lot until she is paid its value. It is now a wellsettled doctrine that payment of the value of the lot can be made only once the conjugal partnership is dissolved and there is a subsequent liquidation of the conjugal partnership properties. In other words, before the lot is converted or transformed into conjugal, property, it is essential that the condition that its value shall be reimbursed to B or to her legal heirs must be complied with. Such reimbursement can take place only during the liquidation proceedings. Obviously, compliance with this condition presupposes that the building constructed on the lot is still in existence at the time of liquidation of the conjugal partnership. In the instant case, the building was destroyed before the condition could be complied with. So even the claim of the legal heirs of B that the lot reverted to its original status of being paraphernal property is not correct. It never ceased to be paraphernal property. (Vda. de Padilla vs. Paterno, 113 Phil. 656; Coingco vs. Flores, 84 Phil. 284.) 91. X died with a will survived by his childless widow, W, and his mother, M. In the will, he left all of his properties to his mother, M. In the course of the testate proceedings for the settlement of X’s estate, the court declared some paraphernal properties of W as coujugal since the buildings were erected on lots belonging to using conjugal funds during coverture and the resulting increase in the value of the entire property are more than the value ofW*s lands. This was followed by an order that their value shall be reimbursed to W with conjugal funds. Before this could be effected, some of these buildings were destroyed. (a) As far as those lots where the buildings were destroyed are concerned, what is the nature of these proper­ ties? Who shall be entitled to the fruits or income accruing thereto from the time of the dissolution of the conjugal part­ nership? 183

Arte. 116-120

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

(b) How about those lots where the buildings were not destroyed, what is the nature of these properties? Who shall be entitled to the fruits or income accruing thereto from the time of the dissolution of the conjugal partnership? ANS: (a) As far as those lots where the buildings were destroyed are concerned, it must be observed that the mere construction of a building on each of these lots with conjugal funds does not automatically convey the ownership thereof to the conjugal partnership. Under our law, the widow retains the ownership of these lots until she is paid their value as a result of the liquidation of the conjugal partnership properties. (Art. 120, FC.) In other words, before there can be a transmission of the right of ownership over such properties to the conjugal partnership, the suspensive condition that their value shall be reimbursed to the widow must have to be complied with. Obviously, compliance with this condition presupposes that the buildings constructed on these lots must still be in existence at the time of the liquidation of the conjugal partnership properties. In the instant case, the conjugal improvements were destroyed before such condition could be complied with. The conclusion therefore is inescapable that these lots never ceased to be paraphernal. Being paraphernal, all of the fruits or income which may have accrued thereto from the time of the death of X, when the conjugal partnership was dissolved, up to the time when they are finally delivered to her belong to her in absolute ownership. (Vda.de Padilla vs. Paterno, 113 Phil. 656; Maramba vs. Lozano, 20 SCRA 474.) (b) As far as those lots where the buildings were not destroyed are concerned, the acquisition thereof by the conjugal partnership is subject to the suspensive condition that their value shall be reimbursed to the widow at the time of the liquidation of the conjugal partnership properties. Consequently, before we can say that the lots have already been converted into conjugal property, it is essential that the conjugal partnership shall pay the value of the lots to W. All the fruits or income of these properties which accrued from the time of the death of X to the time when the final partition is effected shall now belong to W and M in co-ownership, share and share alike. (Vda.de Padilla vs. Paterno, supra.)

184

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 116-120

92, When does ownership of improvements made on the separate property of the spouses at the expenses of the partnership vest upon the conjugal partnership or the origi­ nal owner-spouse, as the case may be? ANS: The third paragraph of Art. 120 of the FC provides that the ownership of the entire property shall be vested upon the reim­ bursement of the cost of improvement to the conjugal partnership or of the value of the property to the owner-spouse which shall be made at the time of the liquidation of the conjugal partnership. In the case of Maramba vs. Lozano (20 SCRA 474), it was declared that “the construction of a house at conjugal expense on the exclusive property of a spouse does not automatically make it conjugal. It is true that, in the meantime, the conjugal partnership may use the land and building, but it does not as owner, but as usufructuary. The ownership of the land remains the same until the value thereof is paid. This payment can only be demanded on the liquidation of the partnership,” 93. Is the doctrine enunciated in the case of Maramba vs. Lozano (20 SCRA 474) the same doctrine enunciated in the case of Vda. de Padilla vs. Paterno (113 Phil. 656)? ANS: No. In the case of Vda. de Padilla vs. Paterno, with the factual background stated in question No. 44(b), the effects of the fulfillment of the suspensive condition (that the value of the lots are reimbursed to the widow at the time of the liquidation of the conjugal partnership properties) should be deemed to retroact to the date of the constitution of the obligation. (Art. 1187, NCC.) In other words, their conversion from paraphernal to conjugal property should be deemed to retroact to the time the buildings were first constructed thereon, or at the very latest, to the time immediately before the death of X. That would be the only logical conclusion, because, if we say that they become conjugal only at the time when the reimbursement is made, that would be equivalent to saying that a conjugal partnership which no longer existed would still be able to acquire ownership over such properties. Certainly, that would be juridically impossible. Exponents of the doctrine enunciated in the Vda. de Padilla vs. Paterno case adhere to the said view for the following reasons: 185

Arts. 116-120

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

(1) The mode by which the right of ownership over the land is transmitted to the conjugal partnership is not the payment of the value of the land but the law itself. To say that such transmission is effected by the payment would be creating another mode of acquiring ownership which is not recognized by law. (Art. 712, NCC.) (2) The payment of the value of the land is merely a suspensive condition imposed by the law in order that said land shall become conjugal in character. That it could not be effected during the marriage is clear and logical because of the bar against transfers (whether by donation or by sale) during marriage. (Art. 1490, NCC.) Hence, it can only be effected or fulfilled after said marriage has been dissolved and the conjugal partnership is liquidated. (3) Between the construction of the building and the payment of the value of the land during the liquidation of the conjugal partnership, said partnership is not only the usufructuary but also the conditional owner; in other words, it has already acquired a hope or expectancy over the land which is protected by law. (Arts. 1181, 1187,1188, NCC.) (4) To say that the land becomes conjugal upon payment is juridically not possible because by then, the conjugal partnership had already been dissolved. 94. Less than a year after Marilyn’s death, her husband, Johnny, married Susan without liquidating their conjugal partnership. The couple were engaged in the transportation business and in the copra business which started during the first marriage. Johnny died. The first marriage existed for 15 years while the second marriage existed for 14 years. The lower court held that the properties left belonged to the first marriage. Is the lower Court correct? ANS: No, the lower court is not correct. In Dael vs. IAC (171 SCRA 524), the SC held that after the first marriage was dissolved, the fruits or income derived from the properties would no longer be conjugal but would belong to the heirs. The fruits and income of the husband’s inheritance and conjugal shares after the dissolution of the first marriage, form part of the conjugal property of the second marriage. The first marriage existed for 15 years, while the second marriage lasted for about 14 years. The property should be divided 186

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 121-123

in proportion to the duration of each marriage and to the property of the respective spouses. (Art. 189, NCC.) The first marriage should receive 15/29 while the second marriage will get 14/29 thereof. (Dael vs. IAC, 17 SCRA 524.) Section 4. CHARGES UPON AND OBLIGATIONS OF THE CONJUGAL PARTNERSHIP (Arts. 121-123, FC) 95. What are the obligations for which the conjugal partnership is liable? ANS: The conjugal partnership shall be liable for: (1) The support of the spouse, their common children and the legitimate children of either spouse. (Art. 121[1], FC.) (2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the other. (Art. 121[2], FC.) (3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefitted. (Art. 121(3], FC.) (4) All taxes, liens, charges and expenses including major or minor repairs upon the conjugal partnership property. (Art. 121[4], FC.) (5) All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse (Art. 121[5], FC), whether or not the property is being used by the family. (This is so because the conjugal partnership is the usufructuary of all separate properties of the spouses and is also entitled to all the fruits of such properties.) (6) Expenses to enable either spouse to commence or complete a professional, vocational or other activity for self improvement. (Art. 121(6], FC.) (7) Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family. (Art. 121[7], FC.) 187

Arts. 121-123

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

(8) The value of what is donated or promised by both spouses in favor of their common legitimate children or for the exclusive purpose of commencing or completing a professional or vocational course or other activity for self-improvement. (Art. 121 [8], FC.) (9) Expenses of litigation between the spouses, unless the suit is found to be groundless. (Art. 121[9], FC.) (Note: The FC states that if the conjugal partnership is insuf­ ficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the unpaid balance with their separate properties.) (10) The payment of personal debts contracted by either spouse before or during the marriage insofar as they redounded to the benefit of the family. (Art. 122, 1st par., FC.) (11) The payment of personal debts contracted by either spouse before the marriage > that of fines and indemnities imposed upon them, as well as the support to illegitimate children of either spouse, may be enforced against the partnership assets but only after the responsibilities enumerated in Art. 121 of the FC have been covered, if the spouse who is bound should have no exclusive property, or if it should be insufficient; but at the time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purposes above-mentioned. (Art. 122, 3rd par., FC.) (12) Funeral expenses. The construction of a tombstone or mausoleum shall be deemed a part of the funeral expenses, and shall be chargeable to the conjugal partnership of property, if the deceased is one of the spouses. (Art. 310, NCC.) 96. H was engaged in the business of buying and selling rice. In the course thereof, he incurred a P20,000 indebtedness from his supplier of rice. Because of his gambling losses, his business went bankrupt and soon thereafter, he and his wife, W, quarrelled and lived separately ever since. A year after they had separated, H’s creditor sued him and obtained a favorable judgment which, however, cannot be enforced against him because he has no property at all. H’s creditor now seeks to enforce the judgment against W’s brand new car which she had bought out of her salary from the company

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 121-123

where she works. The car is registered in W’s maiden name which she has resumed using. May the car be levied upon to answer for the judgment? Why? (1979) ANS: Yes, W’s car maybe levied upon to answer for the judgment. It must be observed that the obligation of H is an obligation which has redounded to the benefit of his family since he had incurred it in the course of his business. Under Art. 121(2) of the FC, the conjugal partnership is liable for the payment of such obligation- The fact that H’s business went bankrupt because of his gambling losses does not affect the liability of the partnership for the obligation. Neither does the separation de facto of H and W have any effect. Under the law, such separation does not terminate the conjugal partnership of gains existing between them. But how about the fact that the car was bought by W out of her salary? Under Art. 117(2) of the FC, W’s salary is conjugal. Consequently, her car which she bought with her salary would then be classified as property acquired during the marriage with conjugal funds by onerous title. According to the same Code, the car is also conjugal. Being conjugal, it may be levied upon to answer for the judgment. 97. Levy was made on the conjugal property of Johnny and Helen on the basis of the liability of Johnny as mere guarantor. Is the levy on the conjugal property proper? ANS: The levy is improper. Under the FC, personal obligations incurred by either spouse are not chargeable against the conjugal partnership, unless it can be proved that they have redounded to the benefit of the family. (Art. 122,1st par., FC.) Johnny, in guaranteeing the loan of another, has incurred liabilities which does not redound to the benefit of the conjugal partnership of Johnny and Helen. It even threatens to dissipate conjugal funds. (Ting vs. Villarin, August 17,1989.) 98. In a petition for review on certiorari, Ayala Investment and Development Corporation (AIDC) charges the Court of Appeals with having erred in ruling that the obligation incurred by Alfredo Cheng did not redound to the benefit of the conjugal partnership of Alfredo and Encamacion Cheng, as well as in ruling that the act of Alfredo Cheng in securing the loan of Philippine Blooming 189

Arts. 121-123

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Mills (PBM) in the amount of P50,300,000.00 is not part of his industry, business or career from which he supports his family, (a) What debts and obligations contracted by the husband alone are considered “for the benefit of the conjugal partnership” which are chargeable against the conjugal partnership? (b) Is a surety agreement or an accommodation contract entered into by the husband in favor of his employer within the contemplation of Art. 161 of the NCC? ANS: (a) If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be used in. or for his own business or his own profession, that contract falls within the term “obligation for the benefit of the conjugal partnership.” Here, no actual benefit may be proved, (b) On the other hand, if the money or services are given to another person or entity, and the husband acted only as a surety or guarantor, that contract cannot, by itself, alone be categorized as falling within the context of “obligation for the benefit of the conjugal partnership.” Proof must be presented to establish benefit redounding to the conjugal partnership. In the case at bar, AIDC claims that the benefits the Cheng family would reasonably anticipate were the following: (i) The employment of Alfredo Cheng would be prolonged; (ii) The shares of stock of the members of Cheng’s family would appreciate if PBM could be rehabilitated through the loan obtained; and, (iii) Alfredo Cheng’s prestige in PBM would be enhanced and his career would be boosted should PBM survive because of the loan. However, these are not the benefits contemplated by Art. 161 of the NCC. The benefits must be those directly resulting from the loan. It cannot be a by-product or a spin-off of the loan itself. The above-enumerated alleged benefits are not only incidental but also speculative. Hence, the FC clarifies that the obligations entered into by one of the spouses must be those that redounded to the benefit of the family and that the measure of the partnership’s liability is to “the extent that the family is benefited.” (Art. 121[3], FC; Ayala Investment and Development Corporation vs. CA, G.R. No. 118305, February 12, 1998.) 99. Are the conj ugal partnership properties answerable for the obligation of a spouse in the amount of P2,500,000.00 190

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 121-123

for the purchase of a house and lot, which obligation was obtained without the consent of the other spouse? ANS: Yes. Under the law, the conjugal partnership shall be liable for all debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the other; as well as for all debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefited. The loan redounded to the benefit of the family because it was used to purchase the house and lot which became the conjugal home of the other spouse and his family. Notwithstanding, therefore, the alleged lack of consent of the other spouse, under Art. 121, FC, he shall be solidarily liable for such loan together with his wife. (Carlos vs. Abelardo, G.R. .No. 146504, April 4, 2002.) 100. In order to pay for the medical and hospital expenses of Fidel, the husband who suffered third degree burns, Fidel had to sell his 1/2 share of the conjugal property even without the consent of Ming which consent was unreasonably withheld. Is the sale valid despite lack of Ming’s consent? ANS: The sale by Fidel of his 1/2 share of the conjugal property is valid despite lack of consent by Ming which was unreasonably withheld. The sale was made necessary to pay for the medical and hospital expenses of Fidel who had suffered third degree burns. The payment thereof redounds to the benefit of the conjugal partnership. Benefit need not be quantified into pesos or square meters of real property. The health and well being of either or both spouses undeniably redound to the benefit of the conjugal partnership. The advancement of its interests depends in great measure on the soundness of the body and mind of the partners. (Costuna vs. Damondon, December 19, 1989.) 101. Lucas, prior to his marriage with Ma. Mercedes, was sued by Leo for P20,000. A final sentence was rendered against him after his marriage. Would it be possible for Leo to enforce the judgment against the conjugal partnership? 191

Arts. 121-123

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

ANS: As a rule, no. According to Art. 122 of the FC: “The payment of personal debts contracted by the hus­ band or the wife before or during the marriage shall not be charged to the conjugal partnership except insofar as they re­ dounded to the benefit of the family. Neither shall the fines and pecuniary indemnities im­ posed upon them be charged to the partnership. However, the payment of personal debts contracted by either spouse before the marriage, and that of fines and in­ demnities imposed upon them x x x may be enforced against the partnership assets after the responsibilities enumerated in the preceding Article have been covered, if the spouse who is bound shall have no exclusive property or if it shall be insuf­ ficient; but at the time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purposes above-mentioned.” (The preceding article referred to is Art. 121 of the FC.)

102. “A,” the husband, contracted a personal obligation that did not redound to the benefit of the family. May the conjugal partnership and the fruits of the paraphernal property, since the same form part of the assets of the conjugal partnership, be both held liable for the obligation? Explain. (1972) ANS: It is submitted that as far as the conjugal partnership assets are concerned, the provision of Art. 122 of the FC is applicable. In other words, such assets can be held liable even though the obligation of “A” had not redounded to the benefit of his family, but subject to the following requisites: first, the lack or insufficiency of capital assets of “A” and second, the satisfaction of the basic conjugal obligations under Art. 121 of the FC. Once the payment has been made, “A” becomes a debtor of the partnership. At the time of the liquidation of the partnership, he shall be charged for what has been paid. While it is true that the statutory provision does not include debts contracted during the marriage by either spouse which have not redounded to the benefit of the debtor’s family, commentators hold the view that such debts should be included for the following reasons: firsts if the partnership assets can not be held liable, creditors 192

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 124-125

who have extended credit relying on the existence of such assets would be unduly prejudiced, and second, debts contracted during the marriage are certainly more pressing than those contracted before such marriage. It is, however, necessary, as a matter of justice, that all or most of such conjugal assets should have been acquired through the effort or industry of the spouse-debtor. Otherwise, Art. 122 of the FC, shall be applied literally. The conjugal assets cannot then be held liable. The fruits of the paraphernal property, however, cannot be held liable for the payment of the obligation. Although conjugal, such fruits cannot be held liable for purely personal obligations of the husband. In the case of Ching vs. CA (G.R. No. 124642, February 23, 2004) the Court held that for conjugal partnership to be liable for a liability that should affection to the husband alone, there must be a showing that some advantages accrued to the spouses. In this case, private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the husband’s act of executing a continuing guaranty and suretyship adjustment. The contract of loss was between the private respondent and the Phil. Blooming Mills Company, Inc., a by-product or a spin-off of the loss itself. Section 5. ADMINISTRATION OF THE CONJUGAL PARTNERSHIP PROPERTY (Arts. 124-125, FC) 103. Who is the administrator of the conjugal partner­ ship? ANS: The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail. This is subject, however, to recourse to the court by the wife for a proper remedy, which must be availed of within five (5) years from the date of the contract implementing such decision. (Art. 124,1st par., FC.) 104. When may spouse assume sole powers of adminis­ tration? Discuss the extent of such powers. 193

Arts. 124-125

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

ANS: In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. (Art. 124, 2nd par., FC.) 105. Can the husband alone perform acts of administra­ tion over the properties without the consent of the wife? ANS: Unlike an act of alienation or encumbrance where the consent of both spouse is required, joint management or administration does not require that the husband and the wife always act together. Each spouse may validly exercise full power of management alone, subject to the intervention of the court in proper cases as a provided under Art, 124 of the FC. The husband alone could, therefore, file against the conjugal property with the Court of Appeals without being joined by his wife. The reason is that it is a mere act of administration. (Docena vs. Lapesura, G.R. No. 140153, March 28, 2001.) 106. (a) Can the sale by the husband of conjugal proper­ ties without the wife’s written consent be valid considering that the wife actively participated in negotiating for the sale of the properties or is aware of the transaction? (b) Can the court’s authorization to sell be sought if the written consent of the other spouse cannot be obtained? ANS: (a) Even granting that the wife actively participated in negotiating for the sale of the conjugal properties, her written consent to the sale is required by law for its validity. The wife may have been aware of the negotiation for the sale of their conjugal properties but being merely aware of the transaction is not consent. 194

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 124-125

(b) If the written consent of the other spouse cannot be obtained or is being withheld, the matter may be brought to court which will give such authority if the same is warranted by the circumstances. However, it should be stressed that court authorization under Art. 124 of the FC is only resorted to in cases where the spouse who does not give consent, is incapacitated. In the absence of such showing of the wife’s incapacity, court authorization cannot be sought. (JaderManalo vs. Camaisa, G.R. No. 147978, January 23, 2002.) Senator Tolentino citing the case of Nicolas vs. CA (154 SCRA 635) observed that the very conspicuous absence of the wife’s conforme to the disposition of the property, there being no showing that the wife is legally incapacitated, renders the sale void ab initio because it is in contravention of the mandatory requirement in Art. 166 of the NCC. In the case of Villaranda vs. Villaranda (G.R. No, 153447, February 23, 2004) the Court ruled that since the Dual Exchange was executed on July 1976, Art. 166 of the NCC stating that a spouse cannot alienate or encumber a real property of the conjugal partnership without the consent of the other spouse, is applicable. However, Art. 173 of the NCC likewise states that an action to annul an alienation or encumbrance may be instituted by the other spouse during the marriage and withn 10 years from the transaction questioned. The lack of consent of the wife will not make the husband’s alienation or encumbrance of real property of the conjugal partnership void, but merely voidable. Hence, the Deed of Exchange is valid unless annulled. 107. In order that a donation of any conjugal partnership property shall be valid, it is essential that the donation is made with the consent of both spouses. What are the exceptions to this rule? ANS: Either spouse may, without the consent of the other, make moderate donations from the conjugal partnership property for charity or on occasions of family rejoicing or family distress. (Art. 125, FCJ

195

Arts. 126-128

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Section 6. DISSOLUTION OF CONJUGAL PARTNERSHIP REGIME (Arts. 126-128, FC) 108. When does the conjugal partnership of gains termi­ nate? ANS: The conjugal partnership of gains terminates: (1)

Upon the death of either spouse;

(2)

When there is a decree of legal separation;

(3)

When the marriage is annulled or declared void; or

(4) In case of judicial separation of property during the marriage under Arts. 134 to 138 of the FC. (Art. 126, FC.) 109. What is the effect of a separation in fact between husband and wife upon the conjugal partnership? ANS: The separation in fact between husband and wife without judicial approval shall not affect the conjugal partnership, except that: (1) The spouse who leaves the conjugal home or refuses to live therein without just cause, shall not have a right to be supported; (2) When the consent of one spouse to any transaction of the other is required by law, judicial authorization shall be obtained in a summary proceeding; (3) In the absence of sufficient conjugal partnership property, the separate property of both spouses shall be solidarily liable for the support of the family, The spouse present shall, upon petition in a summary proceedings, be given judicial authority to administer or encumber any specific property of the other spouse and use the fruits or proceeds thereof to satisfy the latter’s share. (Art. 127\FCJ 110. In case a spouse without just cause abandons the other or fails to comply with his or her obligations to the family (i.e., marital, parental or property relations), what are the remedies of the aggrieved spouse? ANS: There are three (3) alternative remedies of the aggrieved spouse. According to Art. 128 of the FC, the aggrieved spouse may 196

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 129-133

petition the court for: 1) receivership; or 2) for judicial separation of property; or 3) for authority to be the sole administrator of the conjugal partnership property, subject to such precautionary conditions as the court may impose. (Note: A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without any intention of returning. The spouse who has left the conjugal dwelling for a period of three (3) months or has failed within the same period to give any information as to his or her whereabouts shall be prima facie presumed to have no intention of returning to the conjugal dwelling.)

Section 7. LIQUIDATION OF THE CONJUGAL PARTNERSHIP ASSETS AND LIABILITIES (Arts. 129-133, FC) 111. What are the different steps in the liquidation of the conjugal properties after the dissolution of the partnership? ANS: The different steps are as follows: (1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusive properties of each spouse. (2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall be credited to the conjugal partnership as an asset thereof. (3)

Each spouse shall be reimbursed for the use of his or her

exclusive funds in the acquisition of property or for the value of his

or her exclusive property, the ownership of which has been vested by law in the conjugal partnership. (4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, in accordance with the provisions of par. (2) of Art. 121 of the FC. (5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. 197

Arts. 129-133

FAMILY CODE (Persona) Property Relations Between Husband and Wife Conjugal Partnership of Gains

(6) Unless the owner has been indemnified from whatever source, the loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from the conjugal funds, if any. (7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in the FC. (8) The presumptive legitimes of the common children shall be delivered upon partition in accordance with Art. 51 of the FC. (9) In the partition of the property, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of seven years are deemed to have chosen the mother unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interests of the children. (Art. 129, FC.) 112. Suppose that in the liquidation of the conjugal partnership properties, after payment of advances made by the wife to the partnership, nothing remains for the payment of obligations in favor of third persons, what is the remedy of the latter? ANS: The remedy of such creditors is to proceed against the husband and the wife in accordance with the provisions of Art. 1816 of the NCC in relation to Art. 108 of the FC. The FC in its Art. 108 recognizes the suppletory character of the law on partnership in cases not expressly determined in the law on conjugal partnership of gains. Consequently, Art. 1816 under the law on partnership is ap­ plicable. Under this article, the liability of the husband and the wife is joint and subsidiary. Hence, since there are no longer assets of the conjugal partnership, the liability of the wife to the partnership creditors covers only 1/2 of the obligations, while the liability of the husband covers the other half. (See PNB vs. Quintas, 46 Phil. 370.)

198

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

Arts. 129-133

113. How shall the net remainder of the conjugal partnership of gains be divided between the husband and the wife? ANS: According to Art. 129(7) of the FC, the net remainder of the conjugal partnership of gains shall be divided equally between the husband and the wife or their respective heirs, unless a different basis of division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share. 114. What is the procedure for the liquidation of the conjugal properties upon termination of the marriage by death? ANS: Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same proceeding for settlement of the estate of the deceased. If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property either judicially or extrajudicially within one year from the death of the deceased spouse. If upon the lapse of said period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void. (Art. 130, FCJ 115. After the death of H which terminated his marriage to W, W got married to A. W, however, failed to liquidate the partnership property prior to her marriage to A. What regime shall govern the property relations between W and A? ANS: A mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage contracted by W and A. (Art. 130s 3rd par., FC.) 116. Suppose there is a simultaneous liquidation of the conjugal properties for two (2) or more marriages contracted by the same person before the effectivity of the FC, how shall the respective capital, fruits and income of each partnership be determined? ANS: The respective capital, fruits and income of each part­ nership shall be determined upon such proof as may be considered 199

Arts. 129-133

FAMILY CODE (Persons) Property Relations Between Husband and Wife Conjugal Partnership of Gains

according to the rules of evidence. In case of doubt as to which part­ nership the existing properties belong, the same shall be divided between and among the different partnerships in proportion to the capital and duration of each. (Art. 131, FC.) 117. What law shall he observed in the appraisal and sale of property of the conjugal partnership as well as in other matters which are not expressly determined in Chapter 4, Title IV of the FC covering conjugal partnership of gains? ANS: The Rules of Court on the administration of estates of deceased persons shall be observed in the appraisal and sale of the conjugal partnership property and in other matters which are not expressly determined in Chapter 4, Title IV of the FC on conjugal partnership of gains. (Art 132, FC.) 118. Where shall the support to be given to the surviving spouse, S and to the children, A and B, be charged against during the liquidation of the conjugal partnership? ANS: The support to be given to the surviving spouse, S, and to the children, A and B, during the liquidation of the conjugal partnership and until such time that what belongs to them are delivered, shall come from the common mass of property and shall be particularly charged against the fruits, rents or income pertaining to their shares to the inventoried property. But where the support given to the surviving spouse and the children exceeds the fruits, rents or income pertaining to their shares, the excess shall be deducted from their respective shares as these are deemed advances from the inventoried property. (Art. 133, FC.) 119. Shall the surviving spouse, S, and the children, A and B, be entitled to support where at the time of the liquidation of the conjugal partnership, the assets of the partnership are less than the outstanding liabilities? ANS: In such case where the conjugal partnership assets are less than the conjugal partnership liabilities at the time of the liquidation of the partnership, the surviving spouse, S, and the children, A and B, shall not be entitled to support. (Moore and Sons Mercantile Co. vs. Wagner, 50 Phil. 128.) 2 0 0

FAMILY CODE (Persons) Property Relations Between Husband and Wife Separation of Property of the Spouses

Arts. 134-142

Chapter 5 SEPARATION OF PROPERTY OF THE SPOUSES AND ADMINISTRATION OF COMMON PROPERTY BY ONE SPOUSE DURING THE MARRIAGE (Arts. 134-142, FC) 120. Can there be a separation of property between the spouses during the marriage? ANS: There can be no separation of property between the spouses during the marriage except by virtue of a judicial order. (Art 134, FC.) From this, it is clear that the system of complete separation of property shall govern the property relations between the spouses only in the following cases: (1) When it is expressly provided for in the marriage settlements; and (2)

When it is so decreed by a competent court.

(3) Mandatory regime of complete separation of property. (Art. 103, par. 3, FC; Art. 130, par. 3, FC.) 121. Should the spouses, H and W, decide to separate their properties during marriage, how could they validly perfect the separation of such properties? ANS: Spouses, H and W, have to secure judicial approval. Said judicial separation of property may either be voluntary (by agreement) or for sufficient cause. (Art. 134, FC.) 122. H and W, after 10 years of unhappy marital life, signed a formal agreement whereby they shall divide, share and share alike, all of their conjugal properties. State your opinion as to the legal effect of such agreement. ANS: The agreement is void. According to Art. 134 of the FC, “in the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place except by judicial order.” This principle declares as void and no effect every extrajudicial agreement, during marriage, 2 0 1

Arts. 134-142

FAMILY CODE (PersonB) Property Relations Between Husband and Wife Separation of Property of the Spouses

for the dissolution of the conjugal partnership or of the absolute community of property between husband and wife. 123. What are the causes for judicial separation of property? ANS: It depends. (a) If the judicial separation of property is voluntary, then mere agreement by both spouses will be sufficient. (b) If it is involuntary, any of the following shall be considered sufficient cause for judicial separation of property. (1)

That the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction;

(2)

That the spouse of the petitioner has been judicially declared an absentee;

(3)

That loss of parental authority of the spouse of petitioner has been decreed by the court;

(4)

That the spouse of the petitioner has abandoned the latter or failed to comply with his or her obligations to the family as provided for in Art. 101 of the FC;

(5)

That the spouse granted the power of administration in the marriage settlements has abused that power; and

(6)

That at the time of the petition, the spouses have been separated in fact for at least one year and reconciliation is highly improbable.

In cases provided in (b) Nos. (1), (2) and (3), the presentation of the final judgment against the guilty or absent spouse shall be enough basis for the grant of the decree of judicial separation of property. (Art. 135, FC.) However, in cases provided in (b) Nos. (4), (5) and (6), proof of the cause for judicial separation of property must be presented. 124. A married B without having entered into any marriage settlement. During their marriage, they acquired considerable property, due mostly to the industry and 2 0 2

FAMILY CODE (Persons) Property Relations Between Husband and Wife Separation of Property of the Spouses

Arts. 134-142

earnings of the wife, B. B asked her husband, A, to join her in a petition for dissolution of the conjugal partnership of gains. A, out of self-respect, agreed. A petition to that effect is now pending before you, as judge. How will you decide? Reasons. ANS: If I were the Judge, I would approve the dissolution of the conjugal partnership of gains provided, that all necessary steps in voluntary agreement for separation of property are taken. They are as follows: (1) In the verified petition jointly filed by spouses A and B with the court for the voluntary dissolution of the conjugal partnership of gains and for the separation of their common properties, all creditors of the conjugal partnership of gains as well as the personal creditors of the spouses shall be listed. (2) The creditors listed in the petition shall be notified of the filing of the petition so that they may appear at the hearing to safeguard their interests. (3) During the pendency of the proceedings for separation of property, conjugal partnership of gains shall pay for the support of the spouses and their children. (4) After dissolution of the conjugal partnership, the provisions on complete separation of property shall apply. And once the separation of property has been decreed, the conjugal partnership of gains shall be liquidated in conformity with the FC. (5) The petition for separation of property and the final judgment granting the same shall be recorded in the local civil registries and registries of property. (Arts. 136-139, FC.) (Note: The above mentioned procedure in voluntary agreement for separation of property is likewise applicable to the absolute community.)

125. Spouses Onyok and Maria decided to separate and to voluntarily dissolve their conjugal partnership. Hence, they executed a public document wherein they declared that they had no debts, that they were voluntarily dissolving their conjugal partnership, and that each of them would thereafter 203

Arts. 134-142

FAMILY CODE (Persons) Properly Relations Between Husband and Wife Separation of Property of the Spouses

be free to acquire or dispose of any property independently of the other. Thereafter, they lived apart. Onyok engaged in business which unfortunately failed. On the other hand, Maria continued to be gainfully employed and was able to acquire properties through her own efforts. The creditors of Onyok obtained a judgment against the latter which they could not satisfy because Pedro was insolvent. Could the creditors of Onyok obtain satisfaction of the judgment out of the properties of Maria? (1984) ANS: Yes, the creditors can obtain satisfaction of the judgment out of the properties of Maria. It is obvious that the properties of Maria are conjugal because they were acquired through her own effort or industry. (Art. 117[2], FC.) It is also obvious that the obligations of Pedro are conjugal obligations because they have benefited his family. (Art. 121[2], FC.) Therefore, creditors of Pedro can proceed after the properties acquired by Maria. But how about the agreement between Pedro and Maria to separate and dissolve their conjugal partnership voluntarily? This agreement is void because it was never approved by a competent court. (Art. 134, FC.) Consequently, it cannot produce any legal effect. 126. What are the effects of a decree of separation of property between the spouses? ANS: Once the separation of property has been decreed: (1) The absolute community or the conjugal partnership of gains is dissolved and liquidated in conformity with the FC. During the pendency, however, of the proceedings for separation of property, the absolute community or the conjugal partnership shall pay for the support of the spouses and their children. (Art. 137, 1st par., FC.) (2) After dissolution and liquidation of the absolute community of the conjugal partnership, the provisions on complete separation of property are applied. (Art. 138, FC.) 204

FAMILY CODE (Persons) Property Relations Between Husband and Wife Separation of Property of the Spouses

Arts. 134-142

(3) The rights previously acquired by creditors are not prejudiced. (Art. 140, FCJ Also, the spouses shall continue to be solidary liable with their separate properties to creditors. (Art. 121, last sentence, FCJ Notwithstanding the separation of property between the spouses, the spouses shall continue to be jointly liable for the support of the children. (Art. 195[3], FC.) Likewise, the spouses shall continue to be mutually obliged to support each other unless a final judgment granting a petition for legal separation or for annulment of marriage or for declaration of nullity of marriage has been obtained, in which case, the obligation of mutual support between the spouses ceases. (Arts. 195 and 198, FC.) 127. How and when may the spouses terminate the judi­ cial separation of property? What is the effect of such termi­ nation? ANS: The spouses may, in the same proceedings where separation of property was decreed, file a motion in court for a decree reviving the property regime that existed between them before the separation, for mere reconciliation between the spouses will now result to an automatic or instant revival of their previous regime. The spouses may terminate the judicial separation of property in any of the following instances: (1)

When the civil interdiction terminates;

(2)

When the absentee spouse reappears;

(3) When the court, being satisfied that the spouse granted the power of administration in the marriage settlements will not again abuse that power, authorizes the resumption of said administration. (4) When the spouse who has left the conjugal home without a decree of legal separation resumes common life with the other; (5) When parental authority is judicially restored to the spouse previously deprived thereof; (6) When the spouse who have been separated in fact for at least one year, reconcile and resume common life; or 205

Arts. 134-142

FAMILY CODE (Persons) Property Relations Between Husband and Wife Separation of Property of the Spouses

(7) When after voluntary dissolution of the absolute commu­ nity of property or conjugal partnership has been judicially decreed upon the joint petition of the spouses, they agree to the revival of the former property regime. No voluntary separation of property may thereafter be granted. The revival of the former property regime shall be governed by Art. 67 of the FC. (Art 141, FC.) 128. How does an instance where the assumption of sole administration by either spouse of the absolute community or conjugal partnership property differ from a case where administration of all classes of exclusive property of either spouse are transferred to the other spouse? ANS: One spouse may assume sole administration of the abso­ lute community or conjugal partnership property in the event that the other spouse is incapacitated or otherwise unable to participate in the administration of the common properties. Said spouse can as­ sume administration without seeking court authorization. This is so because the administration of the community and conjugal partner­ ship property belong to both spouses jointly. fArfs. 96 and 124, FC.) On the other hand, the administration of all classes of exclusive property of either spouse may be transferred by the court to the other spouse: (1)

When one spouse becomes the guardian of the other;

(2)

When one spouse is judicially declared an absentee;

(3) When one spouse is sentenced to a penalty which carries with it civil interdiction; or (4) When one spouse becomes a fugitive from justice or is in hiding as an accused in a criminal case. If the other spouse is not qualified by reason of incompetence, conflict of interest, or any other just cause, the court shall appoint a suitable person to be the administrator. (Art. 142, FC.)

206

FAMILY CODE (Persons) Property Relations Between Husband and Wife Regime of Separation of Property

Arts. 143-146

Chapter 6 REGIME OF SEPARATION OF PROPERTY (Arts. 143-146, FC) 129. (a) Under the system of complete separation of property, what properties are considered separate proper­ ties? What properties are not considered separate proper­ ties? (b) Who has the ownership, administration and usufruct of those properties which are considered separate? (c)

Who shall be liable for family expenses?

ANS: (a) It must be observed that the system of complete separation of property shall govern the property relations of the spouses only if there is an agreement to that effect in the marriage settlement or if there is a judicial order in accordance with Art. 135 of the FC. In the case of the former, the separation of property may refer to present or future property or both. It may be total or partial. If the spouses merely agreed upon partial separation of property, those properties not agreed upon as separate shall pertain to the absolute community. (Art. 213 of the NCC which provides that the property not agreed upon as separate shall pertain to the conjugal partnership of gains was repealed by Art. 144 of the FC.) In the case of judicial separation of property, although Art. 135 of the FC is silent, there seems to be an implication that the separation of property is total. (b) The ownership, administration and usufruct of those properties which are considered separate pertain to the spouse to whom they belong. Each spouse shall own, dispose of, possess, administer and enjoy his or her own separate estate, without need of the consent of the other. To each spouse shall belong all earnings from his or her profession, business or industry and all fruits, natural, industrial or civil, due or received during the marriage from his or her separate property. (Art. 145, FC,) (c) Both spouses shall bear the family expenses in proportion to their* income or in case of insufficiency or default thereof, to the current market value of their separate properties. 207

Arts. 147-148

FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

The liability of the spouses to creditors for family expenses shall, however, be solidary. (Art. 146, FC.)

Chapter 7 PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE (Arts. 147-148, FC) 130. Under the FC, what are the classes of "unions without marriage”? ANS: The 2 classes of “unions without marriage” are: (1) When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage (Art. 147, FC.); (2) In cases of cohabitation not falling under Art. 147 of the FC. (Art. 148, FC.) These cases refer more particularly where a man and a woman who are not capacitated to marry each other live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage. 131. Illustrate or give examples of the two (2) classes of “unions without marriage.” ANS: An example of the first class of “union without marriage” is where a man and a woman both above 18 years of age and single and who are capacitated to marry each other since they have no legal impediment to get married, cohabit or live together exclusively with each other as husband and wife without, however, getting married; or where the man and woman do not have valid marriages with other persons but their marriage is void for such reasons as, the marriage is incestuous or is against public policy or was solemnized by one who is not authorized by law to perform the marriage. An illustration of the second class of “union without marriage” is where a man and a woman live together as husband and wife when one or both of them have existing valid marriages with other persons. 208

FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

Arts. 147-148

Bigamous marriages, adulterous relationships or relationships in a state of concubinage as well as cohabitation by a man with several women all at the same time are other examples of the second class of union without marriage. 132. What requisites or conditions must be shown before Art. 147 of the FC can be applied? ANS: In order that Art. 147 of the FC can be applied, it must be shown: (1) That there must be a man and a woman who are capacitated to marry each other and who are living together exclusively with each other as husband and wife, but they are not married, or even if they are married, their marriage is void from the beginning; (2) That during the period of their cohabitation, properties should have been acquired by either or both of them through their work or industry or their wages and salaries; (3) Because of the development of our case law during the past fifteen years or so, it is submitted that there is a third requisite which must be shown — that the relationship between the man and the woman should not be adulterous; neither should it be bigamous. 133. (a) What rule governs the property relationship in a void marriage where there is no legal impediment to marry? (b) What rule governs the property relationship where one of the parties has legal impediment to marry the other. ANS: (a) The rule of co-ownership governs the property relationship in a void marriage where there is no legal impediment to marry. (Valdez vs. RTC, G.R. No. 122749, July 31, 1996.) The provisions of Art. 147 of the FC are specifically applicable. Art. 147, FC provides: “Art. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as hus­ band and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them 209

Arts. 147-148

FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

through their work or industry shall be governed by the rules on co-ownership. “In the absence of proof to the contrary, properties ac­ quired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed joint­ ly in the acquisition thereof if the former’s efforts consisted in the care and maintenance of the family and of the household. “Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation. “When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the re­ spective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabita­ tion.” The law is clear. In the absence of proofs to the contrary, any property acquired by common-law spouses dining the period of cohabitation is presumed to have been obtained thru their joint efforts and is owned by them in equal shares. Their property relationship is governed by the rules on co-ownership. And under this regime, they own their properties in common “in equal shares” (Abing vs. Waeyan, G.R. No. 146294, July 31, 2006). (b) When the parties spouses suffer from a legal impediment to marry or when they do not live exclusively with each other (as husband and wife), the provisions of Art. 148 of the FC apply, where “only the properties acquired by both of the parties through their actual joint contribution of money, property or industry shall be owned in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are prima facie presumed to be equal.” The 2 1 0

[ FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

Arts. 147-148

same rule and presumption shall apply to joint deposits of money and evidences of credit. If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership, existing in such valid marriage. If the party who has acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner as above discussed. The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith. (Art. 148, FC.) 134, Discuss the requirement of proof of “actual joint contribution” and the presumption of “equality of contribu­ tion” under Art. 148 of the FC. ANS: A reading of Art. 148 of the FC readily shows that there must be proof of “actual joint contribution” by both the live-in part­ ners before the property becomes co-owned by them in proportion to their contribution. The presumption of “equality of contribu­ tion” arises only in the absence of proof of their proportionate con­ tributions, subject to the condition that “actual joint contribution” is proven first. Simply put, proof of “actual joint contribution” by both parties is required, otherwise there is no co-ownership and no presumption of equal sharing. (Villanueva vs. CA, G.R. No. 143286, April 14, 2004.) 135. In 1989, Rico, then a widower 40 years of age, co­ habited with Sara, a widow 30 years of age. While living to­ gether, they acquired from their combined earnings a parcel of riceland. After Rico and Sara separated, Rico lived together with Mabel, a maiden 16 years of age. While living together, Rico was a salaried employee and Mabel housekept for Rico and did full-time household chores for him. During their cohabi­ tation, a parcel of coconut land was acquired by Rico from his savings. After living together for one year, Rico and Mabel sepa­ rated. Rico then met and married Letty, a single woman 26 years of age. During the marriage of Rico and Letty, Letty bought a mango orchard out of her own personal earnings. 211

Arts. 147-148

FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

a) Who would own the riceland, and what property re­ gime governs the ownership? Explain. b) Who would own the coconut land, and what property regime governs the ownership? Explain. c) Who would own the mango orchard, and what property regime governs the ownership? Explain. (1992) ANS: (a) Rico and Sara are the co-owners of the riceland. The regime is that of co-ownership. (Art. 147, FC, first par.) However, after Rico’s marriage to Letty, the half interest of Rico in the riceland will then become absolute community property of Rico and Letty. (b) Rico is the exclusive owner of the coconut land. The regime is a sole/single proprietorship. (Art. 148, FC, first paragraph is applicable, and not A rt 147, FC.) However, after Rico’s marriage to Letty, the coconut land of Rico will then become absolute community property of Rico and Letty. (c) Rico and Letty are the co-owners. The regime is the Absolute Community of Property. (Arts. 75, 90 and 91, FC.) 136. In cases of cohabitation not falling under Art. 147 of the FC, what rules shall govern their property relations? (1992) ANS: (1) Only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidences of credit. (It is noted that wages and salaries pertaining to each party belong to the earning party exclusively.) (2) If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his of her 2 1 2

FAMILY CODE (Persons) Property Relations Between Husband and Wife Property Regime of Unions Without Marriage

Arts. 147-148

share shall be forfeited in the maimer provided in the last paragraph of Art. 147 of the FC. The same rules on forfeiture shall apply even if both parties are in bad faith. (Art. 148, FC.) (Please note that the NCC provides for the property relations only for unions without marriage o f capacitated parties, without any rules on adulterous unions. Thus, the FC provides for rules on property relations in adulterous unions to fill the gap.)

i

Title V THE FAMILY Chapter 1 THE FAMILY AS AN INSTITUTION (Arts. 149-151, FC) 1.

(a) What is meant by the family? (b)

What relations are included in the family rela­

tions? ANS: (a) Family may be defined as a natural and social institution founded on the conjugal union, binding together the individuals composing it, for the common accomplishment of the individual and spiritual ends of life, under the authority of the original ascendant who heads it. (4 Valverde 8.) (b) Family relations include those: (1)

Between husband and wife;

(2)

Between parents and children;

(3)

Among other ascendants and descendants;

and (4) Among brothers and sisters, whether of the full or half-blood. (Art. 150, FC.) 2. What is the rule regarding suits between members of the same family? ANS: Art. 151 of the FC provides for the rule regarding suits between family members. The rule states that no suit between members of the same family shall prosper unless it should appear from the verified complaint or petition that earnest efforts toward a compromise have been made, but that the same have failed. If it 214

FAMILY CODE (Persons) The Family The Family Home

Arts. 152-162

is shown that no such efforts were in fact made, the case must be dismissed. This rule shall not apply to cases which may not be subject of compromise under the NCC. Art. 2035 of the NCC enumerates the cases which may not be subject of compromise. They are: (1)

The civil status of persons:

(2)

The validity of a marriage or legal separation;

(3)

Any ground for legal separation;

(4)

Future support;

(5)

The jurisdiction of courts;

(6)

Future legitime.

Chapter 2 THE FAMILY HOME (Arts. 152-162, FC) 3. What is meant by “family home” and how may it be constituted? ANS: The family home, constituted jointly by the husband and the wife or by an unmarried head of a family, is the dwelling house where they and their family reside and the land on which it is situated. (Art. 153, FC.) The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and SO' long as any of its beneficiaries actually reside therein, the family home continues to be such. (Art. 153, FC.) 4. Can a family home be constituted on a house without the land on which it is erected? Reason out your answer. ANS: It is submitted that a family home may not be constituted without including the land on which it is erected. From the very definition of a family home enunciated in Art. 152 of the FC, it is clear that the land on which the house is erected is an integral part of a family home. Besides, there is a clear implication both from 215

f

Arts. 152-162

FAMILY CODE (Persons) The Family The Family Home

the definition and the purpose of such family home as well as from the provisions of the NCC as amended by FC regulating said home that it is permanent in character. Now, if a house constructed on rented land, for instance, maybe constituted into a family home, it becomes temporary. It cannot, therefore, serve the purpose of a family home. 5. State the law regarding the exemptions of a family home from execution, forced sale or attachment. ANS: Under Art. 153 of the FC, from the time of the constitution and so long as any of the beneficiaries of the family home actually resides therein, the family home is exempt from execution, forced sale or attachment except as provided for in Art. 155 of the FC, and to the extent of the value allowed by the law. (a) Hence, under Art. 155 of the FC, while the family home shall be exempt from execution, forced sale or attachment, it may not be so exempt for: (1) (2) home;

non-payment of taxes; debts incurred prior to the constitution of the family

(3) debts secured by mortgages on the premises before or after such constitution; and (4) debts due to laborers, mechanics, architects, build­ ers, material men and others who have rendered service or fur­ nished material for the construction of the building, (b) Moreover, Art. 157 of the FC allows the exemption of the family home from execution, forced sale or attachment if its actual value does not exceed at the time of its constitution, the amount of P300,000 in urban areas (chartered cities and municipalities whose annual income at least equals that legally required for chartered cities) and P20Q,000 in rural areas (all others which are not chartered cities and municipalities), or such amounts as may be fixed by the law. Should the value of the currency change after the adoption of the FC, the value most favorable for the constitution of a family home shall be the basis of evaluation.

216

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Arts. 152-162

6. Has the residential house and lot of Cesario Montana which he and his family built in 1960 but which was not constituted as a family home, whether judicially or extrajudicially, under the NCC been constituted as a family home by operation of law under Art. 153 of the FC and, therefore, exempt from execution of a money judgment where the debt or liability was incurred before the effectivity of theFC? ANS: Under Art. 162 of the FC, it is provided that “the provisions of this Chapter shall also govern existing family residences insofar as said provisions are applicable.” It does not mean that Arts. 152 and 153 of the FC have a retroactive effect such that all existing family residences are deemed to have been constituted as family homes at the time of their occupation prior to the effectivity of the FC and are exempt from execution for the payment of obligations incurred before the effectivity of the FC. Art. 162 simply means that all existing family residences at the time of the effectivity of the FC, are considered family homes and are prospectively entitled to the benefits accorded to a family home under the FC. Art. 162 does not state that the provisions of Chapter 2, Title V have a retroactive effect. True, under the FC which took effect on Aug. 3, 1988, Cesario’s residential house and lot became his family home under the simplified process embodied in Art. 153 of the said Code. However, the case of Modequillo vs. Breva explicitly ruled that said provision of the FC does not have retroactive effect. In other words, prior to August 3, 1988, the procedure mandated by the NCC had to be followed for a family home to be constituted as such. There being absolutely no proof that Cesario’s residential house and lot was judicially or extrajudicially constituted as a family home, it follows that the law’s protective mantle cannot be availed of. Since the debt involved herein was incurred prior to August 3,1988, Cesario cannot be shielded by the benevolent provisions of the FC. (Manacop vs. CA, 277 SCRA 64, August 11, 1997.) 7.

Who are the beneficiaries of a family home?

ANS: The beneficiaries of a family home are: (1) The husband and wife, or an unmarried person who is the head of a family, and 217

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FAMILY CODE (Persons) The Family The Family Home

(2) Their parents, ascendants, descendants, brothers and sisters, whether the relationship be legitimate or illegitimate, who are living in the family home and who depend upon the head of the family for legal support. (Art. 154, FC.) 8. Aro Mino contends that he should be deemed residing in the family home because his stay in the U.S. is merely temporary. He asserts that the person staying in the house is his overseer and that whenever his wife, Rosanna, visited the Philippines, she stayed in the family home. Is the contention of Aro meritorious? ANS: The law explicitly provides that occupancy of the family home either by the owner thereof or by “any of its beneficiaries” must be actual. That which is “actual55is something real, or actually existing, as opposed to something merely possible, or to something which is presumptive or constructive. Actual occupancy, however, need not specifically be by the owner of the house. Rather, the property may be occupied by the “beneficiaries’5enumerated by Art. 154 of the FC. “Art. 154. The beneficiaries of a family home are: (1) The husband and wife, or an unmarried person who is the head of the family; and (2) Their parents, ascendants, descendants, brothers and sisters, whether the relationship be legitimate or illegitimate, who are living in the family home and who depend upon the head of the family for legal support.” This enumeration may include the in-laws where the family home is constituted jointly by the husband and wife. But the law definitely excludes maids and overseers. They are not the beneficiaries contemplated by the Code. Consequently, occupancy of a family home by an overseer is insufficient compliance with the law. (Manacop vs. CA, 277 SCRA 65, August 11,1997.) 9. Pursuant to a writ of execution issued in an action for a sum of inoney filed against B by A, several parcels of land belonging to the former were levied upon and later sold at public auction to the latter as the highest bidder. 218

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When B failed to redeem the property, the sheriff issued the corresponding final certificate of sale, whereupon A filed a motion for the issuance of the writ of possession. B opposed the motion, alleging that on one of the parcels of land sold at public auction was erected a house constituted as a family home. It appears that the house of B was constituted as a family home after the decision in the foregoing case was issued. B now contends that said lot and house are beyond the reach of judicial execution. Is this tenable? ANS: Art. 155(2) of the FC, provides that “the family home shall be exempt from execution, forced sale or attachment” except “for debts incurred prior to the constitution of the family home.” B contends that since the money judgment rendered against him was appealed to the SC, the same could not be considered as a debt at the time the family home was constituted for it was still inchoate and as such, cannot come under the provisions of Art. 155 of the FC. This contention is untenable. The reason of the law for providing that a family home constituted after a debt had been incurred is not exempt from execution is to protect the creditor against a debtor who may act in bad faith by resorting to such declaration just to defeat the claim against him. If the purpose is to protect the creditor from fraud it would be immaterial if the debt incurred be undisputed or inchoate, for a debtor acting in good faith would prefer to wait until his case is definitely decided before constituting the family home. Indeed, it may result, as in this case, in the affirmance of the judgment. Hence, the money judgment in question comes within the purview of the word debt used in Art. 155(2) of the FC. (Siari Valley Estate, Inc. us. Lucasan, 109 Phil. 294.) 10. On what properties must the family home be constituted? ANS: The family home must be part of the properties of the absolute community or the conjugal partnership or the exclusive properties of either spouse with the latter’s consent. It may also be constituted by an unmarried head of a family on his or her own property. Nevertheless, property that is subject of a conditional sale on installments where ownership is reserved by the vendor to guarantee 219

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payment of the purchase price may be constituted as a family home. (Art. 156, FC.) 11. How may a family home be sold, alienated, donated, assigned or encumbered? ANS: The family home may be sold, alienated, donated, assigned or encumbered by the owner or owners thereof with the written consent of the person constituting the same, the latter’s spouse, and a majority of the beneficiaries of legal age. In case of conflict, the court shall decide. (Art. 158, FC.) 12. What is the effect of death of one or both spouses or of the unmarried head of the family upon the family home? ANS: Under Art. 159 of the FC, the family home shall continue despite the death of one or both spouses or of the unmarried head of the family for a period of ten years or for as long as there is a minor beneficiary and the heirs cannot partition the same unless the court finds compelling reasons therefor. This rule shall apply regardless of whoever owns the property or constituted the family home. 13. Spouses Marilyn and Johnny died, leaving as their beneficiaries, Susan and Helen, both minors. When can the heirs of the spouses partition the family home? ANS: The heirs can partition the family home only after a period of 10 years and only when Susan and Helen are no longer minor beneficiaries living in the home. The heirs cannot partition the family home notwithstanding the lapse of the 10-year period for as long as the children (or either of them) continue to be minor beneficiaries living in the family home. Should the court, however, find compelling reasons for allowing the partition of the family home, then the heirs could do so prior to the lapse of the 10-year period or even if there are still minor beneficiaries living in the family home. 14. In September 1988, a man and his wife bought a parcel of land in Filinvest Homes, Quezon City for P150,000, built a house thereon for P350,000 and immediately there­ after, constituted the property into a family home. In 1989, because of the increase in land values and the improvements 2 2 0

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subsequently introduced thereon, the family home acquired an actual worth of P700,000. In this year also, a third person obtained a judgment for damages against the spouses in the sum of P200,000 as a result of an automobile accident which happened in 1987, The third person applied to the court which rendered the judgment for an order directing the sale of the family home under execution. If you were the judge, how would you decide the case? ANS: It is evident that the claim of the judgment creditor in the instant case does not fall under any of the exceptions enumerated in Art. 155 of the FC. Should it, therefore, be found that the actual value of the family home exceeds the maximum amount allowed by law as of the time of the constitution of the family home or if the increased actual value exceeds the maximum allowed in Art. 157 of the FC, that is, at P300,000 in urban areas and P200,000 in rural areas, as a result of subsequent voluntary improvements introduced by the spouses-owners who constituted the family home or by any of their beneficiaries, the court shall so order and direct the sale of the family home under execution. At the execution sale, no bid below the value allowed for a family home shall be considered. The proceeds shall be applied first to the amount mentioned in Art. 155 of the FC, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor. (Art. 160, FCJ 15. How many family homes may a person constitute or be a beneficiary of, for the purposes of availing of the benefits of a family home? ANS: Under Art. 161 of the FC, a person may constitute or be the beneficiary of only one family home for purposes of availing of the benefits of a family home. 16. Do the provisions of the FC on family home also govern family homes constituted prior to the effectivity of the FC? ANS: The provisions of the FC on family homes also govern existing family residences insofar as said provisions are applicable. (Art. 162, FC.) 2 2 1

Title VI PATERNITY AND FILIATION Chapter 1 LEGITIMATE CHILDREN (Arts. 163-171, FC) 1.

Define paternity and filiation.

ANS: Paternity is the civil status of a father in relation to the children begotten by him. In its generic sense, it is aiso used to designate the civil status of a mother in relation to the children begotten by her. Filiation is the civil status of a child in relation to its father or mother. 2.

What are the different kinds of children under the

FC? ANS: Under the FC, children are classified as follows: I.

Legitimate children (Art. 164, FC.)

II.

Illegitimate children (Art. 165, FC.)

III. Legitimated children (Arts. 177-178, FC.) IV.

Adopted children (Arts. 183-193, FC.)

(Please note that the further classification of illegitimate children under the NCC was abolished by the FC and are now all classified as illegitimate children.) 3.

What are the kinds of filiation of children under the

FC? ANS: Under Art. 163 of the FC, the filiation of children may be (i) by nature or (ii) by adoption. Natural filiation may be (i) legitimate or (ii) illegitimate. 2 2 2

FAMILY CODE (Persons) Paternity and Filiation Legitimate Children

4.

Arts. 163-171

What is meant by legitimate children?

ANS: Children conceived or bom during the marriage of parents are legitimate. Children conceived as a result of artificial insemination of the wife with the sperm of the husband or that of a donor or both are likewise legitimate children of the husband and his wife, provided that both of them authorized or ratified such insemination in a written instrument executed and signed by them before the birth of the child. The instrument shall be recorded in the civil registry together with the birth certificate of the child. (Art. 164, FC.) Children conceived or born before the judgment of annulment or absolute nullity of the marriage under Art. 36 of the FC has become final and executory, shall be considered legitimate. Children conceived or bom of the subsequent marriage under Art. 53 of the FC shall likewise be legitimate. (Art. 54, FCJ Under Art. 53 of the FC, either of the former spouse may marry again after complying with certain requirements, that is, the recording in the appropriate civil registry and registries of property of 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. 5. A child, S, was conceived while spouses H and W were living together under a marriage which was voidable. S was born after the marriage of H and W had been annulled. Is S legitimate? ANS: Yes, S is a legitimate child of H and W since he was conceived during the marriage of the parents. 6. Ogie and Michelle have been married for 20 years without children. Desirous to have a baby, they consulted Dr. Jun de los Santos, a prominent medical specialist on human fertility. He advised Michelle to undergo artificial insemina­ tion. It was found that Ogie’s sperm count was inadequate to induce pregnancy. Hence, the couple looked for a willing do­ nor. Archie, the brother of Ogie, readily consented to donate his sperm. After a series of test, Archie’s sperm was medical­ 223

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ly introduced into Beth’s ovary. She became pregnant and 9 months later, gave birth to a baby boy, named Jinel. (1)

Who is the father of Jinel? Explain.

Archie is the biological father of Jinel being the source of the sperm. Archie is the legal father of Jinel because there was neither consent nor ratification to the artificial insemination. Under the law, children conceived by artificial insemination are legitimate children of the spouses, provided, that both of them authorized or ratified the insemination in a written instrument executed and signed by both of them before the birth of the child. (Art. 164, FC.) (2) What are the requirements, if any, in order for Ogie to establish his paternity over Jinel? (2006) The following are the requirements for Ogie to establish his paternity over Jinel: a. The artificial insemination has been authorized or ratified by the spouses in a written instrument executed and signed by them before the birth of the child; and b. The written instrument is recorded in the civil registry together with the birth certificate of the child (Art. 164, 2nd paragraph, FC). (Suggested Answers to the 2006 Bar Examination Questions, PALS) 7.

What is meant by illegitimate children?

ANS: Children conceived and born outside a valid marriage are illegitimate, unless otherwise provided in the FC. (Art. 165, FC.) Children born of void marriages under Arts, 35,37, and 38 are considered illegitimate. 8. What are the grounds for the impugnation of the legitimacy of a child? ANS: 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: 224

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(a) The physical incapacity of the husband to have sex­ ual intercourse with his wife; (b) The fact that the husband and wife were living-sepa­ rately in such a way that sexual intercourse was not possible; or (c) Serious illness of the husband, which absolutely pre­ vented sexual intercourse; (2) That it is proved that for biological or other reasons, the child would not have been that of the husband, except in the instance provided in the second paragraph of Art. 164 of the FC where the child is conceived as a result of artificial insemination; or (3) That in case of children conceived through artificial insemination, the written authorization or ratification of either parent was obtained through mistake, fraud, violence, intimidation or undue influence. (Art, 166, FC.) 9. H and W are husband and wife. In the tenth year of their marital life, W conceived and gave birth to a baby boy. Blood tests made at the instance of H, who was suspicious of his wife’s fidelity, indicate that the child could not have been his. Could this be a ground for impugnation of the legitimacy of the child? ANS: Although under the NCC, the blood tests will not be a ground to impugn the legitimacy of the child so long as there was no physical impossibility of access between H and W during the first 120 days of the 300 days immediately preceding the birth of the child, under Art. 166(2) of the FC, however, the blood tests can be submitted as proofs to support the impugnation of the legitimacy of the child. (Note:

In Janice

Marie Jao vs. Perico Jao [152 SCRA 859],

our

SC held: Science has demonstrated that by the analysis of blood samples of the mother, the child and the alleged father, it can be established conclusively that he is not the father of the child. But group blood testing cannot show that a man is the father of a particular child, but at least can show only a possibility that he is . . . it may have some 225

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probative value if the blood type and the combination in the child is rare, thus it is now up to the discretion of the judge whether to admit the results.) 10. Suppose that in the above problem, H can prove that he is sterile. Can this establish physical impossibility of access between H and W during the first 120 days of the 300 days immediately preceding the birth of the child? ANS: No, sterility is not synonymous with impotency. Sterility is the ability to procreate, while impotency is the physical inability to copulate. Consequently, it cannot establish the physical impossibility of access between husband and wife during the first 120 days of the 300 days immediately preceding the birth of the child. (Menciano vs. San Jose, 89 Phil. 63.) 11. Suppose that in the above problem, H was suffering from the last stages of tuberculosis. Will this establish a ground for impugnation of the legitimacy of the child? ANS: Tuberculosis, even in its last stages, is not the kind of serious illness of the husband that will establish physical impossibility of access. Experience shows that tuberculosis, even in its most crucial stage, does not prevent sexual intercourse. (Andal vs. Macaraig, 89 Phil. 165.) Hence, this could not be considered as a ground for the impugnation of the legitimacy of the child. 12. W, a married woman, had an affair with M. Upon learning of the affair, her husband of several years, H, separated from her. Seven months or about 21 days after W’s first illicit intercourse with M, she gave birth to a perfectly normal child. Subsequently, in representation of her child, she brought an action against M to obtain a judicial declaration of the illegitimate filiation of the child and for the support of said child. (a)

Will the action prosper? Explain.

(b) What is the effect of the declaration of W against the legitimacy of the child where the child is conclusively presumed to be the legitimate child of H and W? ANS: (a) The action will not prosper. It must be noted that as of the time of the first illicit intercourse of W and M, W was already 226

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married to H and that their marriage took place several years ago. It is, therefore, obvious that the birth of the child took place more than 180 days following the celebration of said marriage and before 300 days following the alleged separation of the spouses. Hence, it is crystal clear that Arts. 164 and 166 of the FC is the governing law. Since the child was conceived during the marriage of H and W and was born after 180 days following the celebration of the marriage of H and W and before 300 days following the separation of said H and W, and since there was no physical impossibility of H having access to his wife, W, within the first one hundred and twenty days of the three hundred days preceding the birth of the child, said child is now conclusively presumed to be the legitimate child of H and W. Therefore, he cannot possibly be the illegitimate child of M. The fact that the child was born 7 months after the initial contact between W and M is another proof that said child is not the illegitimate child of M since he was born as a normal, full-term child. (b) True, according to W, the child is that of M. Howev­ er, according to Art. 167 of the FC, the child shall still be legitimate, although the mother may have declared against his legitimacy. This law likewise applies to such instances where the mother may have been sentenced as an adulteress. There are three (3) reasons for this provision. They are: First:

In a fit'pf*anger, or to arouse jealousy in the husband, the wife may have made this declaration.

Second:

The child should not be under the mercy of the passion of the parents. Thus, the husband whose honor has been offended, being aware of his wife’s adultery, may have obtained from the latter by means of coercion, a confession against the legitimacy of the child which, in reality, may be only a confession of guilt. Or the wife out of vengeance or spite, may declare the child as not her husband’s although the statement is false.

Third:

Where a woman cohabits during the same period with 2 men, nobody can determine who is really the father of the child. (Macadangdang us. CA, 100 SCRA 73.) 227

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13. Under the above problem, who may attack the legitimacy of the child, and within what time? ANS: Generally, only the husband can contest the legitimacy of the child. He is the one directly confronted with the scandal and ridicule which the infidelity of his wife produces; and he should decide whether to conceal that infidelity or expose it, in view of the moral or economic interest involved. The right to repudiate or contest the legitimacy of a child born in wedlock belongs only to the alleged father, who is the husband of the mother and can be exercised only by him or his heirs in such cases cited in Art. 171 of the FC, within a fixed time, and only in a direct suit brought for the purpose and cannot be attacked collaterally. (Macadangdang us. CA, supra.) Said heirs of the husband may impugn the filiation of the child within the period prescribed in Art. 170 of the FC only in the following cases: (1) If the husband should die before the expiration of the period fixed for bringing his action; (2) If he should die after the filing of the complaint, without having desisted therefrom; or (3) If the child was born after the death of the husband. (Art. 171, FC.) Under Art. 170 of the FC, the action to impugn the legitimacy of the child shall be brought within one year from the knowledge of the birth or its recording in its civil register, if the husband or, in a proper case, any of his heirs, should reside in the city or municipality where the birth took place or was recorded. If the husband or, in his default, all of his heirs do not reside at the place of birth as defined in the first paragraph of Art. 170 of the FC, or were it was recorded, the period shall be 2 years if they should reside in the Philippines; and 3 years if abroad. If the birth of the child has been concealed from or was unknown to the husband or his heirs, the period shall be counted from the discovery or knowledge of the birth of the child or of the fact or registration of said birth, whichever is earlier.

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14. If there is doubt with regard to the filiation of a child whose mother contracted a second marriage within 300 days following the dissolution of the first marriage, how shall such doubt be resolved? ANS: If the marriage is terminated and the mother contracted another marriage within 300 days after such termination of the former marriage, these rules shall govern in the absence of proof to the contrary: (1) A child born before 180 days after the solemnization of the subsequent marriage is considered to have been conceived during the former marriage, provided it be born within three hundred days after the termination of the former marriage. (Art. 168[1], FC.) (2) A child born after 180 days following the celebration of the subsequent marriage is considered to have been conceived during such marriage, even though it be born within the 300 days after the termination of the former marriage. (Art. 168[2], FC.) (These rules are provided for in Art. 168 of the FC where the child is given the status of a legitimate child of either the first or the second husband. The said provision amended Art. 259 of the NCC where only mere presumptions of the legitimacy of the child are established.) The termination of marriage may refer, among others, to such cases where marriage is dissolved by the death of the husband or to the case of a woman whose marriage is annulled and who remarries within 300 days after her separation from her husband. 15. Suppose that in the above problem, the widow did not contract a second marriage after the death of her husband, but gavie birth to a child 301 days following the termination of the marriage. What is the law applicable? ANS: Since the law does not declare the status of a child born after 300 days following the termination of the marriage, Art. 169 of the FC is, thus, applicable. Said law provides that the legitimacy or illegitimacy of a child born after 300 days following the termination of the marriage shall be proved by whoever alleges such legitimacy or illegitimacy.

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Chapter 2 PROOF OF FILIATION (Arts. 172-174, FC) 16. How may the filiation of a legitimate child be estab­ lished or proved? ANS: Under Art. 172 of the FC, the filiation of a legitimate child may be established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in. a public document or a private handwritten instrument and signed by the parent concerned. {Note: Under the FC, documents such as a private instrument signed by the parent concerned is acceptable to establish the, child’s filiation and is not limited only to an authentic public document as required by Art. 265 of the NCC,)

In the absence of the foregoing evidence, legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws. (Art. 172, FCJ 17. What is the standard of proof of filiation under Art. 172, FC where a child seeks to prove filiation by way of open and continuous possession of the status of a child? ANS: To establish filiation under of Art. 172, FC, second paragraph, the plaintiff has to hurdle the high standard of proof. In the case of Mendoza vs. CA, 201 SCRA 675, the SC held that: “For the success of an action to establish illegitimate filiation under the second paragraph, a high standard of proof is required. Specifically, to prove open and continuous possession of the status of 230

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an illegitimate child, there must be evidence of the manifestation of the permanent intention of the supposed father to consider the child as his, by continuous and clear manifestations of parental affection and care, which cannot be attributed to pure charity. Such acts must be of such a nature that they reveal not only the conviction of paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not accidentally, but continuously.” By “continuous” is meant uninterrupted and consistent, but does not require any particular length of time. Under the case of Constantino vs. Mendez, 209 SCRA 18, ‘The foregoing standard of proof required to establish one’s filiation is founded on the principle that an order for recognition and support may create an unwholesome atmosphere or may be an irritant in the family or lives of the parties, so that it must be issued only if paternity or filiation is established by clear and convincing evidence.” 18. Will pictures or certificate of baptism constitute authentic documents to prove the legitimate filiation of a child? ANS: Pictures or the canonical baptismal certificate do not constitute the authentic documents to prove the legitimate filiation of a child. The baptismal certificate of the child, standing alone, is not sufficient. It is not a record of birth. Neither is it a public instrument nor a private handwritten instrument. No manifestations, pretensions or references between the parties are shown in them. (Abelle vs. Santiago, 7 SCRA 925.) 19. Benita was bom an illegitimate child of Eustaquio. Eustaquio supported Benita during his lifetime. It was Eustaquio himself who had the birth of Benita reported and registered. There is no indication in the records that Eustaquio should have known in 1919 that apart from reporting the birth of a child, he should also have signed the certificate and seen to it that it was preserved for 60 years. Or that he should have taken all steps including judicial action to establish Benita’s status as his recognized natural child during the reglementary period to do so. Eustaquio 231

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gave away Benita during her wedding. The couple continued to live with the father even after the wedding and until Eustaquio’s death. Can Benita enjoy the open and continuous possession of the status of an illegitimate child of Eustaquio? ANS: There can be no dispute that Benita enjoyed the open and continuous possession of the status of an illegitimate child of Eustaquio and the action of Benita in defending her status in this case is similar to an “action to claim legitimacy” brought during her lifetime. (Castro vs. CA, May 31,1989.) 20. As X was required to establish his legitimate filiation, he presented a will executed by A which was not presented for probate. May the will sufficiently establish the legitimate status of X? ANS: Yes. (Guevara vs. Guervara, CA 7464-R.) Although the will was not presented for probate, it still constitutes a public document or a private handwritten instrument signed by the parent concerned within the meaning of Art. 172(2) of the FC and will sufficiently establish X’s legitimate filiation. 21. Suppose that in the above problem, A, before his death revoked the will. Will that make any difference in your answer? Reason. ANS: It will not make any difference in my answer. The reason being that the revoked will still constitutes a public document or a private handwritten instrument signed by the parent concerned within the meaning of Art. 172(2) of the FC. 22. Suppose that the writing on the illegitimate filiation of the child appearing in a book of memoirs or family album can be proved to be a handwritten instrument signed by the parent concerned. Will that be sufficient to establish the status of an illegitimate child? ANS: Yes. This is because the private handwritten instrument signed by the parent concerned falls within Art. 172(2) of the FC. 232

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,

23. In the case of Jinkie and Jacqueline de Jesus et al., vs. The Estate o f Juan Dizon, et al. (G.R. No. 142877, Oct. 2, 2001), Danilo de Jesus and Carolina Aves de Jesus got married on 23 August 1964. During their marriage, Jacqueline de Jesus and Jinkie Christie de Jesus were born, the former on March 1, 1979 and the latter on July 6, 1982. Juan Dizon acknowledged Jacqueline and Jinkie as his own illegitimate children by Carolina Aves de Jesus in a notarized document dated June 7,1991, Juan Dizon then died intestate on March 12, 1992, leaving behind assets consisting of shares of stock and some real property. On the strength of his notarized acknowledgment, petitioners Jinkie and Jacqueline de Jesus, filed a complaint for “Partition with Inventory and Accounting” of the Dizon Estate. The surviving spouse and legitimate children of the decedent Juan Dizon, sought the dismissal of the case, arguing that even while denominated as being one for partition, the complaint would call for altering the status of petitioner from being the legitimate children of the spouses Danilo de Jesus and Carolina de Jesus to instead be the illegitimate children of Carolina de Jesus and deceased Juan Dizon. The appellate court upheld the decision of the lower court and ruled that the veracity of the conflicting assertions should be threshed out at the trial considering that the birth certificates presented by respondents appeared to have effectively contradicted petitioners’ allegation of illegitimacy. On January 3, 2000, respondents prayed for the dismiss­ al of the complaint on the ground that the action instituted was made to compel the recognition of petitioners as being the illegitimate children of decedent Juan Dizon. It was con­ tended that an action for partition was not an appropriate forum to ascertain the issue of paternity and filiation, as such issue could only be taken up in an independent suit or proceeding. The trial court dismissed the complaint of peti­ tioners and decreed that the declaration of heirship could only be made in a special proceeding as petitioners were seeking the establishment of a status or right.

233

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Petitioners filed a petition for review on certiorari. Peti­ tioners maintain that their recognition as being illegitimate children of the decedent, embodied in an authentic writing, is in itself sufficient to establish their status as such and does not require a separate action for judicial approval following the doctrine enunciated in Divinagracia vs. Bellosillo (143 SCRA 356). Respondents submit that the rule in Divinagra­ cia being relied upon by petitioners, is inapplicable because there has been no attempt to impugn legitimate filiation. In praying for the affirmance of the dismissal of the complaint, respondents count on the case of Say son vs. CA (205 SCRA 321), where the Court ruled that the issue of legitimacy can­ not be questioned in a complaint for partition and account­ ing but must be brought up in a direct action frontally ad­ dressing the issue. Decide and discuss the case. ANS: A. On proof of filiation. — Like legitimate children, the filiation o f illegitim ate children, is established by: (1) the record of birth appearing in the civil register or a final judgm ent; or (2) an adm ission o f legitim ate filiation in a public document or a private handwritten instrum ent and signed by the parent concerned. In the absence thereof, filiation shall be proved by: (1) the open and continuous possession o f the status o f a legitimate child; or (2) any other means allowed by the Rules o f Court and special laws. (Art. 172, FC.) The due recognition of an illegitimate child in a record of birth, a will, a statement before a court o f record, or in any authentic w riting is, in itself, a consummate act o f acknowledgment of the child, and no further court action is required. (Gono-Javier vs. CA, 239 SCRA 593J Any authentic w riting is treated not ju st a ground for com pulsory recognition. It is in itself a voluntary recognition that does not require a separate action for judicial approval. (Divinagracia vs. Bellosillo, 143 SCRA 356.) W here a claim for recognition is predicated on other evidence merely tending to prove paternity, i.e., outside o f a record o f birth, a will, a statement before a court of record or an authentic writing, judicial action within the applicable statute o f lim itations is essential in order to establish the child’s acknowledgment. (Gono-Javier vs. CA, supra.) B. On presumption o f legitimacy. — Petitioners were born during the marriage o f their parents and the certificate o f live birth identify Danilo de Jesus as being their father, as shown in the records.

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FAMILY CODE (Persons) Paternity and Filiation Proof of Filiation

Arts. 172-174

There is perhaps no presumption of the law more firmly established and founded on sounder morality and more convincing reason than the presumption that children born in wedlock are legitimate. (Tison vs. CA, 276 SCRA 582; Art. 164, FC.) This presumption becomes conclusive in the absence of proof that there is physical impossibility of access between the spouses during the first 120 days of the 300 days which immediately precedes the birth of the child due to: (1) the physical incapacity of the husband to have sexual intercourse with his wife; (2) the fact that the husband and wife are living separately in such a way that sexual intercourse is not possible; or (3) serious illness of the husband, which absolutely prevents sexual intercourse. (Art 166, FC.) Upon the expiration of the periods set forth in Arts. 170, and 171 of the FC, the action to impugn the legitimacy of a child would no longer be legally feasible and the status conferred by the presumption becomes fixed and unassailed. (Tison u. CA, supra J In an attempt to establish their illegitimate filiation to the late Juan G. Dizon, petitioners, in effect, would impugn their legitimate status as being children of Danilo de Jesus and Carolina Aves de Jesus. This step cannot be aptly done because the law itself establishes the legitimacy of children conceived or bom during the marriage of the parents. The presumption of legitimacy fixes a civil status for the child bom in wedlock, and only the father (Art. 170, FC.), or in exceptional instances the latter’s heirs (Art. 171, FC.), can contest in an appropriate action the legitimacy of a child. C. On the application of Divinagracia case. — Petitioners hardly could find succor in case, where the Supreme Court remand­ ed to the trial court the action for partition filed by an illegitimate child who claimed to be an acknowledged spurious child by virtue of a private document signed by the acknowledging parent evidencing recognition. It was not a case of legitimate children asserting to be somebody else’s illegitimate children. Petitioners totally ignored the fact that it was not for them to declare that they could not have been the legitimate children of Danilo and Carolina de Jesus, clearly op­ posed to the entries in their respective birth certificates. Further, the rule that the written acknowledgment made by the deceased Juan Dizon establishes petitioner’s alleged illegitimate filiation to the decedent cannot be validly invoked to be of any relevance in this case. Thus, the issue of whether petitioners are 235

Arts. 172-174

FAMILY CODE (Persons) Paternity and Filiation Proof of Filiation

indeed the acknowledged illegitimate offsprings of the decedent, cannot be aptly adjudicated without having been first to institute an action to impugn their legitimacy as being the children of Danilo de Jesus and Carolina Aves de Jesus born in lawful wedlock. Jurisprudence is strongly settled that the paramount declaration of legitimacy by law cannot be attacked collaterally (Tison vs. CA, supra.), one that can only be repudiated or contested in a direct suit specifically brought for that purpose. (La-Ducasse vs, Ducasse, 45 So. 565, 120 La. 731.) A child so bom in such wedlock shall be considered legitimate although the mother may have declared against its legitimacy or may have been sentenced as having been an adulteress. (Art. 167, FC.) 24. When may the action to claim legitimacy be brought? ANS: The action to claim legitimacy may be brought by the child during his or her lifetime (and not the lifetime of the parents) and shall be transmitted to the heirs should the child die during minority or in a state of insanity. In these cases, the heirs shall have a period of 5 years within which to institute the action. The action already commenced by the child shall survive notwithstanding the death of either or both of the parties. (Art. 173, FC.) 25. What are the rights of legitimate children? ANS: Legitimate children shall have the right: (1) To bear the surname of the father and the mother, in conformity with the provisions of the NCC on surnames; (2) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of the NCC, as amended by the FC, on support. (3) To be entitled to the legitime and other successional rights granted to them by Art. 174 of the FC. 26. B and G (college students, both single and not disqualified to marry each other) had a romantic affair. G was 7 months in the family way as of the graduation of B. 236

FAMILY CODE (Persons) Paternity and Filiation Proof of Filiation

Arts. 172-174

Right after graduation, B went home to Cebu City. Unknown to G, B had a commitment to C (his childhood sweetheart) to marry her after getting his college degree. Two (2) weeks before B’s marriage to C in Cebu City, G gave birth to a son, E, in Metro Manila. After 10 years of married life in Cebu, B became a widower by the sudden death of C in a plane crash. Out of the union of B and C, two (2) children, X and Y, were born. Unknown to C, while on weekend trips to Manila during the last five (5) years of their marriage, B invariably visited G and lived at her residence and as a result of which, they renewed their relationship. A baby girl, F, was born to B and G two (2) years before the death of C. Bringing his family later to Manila, B finally married G. Recently, G died. What are the rights to B’s four (4) children: X and Y of his first marriage; and E and F, his children with G? Explain your answer. (1990) ANS: Under the facts stated, X and Y are legitimate children of B and C. E is the legitimated child of B and G. F is the illegitimate child of B and G. As legitimate children of B and C, X and Y have the following rights: (1) To bear the surnames of the father and the mother, in conformity with the provisions of the NCC on Surnames; (2) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of the FC on Support; and (3) To be entitled to the legitime and other successional rights granted to them by the NCC. (Art, 174, FC.) E is the legitimated child of B and G. Under Art. 177 of the FC, only children conceived and born outside of wedlock of parents who, at the time of the conception of the former, were not disqualified by any impediment to m any each other may be legitimated. E will have the same rights as X and Y. F is the illegitimate child of B and G. F has the right to use the surname of G, her mother, and is entitled to support as well as the legitime consisting of 1/2 of that of each of X, Y and E. (Art. 176, FC.) 237

Arts. 175-176

FAMILY CODE (Persons) Paternity and Filiation Illegitimate Children

Chapter 3 ILLEGITIMATE CHILDREN (Arts. 175-176, FC) 27. Under the law, who are illegitimate children? What are their rights? ANS: The following are illegitimate children: 1)

Children bom of couples who are not legally married, or of common-law marriages;

2)

Children born of incestuous marriages;

3)

Children bom of bigamous marriages;

4)

Children bom of adulterous relations between the parents;

5)

Children bom of marriages which are void for reasons of public policy under Art. 38;

6)

Children bom of couples below 18, whether they are married (which marriage is void) or not;

7)

Children of other void marriages under Art. 35, except where the marriage of the parents is void for lack of authority on the part of the solemnizing officer, but the parties or either of them had believed in good faith that the solemnizing officer had authority, in which case the marriage will be considered valid and the children will be considered legitimate.

The illegitimate children: (i) shall use the surname of the mother; (ii) shall be under the parental authority of the mother; (iii) shall be entitled to support in conformity with the FC; and (iv) shall be entitled to a legitime which shall consist of 1/2 of the legitime of a legitimate child. (Art. 176, FC.) This is the rule regardless of whether the father admits paternity. The recognition of an illegitimate child by the father would be a ground for ordering the latter to give support to, but not the custody of the child. The law explicitly confers to the mother sole parental authority over an illegitimate child; it follows * that only if she defaults can the father assume custody and authority over the minor. (Briones vs. Miguel, G.R. No. 156343, October 18, 2004.) 238

FAMILY CODE (Persons) Paternity and Filiation Illegitimate Children

Arts. 175-176

Republic Act No. 9255 which was approved by President Gloria Macapagal-Arroyo last February 24, 2004, amended Art. 176 of the FC such that illegitimate children may now use the surname of their father if their filiation has been expressly recognized by the father through'the record of birth appearing in the civil register, or when an admission in a public document or private handwritten instrument is made by the father. The father, however, has the right to institute an action before the regular courts to prove non-filiation during his lifetime. 28. The evidence shows that Lani, single, is the mother and guardian ad litem of two (2) petitioners, Mark and John. Lani pointed to Joseph as the father of her two (2) sons. To bolster the case, Lani presented the following documentary evidence: the certificate of live birth identifying respondent Joseph as the father, the baptismal certificate of petitioner Mark which also states that his father is Joseph, photographs of Joseph taken during the baptism of petitioner Mark and pictures of respondent Joseph and Mark taken at the house of Lani. Are petitioners the illegitimate children of Joseph? ANS: No. Petitioners are not the illegitimate children of Joseph and Lani. The Certificate of Live Birth of the petitioners identifying private respondent as their father are not competent evidence on the issue of their paternity. The records do not show that private respondent had a hand in the preparation of said certificate. In Berciles vs. Systems (128 SCRA 93), it was held that a birth certificate not signed by the alleged father therein indicated is not competent evidence of paternity. The baptismal certificate has a scant evidentiary value. There is no showing that private respondent participated in its preparation. In Macandang vs. CA, 100 SCRA 73, it was ruled that while a baptismal certificate may be considered public document, they can only serve as evidence of administration of the sacraments on the dates so specified. They are not necessarily competent evidence of the veracity of entries therein with respect to the child’s paternity. The photographs showing the presence of the private respondent in the baptism of petitioner are far from proofs that private respondent is the father of petitioner Mark. As explained by 239

1

Arts. 175-176

FAMILY CODE (Persons) Paternity and Filiation Illegitimate Children

the private respondent, he was in the baptism as one of the sponsors of petitioner Mark. The pictures taken in the house of Lani showing respondent showering affection to Mark fall short of the evidence required to prove paternity. (Fernandez us. CA, 230 SCRA 131.) 29. Suppose that it was the private respondent who caused the entry in the baptismal certificate and birth cer­ tificate even though without his signature, will your answer be the same? ANS: No, my answer will be different. The natural, logical and coherent evidence of plaintiff regarding the relationship between the parties, their living together as husband and wife in several places, the birth of the first born child, the circumstances of petitioner’s birth, the act of private respondent in recognizing and supporting the petitioners, find ample support from the testimonial and documentary evidence which leaves no room to reasonably doubt his paternity may not be infirmed by his bilateral denials. The last paragraph of Art. 283 contains a blanket provision that practically covers all the other cases in the preceding paragraph “any other evidence of proof’ that the defendant is the father is broad enough to render unnecessary the other paragraph of this Article. When the evidence submitted in the action for compulsory recognition is not sufficient to meet requirements of the first three (3) paragraphs, it may still be enough under the last paragraph. This paragraph permits hearsay evidence as provided in the Rules of Court with respect to illegitimate filiation. (llano vs. CA, 230 SCRA 242J 30. How may illegitimate children establish their illegitimate filiation should their status be impugned? When must the action to claim illegitimacy be brought? ANS: Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children. (Art. 175,1st sentence, FC.) The action must be brought in the same period specified in Art. 173 of the FC, except when the action is based on the second paragraph of Art. 172 of the same Code, in which case the action may be brought during the lifetime of the alleged parent. (AH. 175, FC.) Hence, if the action is based on the record of birth appearing 240

FAMILY CODE (Persons) Paternity and Filiation Legitimated Children

Arts. 177-182

in the civil register or a final judgment or is based on an admission of legitimate filiation in a public document or a private handwritten instrument signed by the parent concerned, the action to claim illegitimacy may be brought by the child during his or her lifetime (and not during the lifetime of the alleged parent). On the other hand, if the action is based on the open and continuous possession of the status of an illegitimate child, or is based on any other means allowed by the Rules of Court and special laws, the action must be brought during the lifetime of the alleged parent. The intent of the law is to give the alleged parent the chance to affirm or contest the filiation of the child, 31. Why is an illegitimate child of a woman who gets married allowed to bear the surname of her spouse, when a legitimate child may not? ANS: While an illegitimate child of a woman is allowed to bear the surname of its stepfather without the benefit of adoption, a legitimate child had by a prior marriage may not. To allow said child to adopt the surname of its mother’s second husband, who is not its father, could result in confusion as to its paternity. It could also create the suspicion that the child who was born during the coverture of the mother with the first husband was in fact sired by the second husband, thus, bringing its legitimate status into discredit. It would create more troubles than solving them. (Republic vs. Vicencio, G.R. No. 88202, December 14,1998.)

Chapter 4 LEGITIMATED CHILDREN (Arts. 177-182, FC) 32. What is meant by legitimated children? Define legitimation. ANS: Legitimated children are children who, because of the subsequent marriage of their parents to each other are, by legal fic­ tion, considered legitimate. Legitimation is a remedy by means of which those who, in fact were not bom in wedlock and should there­ fore be considered illegitimate, are by fiction considered legitimate, 241

Arts. 177-182

FAMILY CODE (Persons) Paternity and Filiation Legitimated Children

it being supposed that they were bom when their parents were al­ ready married. (1 Manresa 550J 33. In order that a child may be legitimated, what requisites must occur? ANS: In order that a child may be legitimated, the following essential requisites must occur: (1)

The child was conceived and born outside of wedlock;

(2) At the time of the conception of the child, the parents were not disqualified by any impediment to marry each other. (Art. 177, FC.) (3) The parents must subsequently enter into a valid marriage. (Art. 178, FC.) 34. Out of the illicit relation between A, a married man and B, an unmarried woman, a child, C, was born two (2) months before the death of A’s wife. A month after his wife’s death, A married B. What is C’s status? Why? ANS: Under the NCC, C is an adulterous (spurious) child who cannot be legitimated. Under the FC, however, such classification was abolished and the child is given the status of an illegitimate child who cannot be legitimated since he was not only born outside wedlock but was also conceived at the time when there was a legal impediment to the marriage of his parents, A and B, to each other. It must be noted that according to the problem, he was bom two (2) months before the death of A’s wife. The fact that a month after the death of his wife, A married B, cannot improve the situation or status of C. Under Art. 269 of the NCC, only a natural child (one bom outside of wedlock of parents who at the time of the conception of the former were not disqualified by any impediment to marry each other) may be legitimated. A spurious child cannot be legitimated. Under Art. 177 of the FC, only 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 may be legitimated. Thus, children bom of adulterous relationships, incestuous marriages (Art. 37, FC.), bigamous or polygamous marriages (Art. 35, FCJ as well as marriages which are void from 242

FAMILY CODE (Persons) Paternity and Filiation Legitimated Children

Arts. 177-182

the beginning for reasons of public policy (Art. 38, FC.) may not be legitimated. 35. *‘A” and “B,” man and woman not related to each other, both single and of age, had an illicit relation. A child “C” was born out of that relation. Subsequently, “A” married “X”. Notwithstanding the marriage, “A " and “B” continued their illicit relation, and two years later, another child “D” was born to them. After the death of “X,” “A” married “B.” What is the legal status of the child “C”? Of the child “D”? ANS: Under the NCC, “C” is a natural child who may be legitimated while “D” is an illegitimate child not natural (spurious child) who may not be legitimated. Said classifications were abolished under the FC. Thus, both “C” and “D” are similarly classified as illegitimate children. However, “C” may be legitimated but “D” may not be legitimated. According to Arts. 177 and 178 of the FC, children 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. It is clear that "C” falls within the purview of this definition. “C” is now promoted to the category of a legitimated child since all the requisites of legitimation under the FC are present. In the first place, he is a natural child; in the second place, there was a subsequent marriage of the parents to each other; and in the third place, he was recognized by both of his parents as their child after the celebration of their marriage. Consequently, he is now a legitimated child. However, in the case of “D,” it is different. Since he was conceived at a time when his father “A” was already married to “X,” he is clearly an illegitimate child not natural who can never be legitimated. 36. A and B, without any impediment to marry each other, started living together as husband and wife without the benefit of marriage. Subsequently, B gave birth to C. A year later, she gave birth to D. Two (2) years later, A married X, but he continued his relationship with B. A year later, B again gave birth to a third child, E. X subsequently died childless. Two (2) years later, A married B. A later died, leaving a large fortune. In the intestate proceedings for the 243

Arts. 177-182

' FAMILY CODE (Persons) Paternity and Filiation Legitimated Children

settlement of the estate of A, M, mother of A, who had C (the oldest child), in her custody, presented as evidence a private document wherein A and B recognized C as their natural child. It is now contended that only C is a legitimated child while the other children are not. Is this correct? Reasons. ANS: This contention is not entirely correct. Under the NCC, there is no question about the status of C; he is a legitimated child because all of the 3 requisites for legitimation are present. He is a natural child; the parents subsequently married; and he was ac­ knowledged by both parents. How about D? He is also a legitimated child. According to Art. 271 of the NCC, if a natural child is recog­ nized or judicially declared as natural, such recognition or declara­ tion shall extend to his or her brothers or sisters of the full blood. Consequently, in the case of D, all of the requisites for legitimation are also present. How about E? He is a spurious and not a legiti­ mated child. It must be noted that during his conception, A, his fa­ ther, was already married to X. Consequently, one of the essential requisites for legitimation — that he must be a natural child — is lacking. Therefore, he cannot be classified as a legitimate child. Under the FC, the classifications of illegitimate children was abolished. At the moment of birth, all C, D and E are given the status of illegitimate children. However, only C and D may be legitimated as all the requisites of legitimation are complied with. E, on the other hand, may not be legitimated since he was conceived at the time A was already married to X. (Arts. 177,178, FC.) 37. How shall the legitimation take place? ANS: Under Art. 178 oftheFC, legitimation shall take place only by a subsequent valid marriage between parents, thus, eliminating the condition required in Art. 271 of the NCC where only natural children who have been recognized by the parents before or after the celebration of the marriage, or have been declared natural children by final judgment, may be considered legitimated by subsequent marriage. 38. Will the annulment of a voidable marriage affect the legitimation of the child? ANS: The annulment of a voidable marriage shall not affect the legitimation. (Art. 178, FC.) 244

FAMILY CODE (Persons) Paternity and Filiation Legitimated Children

Arts. 177-182

39. What rights shall be enjoyed by legitimated children? ANS: Legitimated children shall enjoy the same rights as legitimate children. (Art. 179, FC.) 40. When shall legitimation take effect? ANS: The effects of legitimation shall retroact to the time of the child’s birth. (Art. 180, FCJ 41. What is the effect on the legitimation of the child should the child die before the celebration of the marriage? ANS: The legitimation of the child who died before the celebration of the marriage shall benefit his descendants. (Art. 181, FC.) 42. Who may oppose legitimation? Within what time may the impugnation of the legitima­ tion be made? ANS: Under Art. 182 of the FC, legitimation may be impugned only by those who are prejudiced in their rights, within five (5) years from the time their cause of action accrues, that is, from the death of the putative parent.

245

Title VII ADOPTION (Arts. 183-193, FC) 1.

Define adoption.

ANS: Adoption may be defined as the juridical act which creates between two (2) persons a relationship similar to that which results from legitimate paternity and filiation, (4 Valverde 473, quoted in Prasnick vs. Rep. of the PhiL, 98 PhiL 665.) 2. In the Philippines, what is the nature of adoption proceedings? ANS: Adoption proceedings are judicial, not administrative, in the Philippines. Said proceedings are more particularly prescribed and discussed in Arts. 32-38 of P.D. No. 603, the only provisions of P.D. No. 603 which have not been repealed by the FC, and Rep, Act No. 8552 (An Act Establishing the Rules and Policies on the Domestic Adoption of Filipino Children and for Other Purposes, approved on February 25, 1998). 3.

Who may adopt?

ANS: Under Sec. 7 of R.A. No. 8552, the following may adopt: (a) Any Filipino citizen, of legal age, in possession of full civil capacity and legal rights, of good moral character, has not been convicted of any crime involving moral turpitude, emotionally and psychologically capable of caring for children, at least 16 years older than the adoptee and who is in a position to support and care for his/her children in keeping with the means of the family. The requirement of 16-year difference between the age of the adopter and adoptee may be waived when the adopter is the biological parent of the adoptee, or is the spouse of the adoptee’s parent; 246

FAMILY CODE (Persons) Adoption

Arts. 183-193

(b) A ny alien possessing the same qualifications as above­ stated for Filipino nationals: Provided, That his/her country has diplomatic relations with the Republic o f the Philippines, that he/ she has been living in the Philippines for at least 3 continuous years prior to the filing of the application for adoption and maintains such residence until the adoption decree is entered, that he/she has been certified by his/her diplomatic or consular office or any appropriate governm ent agency that he/she has the legal capacity to adopt in his/her country, and that his/her government allows the adoptee -to enter his/her country as his/her adopted son/daughter; Provided, further, That the requirements on residency and certification of the alien's qualification to adopt in his/her country may be waived for the following: (i) a form er Filipino citizen who seeks to adopt a rela­ tive within the 4th degree of consanguinity or affinity; or (ii) one who seeks to. adopt the legitimate son/daughter o f his/her Filipino spouse; or (iii) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the 4th degree of consanguinity or affinity o f the Filipino spouse; or (c) The guardian with respect to the ward after the termination o f the guardianship and clearance o f his/her financial accountabilities. Husband and wife shall jointly adopt, except in the following cases: (i) if one spouse seeks to adopt the legitimate son/ daughter o f the other; or (ii) if one spouse seeks to adopt his/her own illegitimate son/daughter: Provided, however, That the other spouse has signified his/her consent thereto; or (iii) if the spouses are legally separated from each oth­ er. In case husband and wife jointly adopt, or one spouse adopts illegitimate son/daughter o f the other, join t parental authority shall be exercised by the spouses.

247

Arts. 183-193.

4.

FAMILY CODE (Persons) Adoption

Who may be adopted?

ANS: Under Sec. 8 of R.A. No, 8552, the following m ay be adopted: (a) Any person below 18 years o f age who has been adm in­ istratively or judicially declared available for adoption*; (b) spouse;

The legitimate son/daughter of one spouse by the other

(c) A n illegitimate son/daughter by a qualified adopter to improve his/her status to that o f legitimacy; (d) A person o f legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter(s) as his/her own child since minority; (e)

A child whose adoption has been previously rescinded; or

(f) A child whose biological or adoptive parent(s) has died: Provided, That no proceedings shall be initiated within 6 months from the time o f death of said parent(s).

5. Pops, a former Filipina who became an American citizen shortly after her marriage to an American husband, would like to adopt in the Philippines, jointly with her hus­ band, one of her minor brothers. Assuming that all the re­ quired consents have been obtained, could the contemplated joint adoption in the Philippines prosper? Explain. (2003) ANS: Pops and her Am erican husband can jointly adopt a minor brother o f Pops because she and her husband are both qualified to adopt. Pops, as a form er Filipino citizen, can adopt her minor brother under Sec. 7(b)(i) o f R A . No. 8552 (Domestic Adoption A ct of 1998), or under Art. 184(3)(a) o f the FC. The alien husband can now adopt under Sec. 7(b) o f R.A. No. 8552. The Supreme Court has held in several cases that when husband and wife are required to adopt jointly, each one o f them must be qualified to adopt in his or her own right. (Republic vs. Toledano, 233 SCRA 9 [1994].) However, the Am erican husband must comply with the requirements of the law including the residency requirem ent o f 3 years. Otherwise, the adoption will not be allowed. "By virtue o f R.A. No. 9523 (approved on March 12, 2009), the process of declaring a childto be legally available for adoption shall be administrative. The certification from the DSWD that a child is legally available for adoption shall be in lieu of a judicial order, (for full text, see Appendix RA 9523).

248

FAMILY CODE (Persons) Adoption

6. adopt?

Arts. 183-193

May a person who already has children of his own

ANS: Yes, a person who already has children of his own may still adopt, provided, that he is in a position to support and care for his children, legitimate or illegitimate, in keeping with the means of the family, both material and otherwise, (Art. 183, par. 1, FC.) Of course, this presupposes that all of the other requisites of a valid and effective adoption are also present. 7. May a person with adopted children still adopt another child? ANS: Yes, a person with adopted children may still adopt another child, provided he is in a position to support and care for his adopted children, in keeping with the means, both material and otherwise, of the family, and that the adoption is beneficial to the child to be adopted. This was well-settled under the NCC (HofilefLa vs. Republic, 34 SCRA 545; Paulino vs. Belen, 37 SCRA 357.) and the Child and Youth Welfare Code (P.D. No. 603), as well as under the FC and R.A. No. 8552. 8. What are the applicable rules on adoption in cases where a married person wants to adopt a child? ANS: The general rule is that both husband and wife must jointly adopt except in the following cases: (1) When one spouse seeks to adopt his own illegitimate child: Provided, however, That the other spouse has signified his/her consent thereto; (2) When one spouse seeks to adopt the legitimate child of the other. In case husband and wife jointly adopt or one spouse adopts the illegitimate child of the other, joint parental authority shall be exercised by the spouses. (Sec. 7, R.A. No. 8552J (3) If the spouses are legally separated from each other. (R.A. No. 8552.) 9. In adoption proceedings, whose consent to the adoption is necessary? ANS: After being properly counseled and informed of his/her 249

Arts. 183-193

FAMILY CODE (Persons) Adoption

right to give or withhold his/her approval of the adoption, the written consent of the following to the adoption is hereby required: (a)

The adoptee, if 10 years of age or over;

(b) The biological parent(s) of the child, if known, or the legal guardian, or the proper government instrumentality which has legal custody of the child; (c) The legitimate and adopted sons/daughters, 10 years of age or over, of the adopter(s) and adoptee, if any; (d) The illegitimate sons/daughters, 10 years of age or over, of the adopter if living with said adopter and the latter’s spouse, if any; and (e) The spouse, if any, of the person adopting or to be adopted. (Sec. 9, RA. No. 8552.) 10. Spouses Alvin Clouse, a natural-born US Citizen and Evelyn Clouse, a former Filipino who became a naturalized US Citizen, filed a petition to adopt Solomon Alcala, a minor who is Evelyn’s younger brother. The trial court granted the petition. Are the spouses qualified to adopt? (1995) ANS: No. Alvin Clouse is not qualified to adopt under any of the exceptional cases in Art. 184, par. 3, of the FC as well as R.A. No. 8552. Solomon is neither his relative by consanguinity nor the legitimate child of his spouse. When they filed the petition to adopt Solomon, Evelyn was no longer a Filipino citizen. She lost her Filipino citizenship when she was naturalized as a citizen of the US. Evelyn, on the other hand, may appear to qualify pursuant to Sec. 7 of RA. No. 8552. She was a former Filipino citizen. She sought to adopt her younger brother. Unfortunately, the petition for adoption cannot be granted in her favor alone without violating the above-mentioned provision which mandates a joint adoption by husband and wife. Sec. 7 of R.A. No. 8552 requires a joint adoption by the husband and wife. This is in consonance with the concept of joint parental authority over the child, which is the ideal situation. As the child to be adopted is elevated to the level of a legitimate child, it is but 250

FAMILY CODE (Persons) Adoption

Arts. 183-193

natural to require the spouses to adopt jointly. The rule also insures harmony between the spouses. (Republic vs. Toledano, G.R. No. 94147, June 8, 1994) XI. Are the provisions of Art. 131 of P.D. 603 and Art. 188 of the FC, mandatory or merely directory? Amplify. ANS: The above provisions are clearly mandatory, not directory. The phrase “shall be necessary” means exactly what it says. There is no qualification whatsoever which is stated in or even indicated by the laws. Thus, reading No. (3) of Art. 31 of the Child and Youth Welfare Code in relation to the first paragraph of Art. 27 of the same Code, as amended by Nos. (3) and (4) of Art. 188 and the first paragraph of Art. 183 of the FC, it is crystal clear that if the adopter has children by nature, whether legitimate, adopted or illegitimate, two (2) conditions or requisites, both of which are essential in character, must concur. In the first place, he must be in a position to support and care for such children in keeping with the means, both material and otherwise, of the family; and in the second place, he must secure the written consent of such children. The reason of the law for imposing the above conditions is not difficult to find. It is of course axiomatic that the most basic rights of children by nature in relation to their parent or parents are: first, the right to receive support (Art. 194, et seq., FC.); and second, the right to their legitime and other successional rights which the NCC recognizes in their favor. (Arts. 174[3], 179, 176, FC.) One is predicated upon the birth of the child; the other, upon the death of the parent or parents. One is real and existing, although temporary in the sense that it is good only as a general rule up to the time that the child reaches the age of majority, the other, contingent and inchoate in the sense that there will be a transmission of successional rights upon the death of parent or parents. Obviously, if the parent or parents desire to adopt a child despite the fact they already have children of their own, such adoption will certainly prejudice such children. Indirectly, it will result in the reduction of the amount of support as well as in the amount of legitime to which they should have been entitled in a manner not authorized by law. However, by fiat of the lawmaker, the adoption is allowed, but subject to the two (2) conditions stated above. 251

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Consequently, despite the fact that the statutory bar found in No. (1) of Art. 335 of the NCC, by virtue of which a person who has legitimate, legitimated or illegitimate children cannot adopt has been eliminated, the protective concern of the law for the children by nature of the adopter has not changed as evidenced by the pro­ visions of Art. 183, par. 1, and Art. 188, Nos. (3) and (4) of the FC. Under these provisions, the two (2) conditions stated above must be present; otherwise, the petition for adoption will not prosper. Therefore, in synthesis, the essential requisites for a valid and effective adoption are: (1) (2) rights;

The adopter must be of legal age; He must be in possession of full civil capacity and legal

(3) He must be in a position to support and care for his children by nature, whether legitimate, legitimated or illegitimate, in keeping with the means, both material and otherwise, of the family; (4) He must be at least 16 years older than the person to be adopted unless he is the parent by nature of the adopted, or is the spouse of the legitimate parent of the person to be adopted; (5) The person to be adopted must not be prohibited by law from being adopted; (6) The written consent of those who, according to law, shall be necessary, must be secured; (7) A judicial decree of adoption must be secured. (Art. 36, P.D. 603 as amended by E.O. No. 91, and pertinent provisions of the Rules of Court.) (In the Matter o f the Adoption o f the Minor, Lorence Limormoc vs. Legados, AC-G.R. No. 65927, November 12, 1984.) 12. May a person adopt a close relative such as a grandchild, or a brother or sister, or a step-child? ANS: Assuming that all the requisites of a valid and effective adoption are present, a person may adopt such relatives. True, 252

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there is no provision of the Child and Youth Welfare Code which explicitly declares that the adopter may do so, but then, there is also no provision in the law prohibiting relatives from adopting one another. As the SC has so aptly stated once upon a time, “the fact that the adoption would result in a dual relationship between the parties should not prevent the adoption. One is by nature, while the other is by legal fiction.” ("See Santos, Jr. vs. Republic, 21 SCRA 379.) 13. May a mother who is only 14 years older than her illegitimate child adopt such child? ANS: Reasons of justice and sentiment seem to indicate an af­ firmative answer. Moreover, Sec. 7 of R.A. No. 8552 declares the rule that the adopter must be at least 16 years older than the per­ son to be adopted unless the adopter is the parent by nature of the adopted, or is the spouse of the legitimate parent of the person to be adopted. 14. What are the effects of adoption? ANS: Adoption shall have the following effects: (1) Except in cases where the biological parent is the spouse of the adopter, all legal ties between the biological parent(s) and the adoptee shall be severed and the same shall then be vested on the adopter(s). (Sec. 16, R A . No. 8552.) (2) The adoptee shall be considered the legitimate son/ daughter of the adopter(s) for all intents and purposes and $s such is entitled to all the rights and obligations provided by law to legitimate sons/daughters bom to them without discrimination of any kind. To this end, the adoptee is entitled to love, guidance, and support in keeping with the means of the family. (Sec. 17, R.A. No. 8552.) (3) In legal and intestate succession, the adopter(s) and the adoptee shall have reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parent(s) had left a will, the law on testamentary succession shall govern. (Sec. 18, RA. No. 8552.)

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15. What rules govern the legal or intestate succession to the estate of the adopted? •ANS: Legal or intestate succession to the estate of the adopted shall be governed by the following rules: (1) Legitimate and illegitimate children and descendants and the surviving spouse of the adopted shall inherit from the adopted in accordance with the ordinary rules of legal or intestate succession; (2) When the parents, legitimate or illegitimate, or the legitimate ascendants of the adopted concur with the adopters, they shall divide the entire estate, 1/2 to be inherited by the parents or ascendants and the other half by the adopters; (3) When the surviving spouse or the illegitimate children of the adopted concur with the adopters, they shall divide the entire estate in equal share, 1/2 to be inherited by the spouse or the illegitimate children of the adopted and the other half by the adopters; (4) When the adopters concur with the illegitimate children and the surviving spouse of the adopted, they shall divide the entire estate in equal shares, 1/3 to be inherited by the illegitimate children, 1/3 by the surviving spouse, and 1/3 by the adopters; (5) When only the adopters survive, they shall inherit the entire estate; and (6) When only collateral blood relatives of the adopted survive, then the ordinary rules of legal or intestate succession shall apply. (Art. 190, FC.) 16. A, an adopted person, died intestate, survived by the adopter, X and his natural parents, F and M. His entire estate consists of several properties valued at P400,000, which he had acquired by gratuitous title during his lifetime from X. Distribute the estate. ANS: Under the FC, as well as R.A. No. 8552, the legal reversion recognized in P.D. No. 603 was eliminated. Thus, Art. 190(2) of the FC is now applicable. The entire estate, although consisting of the properties acquired by A during his lifetime from X by gratuitous 254

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title, shall be divided as follows: 1/2 to be inherited by F and M, and the other half, by X. 17. Suppose that in the above problem, in addition to the properties which A had acquired by gratuitous title from X, A left other properties valued at P200,000 which he had acquired through his own effort or industry, how shall you distribute the estate? ANS: Pursuant to Art. 190(2) of the FC, all the properties, although consisting of those acquired by gratuitous title from X and those acquired through A’s effort or industry, shall be divided as follows: 1/2 to be inherited by F and M, and the other half by X. (Please note that the adopter gets a share of the estate of the adopted although both parents by nature are still alive.) 18. X adopted A, a legitimate child of F and M. Two years later, both F and M were killed in a vehicular accident. A died recently, survived by X and his two paternal grandparents, Y and Z. His net estate is P200,000 cash which he had acquired through his own effort or industry. Distribute the estate. ANS: Pursuant to the new rules on legal or intestate succession to the estate of the adopted, when the legitimate ascendants of the adopted concur with the adopters, they shall divide the entire estate, 1/2 to be inherited by ascendants and the other half by the adopters. Thus, distribution of the estate shall be as follows: (1) Y and Z shall be entitled to 1/2 of the estate, or P100,000; (2)

X shall be entitled to 1/2 of the estate, or P100,000.

19. May the adopted person ask for the rescission of the adoption? ANS: Yes. Upon petition of the adoptee, with the assistance of the Department of Social Welfare and Development, if a minor or if over 18 years of age but is incapacitated, as guardian/counsel, the adoption may be rescinded on any of the following grounds committed by the adopter(s): (a) repeated physical and verbal maltreatment by the adopter(s) despite having undergone counseling; (b) attempt 255

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FAMILY CODE (Persons) Adoption

on the life of the adoptee; (c) sexual assault or violence; or (d) abandonment and failure to comply with parental obligations. (Sec. 19, R.A. No. 8552.) 20. May the adopter ask for the revocation of the adoption? ANS: The adopter(s) cannot ask for the revocation of the adoption. Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter(s). However, the adopter(s) may disinherit the adoptee for causes provided in Art. 919 of the NCC. (Sec. 19, R A . No. 8552.) 21. What are the effects of rescission of adoption? ANS: If the petition is granted, the parental authority of the adoptee’s biological parent(s), if known, or the legal custody of the Department of Social Welfare and Development shall be restored if the adoptee is still a minor or incapacitated. The reciprocal rights and obligations of the adopter(s) and the adoptee to each other shall be extinguished. The court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and restore his/her original birth certificate. Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected. All the foregoing effects of rescission of adoption shall be without prejudice to the penalties imposable under the Penal Code if the criminal acts are properly proven. (Sec. 20, R A . No. 8552.) 22. (1) Is a child who was adopted before the effectivity of the Child and Youth Welfare Code on June 10,1975, entitled to the issuance of an amended birth certificate? (2) Can Filipino children who were adopted in foreign countries through the Philippine inter-country adoption program enjoy dual citizenship, be Filipinos all their lives, and/or relinquish their Filipino nationality and citizenship after their adoption in foreign countries? 256

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Arts. 183-193

ANS: (1) The offices of the Civil Registrar General and the National Statistics Office are not aware of any office rule or regulation which prohibits the issuance of amended birth certificate to children adopted prior to June 10, 1975. Thus, Rule 51 of Administrative Order No. 3, Series of 1942, as amended by Rule 53 of Administrative Order No. 1, Series of 1975, as well as Rule 38 of Administrative Order No. 1, as amended, Series of 1983, provide that in case of adoption, the original family name of the child appearing in the Register of Birth shall not be erased or deleted but necessary notations shall be made in the remarks column showing the family name which the child shall bear by virtue of the adoption, indicating the special proceedings number, name of judge and court that issue the decree/order, entry number and the date of registration in the Register of Court Decree/Order. Whenever a certified copy of the birth certificate of the adopted child is issued, the original given name of the child must appear. Clearly, the existing implementing rules expressly authorize the issuance of a certified copy of the birth certificate of the adopted child (Dept, of Justice Opinion No. 34, s. 1990.) (2) It is settled that if an alien adopts a Filipino child, our NCC cannot confer on the child the nationality of the adopter. This would be a matter of foreign law. (Ching Leng us. Galang, 104 Phil. 1058.) Thus, the Department of Justice has ruled on several occasions that in this country, adoption does not operate to change the nationality of the adopted child since adoption is not one of the modes of losing Philippine citizenship as provided for under Sec. 1 of Commonwealth Act No. 63, as amended. Hence, a Filipino child adopted by an alien retains his citizenship unless he acquires the nationality of the adopter through any of the means under the latter’s national law. (Opinions of the Secretary of Justice No. 4, s. 1961, No. 36, s. 1954; No. 334, s. 1961, No. 102, s. 1941 and No. 332, s. 1940, No. 34, s. 1990.)

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Title VIII SUPPORT (Arts. 194-208, FC) 1.

Define support.

ANS: Art. 194 of the FC defines support as that which “com­ prises everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family. The education of the person entitled to be supported referred to in the preceding paragraph shall include his schooling or training for some profession, trade or vocation, even beyond the age of majority. Transportation shall include expenses in going to school, or to and from the place of work.” The foregoing definition truly amended the concept of support stated in Art. 290 of the NCC mainly by ehminating the social standing of the family as a measure of support. Whereas under the NCC, those obliged to support each other are required to give support on the basis of the ‘social position’ of the family, coupled with the indispensability of the support, except for brothers and sisters who owe their legitimate and natural brothers and sisters only the necessaries for life (2nd par., [2], Art. 291, NCC.), the FC has provided that those obliged to support each other, including those illegitimately related, are required to give support on the basis of financial standing and the indispensability of the support. This new concept of support found in the FC extends to legitimate or illegitimate brothers and sisters except only when the need for support of the brother or sister, being of age, is due to a cause imputable to the claimant’s fault or negligence. (Art. 196, FC.) 2.

Who are obliged to give support?

ANS: Under Art. 195 of the FC, the following are obliged to support each other to the whole extent set forth in the preceding 258

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articles of the said Code and subject to the provisions of the succeeding article thereof: (1)

The spouses;

(2)

Legitimate ascendants and descendants;

(3) Parents and their legitimate children and the legitimate and illegitimate children of the latter. (This provision eliminated the barrier placed by the NCC between the legitimate and illegitimate ascending or descending line.) (4) Parents and their illegitimate children and the legitimate and illegitimate children of the latter. (Please note that whereas under par. 5 of Art. 291 of the NCC, spurious children can claim support only from their illegitimate parents, under Art. 196, par. 4 of the FC, these spurious children, who are no longer classified as spurious children but as illegitimate children, can claim support not only from their illegitimate parents but from their illegitimate grandparents as well.) (5) Legitimate brothers and sisters, whether of the full or half-blood. (Art 195, FC.) Brothers and sisters not legitimately related, whether of the full or half-blood, are likewise bound to support each other to the full extent set forth in Art. 194 of the FC, except only when the need for support of the brother or sister, being of age, is due to a cause imputable to the claimant’s fault or negligence. (Art. 196, FC.) (Please note further that while spurious brothers and sisters Eire excluded from supporting each other under Art. 291, par. 2 of the NCC, the FC recognizes illegitimate children as one category of children other than the legitimate and the legitimated children. Hence, under Art. 196 of the FC, spurious brothers and sisters, now classified as illegitimate brothers and sisters, can claim support from each other.)

3. The records show that H and W, husband and wife, are living separately; that both had been unfaithful to each other; and that after their separation, H had been giving money to W for her support. Subsequently, W brought an action against H for separate maintenance. Will the action prosper? 259

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FAMILY CODE (Persons) Support

ANS: The action will prosper. In this case, the principle of in pari delicto is applicable. Both are at fault; consequently, H cannot avail himself of the defense of adultery of W. Besides, the act of H in giving money to W is implied condonation of the adultery of the latter. (Almacen vs. Baltazar, 103 PhiL 1147.) 4. May a woman oblige her husband to pay the fee of the lawyer who defended her in a criminal action for adultery instituted against her by her husband, regardless of her acquittal or conviction? ANS: The woman may oblige her husband to pay the fee of the lawyer who defended her in case of acquittal, but not in case of conviction. It has always been the consistent doctrine of the Supreme Court that expenses, such as judicial costs and attorney's fees, incurred by the wife in order to defend herself against unjust prosecution, are chargeable as support against the husband. (Quintana vs. Lerma, 24 PhiL 285; Mercado vs. Ostrand, 37PhiL 179; Peyer vs. Reyes, 77 PhiL 366.) In case of conviction, however, the rule is different. Adultery on the part of the wife, when proved, is a valid defense against an action for support. (Quintana vs. Lermat 24 PhiL 285; Sanchez vs. Zulueta, 68 Phil. 110; Mangoma vs. Macadaeg, 90 PhiL 508; Reyes vs. Ines-Luciano, 88 SCRA 803.) 5. What properties are answerable for the support of legitimate ascendants; descendants, whether legitimate or illegitimate; brothers and sisters, whether legitimately or illegitimately related? ANS: For the support of legitimate ascendants; descendants, whether legitimate or illegitimate; and brothers and sisters, whether legitimately or illegitimately related, only the separate property of the person obliged to give support shall be answerable provided that in case the obligor has no separate property, the absolute community or conjugal partnership, if financially capable, shall advance the support, which shall be deducted from the share of the spouse obliged upon the liquidation of the absolute community or of conjugal partnership. (Art. 197, FC.) 6. What is the effect of an action for legal separation or for annulment of marriage, and for the declaration of 260

FAMILY CODE (Persons) Support

Arts. 194-208

nullity of marriage upon the obligations of the spouses to support each other and their children? ANS: During the proceedings for legal separation or for annulment of marriage and for declaration of nullity of marriage, the spouses and their children shall be supported from the properties of the absolute community or .conjugal partnership. After the final judgment granting the petition, the obligation of mutual support between the spouses ceases. However, in case of legal separation, the court may order that the guilty spouse shall give support to the innocent one, specifying the terms of such order. (Art. 198, FC.) Under the “Rule On Provisional Orders” (A.M. No. 02-11-12SC, which took effect on March 15, 2003), the Court, upon receipt of a verified petition for declaration of absolute nullity of void marriage or for annulment of voidable marriage, or for legal separation, and at any time during the proceeding, motu proprio or upon application under oath of any of the parties, guardian or designated custodian, may issue provisional orders and protection orders which or without a hearing. These orders may be enforced immediately, with or with­ out a bond, and for such period and under such terms and conditions as the court may deem necessary. (Sec. 1.) In determining support for the spouses, the court may be guided by the following rules; (a) In the absence of adequate provisions in a written agreement between the spouses, the spouses may be supported from the properties of the absolute community or the conjugal partnership. (b) The court may award support to either spouse in such amount and for such period of time as the court may deem just and reasonable based on their standard of living during the marriage. (c) The court may likewise consider the following factors: (1) whether the spouse seeking support is the custodian of a child whose circumstances make it appropriate for that spouse not to seek outside employment; (2) the time necessary to acquire sufficient education and training to enable the spouse seeking support to find appropriate employment, and that spouse’s future earning capacity; (3) the duration of the marriage; (4) the comparative financial resources of the spouses, including their comparative earning abilities in the labor market; (5) the needs and obligations of each 261

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spouse; (6) the contribution of each spouse to the marriage, including services rendered in home-making, child care, education, and career building of the other spouse; (7) the age and health of the spouses; (8) the physical and emotional conditions of the spouses; (9) the ability of the supporting spouse to give support, taking into account that spouse’s earning capacity, earned and unearned income, assets, and standard of living; and (10) any other factor the court may deem just and equitable. (d) The Family Court may direct the deduction of the provi­ sional support from the salary of the spouse. (Sec. 2.) The common children of the spouses shall be supported from the properties of the absolute community or the conjugal partnership. Subject to the sound discretion of the court, either parent or both may be ordered to give an amount necessary for the support, maintenance, and education of the child. It shall be in proportion to the resources or means of the giver and to the necessities of the recipient. In determining the amount of provisional support, the court may likewise consider the following factors: (1) the financial resources of the custodial and non-custodial parent and those of the child; (2) the physical and emotional health of the child and his or her special needs and aptitudes; (3) the standard of living the child has been accustomed to; (4) the non-monetary contributions that the parents will make toward the care and well-being of the child. The Family Court may direct the deduction of the provisional support from the salary of the parent. 7. A wife filed against her husband a complaint for legal separation on the ground that the latter had attempted on her life, with a prayer for support pendente lite. The husband opposed the grant of support on the ground of adultery on the part of the wife. Over the husband’s opposition, the Family Court granted support pendent lite. The husband instituted certiorari proceedings before the CA seeking to annul the award. Is the wife entitled to support pendente lite? ANS: Yes, the wife is entitled to support pendente lite. It is true that adultery of the wife is a valid defense against an action for support commenced by a wife against her husband. This is 262

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well-settled. However, the alleged adultery must be established by competent evidence. The mere allegation that the wife has committed adultery will not bar her from the right to receive support pendente lite. Besides, the instant action is an action for legal separation, not for support. Consequently, if there are properties of the absolute community or the conjugal partnership, the wife should be entitled to support pendente lite. This is expressly ordained by the FC itself. (Note; The above answer is based on Reyes us. Ines-Luciano, 88 SCRA 803, and on Art. 198 of the FC.)

8. Whenever two (2) or more persons are obliged to give support, what is the order of liability that shall be fol­ lowed? ANS: Whenever two (2) or more persons are obliged to give support, the liability shall devolve upon the following persons in the order herein provided: (1) (2)

The spouse;

(3)

The ascendants in the nearest degree;

(4)

The brothers and sisters. (Art. 199, FC.)

The descendants in the nearest degree;

What rules shall govern when: (a) two (2) or more 9. persons are obliged to give support; (b) two (2) or more recipients at the same time claim support from the same person who does not have sufficient means to satisfy all claims? ANS: (a) When the obligation to give support falls upon two (2) or more persons, the payment of the same shall be divided between them in proportion to the resources of each. However, in case of urgent need and by special circumstances, the judge may order only one of them to furnish the support provisionally, without prejudice to his right to claim from the other obligors the share due from them. (b) When two (2) or more recipients at the same time claim support from one and the same person legally obliged to give it, should the latter not have sufficient means to satisfy all claims, 263

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the order established in Art. 199 of the FC shall be followed, unless the concurrent obligees should be the spouse and a child subject to parental authority in which case, the child shall be preferred. (Art. 199, FC.) 10. How shall the amount of support be determined, reduced or increased in the cases referred to in Arts. 196 and 196 of the FC? When shall such amount, in cases of contractual support, be adjusted? ANS: The amount of support, in the cases referred to in Articles 195 and 196 of the FC, shall be in proportion to the resources or means of the giver and to the necessities of the recipient. (Art. 202, FC.) Support in the cases referred to in the preceding article shall be reduced or increased proportionately, according to the reduction or increase of the necessities of the recipient and the resources or means of the person obliged to furnish the same. (Art. 202, FC.) Furthermore, in cases of contractual support, such support shall be subject to adjustment, whenever modification is necessary due to changes in circumstances manifestly beyond the contemplation of the parties. (Art. 208, par. 2, FC.) 11. Under the FC, when and how shall support be claimed and paid? ANS: The obligation to give support shall be demandable from the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extra-judicial demand. Support pendente lite may be claimed in accordance with the Rules of Court. Payment shall be made within the first 5 days of each corresponding month. When the recipient dies, his heirs shall not be obliged to return what he has received in advance. (Art 203, FC.) 12. Why is a judgment for support immediately execu­ tory? ANS: Judgment for support is immediately executory because it is needed by the person to be supported. Sec, 4, Rule 39, the 264

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Arts. 194-208

Rules of Court clearly states that, unless ordered by the trial court, judgments in actions for support are immediately executory and cannot be stayed by an appeal. This is an exception to the general rule which provides that the taking of an appeal stays the execution of the judgment and that advance executions will only be allowed if there are urgent reasons therefor. The provision calls for immediate execution of all judgments for support and makes no distinction between those which are the subject of an appeal and those which are not. The rule has to be so because in all cases involving a child, his interest and welfare are always the paramount concerns. There may be instances where, in view of the poverty of the child, it would be a travesty of justice to refuse him support until the decision of the trial court attains finality while time continues to slip away. (Gan vs. CA, G.R. No. 145527, May 28,2002; De Leon vs. Soriano, 95 Phil. 806, cited in the case o f Gan vs. CA.) 13. How may a person fulfill his obligation to give support? ANS: The person obliged to give support shall have the option to fulfill the obligation either by paying the allowance fixed or by receiving and maintaining in the family dwelling the person who has a right to receive support. The latter alternative cannot be availed of in case there is moral or legal obstacle thereto. (Art. 204, FC.) 14. May the right to receive support be levied upon on attachment or execution? ANS: Under Art, 205 of the FC, the right to receive support as well as any money or property obtained as such support shall not be levied upon on attachment or execution. However, support in arrears are not covered by this provision considering that the need for support was already attended to in the past, notwithstanding failure to receive payments of support. In case of contractual support or that given by will, the excess in amount beyond that required for legal support shall be subject to levy on attachment or execution. (Art. 208, FC.) 15. What is the right of: (a) a stranger who paid the support of another; (b) any third person who furnished support to the needy individual when the person obliged 265

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FAMILY CODE (Persons) Support

to support another unjustly refuses or fails to give support when urgently needed by the latter; (c) any third person who furnished support to the needy individual when the father or mother of a child under the age of majority unjustly refuses to support or fails to give support to the child when urgently needed? ANS: Art. 206 of the FC provides that “when, without the knowledge of the person obliged to give support, it is given by a stranger, the latter shall have a right to claim the same from the former, unless it appears that he gave it without any intention of being reimbursed.” (Art. 206, FC.) Art. 207 of the same Code likewise provides that “when the person obliged to support another unjustly refuses or fails to give support when urgently needed by the latter, any third person may furnish support to the needy individual, with a right of reimbursement from the person obliged to give support. This article shall apply particularly when the father or mother of a child under the age of majority unjustly refuses to support or fails to give support to the child when urgently needed.” (Art. 207, FC.) 16. Should the provision for a common fund for the benefit of the child be considered final and res judicata? ANS: The provision for a common fund for the benefit of the child cannot be considered final and res judicata since any judgment for support is always subject to modification, depending upon the needs of the child and the capabilities of the parents to give support. Thus, in the case of Lam vs. Chua, G.R.. No. 131286, March 18, 2004, the Court ruled that there was no merit to the claim of petitioner that the compromise agreement in the earlier case for the voluntary dissolution of their conjugal partnership of gains, is a bar for any further award of support in favor of their child.

266

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Title IX PARENTAL AUTHORITY Chapter 1 GENERAL PROVISIONS (Arts. 209-215, FC) 1.

Define parental authority.

ANS: Parental authority (patria potestas) is defined as the mass of rights and obligations which parents have in relation to the persons and property of their children until their emancipation, and even after this under certain circumstances. (2 Manresa 8.) 2. What do parental authority and responsibility include under the FC? ANS: Art. 209 of the FC provides that pursuant to the natural right and duty of parents over the person and property of their unemancipated children, parental authority and responsibility shall include the caring for and rearing of such children for civic consciousness and efficiency and the development of their moral, mental and physical character and well-being. 3. May parental authority and responsibility be renounced or transferred? ANS: Parental authority and responsibility may not be renounced or transferred except in cases authorized by law (Art. 210, FC.), such as adoption (Art. 189, par. 2, FC.), guardianship (Art. 222, FC.), commitment of the child in entities or institutions engaged in child care or in children’s home duly accredited by the proper government agency. (Art. 224, FC.) 267

Arts. 209-215

FAMILY CODE (Persons) Parental Authority General Provisions

4. (A) Who has parental authority over the persons of the common children? (B) What are the responsibilities of the children toward their parents? ANS: (a) The father and the mother shall jointly exercise parental authority over the persons of their common children. In case of disagreement, the father’s decision shall prevail, unless there is a judicial order to the contrary. (Art. 211, par. 1, FC.) (b) Other than those responsibilities of the children enumerated in the Art. 4 of P.D. No. 603, Art. 211, par. 2 of the FC requires that children shall always observe respect and reverence toward their parents and are obliged to obey them as long as the children are under parental authority. 5. In case of absence, death or remarriage of either parent, or separation of the parents, who shall exercise parental authority? ANS: In case of absence or death of either parent, the parent present shall continue exercising parental authority. The remarriage of the surviving parent shall not affect the parental authority over the children, unless the court appoints another person to be the guardian of the person or property of the children. (Art. 213, FC.) In case of separation of the parents, parental authority shall be exercised by the parent designated by the court. The court shall take into account all relevant considerations, especially the choice of the child over seven (7) years of age, unless the parent chosen is unfit. No child under seven (7) years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise. (Art. 213, FC.) Pursuant to the “Rule on Provisional Orders (A.M. No. 02-1112 SC, March 15, 2003), the court shall consider the best interests of the child and shall give paramount consideration of the material and moral welfare of the child in determining the right party or person to whom the custody of the child of the parties may be awarded pending the petition. The court may likewise consider the following factors: (a) the agreement of the parties; (b) the desire and ability of each parent 268

FAMILY CODE (Persons) Parental Authority General Provisions

Arts. 209-215

to foster an open and loving relationship between the child and the other parent; (c) the child’s health, safety, and welfare; (d) any history of child or spousal abuse by the person seeking custody or who has had any filial relationship with the child, including anyone courting the parent; (e) the nature and frequency of contact with both parents; (f) habitual use of alcohol or regulated substances; (g) marital misconduct; (h) the most suitable physical, emotional, spiritual, psychological and educational environment; and (i) the preference of the child, if over seven (7) years of age and of sufficient discernment, unless the parent chosen is unfit. The court may award provisional custody in the following order of preference: (1) to both parents jointly; (2) to either parent taking into account all relevant considerations under the foregoing paragraph, especially the choice of the child over seven (7) years of age, unless the parent chosen is unfit; (3) to the surviving grandparent, or if there are several of them, to the grandparent chosen by the child over sevem (7) years of age and of sufficient discernment, unless the grandparent is unfit or disqualified; (4) to the eldest brother or sister over 21 years of age, unless he or she is unfit or disqualified; (5) to the child’s actual custodian over 21 years of age, unless unfit or disqualified; or (6) to any other person deemed by the court suitable to provide proper care and guidance for the child. The custodian temporarily designated by the court shall give the court and the parents five (5) days notice of any plan to change the residence of the child or take him out of his residence for more than three (3) days provided it does not prejudice the visitation rights of the parents. Appropriate visitation rights shall be provided to the parent who is not awarded provisional custody unless found unfit or disqualified by the court. (Secs. 4 and 5.) 6. H and W contested the custody of their two (2) children above the age of seven (7). W contended that H was a drug addict and had undergone rehabilitation, but he was not totally rehabilitated. The court awarded the custody to W but did not conduct further trial which was questioned H. (a) Decide the case. (b) In matters of custody of children, what is the para­ mount consideration? 269

Arts. 209-215

FAMILY CODE (Persons) Parental Authority General Provisions

ANS: (a) In instances involving the care, custody and control of minor children, the contending parents stand on equal footing before the court who shall make the selection according to the best interest of the child. The child, if over seven (7) years of age, may be permitted to choose which parent the child prefers to live with, but the court is not bound by such choice if the parent chosen is unfit. In such cases, the foremost consideration is the physical, educational, social and moral welfare of the child concerned, taking into account the respective resources as well as the social and moral situations of the opposing parents. While a man may have a history of drug dependence, the records are inadequate as to his moral, financial and social well being. The result of the psychiatric evaluation showing that he is not “completely cured” may render him unfit to take custody of the children, but there is no evidence to show that the man is unfit to provide the children with adequate support, education as well as moral and intellectual development. Moreover, the children in the case of Laxamana vs. Laxamana (G.R. No. 144767, September 3, 2002), were 14 and 15 years, yet the court did not ascertain their choice as to which parent they want to live with. These inadequacies could have been remedied by an exhaustive trial probing the accuracy of the report and the capacity of both parties to raise their children. So the case should be returned to the lower court for trial. (b) In matters of custody of a child, the paramount consideration is the welfare and well-being of the child. (Silva vs. CA, 275 SCRA 609; Cervantes vs. Fajardo, 169 SCRA 575.) Strong bias is created in favor of the mother to avoid a tragedy where a mother has seen her baby tom away from her. No man can sound the deep sorrow of a mother who is deprived of her child of tender age. The exception is when there are compelling reasons like neglect, abandonment, unemployment and immorality, habitual drunkenness, drug addition, maltreatment of the child, insanity, and affliction with a communicable illness. (Perez vs. CA, 255 SCRA 661.) If the child however is seven (7) years and above, he can make a choice but such is not binding upon the courts. (Santos vs. CA, Tonog vs. CA, G.R. No. 122906, February 6, 2002.) 7. Under Art. 213 of the FC, no child under seven (7) years of age shall be separated from the mother unless the court finds compelling reasons to order otherwise. 270

FAMILY CODE (Persons) Parental Authority General Provisions

(1)

Arts. 209-215

What is the rationale of this provision?

ANS: The rationale of the 2nd paragraph of Article 213 of the FC is to avoid the tragedy of a mother who sees her baby torn away from her. It is said that the maternal affection and care during the early years of the child are generally needed by the child more than paternal care (Hontiveros vs. IAC, G.R. No. 64982, October 23,1984; Tolentino, Commentaries and Jurisprudence on the Civil Code, Volume One, pp. 718-719). The general rule is that a child below seven (7) years old shall not be separated from his mother due to his basic need for her loving care (Espiritu vs. C.A., G.R. No. 115640, March 15,1995). (2) Give at least three (3) examples of “compelling reasons” for taking away from the motheris custody her child under seven (7) years of age. (2006) a.

The mother is insane (Sempio-Diy, Handbook on the Family Code of the Philippines, pp. 296-297);

b.

The mother is sick with a disease that is communicable and might endanger the health and life of the child;

c.

The m other has been maltreating the child;

d.

The mother is engaged in prostitution;

e.

The mother is engaged in adulterous relationship;

f.

The mother is a drug addict;

g.

The mother is a habitual drunk or an alcoholic;

h.

The mother is in jail or serving sentence. (Suggested Answers to the 2007 Bar Examination Questions, PALS)

8. Pending resolution of a petition for declaration of absolute nullity of void marriage, or for annulment of voidable marriage, or for legal separation, can a child of the spouses be brought out of the country without prior order from the court? ANS: Under Sec. 6 of the “Rule on Provisional Orders” (A.M. No. 02-11-12 SC, March 15,2003), pending resolution of the petition, no child of the parties shall be brought out of the country without prior order from the court. 271

Arts. 209-215

FAMILY CODE (Persons) Parental Authority General Provisions

The court, motu proprio or upon application under oath, may issue ex parte a hold departure order, addressed to the Bureau of Immigration and Deportation, directing it not to allow the departure of the child from the Philippines without the permission of the court. The Family Court issuing the hold departure order shall furnish the Department of Foreign Affairs and the Bureau of Immigration and Deportation of the Department of Justice a copy of the hold departure order issued within 24 hours from the time of its issuance and through the fastest available means of transmittal. The hold-departure order shall contain the following informa­ tion: (a) the complete name (including the middle name), the date and place of birth, and the place of last residence of the person against whom a hold-departure order has been issued or whose departure from the country has been enjoined; (b) the complete title and docket number of the case in which the hold departiire was issued; (c)

the specific nature of the case; and

(d)

the date of the hold-departure order.

If available, a recent photograph of the person against whom a hold-departure order has been issued or whose departure from the country has been enjoined should also be included. The court may recall the order, motu proprio or upon verified motion of any of the parties after summary hearing, subject to such terms and conditions as may be necessary for the best interests of the child. 9. Under the “Rule on Provisional Orders,” the Court may likewise issue on Order of Protection. Discuss. ANS: The court may issue an Order of Protection requiring any person: (a) to stay away from the home, school, business, or place of employment of the child, other parent or any other party, and to stay away from any other specific place designated by the court; 272

FAMILY CODE (Persons) Parental Authority General Provisions

Arts. 209-215

(b) to refrain from harassing, intimidating, or threatening such child or the other parent or any person to whom custody of the child is awarded; (c) to refrain from acts of commission or omission that create an unreasonable risk to the health, safety, or welfare of the child; (d) to permit a parent, or a person entitled to visitation by a court order or a separation agreement, to visit the child at stated periods; (e) to permit a designated party to enter the residence during a specified period of time in order to take personal belongings not contested in a proceeding pending with the Family Court; (f) to comply with such other orders as are necessary for the protection of the child. (Sec. 7.) 10. In case of death, absence or unsuitability of both parents, who shall exercise parental authority? ANS: In case of death, absence or unsuitability of the parents, substitute parental authority shall be exercised by the surviving grandparent. (Bonifacia P. Vancil vs. Helen G. Belanes, G.R. No. 132223, June 19, 2001.) In case several survive, the one designated by the court, taking into account the same consideration mentioned in Art. 213 of the FC, shall exercise the authority. (Art. 214, FC.) 11. Can a child be compelled to testify against his parents in a criminal case? ANS: As a rule, no descendant shall be compelled in a criminal case to testify against his parents and grandparents, except when such testimony is indispensable in a crime against the descendant or by one parent against the other. (Art. 215, FC.) 12. A couple has two (2) children. When the husband died, the wife wanted to bring one of the children to the province where the other child was staying. However, her mother-in-law said that since her son just died, she needed the company of the child to at least compensate for the loss of her late son. The wife went to the province and lived with her other child. She later remarried. When she was getting 273

Arts. 216-219

FAMILY CODE (Persons) Parental Authority Substitute and Special Parental Authority

her child back, her mother-in-law resisted, claiming that the child was abandoned by his mother, who never visited the child nor sent her cards or gifts. Was there abandonment? ANS: No. The law allows a waiver of parental authority only in cases of adoption, guardianship, and surrender to a children’s home or an orphan institution. When a parent entrusts the custody of a minor to another, such as a relative, as in this case, or to a friend or a godfather, even in a document, what is given is merely temporary custody and it does not constitute abandonment or renunciation of parental authority. (Eslao vs. Cordero, G.R. No. 116773, SC 2nd Div., J. Regalado, January 16,1997)

Chapter 2 SUBSTITUTE AND SPECIAL PARENTAL AUTHORITY (Arts. 216-219, FC.) 13. Who shall exercise substitute parental authority over the child in default of parents or a judicially appointed guardian? ANS: In default of parents or a judicially appointed guardian, the following persons shall exercise substitute parental authority over the child in the order indicated: (1)

The surviving grandparent, as provided in Art. 214 of the

FC; (2) The oldest brother or sister, over 21 years of age, unless unfit or disqualified; and (3) The child’s actual custodian, over 21 years of age, unless unfit or disqualified. Whenever the appointment of a judicial guardian over the property of the child becomes necessary, the same order of preference shall be observed. (Art. 216, FC.) (Please note that under Art. 233, par. 2 of the FC, the person exercising substitute parental authority shall have the same authority over the person of the child as the parents.)

274

FAMILY CODE (Persona) Parental Authority Substitute and Special Parental Authority

Arts. 216-219

14. Upon whom is parental authority entrusted in case of fondlings, abandoned, neglected or abused children and other children similarly situated? ANS: In case of fondlings, abandoned, neglected or abused children and other children similarly situated, parental authority shall be entrusted in summary judicial proceedings to heads of children’s homes, orphanages and similar institutions duly accredited by the proper government agency. (Art, 217, FC.) 15. Who exercise special parental authority and re­ sponsibility over the minor child? What is the extent of such authority and responsibility? ANS: Under Art. 218 of the FC, (1) the school, its administrators and teachers; or (2) the individual, entity or institution engaged in child care shall have special parental authority and responsibility over the minor child while under their supervision, instruction, or custody. Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution. Thus, such authority and responsibility applies to field trips, excursions and other affairs of the students outside the school premises whenever authorized by the school or its teachers. (St. Mary’s Academy vs. Williams Carpitanos, et al., G.R. No. 143363, February 6, 2002.) The school administrator, teacher or individual engaged in child care and exercising special parental authority shall in no case inflict corporal punishment upon the child. (Art. 233, 2nd par., FC.) 16. Who are liable for damages caused by the acts or omissions of the unemancipated minor? ANS: Those given the special parental authority and responsibility (Art. 218, FC.) shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor while under their supervision, instruction or custody. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable. However, to be liable, there must be a finding that the act or omission 275

Arts. 216-219

FAMILY CODE (Persons) Parental Authority Substitute and Special Parental Authority

considered as negligent was the proximate cause of the injury caused because the negligence must have a connection to the accident. (St. Mary’s Academy vs. William Carpitanos, supra.) The respective liabilities of those referred to in the preceding paragraph shall not apply if it is proved that they exercised the proper diligence required under the particular circumstances. (Art. 219, FC.) {Note: The provisions of the N CC on quasi-delicts shall govern all other cases not covered by Art. 2 19 and the preceding articles of the FC.)

17. In the case of St. Mary’s Academy vs. Carpitanos, et al., there was an enrollment campaign conducted by the students in Dipolog City. High school students were on board a jeep belonging to a certain Villanueva, driven by Sherwin who is a minor. It met an accident resulting in the death of one of the students. The lower court held that the school is primarily liable for damages as it had special parental authority at the time of the accident. Decide the case. ANS: The school should not be held primarily liable as held in the aforesaid case. In order that there may be a recovery for an injury, it must be shown that the injury for which recovery is sought must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient causes. In other words, the negligence must be the proximate cause of the injuiy. For negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause of the injury complained of. And “the proximate cause of an injuiy is that cause, while, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. (Cruz vs. CA, 346 Phil. 872.) In the instant case, it was shown that the accident was not due to the negligence of the school or the reckless driving of the driver but the detachment of the steering wheel guide of the jeep. Such detachment was, in fact, admitted. Furthermore, no evidence was shown to prove the 276

FAMILY CODE (Persons) Arts. 220-224 Parental Authority Effect of Parental Authority Upon the Persons of the Children

negligence of the school authorities. No evidence was shown to prove that the school allowed the minor to drive the jeep which was underthe possession of a certain Ched Villanueva, the grandson of the owner. The minor was allowed to drive by him. Hence, liability for the accident, whether caused by the negli­ gence of the minor driver or mechanical detachment of the steering wheel guide of the jeep must be pinned on the minor’s parents pri­ marily. The negligence of the school was only a remote cause of the accident. Between the remote cause and the injury, there intervened the negligence of the minor’s parents or the detachment of the steer­ ing wheel guide of the jeep.

Chapter 3 EFFECT OF PARENTAL AUTHORITY UPON THE PERSONS OF THE CHILDREN (Arts. 220-224, FC) 18. Other than those provided for in Chapters 2 and 3 of P.D. No. 603, what rights and duties shall the parents and those exercising parental authority have with respect to their unemancipated children or wards? ANS: Art. 220 of the FC enumerates the following rights and duties: (1) To keep them in their company, to support, educate and instruct them by right precept and good example, and to provide for their upbringing in keeping with their means; (2) To give them love and affection, advice and counsel, companionship and understanding; (3) To provide them with moral and spiritual guidance, inculcate in them honesty, integrity, self-discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs, and inspire them in their compliance with the duties of citizenship; (4) To enhance, protect, preserve and maintain their physical and mental health at all times; 277

Arts. 220-224

FAMILY CODE (Persons) Parental Authority Effect of Parental Authority Upon the Persons of the Children

(5) To furnish them with good and wholesome educational 'materials, supervise their activities, recreation and association with others, protect them from bad company, and prevent them from acquiring habits detrimental to their health, studies and morals; (6) To represent them in all matters affecting their interests; (7)

To demand from them respect and obedience;

(8) To impose discipline on them as may be required under the circumstances; and (9) To perform such other duties as are imposed by law upon parents and guardians. (Art. 220, FC.) 19. Adelberto Bundoc, a minor 10 years of age, shot Jennifer Tamargo with an air rifle causing injuries which resulted in her death. At the time of the incident, Adelberto was living with his natural parents, Victor and Clara Bundoc. Prior to the incident, spouses Rapisura had filed a petition to adopt Adelberto which petition was granted. On a complaint for damages, spouses Bundoc claimed that not they, but rather the adopting parents, namely, the spouses Rapisura, were indispensable parties to the action since parental authority had shifted to the adopting parents from the moment the successful petition for adoption was filed. Can the effects of adoption, insofar as parental authority is concerned, be given retroactive effect so as to make the adopting parents the indispensable parties in a damage suit filed against their adopted child, for acts committed by the latter when actual custody was yet lodged with the biological parents? ANS: The Court believes that it is not proper to regard parental authority as having been retroactively transferred to and vested in the adopting parents. Retroactive effect may not be given to the decree of adoption so as to impose a liability upon the adopting parents accruing at the time when the adopting parents had no actual or physical custody over the adopted child. Such effect may perhaps be given to the granting of the petition for adoption where 278

FAMILY CODE (Persons) Arts. 220-224 Parental Authority Effect of Parental Authority Upon the Persons of the Children

such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. In the case at bar, to hold that parental authority had been retroactively lodged in the Rapisura spouses so as to burden them with liability for a tortious act that they could not have foreseen and prevented would be unfair and unconscionable. (Tamargo vs. CA, 209 SCRA 518.) 20. What is the extent of liability of parents and other persons exercising parental authority for the injuries and damages caused by the acts or omissions of their unemancipated children? ANS: Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority subject to the appropriate defenses provided by law. (Art. 221, FC; Arts. 2180 and 2194, NCC.) 21. What actions may be adopted by the parents or those exercising parental authority to provide for disciplinary measures over the child? ANS: The parents or, in their absence or incapacity, the individual, entity or institution exercising parental authority, may petition the proper court of the place where the child resides, for an order providing for disciplinary measures over the child. The child shall be entitled to the assistance of counsel, either of his choice or appointed by the court, and a summary hearing shall be conducted wherein the petitioner and the child shall be heard. However if in the same proceeding, the court finds the petitioner at fault, irrespective of the merits of the petition, or when the circumstances so warrant, the court may also order the deprivation or suspension of parental authority or adopt such other measures it may deem just and proper. (Art. 223, FC.) The measures may include the commitment of the child for not more than thirty days in entities or institutions engaged in child care or in children’s home duly accredited by the proper government agency. 279

Arts. 225-227

FAMILY CODE (Persons) Parental Authority Effect of Parental Authority Upon the Property of the Children

The parent exercising parental authority shall not interfere with the care of the child whenever committed but shall provide for his support. Upon proper petition or at its own instance, the court may terminate the commitment of the child whenever just and proper. (Art. 224, FC.)

Chapter 4 EFFECT OF PARENTAL AUTHORITY UPON THE PROPERTY OF THE CHILDREN (Arts. 225-227, FC) 22. Who shall exercise legal guardianship over the property of the unemancipated common child? ANS: Under Art. 225 of the FC, both the father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail, unless there is a judicial order to the contrary. 23. Under the FC, what rules on the exercise of legal guardianship shall govern where the market value of the property or the annual income of the unemancipated common child exceeds P50,000? ANS: Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned shall be required to furnish a bond in such amount as the court may determine, but not less than 10% of the value of the property or annual income, to guarantee the performance of the obligations prescribed for general guardians. A verified petition for approval of the bond shall be filed in the proper court of the place where the child resides, or, if the child resides in a foreign country, in the proper court of the place where the property or any part thereof, is situated. The petition shall be docketed in a summary special proceeding in which all incidents and issues regarding the performance of the 280

FAMILY CODE (Persons) Arts. 225-227 Parental Authority Effect of Parental Authority Upon the Property of the Children

obligations referred to in the 2nd paragraph of Art. 225, FC, shall be heard and resolved. The ordinary rules on guardianship shall be merely suppletory except when the child is under substitute parental authority, or the guardian is a stranger, or a parent has remarried, in which case, the ordinary rules on guardianship shall apply. (Art. 225, FC.) 24. To whom shall the property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title belong? What is the right of the parents over the fruits or income of the child’s property? ANS: The property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title shall belong to the child in ownership and shall be devoted exclusively to the latter’s support and education, unless the title or transfer provides otherwise. The right of the parents over the fruits and income of the child’s property shall be limited primarily to the child’s support and secondarily to the collective daily needs of the family. (Art. 226, FC.) (Note: Under Art. 226 of the FC, parental usufruct over the child’s property as well as the fruits and income thereof as recognized in Arts. 3 2 1 and 324 of the NCC was abolished.)

25. What rules shall be applied if the parents entrust the management or administration of any of their properties to an emancipated child? ANS: Art. 227 of the FC provides that “if the parents entrust the management or administration of any of their properties to an unemancipated child, the net proceeds of such property shall belong to the owner. The child shall be given a reasonable monthly allowance in an amount not less than that which the owner would have paid if the administrator were a stranger, unless the owner grants the entire proceeds to the child. In any case, the proceeds, thus, given in whole or in part shall not be charged to the child’s legitime.”

281

Arts. 228-233

FAMILY CODE (Persons) Parental Authority Suspension or Termination of Parental Authority

Chapter 5 SUSPENSION OR TERMINATION OF PARENTAL AUTHORITY (Arts. 228-233, FC) 26. What are the grounds for extinguishment of paren­ tal authority? ANS: Parental authority terminates permanently: (1)

Upon the death of the parents;

(2)

Upon the death of the child; or

(3) Upon the emancipation of the child. Unless subsequently revived by a final judgment, parental authority also terminates: (4)

Upon adoption of the child;

(5)

Upon appointment of a general guardian;

(6) Upon judicial declaration of abandonment of the child in a case filed for the purpose; (7) Upon final judgment of a competent court divesting the child concerned of parental authority; or (8) Upon judicial declaration of absence or incapacity of the person exercising parental authority. (Arts. 228, 229, FC.) 27. What are the grounds for the suspension and depri­ vation of parental authority? ANS: The grounds for suspension and deprivation of parental authority are: (1) Conviction of the parent or the person exercising the same of a crime which comes with it the penalty of civil interdiction. The authority is automatically reinstated upon service of the penalty or upon pardon or amnesty of the offender, (Art. 230, FC.) (2) The court in an action filed for the purpose or in a related case may also suspend parental authority if the parent or the person exercising the same: 282

FAMILY CODE (Persons) Parental Authority Suspension or Termination of Parental Authority

Arts. 228-233

(i)

Treats the child with excessive harshness or cruelty;

(ii)

Gives the child corrupting orders, counsel or example;

(iii) Compels the child to beg; or (iv) Subjects the child or allows him to be subjected to acts of lasciviousness. The grounds enumerated above are deemed to include cases which have resulted from culpable negligence of the parent or the person exercising parental authority. If the degree of seriousness so warrants or the welfare of the child so demands, the court shall deprive the guilty party of parental authority or adopt such other measures as may be proper under circumstances. The suspension or deprivation may be revoked and the parental authority revived in a case filed for the purpose or in the same proceeding if the court finds the cause therefore has ceased and will not be repeated. (Art. 231, FC.) (3) If the person exercising parental authority has subjected the child or allowed him to be subjected to sexual abuse, such person shall be permanently deprived by the court of such authority. (Art. 232, FC.)

283

Title X EMANCIPATION AND AGE OF MAJORITY (Arts. 234-237, FC) 1.

Define emancipation.

ANS: Emancipation is the release of a person from parental authority whereby he becomes capacitated for civil life. (Francisco, Civil Code, Book One, p. 968.) 2.

When does emancipation take place?

ANS: Emancipation takes place: (1)

By the attainment of majority;

(2)

By the marriage of the minor;

(3) By the recording in the Civil Register of an agreement in a public instrument executed by the parent exercising parental authority and the minor at least 18 years of age; (4) By the recording in the Civil Register of an agreement in a public instrument executed by the parent exercising parental authority and the orphaned minor at least 18 years of age but the agreement must be approved by the court before it is recorded. (Arts. 234, 235, FC.) 3. When does majority commence and what is the effect thereof? ANS: Unless otherwise provided, majority commences at the age of 18 years. (Art. 234, FC, as amended by R.A. No. 6809.) Emancipation takes place by the attainment of majority. (Art. 234, FC, as amended by R.A. No. 6809.) Emancipation shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil 284

FAMILY CODE (Persons) Emancipation and Age of Majority

Arts. 234-237

life, save the exceptions established by existing laws in special cases. Contracting marriage, however, shall require p aren tal consent until the age of 21, Furthermore, nothing in the FC shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below 21 years of age mentioned in the second and third paragraphs of Art. 2180 of the NCC. (Art 236, FC, as amended by R A . No. 6809.) Finally, existing wills, bequests, donations, grants, insurance policies and similar instruments containing references and provisions favorable to minors will not retroact to their prejudice. (RA. No. 6809.) 4. What is the effect of annulment or declaration of nullity of the marriage of a minor or of the recorded agree­ ment mentioned in Arts. 234 and 235 of the FC? ANS: The annulment or declaration of nullity of the marriage of a minor or of the recorded agreement mentioned in Arts. 234 and 235 of the FC shall revive the parental authority over the minor but shall not affect acts and transactions that took place prior to the recording of the final judgment in the Civil Register. (Art. 237, FC.)

285

Title XI SUMMARY JUDICIAL PROCEEDINGS IN THE FAMILY LAW (Arts. 238-253, FC) Title XII FINAL PROVISIONS (Arts. 254-257, FC) 1. What provisions of R A No. 386 (otherwise known as the NCC of the Philippines), as amended, and Presidential Decree No. 603 (otherwise known as the Child and Youth Welfare Code), as amended, were repealed by E.O. No. 209 (otherwise known as the FC of the Philippines)? ANS: Titles III (Marriage); IV (Legal Separation); V (Rights and Obligations Between Husband and Wife); VI (Property Relations Between Husband and Wife); VII (The Family); VIII (Paternity and Filiation); IX (Support); XI (Parental Authority); and XV (Emancipation and Age of Majority) of Book I of R.A. No. 386, otherwise known as the CC of the Philippines, as amended, and Arts. 17, 18, 19, 27, 28, 29, 30, 31, 39, 40, 41 and 42 of P.D. No. 603, otherwise known as the Child and Youth Welfare Code, as amended, and all laws, decrees, executive orders, proclamations, rules and regulations, or parts thereof, inconsistent therewith were repealed. (Art. 254, FC.) 2.

How shall the provisions of the FC take effect?

ANS: The FC shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the NCC or other laws. (Art. 256, FC.) 286

FAMILY CODE (Persons) Final Provisions Funerals

3.

Arts. 305-310

When did the FC take effect?

' ANS: The FC took effect last August 3,1988, one year after the completion of its publication in a newspaper of general circulation, as certified by the Executive Secretaiy, Office of the President. (Art. 257, FC.) PROVISIONS OF THE NCC AND P.D. NO. 603 AS AMENDED, WHICH HAVE NOT BEEN REPEALED BY THE FAMILY CODE FUNERALS (Arts. 305-310, NCC) 4. (a) Who has the duty and right to make funeral arrangements? (b) chargeable?

Against what property are funeral expenses

ANS: (a) According to Art. 305 of the NCC, the duty and the right to make funeral arrangements of a deceased relative shall be in accordance with the order established for support under Art. 199 of the FC. In other words, preferential rights are given first, to the spouses; second, to the descendants of the nearest degree; third, to the ascendants of the nearest degree; and fourth, to the brothers and sisters. In case of descendants of the same degree, or of brothers and sisters, the oldest shall be preferred. In case of ascendants, the paternal shall have a better right. (b) Obviously, funeral expenses are chargeable against the property of the deceased. However, if the deceased is one of the spouses, such expenses are chargeable against the conjugal partnership property. (Art. 310, NCC.) 5. May a person validly dispose of his mortal remains or any organ of his body in favor of another? ANS: Authorities sustain the view that inasmuch as mortal remains or organs of a person’s body cannot be considered property within the meaning of the law, therefore, such remains or organs can neither be the subject matter of a contract nor constitute a part of 287

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the inheritance. (Alexander on Wills, Vol. 1, pp. 316-317.) However, in this jurisdiction, under R.A. No. 349, as amended by R.A. No. 1056, a person may validly grant to a licensed physician, surgeon, known scientist, of any medical or scientific institution authority to detach at any time after the grantor’s death any organ of his body and to utilize the same for medical, surgical or scientific purposes. The grant must: (1) be in writing; (2) specify the person to whom or the institution to which the grant is given; (3) specify the organ to be detached; (4) specify the use or uses; and (5) be signed by the grantor and two disinterested witnesses. CAKE AND EDUCATION OF CHILDREN (Arts. 356-363, NCC) (Arts. 67-208, P.D. No. 603) 6. In an action for legal separation instituted by H against his wife, W, one of the questions that has to be decided by the court is the custody of two (2) minor children, one of whom is two (2) years old and the other, three (3) years old. H contends that W is wanting in morality, having resumed illicit relations with her previous lovers. If you were the judge, to whom shall you award the custody of the children? Reasons. ANS: Notwithstanding the fact that the mother is wanting in morality, having resumed illicit relations with her previous lovers, she is nonetheless entitled to the custody of her children who are below seven (7) years of age. This is in consonance with the provision of Art. 363 of the NCC. (Sy Chap vs. Funa, CA, 12217-R, February 16,1955.) While it is true that there is an exception provided for by the article itself and that is when there are compelling reasons for the court to separate the children from the mother, nevertheless, “compelling reasons” refer to reasons of health rather than of morality. Thus, the Code Commission justifying this provision says: “The general rule is recommended in order to avoid many a tragedy where a mother has seen her baby tom away from her. No man can sound the deep sorrows of a mother who is deprived of her child of tender age. The exception allowed by the proposed rule has to be for ‘compelling reasons’ for the good of the child: These cases must indeed be rare, if the mother’s heart is not to be unduly hurt. If she 288

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Arts. 356-363

has erred, as in cases of adultery, the penalty of imprisonment and the .divorce decree will ordinarily be sufficient punishment for her. Moreover, her moral dereliction will not have any effect upon the baby who is as yet unable to understand the situation.” (Report of the Code Commission, p. 12.) (Note; Art. 2 1 3 , 2nd paragraph of the F C had reverted to the old provision that child under 7 years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise.)

7. After a protracted litigation, a litigation which reached the Supreme Court, the judgment awarding the custody of Shirley Salumbides, now nine years old, to her natural parents became final. A writ of execution to enforce the decision was vigorously opposed by her wealthy paternal grandparents (with whom she had been living since she was barely four months old) on the ground of supervening events which would prove that to compel her to live with her biological parents would be prejudicial to her welfare. In a conference called by the court, and this was reiterated in the SC, Shirley manifested that she would kill herself or run away from home if she should be separated from her grandparents. Would the SC be justified if the custody of Shirley will be awarded to her grandparents? Explain. ANS: Yes, the court would be justified in issuing an order granting the custody of Shirley to the paternal grandparents. It must be noted that this will not be violative of the doctrine of finality of judgments. Like decisions in actions for support, decisions in actions for custody of children are never final in character. It is clear that the manifestation of the child that she would kill herself or run away from home if she should be taken away from her grandparents and forced to live with her real parents, which she reiterated during the hearing, is a circumstance that would make the execution of the judgment inequitable, unfair and unjust, if not illegal. Art. 363 of the NCC means that the best interest of the minor can override procedural rules and even the rights of parents to the custody of their children. Since, in this case, the very life and existence of the minor is at stake and the child is at an age when she can exercise an intelligent choice, the courts can do no 289

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less than respect, enforce, and give meaning and substance to that choice and uphold her right to live in an atmosphere conducive to her physical, moral and intellectual development (citing Art. 365, par, 4, NCC.). The threat may be proven empty, but Shirley has a right to a wholesome family life that will provide her with love, care and, understanding, guidance and counselling, and moral and material security. To return her to the custody of her real parents to face the same emotional environment which she is now complaining of would be indeed traumatic and may cause irreparable damage to the child. By all means, her fortune should not be destroyed. (Luna vs. Intermediate Appellate Court, 137 SCRA 7,) 8. What are the different special categories of children under the Child and Youth Welfare Code? ANS: There are three (3) special categories which are treated under three (3) separate chapters of the Code. They are: (1) As to lack of inadequacy of parental care, the child may be either dependent, abandoned or neglected. (Arts. 141-167, P.D. No. 603.) (2) As to subjective defect or disability, the child may be mentally retarded, physically handicapped, emotionally disturbed, or mentally ill. (Arts. 168-188, P.D. No. 603.) (3) And as to susceptibility to criminal liability by reason of minority, we have the so-called youthful offender (Arts. 189-204, P.D. No. 603.) 9. Define: (1) dependent child; (2) abandoned child; (3) neglected child. ANS: (1) A dependent child is one who is without a parent, guardian or custodian; or one whose parents, guardian or other custodian for good cause desires to be relieved of his care and custody; and is dependent upon the public for support. (Art. 141[11], P.D. No. 603.) (2) An abandoned child is one who has no proper parental care or guardianship, or whose parents or guardians have deserted him for a period of at least six (6) continuous months. (Art. 141[2], P.D. No. 603.) 290

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Arts. 356-363

(3) A neglected child is one whose basic needs have been deliberately unattended or inadequately attended. Neglect may occur in 2 ways: (a) There is physical neglect when the child is malnour­ ished, ill-clad and without proper shelter. A child is unattend­ ed when left by himself without provisions for his needs and/or without proper supervision. (b) Emotional neglect exists: when children are mal­ treated, raped or seduced; when children are exploited, over­ worked or made to work under conditions not conducive to good health; or are made to beg in the streets or in public places, or when children are in moral danger, or exposed to gambling prostitution and other vices. (Art. 141[3], P.D. No. 603.) 10. What is meant by commitment of a child? ANS: Commitment or surrender of a child is the legal act of entrusting a child to the care of the Department of Social Services or any duly licensed child placement agency or individual. (Art. 141[4], P.D. No. 603.) 11. How may commitment of a child be done? ANS: Commitment may be done in the following manner. (a) Involuntary commitment, or that which is initiated by the Department of Social Services or its duly authorized representative or any duly licensed child placement agency by virtue of which a dependent, abandoned or neglected child is placed under the care and custody or guardianship of a duly licensed placement agency or individual by order of a competent court after hearing in the manner, form and procedure prescribed by the Child and Youth Welfare Code. The procedure is outlined by the Code in Arts. 142 to 149. (b) Voluntary commitment, or that which is initiated by the parents, or surviving parent, or guardian by virtue of which there is a relinquishment of parental or guardianship rights in favor of the Department of Social Services or a duly licensed child placement agency or individual in the manner and form prescribed by the Child and Youth Welfare Code. The procedure is simple. All that is 291

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prescribed by the Code is that the relinquishment by the parents, surviving parent or guardian must be in writing. (See Arts. 154,155, P.D. No. 603.) 12. What is the effect of the involuntary or voluntary commitment of a dependent, abandoned or neglected child? ANS: Effect of involuntary commitment: When a child shall have been committed to the Department of Social Services or any duly licensed child placement agency or individual pursuant to an order of the court, his parents or guardian shall thereafter exercise no authority over him except upon such conditions as the court may impose. (Art. 151, P.D. No. 603.) The Department of Social Services or any duly licensed child placement agency or individual receiving a child pursuant to an order of the court shall be the legal guardian and entitled to his legal custody and control, be responsible for his support as defined by law, and when proper, shall have authority to give consent to his placement, guardianship and/or adoption. (Art. 152, P.D. No. 603.) Effect o f voluntary commitment: When any child shall have been committed voluntarily and such child shall have been accepted by the Department of Social Services or any duly licensed child placement agency or individual, the rights of his natural parents, guardian, or other custodian to exercise parental authority over him shall cease. Such agency or individual shall be entitled to the custody and control of such child during his minority, and shall have authority to care for, educate, train and place him out temporarily or for custody and care in a duly licensed child placement agency. Such agency or individual may intervene in adoption proceedings in such manner as shall best inure to the child’s welfare. (Art. 156, P.D. No. 603.) 13. Define: (1) mentally retarded children; (2) physically handicapped children; (3) emotionally disturbed; and (4) mentally-ill children. What is meant by “disabled children”? ANS: (1) Mentally retarded children are: (a) socially incompe­ tent, socially inadequate and occupationally incompetent and un­ able to manage their own affairs; (b) mentally subnormal; (c) retard­ ed intellectually from birth or early age; (d) retarded at maturity; (e) mentally deficient as a result of constitutional origin, through 292

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Arts. 356-363

heredity or disease; and (f) essentially incurable, (Art. 168, P.D. No. 603.) (2) Physically handicapped children are those who are crippled, deaf-mute, blind, or otherwise defective which restricts their means of action or communication with others, (Art. 170, P.D. No. 603.) (3) Emotionally disturbed children are those who although not afflicted with insanity or mental defect, are unable to maintain normal social relations with others and the community in general due to emotional problems and complexes. (Art. 171, P.D. No. 603.) %

(4) Mentally-iU children are those with any behavioral disorder, whether functional or organic which is of such a degree of severity as to require professional help or hospitalization. (Art. 172, P.D. No. 603.) “Disabled children” as used in the Child and Youth Welfare Code include mentally retarded, physically handicapped, emotionally disturbed, and mentally-ili children. (Art 173, P.D. No. 603.) 14. tion?

What are the four (4) classes of mental retarda­

ANS: The four (4) classes of mental retardation are: (1) Custodial group, or those who are severely or profoundly retarded; hence, the least capable group. This includes those with IQs to 25. (2) Trainable group, or those with IQs from about 25 to 50. One who belongs to this group shows a mental level or rate of development which is 1/4 to 1/2 that of the average child. He is unable to acquire higher academic skills, but can usually acquire the basic skills for living to a reasonable degree. He can likewise attain a primary grade level of education if he receives effective instruction. (3) Educable group, or those with IQs from about 50 to about 75. One who belongs to this group shows an intellectual development which is approximately 1/2 to 3/4 of that expected of a normal child of the same chronological age. The degree of success or accomplishment that they will reach in life depends very much 293

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on the quality and type of education they receive, as well as on the treatment at home and in the community. Many of the educable retardates may reach 5th or 6th grade educational level and can develop occupational skills which may result in partial or complete economic independence in adulthood. (4) Borderline or low normal group, or those with IQs from about 75 to about 89. One who belongs to this group is only slightly retarded and can usually get by in regular classes if he receives some extra help, guidance and consideration. He has to spend much more time with his studies than most children in order to pass. (See Art. 169, P.D. No. 603.) 15. In order to cure or help disabled children, what must the parent, or parent, or guardian, or Department of Social Welfare do? ANS: In order that the disabled child may be cured or helped, it is necessary that he must be placed or committed to a reputable institution providing care, training and rehabilitation for disabled children. This may be done: (1) Voluntarily — When the Department of Social Services, upon the application of the parents or guardian and the recommen­ dation of any reputable diagnostic center or clinic, shall refer and/or admit the disabled child to any public or private institution provid­ ing the proper care, training and rehabilitation. (Art. 173, P.D. No. 603.) (2) Involuntarily — When there is opposition of the parents or guardian to the commitment of the disabled child. In such case, the Department of Social Services, or any duly licensed child placement agency or individual shall have the authority to file a petition for commitment of the child to any reputable institution providing care, training and rehabilitation for disabled children. (Art. 177, P.D. No. 603.) 16. What is meant by a youthful offender? Explain briefly. ANS: A youthful offender is one who is over 9 years but under 18 years of age at the time of the commission of the offense. (Art. 189, par. 1, P.D. No. 603, as amended.) 294

FAMILY CODE (Persons) Final Provisions Use of Surnames

Arts. 364-380

A child nine (9) years of age or under at the time of the offense shall be exempted from criminal liability and shall be committed to the care of his or her father or mother, or nearest relative, or family friend in the discretion of the court and subject to its supervision. (Art. 189, par. 2, P.D. No. 603.) The same shall be done for a child over 9 years and under 15 years of age at the time of the commission of the offense, if he or she acted without discernment. (Id.) However, if he or she acted with discernment, the ordinary rules for youthful offenders who are under 18 shall then apply. (For such rules, See Arts. 192, et seq., P.D. No, 603.) USE OF SURNAMES (Arts. 364-380, NCC) 17.

(a) What is the surname which children shall use?

(b) What is the name which a married woman may use? Suppose that she is legally separated from her husband, what name may she use? Suppose that her marriage is annulled, what name may she use? Suppose that she becomes a widow, what name may she use? ANS: (a) If the child is a legitimate or a legitimated child, he shall use the surname of the father; if he is an adopted child, he shall use the surname of the adopting parent; if he is an illegitimate child, he shall use the surname of the mother, (Arts. 364, 365, 366, 367, 368t NCC as amended by Art. 176, FC.) But R.A. No. 9255, amended Art. 176 of the FC such that illegitimate children may now use the surname of their father if their filiation has been expressly recognized by the father through the record of birth appearing in the civil register, or when an admission in a public document or private handwritten instrument is made by the father; Provided, That the father has the right to constitute an action before the regular courts to prove non-filiation during his lifetime. (b) A married woman may use: (1) Her maiden first name and surname and add her husband’s surname; or (2) Her maiden first name and her husband’s surname; or 295

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FAMILY CODE (Persons) Final Provisions Use of Surnames

(3) Her husband’s full name, but prefixing a word indi­ cating that she is his wife, such as “Mrs.” (Art. 370, NCC.) If she is legally separated from her husband, she may continue using the above names. (Art. 372, NCC.) If her marriage is annulled, and she is the guilty party, she shall resume her maiden name and surname. If she is the innocent party, she may resume her maiden name and surname. However, she may choose to continue employing her former husband’s surname, unless: (1)

The court decrees otherwise; or

(2) She or the former husband is married again to an­ other person. (Art. 371, NCC.) If she becomes a widow, she may use the deceased husband’s surname as though he were still living. (Art. 373, NCC.) 18. A mother who had an illegitimate child subsequently married a man other than the child’s father. The child filed a petition to change his surname from the father’s name to that of the stepfather who has no objection thereto. May the petition be granted? Why? (1976) ANS: It is submitted that the petition may be granted provided that it is clearly for the best interest of the child. Since the change of surname is effected with the consent of the stepfather and would promote the personality of the child and remove the stigma of illegitimacy, justice dictates that he should be allowed to improve his social standing as long as in doing so, he does not cause prejudice and injury to the interest of the State or of other persons. (Calderon vs. Republic, 19 SCRA 721.) 19. What entries in the Civil Registry may be changed or corrected without a judicial order? (2006) ANS: Only clerical or typographical errors and first or nicknames may be changed or corrected without a judicial order under R.A. No. 9048. (Clerical Error Law) Clerical or typographical errors refer to mistakes committed in the performance of clerical work in writing, copying, transcribing 296

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Arts. 364-380

or typing an entry in the civil register. The mistake is harmless and innocuous, such as errors in spelling, visible to the eyes or obvious to the understanding, and can be corrected or changed only by reference to other existing records. Provided, however, That no correction must involve the change of nationality, age, status or sex of the petitioner. (Suggested Answers to the 2006 Bar Examination Questions, PALS) 20. Suppose that a certain businesswoman, married, but legally separated from her husband, for the sale of her business, files a petition for a change of her surname in accordance with the Rules of Court. Will such a petition prosper? Reasons. ANS: Such petition will not prosper. The language of Art. 372 of the NCC that the wife, even after legal separation has been decreed, shall continue using her name and surname employed before the legal separation is mandatory. This is so because her marriage status is unaffected by the separation, there being no severance of the vinculum. Consequently, where a married woman, legally separated from her husband, files a petition for the change of her name, although such a petition is allowed by the Rules of Court, the general provisions provided therein cannot prevail over the specific provisions of Art. 372 of the NCC. (Laperal vs. Republic, 6 SCRA 357.) 21. A petition for change of name is allowed by the Rules of Court (Rule 103). What are some of the reasons recognized by the SC as proper and reasonable causes for change of name? ANS: Among the reasons recognized by the SC as proper and reasonable causes for change of name are: (1) when the name is ridiculous, tainted with dishonor, or is extremely difficult to write or pronounce; (2) when the request for change is a consequence of a change of status, such as when the natural child is acknowledged or legitimated; and (3) when the change is necessary to avoid confusion. (See Annotation, 57 SCRA 41; see also Yu Chi Han vs. Rep., 15 SCRA 454; Haw Liong vs. Republic, 16 SCRA 677; Chiu Hap Chiu vs. Rep., 16 SCRA 864.) A fourth may be added, and that is when justice dictates that a person should be allowed to improve his social standing as long as in doing so, he does not cause prejudice 297

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or injury to the interests of the State or of third persons. (Calderon vs. Republic, 19 SCRA 731; Llaneta us. Agrava, 57 SCRA 29.) 22. Teresita Ferrer, a scholar of the Catholic Charities, was required to present a copy of her record of birth. When she secured the copy, she found out that Serafin Ferrer, who was killed in Bataan in 1942, was not really her father; that in reality, she is an illegitimate child bom 5 years after the death of Serafin Ferrer; that the woman (mother of Serafin Ferrer) in whose house she had always lived was not really her grandmother; and that her real name is Teresita Llaneta. Subsequently, she filed a petition for the change of her surname “Llaneta” to “Ferrer.” Will the petition prosper? ANS: Yes, the petition will prosper. Teresita had been using the surname Ferrer for as long as she can remember, that in all her records, in school and elsewhere puts her name down as Teresita Ferrer; and that even the late Serafin Ferrer’s nearest of kin approve of her use of the surname Ferrer. Indeed, a sudden shift at this time to the name Teresita Llaneta would result in confusion and entail endless and vexatious explanations of the circumstances of her new surname. Indeed, it is a salutory law that would allow Teresita, inspite of her illegitimate birth, to carry on in society without her unfortunate status being bandied about at every turn. Besides, all of the Ferrers have come forward supporting her petition. Whether the late Serafin Ferrer who died some 5 years before Teresita was bom, would have consented or objected to her use of his surname is open to speculation. One thing, however, is beyond cavil. Those living who possess the right of action to prevent the surname Ferrer from being smeared are proud to share it with her. (Llaneta vs. Agrava, 57 SCRA 29.) 23. Suppose that a certain person uses the surname of another, what is the remedy of the latter? Suppose that what is used by the former is merely the pen name or stage name of the latter, would the same remedy be available? ANS: The usurpation of name under Art. 377 of the NCC implies some injury to the interests of the owner of the name. It consists in the possibility of confusion of identity betwen the owner 298

FAMILY CODE (Persons) Final Provisions Absence

Arts. 381-395

and the usurper, and exists when a person designates himself by another name. The elements are: (1) there is an actual use of another’s name by the defendant; (2) the use is unauthorized; and (3) the use of another’s name is to designate personality or identify a person. The mere use of a surname cannot be enjoined; it is the use thereof coupled with the representation that one is the lawful wife, or the usurpation of the wife’s status, which gives rise to an action for damages. (Dapar vs. Biascan, G.R. No, 141880, September 27, 2004.) The remedy available to the latter is that he may bring an action against the former for the purpose of recovering damages and for the purpose of restraining him from further using such surname. (Arts. 377, 378, NCCJ If what is used by the former is the pen name or stage name of the latter, the same remedies would be available. (Art. 379, NCC.) All of these rules, however, are predicated on the fact that the use is unauthorized or unlawful. (Art. 378, NCC.) 24, May an illegitimate child, upon adoption by her natural father, use the surname of her natural mother as the middle name? (2006) ANS: Yes, an illegitimate child, upon adoption by her natural father, can use the surname of her natural mother as her middle name. The Court has ruled that there is no law prohibiting an illegitimate child adopted by her natural father to use, as middle name, her mother’s surname. What is not prohibited is allowed. After all, the use of the maternal name as the middle name is in accord with Filipino culture and customs and adoption is intended for the benefit of the adopted. [In re: Adoption of Stephanie Nathy Astorga Garcia, G.R. No. 148311, March 31,2005; Rabuya, The Law on Persons and Family Relations, p. 613]. (Suggested Answers to the 2006 Bar Examination Questions, PALS.) ABSENCE (Arts. 381-395, NCC) 25. Define absence as a status. ANS: Absence may be defined as the legal status of a person who has absented himself from his domicile and whose whereabouts and fate are unknown it not being known with certainty whether he is still living or not. 299

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FAMILY CODE (Persons) Final Provisions Absence

26. What are the different stages of absence under our NCC? ANS: There are three (3) stages of absence. They are: (1) Provisional absence — When a person disappears from his domicile, his whereabouts being unknown, without leaving an agent to administer his property. (Art. 381, NCC.) (2) Declared absence — When a person disappears from his domicile, and two (2) years have elapsed without any news about him or since the receipt of the last news, or five (5) years have elapsed in case he left a person to administer his property. (Art. 384, NCC.) (3) Presumptive death — When the absentee is presumed dead. (Arts. 390, 391, NCC.) 27. In order that there will be what is known as provisional absence, what requisites are necessary? ANS: The requisites of provisional absence are: (1) That the absentee should have disappeared from his domicile; (2) That his whereabouts are not known; (3) That he did not leave any agent to administer his property; and (4) That the appointment of a representative in connection with such property is urgent or necessary. 28. In order that there will be a declaration of absence, what requisites are necessary? ANS: The requisites of declared absence are: Cl) That the absentee should have disappeared from his domicile; (2) That his whereabouts are not known; and (3) That he has been absent without any news for two (2) years, if nobody was left to administer his property, or for five (5) years if somebody was left to administer such property. 29. When is a person presumed to be dead? ANS: After an absence of seven (7) years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of 10 years. If he 300

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Arts. 407-413

disappeared after the age of 75 years, an absence of 5 years shall be sufficient in order that his s u c c e s s io n may be opened. (Art. 390, NCC.) CIVIL REGISTER (Arts. 407-413, NCC) 30.

(1) What is a Civil Register?

(2) What law or laws were in force in the Philippines as Civil Registry before the NCC? (3) Art. 412 of the NCC provides that “no entry in a Civil Register shall be changed or corrected without judicial order.” (a) What errors may be corrected under this ar­ ticle? (b) What is the nature of the procedure contem­ plated under this article? (c) Suppose the change or correction sought in­ volves the question of citizenship, which is in issue, should the question in v o lv e d be threshed under the same procedure? If not, under what procedure and why? ANS: (1) The Civil Register refers to the books and all documents relating thereto wherein all acts, events and judicial decrees concerning the civil status of persons are recorded. (Art. 407, NCCJ (2) Act N o . 3753, o th e rw ise known as the Civil Registry Law. (3) (a) Only clerical or typographical errors and change of first name or nickname which can be corrected or changed by the concerned city or municipal registrar or consul general in accordance with the provisions of R.A. No. 9048 and its implementing rules and regulations. (Sec. 1, R.A. No. 9048.) (b) The procedure contemplated in this article is summary in nature because it is a mere petition for cor­ rection. (Ibid.) 301

¥ Arts. 407-413

FAMILY CODE (Persons) Final Provisions Civil Register

(c) The question involved should not be threshed out under the same procedure; it should be threshed out in an appropriate action, adversary in nature, wherein all parties who may be affected by the entry are noti­ fied or represented. This is so because citizenship, which is the issue in the case, affects the status of a person. (Ibid.) (Note: However, inRepublic vs. Valencia, 141 SCRA 462} March 5, 1986, speaking through Justice Gutierrez, the SC ruled: “The persons who must be made parties to a proceeding concerning the cancellation or correction of an entry in the civil register are — (1) the civil registrar, and (2) all persons who have or claim any interest which would be affected thereby. Upon the filing of the petition, it becomes the duty of the court to — (1) issue an order fixing the time and place for the hearing of the petition, and (2) cause the order or hearing to be published once a week for 3 consecutive weeks in a newspaper of general circulation in the province. The following are likewise entitled to oppose the petition — (1) the civil registrar, and (2) any person having or claiming any interest under the entry whose cancellation or correction is sought. If all these procedural requirements have been followed, a petition for correction and/or cancellation of entries in the record of birth even if filed and conducted under Rule 108 of the Revised Rules of Court can no longer be described as “summary.” There can be no doubt that when an opposition to the petition is filed either by the Civil Registrar or any person having or claiming any interest in the entries sought to be cancelled and/or corrected and the opposition is actively prosecuted, the proceedings thereon become adversary proceedings. In the instant case, a petition for cancellation and/or correction of entries of birth of Bernardo Go and Jessica Go in the Civil Registry of the City of Cebu was filed by respondent Leonor Valencia on January 27, 1970, and pursuant to the order of the trial court dated February 4, 1970, the said petition was published once week for 3 consecutive weeks in the Cebu Advocate, a newspaper of general circulation in the City of Cebu. Notice thereof was duly served on the Solicitor General, the Local Civil Registrar and Go Eng. The order likewise set the case for hearing and directed the local civil registrar and the other respondents or any person claiming any interest under the entries whose corrections were sought, to file their opposition to the said petition. An opposition to the petition was consequently filed by the Republic on February 26, 1970. Thereafter, a full-blown trial followed with respondent Leonor Valencia testifying and presenting

302

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her documentary evidence in support of her petition. The Republic on the other hand cross-examined respondent Leonor Valencia. We are of the opinion that the petition filed by the respondent in the lower court by ways of a special proceeding for cancellation and/or correction of entries in the civil register with the requisite notice and publication and the recorded proceedings that actually took place thereafter could very well be regarded as that proper suit or appropriate action.” (The above ruling was reiterated in the case o f Chaio Ben Lim us. Laza, G.R. No. 40252, December28,1 98 6 ; Republic vs. Judge Flojo, G.R. No. 49703, July 3 1 ,1 9 8 7 and Rep. vs. Glicerio, G.R. No. 54159, March 18, 1988.)

31. What is R.A. No. 9048? (2006) ANS: R.A. No. 9048 is an Act Authorizing the City or Municipal Civil Registrar or the Consul General to correct a clerical or typographical error in an entry and/or change of first name or nickname in the Civil Register without need of a judicial order, amending Arts. 376 and 412 of the NCC. 32. What is a “clerical or typographical error” under R A No. 9048? (2006) ANS: Clerical or typographical errors refers to a mistake committed in the performance of clerical work in writing, copying, transcribing or typing an entry in the civil register that is harmless and innocuous, such as misspelled name or misspelled place of birth or the like, which is visible to the eyes or obvious to the understanding, and can be changed only by reference to other existing records; Provided, however, That no correction must involve the change of nationality, age, status or sex of the petitioner. 33. Jennifer Cagandahan was born in 1981 and was registered as a female in the Certificate of Live Birth. Twenty three years later, she filed a petition in the RTC to change her gender from female to male and her name from Jennifer to Jeff. Jennifer proved that while growing up, she developed secondary male characteristics and was diagnosed to have Congenital Adrenal Hyperplasia (CAH), a condition where a person possesses both male and female characteristics. The doctor explained that genetically, Jennifer is female but because her body secretes male hormones, her female organ did not develop normally and she has two (2) sex organs — 303

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female and male — a very rare condition (about 1 in 10,000 to 18,000 children. According to the doctor, a child born with CAH has an ambiguous genitalia often appearing more male than female,* and while she has normal internal structures of the female reproductive tract such as ovaries, uterus and fallopian tubes, some features start to appear male as the child grows older such as the deepening of the voice, facial hair and failure to menstruate at puberty like Jennifer whose uterus is not fully developed because of lack of female hormones which is already a permanent condition. In a previous case, the SC ruled that a man cannot correct entries in his birth certificate by changing his gender and his name from male to female on the ground that he did not follow the course of nature but had undergone sex change through medical procedure. Can the RTC now authorize a change of sex and also as a consequence, a change of name in the birth certificate of a person? ANS: The SC, in its latest ruling in Republic vs. Cagandahan, (G.R. No. 166676, September 12, 2008), sustained the decision of the RTC allowing the change of gender in the birth certificate of a woman from female to male and consequently from a feminine name to a masculine name. The SC found Jennifer to be really afflicted with CAH which is one of the many conditions involving “intersexuality” as applied to human beings who cannot be classified as either male or female. The SC said that while the current state of Philippine statutes apparently requires a person to be classified either as a male or as a female, it is not controlled by mere appearances when nature itself fundamentally negates such rigid classification. Jennifer here has simply let nature take its course and has not taken unnatural steps to arrest or interfere with what she was born. Accordingly, she has already ordered her life to that of a male. She could have undergone treatment and taken steps like taking lifelong medication to force her body into the categorical mode of a female, but she did not do so. Nature has instead taken its due course in Jennifer’s development to reveal more fully her male characteristics. In the absence of evidence to show that classifying Jennifer as male will harm other members of society who are equally entitled to protection under the law, her personal judgment of being a male is valid and 304

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justified. This is to give respect to the diversity of nature and how an individual deals with what nature has handed out. 34. How is “First Name” defined in R.A. No. 9048? ANS: “First Name” refers to a name or a nickname given to a person which may consist of one or more names in addition to the middle and last names. 35. Who may file the petition and where? Can petitions of this nature be filed more than once? ANS: Any person having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register may file, in person, a verified petition with the local civil registry office of the city or municipality where the record being sought to be corrected or changed is kept. In case the petitioner has already migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected, the petition may be filed, in person, with the local civil registrar of the place where the interested party is presently residing or domiciled. The two (2) local civil registrar concerned will then communicate to facilitate the processing of the petition. Filipino citizens who are presently residing or domiciled in foreign countries may file their petition, in person, with the nearest Philippine Consulates. All petitions for the correction of clerical or typographical errors and/or change of first names or nicknames may only be filed once. (Sec. 3, RA. No. 9048.) 36. What are the grounds for change of first name or nickname? ANS: The petition for change of first name or nickname may be allowed in any of the following cases: (1)

The petitioner finds the first name or nickname to be 305

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ridiculous, tainted with dishonor or extremely difficult to write or pronounce; (2) The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community; or (3)

The change will avoid confusion. (Sec. 4, RA . No. 9048.)

37. To whom may the petitioner appeal the decision where the petition is denied by the city or municipal civil registrar or the consul general? ANS: The petitioner may appeal the decision to the civil registrar general or file the appropriate petition with the proper court. (Sec. 7, R.A. No. 9048.) 38. Zirxthoussous delos Santos filed a petition for change of name with the Office of the Civil Registrar of Mandaluyong City under the administrative proceeding provided in R.A. 9048. He alleged that his first name sounds ridiculous and is extremely difficult to spell and pronounce. After complying with the requirements of the law, the Civil Registrar granted his petition and changed his first name Zirxthoussous to “Jesus.” His full name now reads “Jesus delos Santos.” Jesus delos Santos moved to General Santos City to work in a multi-national company. There, he fell in love and married Mary Grace delos Santos. She requested him to have his first name changed because his new name “Jesus delos Santos” is the same name as that of her father who abandoned her family and became a notorious drug lord. She wanted to forget him. Hence, Jesus filed another petition with the Office of the Local Civil Registrar to change his first name to “Roberto.” He claimed that the change is warranted because it will eradicate all vestiges of the infamy of Mary Grace’s father. Will the petition for change of name of Jesus delos Santos to Roberto delos Santos under R A 9048 prosper? Explain. (2006) 306

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ANS: No, under the law, Jesus may only change his name once. In addition, the petition for change of name may be denied on the following grounds: (1) “Jesus” is neither ridiculous, nor tainted with dishonor nor extremely difficult to write or pronounce. (2) There is no confusion to be avoided or created with the use of the registered first name or nickname of the petitioner. (3) The petition involves the same entry in the same document, which was previously corrected or changed under this Order [Rules and Regulations Implementing R.A. No. 9048]. (Suggested Answers to the 2006 Bar Examination Questions, PALS)

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BOOK II PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Title I CLASSIFICATION OF PROPERTY (Arts. 414-426) 1.

Define property.

ANS: Property may be defined as anything which is or may be the object of appropriation. (Art. 414, NCC.) 2.

Distinguish between thing and property.

ANS: Strictly speaking, the concept of thing is broader than the concept of property, because while property refers only to those objects which are or may be the object of appropriation, thing refers also to those which are not or may not be the object of appropriation. In other words, thing is the genus, while property is the species. (See 3 Manresa 9-10; 1 Castan, pp. 365-367.) Under our NCC, however, the two (2) terms are used interchangeably. 3. How do you classify property according to its nature and according to its ownership? ANS: According to its nature, property may be either: (1)

Immovable or real property, or

(2)

Movable or personal property. (Art. 414, NCC.)

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According to its ownership, it may be either: • (1)

Of public dominion; or

(2)

Of private ownership. (Art. 419, NCC J

4.

What is immovable property?

ANS: The following are immovable property: (1) Land, buildings, roads and constructions of all kinds nature adhered to the soil; (2) Trees, plants, and growing fruits, while they are attached incorp. to the land or form an integral part of an immovable; (3) Everything attached to an immovable in a fixed manner in such a way that it cannot be separated therefrom without breaking incorp the material or deterioration of the object; (4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the incorp immovable in such a manner that it reveals the intention to attach them permanently to the tenements; (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land and forming a permanent part of it; the animals in these places are included; (7)

Fertilizer actually used on a piece of land;

(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant; (9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on the river, lake, or coast;

desti

desti

desti nature

desti

(10) Contracts for public works, and servitudes and other real analogy rights over immovable property. (Art. 415, NCCJ 309

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5.

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

What are the different classes of immovables?

ANS: The different classes of immovables are: (1) Immovables by nature, or those which cannot be moved from place to place, such as those mentioned in Nos, 1 (with respect to land and roads) and 8 in Art. 415 of the NCC. (2) Immovables by incorporation, or those which are attached to an immovable in such a manner as to form an integral part thereof, such as those mentioned in Nos. 1 (except land and roads), 2, 3, and 4 of Art. 415. (3) Immovables by destination, or those which are placed in an immovable for the use, exploitation or perfection of such immovable, such as those mentioned in Nos. 4, 5, 6, 7, and 9 of Art. 415. (4) Immovables by analogy, or those which are considered immovables by operation of law, such as those mentioned in No. 10 of Art. 415. 6. Petitioners contend that the machines that were the subjects of the Writ of Seizure were placed in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry. Petitioners argue that said machines are real property pursuant to Art. 415(5) of the NCC and are not, therefore, the proper subjects of a Writ of Seizure. However, the Lease Agreement entered into by the petitioners provides that the machines in question are to be considered as personal property. ANS: Clearly, the petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are personal properties which are proper subjects of the Writ of Seizure. It should be stressed, however, that the Court’s holding — that the machines should be deemed personal property pursuant to the Lease Agreement — is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Lease 310

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Agreement, third persons acting in good faith are not affected by its-stipulation characterizing the subject m achinery as personal.

(Serg’s Products, Inc. vs. PCI Leasing and Finance, Inc., 338 SCRA 504, August 22, 2000.) 7. A constructed his building on a piece of land belonging to B, to whom he (A) pays a monthly rental of P500.00. Is the building real or personal property? Reasons. ANS: The building is a real or immovable property. Whether constructed on land belonging to the owner of the building or on land belonging to another, such as in the instant case, from the viewpoint of the law and third persons,.the building is real property by incorporation within the meaning of No. 1 of the Art. 415 of the NCC. This is well-settled in this jurisdiction. 8. In order to secure the payment of a debt of P100,000, A, the debtor, executed a chattel mortgage in favor of B, the creditor, over a house which he had constructed on a rented lot belonging to C. In the deed of chattel mortgage, the parties expressly stated that A’s house is a chattel. Because of A’s in­ ability to pay the debt when it became due and demandable, B finally decided to foreclose the mortgage. A contends that B cannot foreclose the mortgage on the ground that the chat­ tel mortgage contract is void since under the law, a building is real property and not personal property, and therefore, cannot be the subject matter of a chattel mortgage contract. Is the contention correct? Reasons. ANS: A’s contention is not correct for the following reasons: (1) Since the contracting parties had voluntarily entered into the contract, neither of them should now be allowed to impugn its validity. It must be observed, however, that this view that parties to a contract of chattel mortgage may agree in a contract, is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel. (2) It is now settled that an object placed on land by one who has only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized by attachment. Hence, if a house belonging to a person stands on a rented land belonging 311

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to another person, it may be mortgaged as a personal property as stipulated in the document of mortgage. It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel or that he is ceding, selling or transferring by way of chattel mortgage the property, a conduct that will subsequently estop him from claiming otherwise. (See Navarro vs. Pineda, 9 SCRA 631; Tumalad vs. Vicencio, 41 SCRA 143.) 9. Suppose that in the above problem, instead of expressly declaring his house to be a chattel, the owner merely stated that he “cedes, sells and transfers by way of chattel mortgage the property together with its leasehold rights over the lot x x x,” will that make a difference in your answer? ANS: It will not make any difference in my answer. As a matter of fact, this question was one of the principal issues which was resolved by the SC in Tumalad vs. Vicencio (41 SCRA 143). There were three (3) reasons given by the Court in holding that the parties are still bound by the contract of chattel mortgage. They are: (1) Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring the property to the creditor-mortgagee by way of chattel mortgage, the debtor-mortgagor conveyed the house as chattel, or at least, intended to treat the same as such, so that he should not now be allowed to make an inconsistent stand by claiming otherwise. (2) Moreover, the subject house stood on a rented lot to which the owner merely had a temporary right as lessee, and although this in itself cannot determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagor, intended to treat the house as personalty. (3) Finally, unlike the other cases wherein third persons assailed the validity of the chattel mortgage, it is the debtor mortgagor who is not attacking the validity of the contract in this case. The doctrine of estoppel therefore applies.

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10. Suppose that in the above problem, B, the creditor, finally foreclosed the chattel mortgage. The house was therefore levied upon and sold at a public sale by the sheriff for only P2,000. The sale on execution, however, was made without any previous publication in a newspaper of general circulation as required by Sec. 18 of Rule 39 of the Revised Rules of Court for sales on execution of real property. Can A now question the validity of the sale? Reasons. ANS: Yes, A can now question the validity of the sale. Although the contract of chattel mortgage (CM) is binding upon the contracting parties applying the doctrine of estoppel, yet as far as the law and third persons are concerned, it is void. As far as they are concerned, the house, whether constructed on rented land or on land belonging to the owner of such house, is still real property. Consequently, the requirements of the Rules of Court with regard to publication in a newspaper of general circulation as a condition precedent to sales on execution of real property must be complied with. Hence, the sale made by the sheriff is void. (Manarang vs. Ofilada, 52 Off. Gaz. 3954; Evangelista vs. Alto Surety, 103 PhiL 401; See also Ladera vs. Hodges, 48 Off. Gaz. 5374.) 11. On November 6, 1951, A executed in favor of X a chattel mortgage over his house on a lot not then owned by him. The deed was duly registered on December 6, 1951. On October 18, 1962, A became the registered owner of both house and lot. On October 24, 1962, he executed a real estate mortgage over the house and lot in favor of Y and the same was annotated in the title. On December 26, 1952, because of non-payment of A’s debt to X, the sheriff sold A’s house to X. On October 29, 1953, Y filed a suit to foreclose the real estate mortgage. He obtained judgment in his favor and the mortgaged properties were sold to him at the execution sale. Who has a better right to the house — X or Y? Reasons. ANS: This problem is based on the case of Associated Insurance Co. vs. Isabel Iya, 103 PhiL 972. In this case, the SC held that Y has a better right to the house. A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another. In the case at bar, as far as the law and third persons are concerned, the chattel mortgage (CM) contract 313

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is clearly void. This is so because under the law, only personalty can be the subject matter of a chattel mortgage (CM). Consequently, the sale made by the sheriff to X is also void. Therefore, Y is now the owner of the house and lot. 12. To secure the payment to B of a loan, the owner of a lot, executed a chattel mortgage (CM) on the building he erected thereon as well as on some newly bought machinery stored therein. Thereafter, a judgment was rendered against A in favor of C who had the building and machinery levied upon to satisfy the judgment. Is the chattel mortgage (CM) binding on C? Explain. (1983) ANS: The chattel mortgage on the building is not binding on C; however, the chattel mortgage on the machinery is binding. That the chattel mortgage on the building is not binding on C is crystal clear. As far as C is concerned, the contract of chattel mortgage (CM) is void from the very beginning. The reason is obvious. Under the Chattel Mortgage Law, only chattels or personalty may be the object of a contract of chattel mortgage (CM). A building is certainly not a chattel or personalty. It is realty by incorporation. Therefore, it cannot be the object of a contract of chattel mortgage (CM). True, in some cases decided by the SC, it has been held that the contract of chattel mortgage (CM), applying the principle of estoppel, is binding. However, this rule can be applied only to a situation or controversy involving the contracting parties only. It cannot be applied to C, who is a third person, as far as the contract is concerned. It is different in the case of the chattel mortgage on the machinery. The contract of chattel mortgage (CM) is certainly valid and binding not only as far as the contracting parties are concerned but even as far as third persons are concerned. True, under the NCC, machineries are classified as real property but only when they are intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of said industry or works. Here, the machineries are merely stored by A in his building. Therefore, they are still classified as chattels or personalty for the purpose of the Chattel Mortgage Law. 314

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(Note: The above answer is based on Art. 415, Nos. 1 and 5, NCC, on the Chattel Mortgage Law [Act 15081 and on decided cases.)

13. As A was constructing a concrete building on his own lot, he also erected wooden scaffoldings on which plumbers and carpenters may climb. (a) What kind of property are the wooden scaffoldings and why? (b) What kind of property is the building being constructed on the lot? ANS: (a) The wooden scaffoldings are movable or personal property. The best test in order to determine whether a certain property is immovable or movable is to find out whether such property falls within the purview of those enumerated in Art. 415 of the NCC or not. If it does, as a rule, it is immovable; if it does not, it is movable. It must be noted, however, that the properties enumerated in said article are immovable either: (1) by nature, such as those in Nos. 1 (except buildings and constructions adhered to the soil) and 8; or (2) by incorporation, or those which are attached permanently to an immovable in such a manner as to form an integral part thereof, such as those in Nos. 1 (buildings and constructions adhered to the soil), 2, 3, and 4; or (3) by destination, or those which are placed permanently in an immovable by the owner of the immovable for the use, exploitation or perfection of said immovable, such as those in Nos. 4, 5,6, 7, and 9; or (4) by analogy, or those which are considered immovable by operation of law, such as those in No. 10. Obviously, the scaffoldings cannot be considered as immovable property either by nature or by operation of law. Neither can they be considered immovables by incorporation, because they are not per­ manent and they cannot be classified as constructions adhering to the land and forming an integral part thereof since they are merely superimposed on the land. Neither can they be considered immov­ ables by destination, because they are not permanent and they are not destined for the use, exploitation or perfection of the land. (b) In the enumeration of properties under Art. 415 of the NCC, the inclusion of “building” separate and distinct from the land, in the said provision of law, can only mean that a building is by itself 315

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an immovable property. Thus, a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a real estate mortgage. (Prudential Bank vs. Panis, G.R. No. 50008, May 31, 1987.) 14. A was the owner of a beautiful painting with a frame, which he bought in Florence, Italy. As his house was not yet habitable, A gave the painting to his neighbor and friend B, who in turn attached the painting in the meantime that A’s house was being constructed, to the wall of his house. What kind of property is the painting while in the house of B? Reasons. ANS: The painting, at this stage, can be classified only as movable or personal property. Under No. 4 of Art. 416 of the NCC, in order that paintings may be classified as immovable property, it is essential that they should have been placed in a building by the owner of such building for use or ornamentation in such a manner that it reveals the intention to attach them permanently to the tenement. Here, the attachment is merely temporary, not permanent. 15. State if the following properties have become immovable, giving reason for your answer: (a) Machineries placed by X inside a building built by him on a land owned by Y. The machineries were mounted and placed on foundations of concrete. In the contract of lease, X agreed to turn over to Y, upon the termination of the lease, all the buildings and improvements, except the machineries which shall remain with X. (b) Machineries installed and placed in the sugar central by the Bacolod Murcia Mining Co., owner of said central, for purposes of increasing its mining capacity. ANS: (a) The machineries placed by X inside the building have not become immovables. Actually, the factual setting of the above problem is identical to that in Davao Sawmill Co. vs. Castillo (61 Phil. 709), where the SC ruled that the machineries have not become immovables. Under No. 6 of Art, 415 of the NCC, such machineries should have been installed by the owner of the tenement itself, with the intention of making use of them for a certain industry or works which is being 316

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carried on in the building or land, and should tend directly to meet the- needs of the said industry or works. Here, the machineries were installed by the lessee, and not by the owner of the tenement. They have not, therefore, become immobilized as contemplated in No. 5 of Art. 415 of the NCC. Machinery becomes immobilized only when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. (b) The machineries installed and placed in the sugar central by the Bacolod Murcia Milling Co. have become immovables. Actually, the factual setting of the above problem is identical to that in Berkenkotter vs. Cu Unjieng (61 Phil. 663), where the SC ruled that the machineries have become immovables by reason of the fact that the company installed the machineries in the central for the use of the industry which is being carried on in said central. They have, therefore, become immobilized because of their purpose. In other words, they tend directly to meet the needs of the industry which is being carried on in the central and in which the Company which installed them is engaged. And it cannot be said that their incorporation is not permanent in character, because, as essential and principal elements of a sugar central, without them the central would be unable to function or carry on the industrial purpose for which it was established. 16. Manila Petroleum Co. (MPC) owned and operated a petroleum operation facility off the coast of Manila. The facility was located on a floating platform made of wood and metal, upon which was permanently attached the heavy equipment for the petroleum operations and living quarters of the crew. The floating platform likewise contained a garden area, where trees, plants and flowers were painted. The platform was tethered to a ship, the MV 101, which was anchored to seabed. (a) (2007)

Is the platform movable or immovable property?

ANS: The platform is an immovable property by destination. It was intended by the owner to remain at a fixed place on a river or coast. 317

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Art. 415(9) of the NCC considers as real property “docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coasts.” Please note that in Fels Energy, Inc. vs. The Province of Batangas, G.R. No. 168557, February 16, 2007, the Court ruled that the power barges moored off the coast of Balayan, Batangas are real property under Art. 415(9) of the NCC. Alternative Answer: (The platform is movable property if it is not permanently attached or anchored to the ship or seabed. As a result, it may be brought from place to place for various purposes or may be towed or tethered to other vessels.) ( Suggested Answers to the 2007 Bar Examination Questions, PALS)

b) Are the equipment and living quarters movable or immovable property (2007) ANS: With respect to the equipment, the same is real property under paragraph 5 of Art. 415, NCC. It is intended to meet the needs of the industry being undertaken by MPC. The equipment partakes of the nature of the immovable upon which it has been placed. The living quarters, if attached to the immovable platform with permanence, becomes an immovable as well. Permanence means they cannot be separated without destroying the platform or the quarters (Art. 415[3), NCC). On the other hand, if the attachment is not permanent, or is merely superimposed on the platform, then the living quarters are movable property. Alternative Answers: (With respect to the equipment, the same is real property under paragraph 5 of Art. 415. It is intended to meet the needs of the industry being undertaken by MPC. The equipment partakes of the nature of the immovable upon which it has been placed. If the platform is movable property, then the living quarters are movable property as well, because they partake of the nature of the platform to which they are attached.) (Suggested Answers to the 2007 Bar Examination Questions, PALS)

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(c) Are the trees, plants and flowers immovable or movable property? (2007) ANS: The trees, plants and flowers are also immovable, having been “planted” in the garden area, under Art, 415(2) which provides that “Trees, plants, and growing fruits, while they are attached to the land or form an integral part of the immovable” are likewise immovable property. Alternative Answers: (If the plant form is movable property, then the trees, plants and flowers are movable because they are not attached to the land or form an integral part of any immovable.) (par. 2, Art. 415, NCC, Suggested Answers to the 2007 Bar Examination Questions, PALS)

17. A leased a building to B for a term of 10 years. B established a shoe factory in the building and as a result he installed certain machineries therein. Are such machineries movables or immovables? Reasons. ANS: The machineries are movables. In order that machineries can be classified as immovables within the meaning of No. 5 of Art. 415 of the NCC, it is essential that the following requisites must concur: (1) The machinery must be placed by the owner of the tenement; (2) An industry or works must be carried on in the tenement; (3) The machinery must be intended for such industry or works; and (4) The machinery must tend directly to meet the needs of such industry or works. It is clear from the facts stated in the problem that the machineries are movables since they were installed by the lessee, B, and not by A. (See Davao Sawmill us. Castillo, 61 Phil. 709.) 18. Suppose that in the above problem, there is a stipulation in the contract of lease to the effect that the 319

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machineries to be installed by B shall automatically belong to A upon the expiration of the lease, are the machineries movables or immovables? Reasons? ANS: The machineries are immovables. In such case, it is evident that B would then be considered as the agent of A. (Davao Sawmill vs. Castillo, supra.) 19. Suppose that in the above problem, the stipulation in the contract of lease is to the effect that the machineries to be installed by B shall belong to A upon the expiration of the lease, provided that A shall pay a stipulated amount, would such a stipulation make any difference in your answer? Reasons. ANS: Yes, it would make a difference in my answer. The machineries in such case would then be classified as movables. It is evident that B cannot be considered as the agent of A. (Davao Sawmill vs. Castillo, ibid.) 20. Is mortgage on land movablp or immovable prop­ erty? ANS: It depends. If the mortgage is registered in the Registry of Property, it constitutes a real right over an immovable within the meaning of No. 10 of Art. 415 of the NCC, which declares that contracts for public works, servitudes and other real rights over immovable property are classified as immovable property. However, if the mortgage is not registered in the Registry of Property, although valid as between the contracting parties, it cannot be classified as immovable property. 21. What is movable property? ANS: The following things are deemed to be personal property: (1) Those movables susceptible of appropriation which are not included in Art. 415; (2) Real property which by any special provision of law is considered as personalty; 320

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

(3) science;

Arts. 414-426

Forces of nature which are brought under control by

(4) In general, all things which can be transferred from place to place without impairment of the real property to which they are fixed. (Art. 416, NCC.) The following are also considered personal property: (1) Obligations and actions which have for their object movables or demandable sums; and (2) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate. (Art. 417, NCC.) 22. What are the tests which must be applied in order to determine whether an object is movable or not? ANS: The tests which must be applied successively are: (1) place;

Whether the object can be transported from place to

(2) Whether the change of location can take place without injury to the immovable to which it may be attached; and (3) Whether it is not included in the enumeration found in Art. 415 of the NCC. If the answer to all the above questions is in the affirmative, then the object is movable. 23. May certain things partake both of the nature of real and personal property? Discuss, citing examples. ANS: Yes, certain things may partake of the nature of real and personal property at the same time. This is expressly recognized in No. 2 of Art. 416 of the NCC, which states that real property which by any provision of law is considered as personalty is deemed to be movable or personal property. Thus, under the Chattel Mortgage Law (Sec. 7, Act No. 1508.), growing crops may be the object of a contract of chattel mortgage (CM). Similarly, growing crops may also be considered as personalty for the purpose of a contract of sale. (Art. 1462, NCC.) 321

Arts. 414-426

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

24. Is the steamship President Cleveland personal or real property? ANS: The steamship President Cleveland is personal property (See Phil. Refining Co. vs. Jarque, 61 Phil. 229.) In the first place, it can be transported from place to place; in the second place, the change of location can take place without injury to the immovable to which it may be attached; and in the third place, it is not included in the enumeration of immovables in Art. 415 of the NCC. However, because of its importance in the world of commerce, it partakes of the nature of immovables when it comes to the requirement of registration. Thus, if it is mortgaged under the Chattel Mortgage Law, the mortgage must be registered not only in the Chattel Mortgage Register but also in the office of the Collector of Customs at the port of entry. (Rubiso vs. Rivera, 37 Phil. 72; Arroyo vs. Yu de Sane, 54 Phil. 7; Phil. Refining Co. vs. Jarque, 61 Phil. 229.) 25. How do you classify movable property according to its nature? ANS: As to their possibility of being consumed by their use, movable or personal property may be either: (1) Consumables, or those which cannot be used in a manner appropriate to their nature without their being consumed; or (2) Non-consumables, or those which can be used in a manner appropriate to their nature without their being consumed. (Art. 418, NCC.) As to their possibility of being substituted by others of the same kind and quality, they may be either: (1) Fungibles, or those which can be substituted by others of the same kind and quality; or (2) Non-fungibles, or those which cannot be substituted by others of the same kind and quality. 26. What is meant by property of public dominion? ANS: The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, 322

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

Arts. 414-426

shores, roadsteads, and other of similar character (Art. 420, No. 1, NCC.); (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth (Art. 420, No. 2, NCC.); and (3) Property for public use, in the provinces, cities, and municipalities, such as provincial roads, city streets, municipal streets, squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. (Art. 424, par. 1, NCC.) 27. What are the characteristics of property of public dominion? ANS: Property of public dominion are outside of the commerce of man. Consequently: (1)

They cannot be appropriated;

(2) They cannot be the subject matter of contracts; hence, they cannot be alienated or encumbered; (3)

They cannot be acquired by prescription;

(4)

They cannot be subject to attachment or execution;

(5) They cannot be burdened by any voluntary easement. (Tan Toco vs. Mun. of Iloilo, 49 Phil. 52; Meneses vs. Commonwealth, 69 Phil. 449; 2 Tolentino 30.) 28. A’s land is bounded on the south by the sea and on the east by a river. Both sides have grown by accretion. What should A do to obtain a certificate of title to the enlarged areas? ANS: A cannot obtain a certificate of title (or an amendment thereof) over the accretion on the south by the sea. He has no right over it. Such accretion is property of public dominion. (Art 420, NCC.) As such, it is outside the commerce of man. Therefore, it cannot be appropriated; neither can it be acquired by prescription. (Ignacio vs. Dir. of Lands, 108 Phil. 335; Lanzar vs. Dir. of Lands, 78 SCRA 130.) 323

Arts. 414-426

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

However, as far as the accretion on the east of the river is concerned, assuming that all of the requisites of alluvion under the NCC (Art. 457.) are present, A is now ipso jure the owner of such accretion. In order that he can acquire a certificate of title (or an amendment thereof), he should now comply with all of the different steps dictated by the Land Registration Law (now Property Registration Decree, P.D. No. 1529) in order that there will be a judicial confirmation of his title over the accretion. 29. What is meant by “public lands,” “public domain” and “government lands,” and how shall we distinguish one from the other? ANS: Public lands and public domain are synonymous. They refer only to government lands which are opened to private appropriation and settlement by homestead and other similar acts as provided by law. On the other hand, public lands and government lands are not synonymous. Government lands include not only public lands, but also other lands already reserved for or devoted to public use or subject to private right. Therefore, the government owns lands which are known as public lands or public domain as well as lands which are not public lands or public domain. (Montano vs. Insular Government, 12 Phil. 572.) 30. How are lands of the public domain classified? ANS: Lands of the public domain are classified into: (1) agricultural; (2) forest or timber; (3) mineral lands; and (4) national parks. (Art. XIV, Sec. 10, Philippine Constitution.) 31. What is meant by patrimonial property of the State or of provinces, cities and municipalities? ANS: Those property of the State which are not intended for public use, or for public service, or for the development of the national wealth, as well as those property of provinces, cities and municipalities which are not intended for public use are patrimonial. (Arts. 421, 424, NCC.) 32. What is meant by property of private ownership? ANS: Property of private ownership, besides the patrimonial property of the State, provinces, cities, and municipalities, consists 324

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

Arts. 414-426

of all property belonging to private persons, either Individually or collectively. (Art. 425, NCC.) 33. Discuss the nature and classification of the Rop­ pongi lot. ANS: (1) The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations Agreement and the corresponding contract of procurement, which bind both the Philippine government and the Japanese government. It is of public dominion unless it is convincingly shown that the property has become patrimonial. The Roppongi property is correctly classified under paragraph 2 of Art. 420 of the NCC as property belonging to the State and intended for some public service. (2) The fact that the Roppongi site has not been used for a long time for actual embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use. A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such. Abandonment must be definite. (3) It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by Congress. It requires executive and legislative concurrence. (Laurel vs. Garcia, G.R. No. 92013, July 25,1990.) 34. Accretion was formed as a result of the dumping of sawdust by the Sun Valley Lumber Co. somewhere at an area near Balacanas Creek and Cagayan River. Is the land private or public? ANS: It is part of the public domain. Art. 457 of the NCC provides: “To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters.” In the earlier case of Meneses vs. CA, 246 SCRA 374 (1995), it was ruled that accretion as a mode of acquiring property under Art. 457, NCC requires: 325

Artg. 414-426

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Classification of Property

1. That the deposit of soil or sediment be gradual and imperceptible; 2. (or sea);

That it be the result of the action of the waters of the river

3. That the land where accretion takes place is adjacent to the banks of rivers (or the sea coast). These are called the rules on alluvion which if present in a case, give to the owners of lands adjoining the banks of rivers or streams any accretion gradually received from the effects of the current of waters. However, if the accretion was formed by the dumping of boulders, soil, and other filing materials on portions of the Balacanas Creek and the Cagayan River bounding their land, it cannot be claimed, that the accumulation of such boulders, soil and other filling materials was gradual and imperceptible, resulting from the action of the waters or the current of the Balacanas Creek and the Cagayan River. In Hilario vs. City of Manila, 19 SCRA 931 (1967), the Court held that the word “current” indicates the participation of the body of water in the ebb and flow of waters due to high and low tide. The accretion was man-made or artificial. In Republic vs. CA, 132 SCRA 514, the Court ruled that the requirement that the deposit should be due to the effect of the current of the river is indispensable. This excludes from Art. 457 of the NCC all deposits caused by human intervention. Putting it differently, alluvion must be the exclusive work of nature. Thus, in Tiongco vs. Director of Lands (6 CA. Rep. 211), where the land was not formed solely by the natural effect of the water current of the river bordering said land but is also the consequence of the direct and deliberate intervention of man, it was deemed a man-made accretion and, as such, part of the public domain. (Vda. De Nazareno vs. CA, G.R. No. 98405, June 26,1996.)

326

Title II OWNERSHIP (Arts. 427-439) 1.

Define ownership.

ANS: Ownership may be defined as the independent right of exclusive enjoyment and control of a thing for the purpose of deriving therefrom all advantages required by the reasonable needs of the owner and the promotion of the general welfare but subject to the restrictions imposed by law and the rights of others. (Outline o f Civil Law, Reyes and Puno, p. 20.) It may also be defined as a relation in private law by virtue of which a thing pertaining to one person is completely subjected to his will in everything not prohibited by law and the concurrent rights of another. (1 Ruggiero 534, quoted in 2 Tolentino 43.) 2. What are the traditional attributes or elements of ownership? In other words, what are the rights of a person over his property? ANS: The traditional attributes or elements of ownership are: a.

The right to enjoy, which includes: (1)

Jus. utendiy or the right to use;

(2)

Jus fruendi, or the right to enjoy the fruits; and

(3)

Jus abutendi, or the right to consume the thing by its use.

b. The right to dispose (jus disponendi), or the right to alienate, encumber, transform, or even to destroy the property. c. The right to vindicate (jus vindieandi), or the right of action available to the owner to recover the property against the holder or possessor. (Art. 428, NCC.) 327

Arts. 427-439

3. ship?

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership

What are the limitations upon the right of owner­

ANS: The limitations upon the right of ownership are; (1) General limitations imposed by the State for its benefit such as the power of eminent domain, the police power, and the power of taxation; (2) Specific limitations imposed by law, such as legal servitudes; (3) Limitations imposed by the party transmitting the property either by contract or by will; (4) Limitations imposed by the owner himself, such as voluntary servitudes, mortgages, pledges, and lease rights; and (5) Inherent limitations arising from conflict with other rights, such as those caused by contiguity of property. (2 Tolentino, NCC, p. 50.)

We might add to the above enumeration the Constitutional prohibition regarding acquisition of private land by aliens and other Constitutional limitations. 4. A and B, employees of the China Banking Corpora­ tion, were charged by the latter with qualified theft. There­ after, A after admitting his civil liability, ceded to the Bank a parcel of land located in Manila. The deed of transfer was presented to the Registry of Deeds for registration but be­ cause the Bank is alien-owned, the Register of Deeds submit­ ted the matter to the Land Registration Commission in consulta. The Land Registration Commissioner handed down a resolution declaring that the transfer in favor of the alien bank is in contravention of the Constitution of the Philip­ pines. Is this resolution correct? ANS: The resolution is correct. It is, of course, true that under Sec. 25 of R.A. 337, a commercial bank even if alien-owned is allowed to purchase and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. It is clear, however, that the debts referred to are those made or entered into by a commercial bank in the ordinary 328

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership

Arts. 427-439

course of its business as such. Obviously, civil liability arising from a criminal offense is not a debt resulting from a transaction in the ordinary course of banking business. The transfer, therefore, is in contravention of the constitutional prohibition regarding acquisition of real estate by aliens. That the transfer is only temporary does not affect the issue. The prohibition is absolute. (Register of Deeds vs. China Banking Corp., 4 SCRA 1146.) 5. As a consequence of ownership, what are the rights of a person over his property? ANS: As a consequence of ownership, the rights of a person over his property are: (1) (2) (3)

To enjoy the property; j

To dispose of the property; To recover the property from any holder or possessor;

(4) To exclude any person from the enjoyment and disposal of the property; (5)

To enclose or fence his land or tenement;

(6)

To just compensation in case of eminent domain;

(7) To construct any works, or make any plantation or excavation on the surface or sub-surface of his land; (8) To the ownership of all or a part of hidden treasures found in his property; and (9) To the ownership of all accessions to his property. (See Arts. 428, 429, 430, 435, 437, 438, 440, NCC.) 6.

When is force in defense of property justified?

ANS: Force in defense of property is justified if the following requisites will concur: (1) The force must be employed by the owner or lawful possessor of the property; (2) There must be an actual or threatened physical invasion or usurpation of the property; 329

Arts. 427-439

(3)

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership

The invasion or usurpation must be unlawful; and

(4) The force employed must be reasonably necessary to repel the invasion or usurpation. (Art. 429, NCC.) Force in the defense of property as contemplated in Art. 429 of the NCC is what is sometimes known as the “doctrine of self-help.” 7. What is the extent of the right of ownership of the owner of a parcel of land? ANS: The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of aerial navigation. (Art. 437, NCC.) 8.

What is a hidden treasure?

ANS: By treasure is understood, for legal purposes, any hidden and unknown deposit of money, jewelry, or other precious objects, the lawful ownership of which does not appear. (Art, 439} NCC.) 9. To whom does hidden treasure which is discovered belong? ANS: Hidden treasure belongs to the owner of the land, building, or other property on which it is found. Nevertheless, when the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half thereof shall be allowed to the finder. If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things found be of interest to science or the arts, the State may acquire them at their just price, which shall be divided in conformity with the rule stated. (Art. 438, NCC.) 10. In order that the rule regarding discovery of hidden treasures by a stranger on property belonging to another may be applied, what requisites must concur? ANS: The following requisites must concur: 330

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership

Arts. 427-439

(1) The treasure must consist of money, jewelry or other precious objects; (2)

It must be hidden and unknown;

(3)

Its lawful ownership does not appear;

(4)

The discovery must be by chance; and

(5)

The discoverer must be a stranger and not a trespasser.

11. X is the owner of a piece of land where hidden treasure was believed to be buried. Y who owns a device used in detecting hidden treasure was given permission by X to use the device on his land. Y discovered, after some effort, jewelry and other precious objects which are not of interest to science or the arts worth P60,000. To whom should the treasure belong? Explain your answer. (1970) ANS: It is submitted that the treasure should belong to X and not to Y. This is clear from Art. 438 of the NCC. The first paragraph of this article declares that hidden treasure belongs to the owner of the land, building or other property on which it is found. The second paragraph declares that when the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, 1/2 thereof shall be allowed to the finder, provided the latter is not a trespasser. The third paragraph declares that if the thing found be of interest to science or the arts, the State may acquire it at their just price, which shall be divided in conformity with the rule stated. The only possible basis for awarding the ownership of the treasure to Y is the provision of the second paragraph of the abovementioned article. However, this would require the concurrence of the following requisites: first, the treasure must consist of money, jewelry or other precious objects; second, it must be hidden and unknown; third, its lawful ownership does not appear; fourth, the discovery must be by chance; and fifth, the discoverer must be a stranger and not a trespasser. The fourth requisite is not present in the instant case. Note that Y was given permission by X to use a device used for detecting hidden treasure on his land. Therefore, what is clearly applicable here is the provision of the first paragraph of Art. 438 of the Code. 331

1 Arts. 440-475

PROPERTY, OWNERSfflP, AND ITS MODIFICATIONS Ownership Right of Accession

(Note: An opinion has been advanced that he can also recover damages from such builder, planter or sower. (Art. 451, NCC.) The builder, planter or sower, on the other hand, has no right whatsoever except the right to be reimbursed for necessary expenses which he may have incurred for the preservation of the land. (Art. 452, NCC.) 36. “A” plants on land belonging to “B,” taking advantage of the latter’s absence in America. Upon the latter’s return, he filed an action for the recovery of the land as well as all of the fruits, both harvested and pending, plus damages. Granting that the action will prosper, what are the rights of “A”? ANS: Under the facts stated in the problem, it is evident that “B” has elected the right to appropriate whatever had been planted to 346

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

Arts. 440-475

his land. (Art. 449, NCC.) “A,” however, has two (2) rights which are available to him. In the first place, he can demand reimbursement for all necessary expenses which he may have incurred in the production, gathering and preservation of the fruits which have been harvested and which are adjudicated to the landowner. (Art. 443, NCC.) In the second place, he can also demand reimbursement of all expenses which he might have incurred for the preservation of the land. (Art. 452, NCC.) 37. If a certain person builds, plants or sows in good faith on land belonging to another who is in bad faith, what are the rights and obligations of the parties? ANS: In such case, the provisions of Art. 447 of the NCC shall apply (Art. 454, NCC.), since the builder, planter or sower is considered the agent of the landowner. (3 Manresa 228.) Such builder, planter or sower will have the option either to compel the landowner to pay to him the value of the work, planting or sowing plus damages, or to remove such work planting or sowing with or without injury to the work or with or without the planting or sowing being destroyed plus damages, 38. If a certain person builds, plants or sows on land belonging to. another with the materials, plants or seeds of a third persons, what are the rights and obligations of the parties? qualify ANS: If the owner of the materials, plants or seeds had acted in good faith, then he has a right to recover the value of his materials, plants or seeds primarily from the builder, planter or sower and subsidiarily from the owner of the land in case of insolvency of the said builder, planter or sower. This subsidiary liability of the owner of the land, however, does not hold true in case such owner demands the demolition of the work or the removal of the planting or sowing under Art. 450 of the NCC. If the owner of the materials, plants or seeds has been paid by the builder, planter or sower, the latter may demand from the owner of the land the value of the materials and labor. This rule, however, is applicable only if such builder, planter or sower had acted in good faith. (See Art. 455, NCC.) If the owner of the materials, plants or seeds had acted in bad faith and the other two (2) had also acted in bad faith, then their 347

1 3

Arts. 440-475

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

rights will be determined as though all of them had acted in good faith, in which case the above rules will still be applicable. If the owner of the materials, plants or seeds had acted in bad faith, and the other two (2) had acted in good faith, then he will lose his materials, plants or seeds without any right to indemnity and will furthermore be liable for damages in accordance with Arts. 449 and 451 of the NCC, because in such case, the builder, planter or sower will be considered his agent. 39. Using lumber belonging to C, B constructed a house on land belonging to A. He was aware that the lumber belonged to C and the land to A. Both A and C were abroad at the time of construction. Two years later, the two (2) returned to the Philippines. Subsequently, A commenced an action against B. C intervened. What are the rights and obligations of the parties? ANS: Since A is in good faith and B is in bad faith, the provisions of Arts. 449 to 452 are now applicable. A, therefore, may avail himself of either of the following remedies: (1) Appropriate the building plus damages; (2) demand the demolition or removal of the building at the expense of the builder plus damages; or (3) compel B to buy the land plus damages. If A chooses the first option, C, who is in good faith, can proceed against B for the value of his lumber plus damages. If the latter cannot pay by reason of insolvency, he can proceed against A for the value of the lumber, but not for damages. (Art. 455, NCC.) If A chooses the second option, C can proceed against B for the value of the lumber plus damages. If the latter cannot pay by reason of insolvency, he has no further remedy. A cannot be held subsidiarily liable. (Art. 455, NCC.) If A chooses the third option, C can proceed against B for the value of the lumber plus damages. A cannot be held subsidiarily liable. (Art. 455, NCC.) 40. Believing that a piece of land belonged to him, A erected thereon a building, using materials belonging to C. B, the owner of the land, was aware of the construction being made by A, but did not do anything to stop it. 348

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

Arts. 440-475

ANS: A can choose between: (1) reimbursement by B of the value of the building plus damages, or (2) removal of the materials, with or without injury to the building, plus damages. It must be observed that B is in bad faith. According to the law (Art. 454, NCC.), when the landowner acted in bad faith and the builder acted in good faith, the provision of Art. 447 of the NCC shall apply. The rights of B, owner of the land, will depend upon the option selected by A. If A decides to demand reimbursement of the building plus damages, of course, B becomes the owner of the building. If A decides to remove the materials regardless of whether or not there is injury to the building, plus damages, B does not become the owner of the building. In the case of C, owner of the materials, assuming that he was in good faith, obviously, he can proceed against A for the value of his materials and against B for damages. If A cannot pay him the value of his materials, he (C) can then proceed against B for the value of said materials. (Art. 455, NCCJ In other words, B will then be liable not only for the value of C’s materials but also for damages. 41. Define alluvion. ANS: Alluvion may be defined as the accretion which the lands adjoining the banks of rivers, creeks, torrents or lakes gradually receive from the effects of the current of the waters. 42. What is the rule with regard to alluvion? ANS: To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters, (Art. 457, NCC.) The owners of estates adjoining ponds or lagoons do not acquire the land left dry by the natural decrease of the waters, or lose that inundated by them in extraordinary floods. (Art. 458, NCC.) 43. A is the registered owner of land adjoining the hank of the Cagayan River. From the time of the registration of the land up to 1958, alluvial deposits had accumulated on that part of the property adjoining the river. This accretion was occupied in 1933 by B and C. They have been in possession 349

Arts. 440-475

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

ever since, in the concept of owner, openly, continuously, adversely, and without any interruption whatsoever. In 1958, A brought an action against B and C to quiet his title to said alluvial property invoking the principle of alluvion as enunciated in Art. 457 of the NCC. Defendants, however, contend that they have already become the absolute owners of the property through prescription. Is this correct? ANS: Yes, defendants are correct. In Grande vs. CA (115 Phil. 521), a case with similar facts, the Supreme Court held that the accretion does not automatically become registered land just because the land which receives it is covered by a Torrens Title thereby withdrawing the alluvial property from the scope and purview of our rules with respect to prescription acquisitiva. Ownership of a piece of land is one thing; registration under the Torrens system of that land is quite another. Ownership of the accretion is governed by the NCC; imprescriptibility of the registered ownership is governed by the registration laws. Registration does not give title to the land, but merely confirms and thereafter protects the title already possessed by the owner, making it imprescriptible by occupation of 3rd parties. But to obtain this protection, the land must be placed under the operation of the registration laws wherein certain judicial procedures have been provided. In the instant case, A never sought registration of the alluvial property. The increment, therefore, never became registered property. Hence, the right which A had acquired by virtue of Art. 457 of the NCC is not entitled to the protection of imprescriptibility. Consequently, since all of the requisites for prescription acquisitiva under the old law are present, B and C have already become the absolute owners of the property. 44. Kiko is a riparian owner of a parcel of registered land. His land, however, has gradually diminished in area due to the current of the river, while the registered land of Sergio on the opposite bank has gradually increased in area by 200-square meters. (a) Who has the better right over the 200-square meter area that has been added to Sergio’s registered land, Sergio or Kiko? (b) May a third person acquire said 200-square meter land by prescription? (2003) 350

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

Arts. 440-475

ANS: (a) Sergio has a better right over the 200 square meter increase in area by reason of accretion, applying Art, 457 of the NCC, which provides that “to the owners of lands adjoining the banks o f rivers belong the accretion which they gradually receive from the effects of the current of the waters.” Kiko cannot claim that the increase in Sergio’s land is his own, because such is an accretion and not a result of the sudden detachment of a known portion of his land and its attachment to Sergio’s land, a process called “avulsion.” He can no longer claim ownership of the portion of his registered land which was gradually and naturally eroded due to the current of the river, because he had lost it by operation of law. That portion of the land has become part of the public domain. (b) Yes, a third party may acquire by prescription the 200 square meters, increase in area, because it is not included in the Torrens Title of the riparian owner. Hence, this does not involve the imprescriptibility conferred by Section 47, P.D. No. 1529. The fact that the riparian land is registered does not automatically make the accretion thereto a registered land. (Grande vs. CA, 115 Phil. 521 [1962]; Jagualing vs. CA, 194 SCRA 607 [1991].) 45. In 1951, PE occupied the bank of the river in San Mateo which was called Libis. By force of the current of the river, silt was deposited on this river bank so that it gradually became wider and wider and wider until it measured about 2 hectares. In 1976, VA, the registered owner of the land adjoining the old river bank, demanded that PE vacate the land but the latter refused claiming he had acquired the alluvial deposits by prescription. VA then filed an action to quiet the title and recover possession. Will the action prosper? Why? (1979) ANS: The action will prosper. According to the NCC, to the owners of land adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters. The silt or alluvial deposit occupied by defendant PE, therefore, belongs to VA, the riparian owner. However, since the latter never sought registration of the accretion in accordance with the Land Registration Law, said accretion never became registered 351

Arts. 440-475

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

property. It was, therefore, possible for PE to become absolute owner thereof by extraordinary acquisitive prescription. Since obviously, he was in bad faith, 30 years of continuous, public and peaceful possession in concept of owner would then be necessary in order that he shall become the absolute owner of the accretion by prescription. He took possession of the property in 1951; the action of VA against him was filed in 1976. That means that he has been in continuous possession for only 25 years. The defense of acquisitive prescription, therefore, is untenable. (See Grande vs. CA, 114 Phil. 521.) 46. Define avulsion. ANS: Avulsion maybe defined as the accretion which takes place whenever the current of a river, creek, torrent or lake segregates from an estate on its bank a known portion of land and transfers it to another estate. 47. What is the rule with regard to avulsion? ANS: Whenever the current of a river, creek or torrent segregates from an estate on its bank a known portion of land and transfers it to another estate, the owner of the land to which the segregated portion belonged retains the ownership of it, provided that he removes the same within two years. (Art. 459, NCC.) Trees uprooted and carried away by the current of the waters belong to the owner of the land upon which they may be cast, if the owners do not claim them within six months. If such owners claim them, they shall pay the expenses incurred in gathering them or putting them in a safe place. (Art. 460. NCC.) 48. Distinguish between alluvion and avulsion. ANS: The two may be distinguished from each other in the following ways: (1) In alluvion the accretion is gradual, whereas in avulsion it is sudden and abrupt; (2) In alluvion the accretion cannot be identified, whereas in avulsion it can be identified; (3) In alluvion there is merely an attachment, whereas in avulsion there is first a detachment followed by attachment; and 352

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(4) In alluvion the accretion belongs to the owner of the land to which the attachment is made ipso jure, whereas in avulsion the ownership is retained by the owner of the land from which it is detached, at least; for a certain period. 49. The Rio Magnifico river deposited soil along its bank for many years beside the titled land of Jim. In time, such deposit reached an area of 1,000 square meters. With the permission of Jim, Mike cultivated the said area. Ten (10) years later, a big flood occurred in the river and transferred the 1,000 square meters to the opposite bank, beside the land of Lito. The land transferred is now contested by Jim and Lito as riparian owners and by Mike who claims ownership by prescription. Who should prevail? Why? (2001) ANS: Jim should prevail. The disputed area, which is an alluvion, belongs by right of accretion to Jim, the riparian owner. (Art. 457, NCC.) When, as given in the problem, the very same area was “transferred” by flood waters to the opposite bank, it became an avulsion and ownership thereof is retained by Jim who has two (2) years to remove it. (Art. 459, NCC.) Mike’s claim based on prescription is baseless since his possession was by mere tolerance of Jim and, therefore, did not adversely affect Jim’s possession and ownership. (Art. 537, NCC.) Inasmuch as his possession is merely that of a holder, he cannot acquire the disputed area by prescription. 50. What is the rule with regard to changes in the course of rivers? ANS: River beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost. However, the owners of the lands adjoining the old bed shall have the right to acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed. (Art. 461, NCC.) Attention, however, must be called to the fact that the above provision has already been superseded by the following provision of the Water Code of the Philippines. (P.D. No. 1067.) 353

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

“Art. 58. When a river or stream suddenly changes its course to traverse private lands, the owners of the affected lands may not compel the government to restore the river to its former bed; nor can they restrain the government from taking steps to revert the river or stream to its former course. The owners of the lands thus affected are not entitled to any compensation for any damage sustained thereby. However, the former owners of the new bed shall be the owners of the abandoned bed in proportion to the area lost by each. The owners of the affected lands may undertake to return the river or stream to its old bed at their own expense; Provided, That a permit therefor is secured from the Minister of Public Works and works pertaining thereto are commenced within two years from the change in the course of the river or stream.” (Note: Hence, in Nos. 75, 76 and 77 [infra.], the answers should be changed correspondingly in order that they will conform with the change in the Water Code.)

51. A and B each owns a parcel of land on opposite sides of a river. The river changed its course and passed through C’s land not adjoining either A’s or B’s land. As a result of the change of the river, C lost 10 hectares of his land. (a) Assuming that the area of the abandoned river bed between the lands of A and B is also 10 hectares, who is entitled to the accession? Why? (b) Suppose the area of the abandoned river bed is 15 hectares, will that make any difference in your answer? Why? ANS: (a) C is entitled to the abandoned bed. According to Art. 461 of the NCC, river beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost. However, the owners of the lands adjoining the old bed shall have the right to acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed. (b) Even if the area of the abandoned bed is 15 hectares, C is still entitled thereto. This is so because after all, the law does not 354

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Arts. 440-475

make any qualification. Besides, if the area of the old bed is less than the area lost by C, there is no additional compensation that is granted to him to make up for the difference. 52. The Director of Lands sold a 24 hectares — public land to A at 20 centavos per sq.m. The land was adjoining a river which after the sale changed its course and left its bed dry, the area of which is two (2) hectares. The purchaser, A claimed and occupied this portion of land alleging right of accretion, to which the Director of Lands objected contending that the purchaser only bought 24 hectares at a specified price per sq.m., and consequently, he has no right to claim said portion of land, it being in excess of what he bought. Who owns the two hectares in question? ANS: It is submitted that the resolution of the instant problem shall depend upon whether the property occupied by the new course of the river is public land or private land. This necessarily follows from Art, 461 of the NCC which states that “river beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners whose lands are occupied by the new course in proportion of the area lost.” Thus — If the new course has occupied public land, undoubtedly, the claim of the Director of Lands is proper. It is clear from the above­ quoted provision that the abandoned bed would then be public land. This is, however, without prejudice to the right of A to acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed. (Art. 461, NCC.) If the new course has occupied private land belonging to A, then A’s claim is proper. Under Art. 461 of the NCC, there can be no question regarding the propriety of such claim. If the new course has occupied private land belonging to a third person, then neither the Director of Lands nor A can claim ownership over the abandoned bed, since the third person has ipso facto become the owner of the abandoned bed. Of course, A in such case can always acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed. (Ibid.) 355

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

53. “A” owns a parcel of land adjoining the bank of the Pampanga River. The land on the opposite bank is owned by “B.” The river suddenly changed its natural course and the new river bed passed through more than 1/2 of the land of “B.” The ownership of the abandoned river bed is claimed by: (a)

“A” as owner of the adjacent land;

(b) “B” who lost more than 1/2 of his land to the new river bed; and (c) the Government on the ground that the abandoned river bed is part of the public domain. Determine the rights, if any, of each of the claimants. Explain fully, giving reasons. ANS: Art. 461 of the NCC provides: “River beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost. However, the owners of the lands adjoining the old bed shall have the right to acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed.” From this provision, it is clear that the rights of the three (3) claimants may be determined as follows: (a) A has no right to the ownership of the abandoned river bed. This is so because under Art. 461 of the NCC, such abandoned bed shall ipso facto belong to the owners whose lands are occupied by the new course. However, being the owner of the adjacent land, he, in conjunction with the other riparian owner, shall have the right to acquire the same by paying the value of the area occupied by the new bed. It must be noted, however, that B is not only the owner of the land on the opposite bank of the river but he is also the owner to whom the abandoned bed shall belong ipso facto because, it is his land on such opposite bank that was occupied by the new course. It is but logical, therefore, that the right given to the riparian owners to acquire the abandoned bed by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed, can be availed of only by A, since B, the other riparian owner, is already the owner of the abandoned bed. Furthermore, such right can only be directed against a proportionate part of such abandoned 356

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Arts. 440-475

bed. Consequently, A, if he so desires, can now compel B to sell to him a proportionate part o f the abandoned bed, but the price must not be higher than the value o f the corresponding- proportionate part of the area occupied by the new bed.

(b) B, of course, automatically or ipso facto acquires ownership of the abandoned river bed pursuant to the provisions of Art. 461 of the NCC. His right of ownership, however, is limited by the right of A to compel him, if he (A) so desires, to sell him a proportionate part of the abandoned bed for a price which must not be higher than the value of the corresponding proportionate part of the area occupied by the new bed. (c) As far as the Government is concerned, it is clear that it has no right whatsoever over the abandoned river bed. This is so because Art. 461 of the NCC expressly declares that the abandoned bed shall “ipso facto belong to the owners whose lands are occupied by the new course.” Consequently, the doctrine enunciated in Panlileo vs. Mercado, 44 Phil. 695, to the effect that abandonment by the Government is necessary before the abandoned bed can become private property, has already been abrogated. Of course, as far as the new bed running through the estate of B is concerned, such new bed becomes a part of the public dominion. (Art. 462, NCC.) 54. Will failure to register accretion divest the land of its character as a private property? ANS: The right in re to the principal is likewise a right in re to the accessory as it is a mode of acquisition provided by law, as the result of the right of accretion. Since the accessory follows the principal, there need not be any tendency to the thing or evident manifestation of the purpose to subject it to ownership, as it is subject thereto ipso jure from the moment the mode of acquisition becomes evident. The failure to register the accretion of the land and declare it for purposes of taxation does not divest it of its character as private property. (Agne vs. Dir. of Lands, G.R. No. 40399, February 6, 1990.) 55. The Cagayan river separates the towns of Solana on the west and Tuguegarao on the east. In 1919, the lands east of the river were covered by the Tuguegarao Cadastre, 357

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in which the land of Agustin was found. All lands in the west were covered by the Solana Cadastre on which the lands of Binayug and Melad were located. As the years went by, the Cagayan River moved gradually eastward, depositing silt on the western bank. But in 1968, after a .big flood, the river changed its course, returned to its 1919 bed and in the process, cut across the lands of Binayug and Melad whose lands were transferred to the eastern side. To cultivate these lands, they had to cross the river. One day, while cultivating their lots on the eastern side of the river, Binayug and Melad were driven away by Agustin who claimed the lands as his own. Determine the ownership of the lands as claimed by Agustin. ANS: The ownership of Melad and Binayug upon the accretion to their lands was not lost upon the sudden and abrupt change of the course of the Cagayan River in 1968 when it reverted to its old 1919 bed, and separated or transferred said accretion to the other side (or eastern bank) of the river. Arts. 459 and 463 of the NCC apply to this situation. (Agustin vs. IAC, G.R. No. 66075, July 5,1990.) 56. In cases where the government sells, on an install­ ment basis, a lot bordering on a public stream, what con­ stitutes the boundary and what area shall be considered as included in the sale? ANS: When the lot bordering on a public stream is sold on an installment basis by the government, said stream is made the boundary. The stream may advance or recede but it will always constitute the boundary or boundaries of the lot, and the purchaser has the right to insist that the original boundaries be observed and all the area inside said boundaries be considered as included in the sale. (Asst. Exec. Sec. vs. CA, G.R. No. 76761, January 9, 1989.) 57.

Classify the natural bed or basin of lakes.

ANS: Under Art. 74 of the Law of Waters, the natural bed or basin of lakes is the ground covered by their waters at their highest ordinary depth, in which case, it forms part of the national dominion. 358

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Arts. 440-475

58. Suppose that a river dries up, who is the owner of the old bed? ANS: The old bed will still be considered as property of public ownership. 59. What is the rule with regard to islands which may be formed either on the seas or on rivers? ANS: Islands which maybe formed on the seas within the jurisdiction of the Philippines, on lakes, and on navigable or floatable rivers belong to the State. (Art. 464, NCC.) Islands which through successive accumulation of alluvial deposits are formed in non-navigable and non-floatable rivers, belong to the owners of the margins or banks nearest to each of them, or to the owners of both margins if the island is in the middle of the river, in which case it shall be divided longitudinally in halves. If a single island thus formed be more distant from one margin than from the other, the owner of the nearer margin shall be the sole owner thereof. (Art. 465, NCC.) 60. (a) What are the distinctive characteristics of adjunction? (b) What are the different ways in which adjunction may take place? ANS: (a) The distinctive characteristics of adjunction are: first, that two or more movable things are united in such a way that they form a single object; and second, that each of the things united preserves its own nature. (b)

Adjunction may take place in the following ways: (1)

inclusio or engraftment;

(2)

soldadura or attachment;

(3)

tejido or weaving;

(4) pintura or painting; and (5)

escritura or writing. (3 Manresa 275-276.)

359

Arts. 440-475

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Right of Accession

61. If two movable things belonging to different owners are united in such a way that they form a single object, to whom shall such object belong? ANS: (1) When both owners had acted in good faith: If the two things which are united cannot be separated from each other without injury, the owner of the principal thing acquires the accessory, indemnifying the owner of such accessory for its value. (Art. 466, NCC.) If the two (2) things can be separated without injury, their respective owners may demand their separation. (Art, 469, par. 1, NCC.) Nevertheless, in case the thing united for the use, embellishment or perfection of the other is much more precious than the principal thing, the owner of the former may demand its separation, even though the thing to which it has been incorporated may suffer some injury. (Art. 469, par. 2, NCC.) (2) When the owner of the accessory had acted in bad faith: Whenever the owner of the accessory thing has made the incorporation in bad faith, he shall lose the thing incorporated and shall have the obligation to indemnify the owner of the principal thing for the damages he may have suffered. (Art. 470, NCC.) (3) When the owner of the principal had acted in bad faith: If the one who has acted in bad faith is the owner of the principal thing, the owner of the accessory thing shall have a right to choose between the former paying him its value or that the thing belonging to him be separated, even through for this purpose it be necessaiy to destroy the principal thing; and in both cases, furthermore, there shall be indemnity for damages. (Art. 470, NCC.) (4) When both owners had acted in bad faith: If either one of the owners has made the incorporation with the knowledge and without the objection of the other, their respective rights shall be determined as though both acted in good faith. (Art. 470, NCC.) 62. In adjunction or conjunction, what are the tests to be applied in order to determine the principal? ANS: In general, there are four (4) tests which may be applied. In their order of preference, they are as follows: 360

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Arts. 440-475

(1) That to which the other has been united as an ornament, or for its use or perfection. (2)

The thing of greater value.

(3)

If they are of equal value, that of the greater volume.

(4) If not one of these tests can be applied, then, the question will be resolved by taking into consideration all pertinent provisions applicable as well as their respective merits, utility and volume. (Arts. 467, 468, NCC; 3 Manresa 282.) In painting, sculpture, writings, printed matter, engraving, and lithographs, however, the board, metal, stone, canvas, paper, or parchment shall be deemed the accessory thing. (Art. 468, par. 2, NCC.) 63. If two or more things belonging to different owners are mixed (commixtion or confusion), to whom shall the mixture belong? ANS: If by the will of their owners two things of the same or different kinds are mixed, or if the mixture occurs by chance, and in the latter case the things are not separable without injury, each owner shall acquire a right proportional to the part belonging to him, bearing in mind the value of the things mixed or confused. (Art. 472, NCC.) If by the will of only one owner, but in good faith, two things of the same or different lands are mixed or confused, the rights of the owners shall be determined by the provisions of the preceding article. (Art. 473, par. 1, NCC.) If the one who caused the mixture or confusion acted in bad faith, he shall lose the thing belonging to him thus mixed or confused, besides being obliged to pay indemnity for the damages caused to the owner of the other thing with which his own was mixed. (Art. 473, par. 2, NCC.) 64. During the prolonged absence of A, the owner of a cattle ranch where cattle from America and Australia were being bred, B, owner of neighboring ranch, fraudulently mixed up all of his cattle with all of those belonging to the former. Several years later, A returned. When he found out 361

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Quieting of Title

what had happened, he brought an action against B for the recovery of his cattle plus damages. Decide the case. ANS: Normally, in a case where animals are mixed and they have offsprings, the rule that is applicable is partus sequitur ventrem (The owner of the dam or mother is the owner of the offspring). Obviously, this rule cannot be applied to the case at bar. Consequently, we must apply the rules of commixtion. Since B had acted in bad faith, all of his cattle shall now be awarded to A plus damages pursuant to the provision of the last paragraph of Art. 473 of the NCC. (Shari Valley Estate, Inc. vs. Lucasan, 97 Phil. 987.) 65. If a certain person employs the materials of another in order to make a thing of a different kind (specification), to whom shall the thing belong? ANS: One who is in good faith employs the material of another in whole or in part in order to make a thing of a different kind, shall appropriate the thing thus transformed as his own, indemnifying the owner of the material for its value. If the material is more precious than the transformed thing or is of more value, its owner may, at his option, appropriate the new thing to himself, after first paying indemnity for the value of the work, or demand indemnity for the material. If in the making of the thing, bad faith intervened, the owner of the material shall have the right to appropriate the work to himself without paying anything to the maker, or to demand of the latter that he indemnify him for the value of the material and the damages he may have suffered. However, the owner of the material cannot appropriate the work in case the value of the latter, for artistic or scientific reasons, is considerably more than that of the material. (Art. 474, NCC.) QUIETING OF TITLE (Arts. 476-481) 66. When may an action be brought to remove the cloud or to quiet the title to real property or any interest therein? ANS: An action may be brought to remove the cloud or to quite the title to real property or any interest therein if the following requisites are present: 362

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Ownership Quieting of Title

Arts. 476-4815

(1) The plaintiff must have a legal or equitable title to, or interest in the real property which is the subject-matter of the action (Art. 477, NCC.); (2)

There must be a cloud on such title (Art. 476, NCC.);

(3) Such cloud must be due to some instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and is prejudicial to the plaintiffs title (Art. 476, NCC.); and (4) The plaintiff must return to the defendant all benefits he may have received from the latter, or reimburse him for expenses that may have redounded to his benefit. (Art. 479, NCC.) 67. Are tax declarations conclusive evidence of owner­ ship of properties stated therein? ANS: Jurisprudence is consistent in ruling that tax declara­ tions are not conclusive evidence of ownership of properties stated therein. A disclaimer is even printed on their face that they are “is­ sued only in connection with real property taxation and should not be considered as title to the property.” At best, tax declarations are an indicia of possession in the concept of an owner. However, non­ declaration of a property for tax purposes does not necessarily ne­ gate ownership (Sps. Azana vs. Lumbo, G.R. No. 157593, March 22, 2007).

363

?

Title 111 CO-OWNERSHIP (Arts. 484-501) 1 .'

Define co-ownership.

ANS: There is co-ownership whenever the ownership of an undivided thing or right belongs to different persons. (Art. 484, NCC.) It has also been defined as the right of common dominion which two or more persons have in a spiritual part of a thing which is not materially or physically divided. (3 Sanchez Raman 162.) 2.

What are the requisites of co-ownership?

ANS: The requisities of co-ownership are: (1)

Plurality of subjects;

(2)

Unity of object (material indivision); and

(3) Recognition of the ideal or intellectual shares of the co­ owners which determine their rights and obligations, (2 Castan 311; 2 Tolentino, NCC, p. 140.) 3.

Distinguish co-ownership from partnership. (1988)

ANS: Co-ownership is distinguished from an ordinary partnership in the following ways: (1) As to creation: Whereas co-ownership may be created by law, contract, succession, fortuitous event, or occupancy, partnership is always created by contract. (2) As to purpose: Whereas the purpose of co-ownership is the common enjoyment of the thing or right owned in common, the purpose of a partnership is to obtain profits. (3)

As to personality: Whereas a co-ownership has no juridical 364

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

personality which is separate and distinct from that of the co-owners, a partnership has. (4) As to duration: Whereas an agreement not to divide the community property for more than ten years is not allowed by law, such an agreement would be perfectly valid in the case of partnerships. This is so, because under the law, there is no limitation upon the duration of partnerships. (5) As to power of members: Whereas a co-owner has no power to represent the co-ownership, unless there is an agreement to that effect, a partner has the power to represent the partnership, unless there is a stipulation to the contrary. (6) As to effect of disposition of shares: If a co-owner transfers his share to a third person, the latter becomes automatically a co­ owner, but if a partner transfers his share to a third person, the latter does not become a partner, unless agreed upon by all of the partners. (7) As to division o f profits: Whereas in co-ownership the division of the benefits and charges is fixed by law, in a partnership the division of profits and losses may be subject to the agreement of the partners. (8) As to effect of death: Whereas the death of a co-owner has no effect upon the existence of the co-ownership, the death of a partner shall result in the dissolution of the partnership. 4. How do you determine the share of the co-owners in the benefits and charges arising from the co-ownership? ANS: According to the NCC, the share of the co-owners in the benefits and charges arising from the co-ownership shall be proportional to their respective interests and any stipulation in a contract to the contrary shall be void. (Art. 485, par. 1, NCC.) Consequently, in order to determine the share of the co-owners in the benefits and charges, we must first determine their respective interests in the co-ownership. Under the law, such interests are presumed equal, unless the contrary is proved. (Art. 485, par. 2, NCC.)

365

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownerahip

5. What are the limitations upon the right of a co­ owner to use the thing owned in common? ANS: The thing should be used only: (1) in accordance with the purpose for which it is intended; (2) in such a way as not to injure^ the interest of the co-ownership; and (3) in such a way as not to prevent the other co-owners from using it according to their rights. (Art 486, NCC.) 6. A and her sister B, are co-owners of a two-storey building. The upper floor of the building was occupied for residential purposes by B and her husband, H, while the ground floor, which was divided into several spaces, was leased to several storeowners. One of the spaces, however, was used by H as his office. Later, after a quarrel, A brought an action against B and H demanding for payment of her 1/2 share of the rentals for the use of the part of the house which they were occupying. Decide the case. ANS: B cannot be compelled to pay rentals to her sister, A. In living in the upper floor, she was merely exercising her right as a co-owner. She did not prejudice her sister; neither did she prevent her from also living there had she desired to do so. It is different, however, in the case of the space in the ground floor which H used as an office. The latter is clearly liable to A for 1/2 of the rent which such space should have earned if rented to others. Under the law, he cannot use such space gratuitously because that would prejudice his sister-in-law. (Pardell vs. Bartolome, 23 Phil. 450.) 7. A, B, and C are the co-owners in equal shares of a residential house and lot. During their co-ownership, the following acts were respectively done by the co-owners: 1. A undertook the repair of the foundation of the house, which was then tilting to one side, to prevent the house from collapsing. 2. loan.

B and C mortgaged the house and lot to secure a

3. B engaged a contractor to build a concrete fence all around the lot. 366

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

4.

C built a beautiful grotto in the garden.

5.

A and C sold the land to X for a very good price.

a) Is A’s sole decision to repair the foundation of the house binding on B and C? May A require B and C to contribute their 2/3 share of the expense? Reasons. b) What is the legal effect of the mortgage contract executed by B and C? Reasons. c) Is B’s sole decision to build the fence binding upon A and C? May B require A and C to contribute their 2/3 share of the expense? Reasons. d) Is C’s sole decision to build the grotto binding upon A and B? May C require A and B to contribute their 2/3 share of the expense? Reasons. e) What are the legal effects of the contract of sale executed by A, C and X? Reasons. (1992) ANS: (a) Yes. A’s sole decision to repair the foundation is binding upon B and C. B and C must contribute 2/3 of the expense. Each co-owner has the right to compel the other co-owners to contribute to the expense of preservation of the thing (the house) owned in common in proportion to their respective interests. (Arts. 485 and 488, NCC.) (b) The mortgage shall not bind the 1/3 right and interest of A and shall be deemed to cover only the rights and interests of B and C in the house and lot. The mortgage shall be limited to the portion (2/3) which may be alloted to B and C in the partition. (Art. 493, NCC.) (c) B’s sole decision to build the concrete fence is not binding upon A and C. Expenses to improve the thing owned in common must be decided upon by a majority of the co-owners who represent the controlling interest. (Arts. 489 and 492, NCC.) (d) C’s sole decision to build the grotto is not binding upon A and B who cannot be required to contribute to the expenses for the embellishment of the thing owned in common if not decided upon by the majority of the co-owners who represent the controlling interest. (Arts. 489 and 492, NCC.) 367

1 Arts. 484-501

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

(e) The sale to X shall not bind the 1/3 share of B and shall be deemed to cover only the 2/3 share of A and C in the land. (Art. 493, NCC.) B shall have the right to redeem the 2/3 share sold to X by A and C since X is a third person. (Art. 1620, NCC.) 8. If the different stories of a house belong to different owners, and the titles of ownership do not specify the terms under which they should contribute to the necessary expenses and there exists no agreement on the subject, what rules shall be observed? ANS: The following rules shall be observed: (1) The main and party walls, the roof and the other things used in common, shall be preserved at the expense of all the owners in proportion to the value of the story belonging to each; (2) Each owner shall bear the cost of maintaining the floor of his story; the floor of the entrance, front door, common yard and sanitary works common to all, shall be maintained at the expenses of all the owners pro rata; (3) The stairs from the entrance to the first storey shall be maintained at the expense of all the owners pro rata, with the exception of the owner of the ground floor; the stairs from the first to the second storey shall be preserved at the expense of all, except the owner of the ground floor and the owner of the first story; and so on successively. (Art. 490, NCC.) 9.

(a) What is meant by condominium? (b) Who has title to the condominium project?

ANS: (a) According to the Condominium Act (R.A. No. 4726), a condominium is an interest in real property consisting of a separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. (Sec. 1.) (b) We must qualify pur answer. When we speak of the condominium project, we refer to the entire parcel of real property divided or to be divided in condominiums, including all structures 368

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

thereon. (Sec. 3[c], R-A. No. 4726J Thus, as far as the unit of the project which is being used by a condominium owner is concerned, such owner has title thereto, but as far as the common areas, including the land, are concerned, all of the condominium owners have an undivided interest or title thereto. However, title to such common areas, including the land, may be held by a corporation (hereinafter known as the condominium corporation) in which the holder of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. (Sec. 1, R A . No. 4726.) 10. If you are the owner of a unit in a condominium project, such as an apartment, office or store, can you transfer your interest in the project to a third person? Explain your answer. ANS: Yes, I can. However, the limitations prescribed by Sec. 5 of the Condominium Act must be observed. According to this section “Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interest in the common areas or, in a proper case, the membership or shareholding in the condominium corporation: Provided, however, That where the common areas in the condominium project are held by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to person other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.” 11. Under the Condominium Law, when can the owner of a unit demand for the partition by sale of the condominium project? ANS: According to Sec. 8 of the Condominium Law, when sev­ eral persons own condominiums in a condominium project, an action 369

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

may be brought by one or more such persons for partition by sale of the entire project, as if the owners of all of the condominiums in such project were co-owners of the entire project in the same proportion as their interests in the common areas: Provided, however, That a partition shall be made only upon a showing: (1) That three (3) years after damage or destruction to the project which renders a material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction; or (2) That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than 30% interest in the common areas are opposed to repair or restoration of the project; or (3) That the project has been in existence in excess of 50 years, that it is obsolete and uneconomical, and that condominium owners holding in aggregate more than 50% interest in the common areas are opposed to repair, restoration or modelling or modernizing of the project; or (4) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than 70% interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or (5) That the conditions for such partition by sale set forth in the declaration of restrictions duly registered in accordance with the terms of this Act have been met. 12. Distinguish between the right of a co-owner to make repairs for the preservation of the property owned in common, to perform acts of administration, and to perform acts of ownership or alteration. ANS: (1) With regard to acts of preservation: Repairs for preservation may be made at the will of one of the co-owners, but he must, if practicable, first notify the other co-owners of the necessity for such repairs. (Art. 489, NCC.) 370

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Arts. 484-501

(2) With regard to acts o f administration: Acts of ad­ ministration. can be performed only with the concurrence of the ma­ jority of the co-owners. (Art. 492, NCC.) (3) With regard to acts o f alteration: Acts of alteration can be performed only with the concurrence of the other co-owners. (Art. 491, NCC.) 13. What is meant by acts of administration and acts of alteration? Distinguish one from the other. ANS: Acts o f administration are those which refer to the enjoyment, exploitation and alteration of the thing which do not affect its substance or form, while acts o f alteration are those by virtue of which a co-owner, in opposition to the expressed or tacit agreement of all the co-owners, and in violation of their will, changes the thing from the state in which the others believe it should remain, or withdraws it from the use to which they believe it is intended. (See 3 Manresa 447; 2 Castan 317.) Consequently, acts of administration are transitory in charac­ ter, while acts of alteration are more permanent. The former do not affect the substance or form of the thing, while the latter relate to the substance or essence of the thing itself. And in relation to the right of a co-owner, the former require the consent or resolution of the majority of the co-owners, while the latter require the consent of all. 14. R, S, and T are co-owners of a 10-hectare agricultural land in Quezon City. R is the administrator. S and T are in Spain. May R convert the land to a memorial park without the knowledge and consent of S and T? Explain. ANS: R cannot convert the land into a memorial park without the knowledge and consent of S and T. Undoubtedly, to convert an agricultural land into a memorial park constitutes an act of alteration or ownership which, according to Art. 491 of the NCC, requires the concurrence of all the co-owners, because such act involves a change of the use for which the property is intended. According to Manresa, acts of alteration are those acts by virtue of which a co-owner, in opposition to the expressed or tacit 371

Arts. 484-501

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

agreement of all the co-owners, and in violation of their will, changes the thing from the state in which the others believe it should remain, or withdraws it from the use to which they believe it is intended. (3 Manresa 447.) Thus, even assuming that the transformation of the land into a memorial park will benefit all the co-owners, the law still requires the concurrence of all. (Art. 491, NCC.) 15, Three of four brothers, the sole heirs of their deceased parents, agreed to convert a ricefield in the estate into a subdivision and spend the money, also left by their parents, for developing the subdivision. The fourth son disagreed and brought a suit to enjoin his brothers from proceeding with the subdivision and spending the money they inherited to its development. Will the action prosper? Why? (1983) ANS: Yes, the action commenced by the fourth son against his three brothers will prosper. Undoubtedly, to convert a ricefield into a subdivision and to spend their inheritance in order to develop the subdivision constitute acts of alteration which, according to the NCC, require the concurrence of all the co-owners, because such acts involve changes of the use for which the properties are intended. Consequently, even assuming that the transformation of the ricefield will benefit all of the co-owners, the concurrence of all the four brothers to such transformation is still essential. (Note: The above answer is based on Art. 491 of the NCC.)

16. How do you determine the majority of the co­ owners? What is the effect if a co-owner desires to make an improvement on the property, but he cannot secure the consent of the majority? ANS: To constitute a majority, the resolution must be approved by the co-owners who represent the controlling interest in the object of the community property. (Art. 492, par. 2, NCC.) Should there be no majority, or should the resolution of the majority be seriously prejudicial to those interested in the property owned in common, the court, at the instance of an interested party, shall order such measures as it may deem proper, including the appointment of an administrator. (Art. 492, par. 2, NCC.) 372

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Arts. 484-501

17. Who has the right of administration of the property owned in common? ANS: The management of the property owned in common lies, in the first place, in the co-owners themselves. In this management, the majority of interest control, and their decisions are binding upon the minority. However, the administration may be delegated by the co-owners to one or more persons, whether co-owners or not. In such case, the powers and duties of such administrators shall be governed by the rules on agency. Should there be no majority, or should the resolution of the majority be seriously prejudicial to those interested in the property owned in common, the court, at the instance of an interested party, may order the appointment of an administrator. (2 Tolentino, NCC, pp. 163-164; Art. 492, NCC; Gala vs. Rodriguez, 70 Phil. 124J 18. Is the lease of the entire community property an act of administration or an act of ownership or alteration? (1988) ANS: Lease of personal property is a mere act of administration, and therefore, requires the resolution of the majority of the co-owners. However, lease of real property may be an act of administration or an act of alteration depending upon the circumstances of each particular case. Thus: (1) If the lease is recorded in the Registry of Property, whatever may be the duration thereof, it is an act of ownership, and therefore, requires the unanimous consent of all the co-owners, since under the law, a special power of attorney is required. (See Art. 1647, NCC.) (2) If the lease is not recorded in the Registry of Property, but the duration thereof is more than one year, it is also an act of ownership, and therefore, requires the unanimous consent of all the co-owners, since, again, under the law, a special power of attorney is required. (See Art. 1878, No. 8, NCC.) (3) If the lease, however, is not recorded in the Registry of Property and the duration thereof is only one year or less, it is an act of administration, and therefore, merely requires the resolution of the majority of the co-owners. 19. H died in 1958, survived by his widow, W, and several legitimate children. During their marriage, the two (2) acquired several parcels of land which they registered 373

5

Arts. 484-501

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

as conjugal properties. After H’s death, W mortgaged all of her rights in such properties in favor of X. When the latter tried to register the mortgage, the Register of Deeds refused on the ground that W’s rights were merely inchoate there being no previous liquidation of the conjugal properties. Is this refusal in accordance with law? ANS: In Taningco vs. Register of Deeds (5 SCRA 281), a case with similar facts, the SC held that the refusal of the Register of Deeds to register the mortgage is not in accordance with law. It is well-settled that the conjugal property, at the time of the dissolution of the marriage, ceases to belong to the conjugal partnership and becomes community property, by operation of law, between the surviving spouse and the heirs of the deceased. Consequently, under Art. 493 of the NCC, such surviving spouse may alienate, assign or mortgage her undivided share, subject to the limitation that the alienation or mortgage, with respect to the co-owners, shall be limited to what will eventually be allotted to her during the partition upon the termination of the co-ownership. 20. How may co-ownership be terminated or extin­ guished? ANS: Co-ownership may be terminated by: (1) The merger or consolidation in one of the co-owners of all the shares of the other co-owners; (2) The destruction or loss of the thing or right owned in common; (3)

Prescription in favor of a third person or a co-owner; or

(4)

Partition of the property owned in common. (3 Manresa

486.) 21. Will redemption by a co-owner of a co-owned prop­ erty, in its entirety, terminate or extinguish co-ownership? ANS: The fact that a co-owner redeems a co-owned property in its entirety, shouldering the expenses therefor, does not make said co-owner the owner of it all. The redemption made by him does not put an end to the existing state of co-ownership. The property 374

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

remains to be in a condition of co-ownership. (Adille vs. CA, G.R. No. 44546, January 29,1988.) The redemption of property, however, entails a necessary expense. Necessary expenses may be incurred by one co-owner but this is subject to his right to collect reimbursement from the remaining co-owners. 22. Can a co-owner acquire exclusive ownership over the property owned in common by prescription? ANS: As a general rule, he cannot. However, if — (1)

he repudiates the rights of the other co-owners;

(2) such act of repudiation is brought to the knowledge of such co-owners; and (3) the evidence thereon is clear and conclusive, he may be able to acquire exclusive ownership over the property by prescription; but only (4) after the lapse of the period fixed by law. (See Lagura vs. Levantino, 71 Phil. 566; Mallari vs. Sunga, 92 Phil. 350; Bargayo vs. Camumot, 40 Phil. 857; Africa vs. Africa, 42 Phil. 902.) A mere silent possession by a co-owner, his receipt of rents, fruits or profits from the property, the erection of buildings and fenc­ es and the planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear, complete and conclusive evidence that he exercised acts of possession which unequivocally constituted an ouster or deprivation of the rights of the others. (Guillen vs. CA, G.R. No. 83175, December 4, 1989.) 23. Can the possession of a co-owner ripen into owner­ ship? Why? ANS: The possession of a co-owner cannot ripen into ownership for the reason that the possession was merely in the concept of a trustee for the other co-owners. In Salvador vs. CA, 243 SCRA 239, the Court held that: “The possession o f a co-owner is like that o f a trustee and shall not be regarded as adverse to the other co-owners but in 375

1 Arts. 484-501

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

fact as beneficial to all o f them. Acts which may be considered adverse insofar as owner, his receipt o f rents, fruits or profits from the property, erection o f buildings and fences and the planting o f trees thereon, and the payment o f land taxes, cannot serve as proof o f exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts o f posses­ sion which unequivocably constituted an ouster or deprivation o f the rights o f the other co-owners "Thus, in order that a co-owner’s possession may be deemed adverse to the cestui que trust or the other co-owners, the follow­ ing elements must occur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-owners; (2) that such positive acts o f re­ pudiation have been made known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must be clear and convincing” 24. Robert, Ricky and Philip are brothers. They pur­ chased from their parents specific portions of a parcel of land as evidenced by three separate deeds of sale, each deed referring to a particular lot in metes and bounds. When the deeds were presented for registration, the Register of Deeds could not issue separate certificates of title due to the ab­ sence of a subdivision plan. The new title had to be issued therefore, in the names of the brothers as co-owners of the entire property. The situation has not changed up to now, but each of the brothers has been receiving rentals exclusively from the lot actually purchased by him. Robert sells his lot to a third person, with notice to his brothers. To enable the buyer to secure a new title in his name, the deed of sale was made to refer to an undivided interest in the property of the seller (Robert), with the metes and bounds of the lot sold be­ ing stated. Ricky and Philip reacted by signifying their exer­ cise of their right of redemption as co-owners. Robert, in his behalf and in behalf of his buyer, contends that they are no longer co-owners, although the title covering the property has remained in their name as such. May Ricky and Philip still redeem the lot sold by Robert? Explain. (2002) 376

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

ANS: No, they may not. Under Art. 493 of the NCC, each co­ owner has full ownership of his part and of the fruits and benefits pertaining thereto, and he may alienate, assign or mortgage the por­ tion which may be allotted to him upon the termination of the coownership. It appears that while there is a single certificate of title, the three lots are distinguishable from each other. 25. Spouses Sergio and Marimar Concierto mortgaged their townhouse located at Tierra Pura to secure the loan extended to them by the lender/mortgagee, the Bank of the Philippine Islands. Spouses Concierto, however, failed to pay their loan obligations with the bank. Thus, the bank foreclosed the property. Subsequently, both spouses died. (a) One of the heirs, Mara Clara, redeemed the fore­ closed property within the one-year period of redemption. Will redemption by Mara Clara extinguish the co-ownership among the heirs of Spouses Concierto? (b) In a case where none of the heirs of Spouses Concierto redeemed the foreclosed property within the oneyear redemption period but Mara Clara was able to purchase from the mortgagee bank (to whom the property was sold at the foreclosure sale) after the redemption period had expired, will such purchase by Mara Clara extinguish the coownership among the heirs of Spouses Concierto? ANS: (a) Where a lot and improvements thereon were mort­ gaged by the deceased parents, a co-ownership existed among the heirs during the period given by law to redeem the foreclosed prop­ erty. Redemption by one during this period would inure to the ben­ efit of all. (b) 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 had been issued in its 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 parents9 former property and permitted the consolidation of ownership and issuance of a new title, the co377

Arts. 484-501

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

ownership was extinguished. (Annie Tan vs. CA, G.R. No. 79899, April 24,1989.) 26. When is the partition of the community property at the instance of a co-owner not allowed? ANS: The partition of the community property is not allowed in the following cases: (1) When the co-owners have agreed to keep the thing undivided for a certain period of time, not exceeding ten years (Art. 494, par. 2, NCC.); (2) When it is prohibited by the donor or testator for a period which shall not exceed 20 years, if the thing was acquired either by donation or succession (Art. 494, par. 3, NCC.); (3) When it is prohibited by law, such as in the case of party walls and the family home (Art. 494, par. 4, NCC.); or (4) When to do so would render the thing unserviceable for the use for which it is intended, although the co-ownership may still be terminated in accordance with Art. 498 of the NCC. (Art. 495, NCC.) 27. A, a co-owner of a property with B, succeed in acquiring a Torrens title in his own name to the property. Five years after B learned of A’s action, B filed an action for partition of the property. May A plead prescription of B’s cause of action? Explain your answer. (1970) ANS: Assuming that 10 years had not yet lapsed since A succeeded in acquiring a Torrens title in his own name to the subject property, it is submitted that he cannot yet plead prescription of B’s cause of action. In reality, the action for partition commenced by B is an action for reconveyance. And rightly so, because Art. 1456 of the NCC declares that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Since an implied trust was certainly created by operation of law in the instant case by the act of A in acquiring a Torrens 378

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Co-Ownership

Arts. 484-501

title to the property in his own name, the remedy of B is an action for reconveyance of his share or an action for partition which has all of the effects of an action for reconveyance. However, it is now well-settled in this jurisdiction that the right to enforce an implied trust in one’s favor shall prescribe after ten years. (Gerona vs. De Guzman, L-19060, May 29, 1964; Buencamino vs. Matias, 16 SCRA 849; Araneta vs. Perez, 17 SCRA 643; Pascual vs. Meneses, 20 SCRA 219; Julio vs. Dalandan, 21 SCRA 543; Cuaycong vs. Cuaycong, 21 SCRA 1192; Fabian vs. Fabian, 22 SCRA 231; Bueno vs. Reyes, 27 SCRA 1179.) The period is counted from the date the trustee set up a title adverse to that of the beneficiary. Normally, this would take place at the time a new certificate of title is issued in the name of the trustee. The reason for this is the fact that such registration constitutes a notice to the whole world. (Gerona vs. De Guzman, supra; Fabian vs. Fabian, supra.) 28. One of the co-owners of a parcel of land took possession of a part of it, but did not by any express or implied act show that he repudiated the co-ownership. Can the other co-owners ask for partition? ANS: The co-owner can ask for partition. This is because his possession hardly proved an act of repudiation as there was no showing that said possession was to the exclusion of the other co­ heirs. The action for partition has not yet prescribed. An action to demand partition is imprescriptible or cannot be barred by laches. (Del Banco vs. IAC, 156 SCRA 57.)

379

Title IV SOME SPECIAL PROPERTIES (Arts. 502-522) (P.D. No. 1067) {Note: The provisions of Secs. 1, 2, 3, 4 and 5 [Arts. 502-518], Chapter 1, Title IV, of the NCC of the Philippines have already been repealed by P.D. No. 1067, otherwise known as the Water Code of the Philippines [See Art. 100, P.D. No. 1067]. This new law took effect on Dec. 31, 1976. Although this new Code was not taken up in the Bar Examinations of 1977 to 1985, we have selected some basic provisions thereof which may be taken up in future Bar Examinations.) 1. What are the objectives of the Water Code of the Philippines? ANS: The objectives of the Water Code of the Philippines are: (a) To establish the basic principles and framework relating to the appropriation, control and conservation of water resources and to achieve the optimum development and rational utilization of these resources; (b) To define the extent of the rights and obligations of water users and owners including the protection and regulation of such rights; (c) To adopt a basic law regarding the ownership, appropria­ tion, utilization, exploitation, development, conservation and pro­ tection of water resources and rights to land related thereto; and (d) To identify the administrative agencies which will enforce the Water Code. (Art. 2, P.D. No. 1067.) 2. What are the underlying principles of the Water Code of the Philippines? ANS: The underlying principles of the Water Code of the Philippines are: (a)

All waters belong to the State. 380

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Some Special Properties

Arts. 502-522

(b) All waters that belong to the State cannot be subject to acquisitive prescription. (c) The State may allow the use or development of waters by administrative concession. (d) The utilization, exploitation, development, conservation and protection of water resources shall be subject to the control and regulation of the government through the National Water Resources Council. (e) Preference in the use and development of waters shall consider current usages and be responsive to the changing needs of the country. (Art. 3, P.D. No. 1067.) 3. Code?

What is meant by “waters” as used in the Water

ANS: “Waters” as used in the Water Code, refers to water under the ground, water above the ground, water in the atmosphere and the waters of the sea within the territorial jurisdiction of the Philippines. (Art. 4, P.D. No. 1067.) 4.

What waters belong to State?

ANS: The following belong to the State: (a)

Rivers and their natural beds;

(b) Continuous or intermittent waters of springs and brooks running in their natural beds and the beds themselves; (c)

Natural lakes and lagoons;

'(d) All other categories of surface waters such as water flowing over lands, water from rainfall whether natural or artificial, and water from agricultural run-off, seepage and drainage; (e)

Atmospheric water;

(f)

Subterranean or ground waters; and

(g)

Seawater. (Art. 5, P.D. No. 1067.)

The following waters found on private lands also belong to the State: (a)

Continuous or intermittent waters rising on such lands; 381

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Some Special Properties

(b)

Lakes and lagoons naturally occurring on such lands;

(c)

Rain water falling on such lands;

(d)

Subterranean or ground waters; and

(e)

Waters in swamps and marshes. (Art. 6, P.D. No. 1067.)

5. Even waters found on private lands belong to the State according to the Water Code. May the owner of the land where the water is found use the same? Explain. ANS: The owner of the land where the water is found may use the same for domestic purposes without securing a permit, provided that such use shall be registered, when required by the National Water Resources Council. The Council, however, may regulate such use when there is wastage, or in times of emergency. (Art. 6, P.D. No. 1067.) Additionally, subject to the provisions of the Water Code, any person who captures or collects water by means of cisterns, tanks or pools shall have exclusive control over such water and the right to dispose of the same. (Art. 7, P.D. No. 1067.) 6. (1) What is meant by appropriation of waters, as used in the Water Code? (2)

For what purposes may water be appropriat­

ed? ANS: (1) Appropriation of waters, as used in the Water Code, is the acquisition of rights over the use of waters or the taking or diverting of waters from a natural source in the manner and for any purpose allowed by law. (Art. 9, P.D. No. 1067.) (2) Water may be appropriated for the following purposes: (a)

Domestic,

(b)

Municipal,

(c)

Irrigation,

(d)

Power generation,

(e)

Fisheries,

(f)

Livestock raising, 382

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Some Special Properties

(g)

Industrial,

(h)

Recreational, and

(i)

Other purposes.

Arts. 502-522

Use of water for domestic purposes is the utilization of water for drinking, washing, bathing, cooking or other household needs, home gardens, and watering of lawns or domestic animals. Use of water for municipal purposes is the utilization of water for supplying the water requirements of the community. Use of water for irrigation is the utilization of water for producing agricultural crops. Use of water for power generation is the utilization of water for producing electrical or mechanical power. Use of water for fisheries is the utilization of water for the propagation and culture of fish as a commercial enterprise. Use of water for livestock raising is the utilization of water for large herds or flocks of animals raised as a commercial enterprise. Use of water for industrial purposes is the utilization of water in factories, industrial plants and mines, including the use of water as an ingredient of a finished product. Use of water for recreational purposes is the utilization of water for swimming pools, both houses, boating, water skiing, golf courses and other similar facilities in resorts and other places of recreation. (Art. 10, P.D. No. 1067.) 7. (1) What is meant by water right and water permit under the Water Code? (2) May any person appropriate or use natural bodies of water without securing a water permit? Explain. ANS: (1) Water right is the privilege granted by the government to appropriate and use water. Water permit is the document evidencing the water right. (Art. 13, P.D. No. 1067.) (2) Generally, no person, including government instru­ mentalities or government-owned or controlled corporations, shall 383

Arts. 502-522

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Some Special Properties

appropriate water without a water right, which shall be evidenced by a document known as a water permit. However, any person may appropriate or use natural bodies of water without securing a water permit for any of the following: (a) Appropriation of water by means of handcarried recep­ tacles; and (b) Bathing or washing, watering or dipping of domestic or farm animals, and navigation of watercrafts or transportation of logs and other objects by floatation. (Arts. 13,14, P.D. No. 1067.) 8.

What is the Regalian Doctrine?

ANS: The Regalian Doctrine is the doctrine recognized in our Constitution whereby ownership of minerals and all forces of potential energy and other natural resources are reserved for the State. (Art. XII, Sec. 2,1987 Constitution.)

384

Title V POSSESSION (Arts. 523-561) 1.

Define possession.

ANS: Possession is the holding of a thing or the enjoyment of a right, either by material occupation or by the fact of subjecting the thing or right to the action of our will. (4 Manresa 18; Art. 523, NCC.) 2.

What are the requisites (elements) of possession?

ANS: The requisites of possession are: (1) The corpus or holding or material detention or enjoyment of a thing or right; and (2) right. 3.

The animus possidendi or intent to possess the thing or

What are the different degrees of possession?

ANS: The degrees of possession are: (1) Possession without any title whatsoever in violation of the right of the true owner, such as that of a thief. (2) Possession with a juridical title, but not in concept of owner, such as that of a lessee, depositary, or pledgee. (3) Possession with a just title, or a title which is sufficient to transfer ownership, but not from the true owner, such as that of a person who buys a thing from one who pretends to be the owner but is in fact not the owner thereof. (4) Possession with a just title from the true owner. (3 Sanchez Roman 406.) 385

Arts. 523-561

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Possession

4. Distinguish between jus possessionis and jus possidendi. ANS: Jus possessionis is the right of possession of a thing or right independent of the right of ownership, while jus possidendi is the right to the possession of a thing or right as a consequence of ownership. (2 Castan 111.) 5.

What are the different classes of possession?

ANS: Under the NCC, possession is classified into: (1) Possession in one’s own name or possession in the name of another (Art. 524, NCC.); (2) Possession in concept of owner or possession in concept of holder (Art. 525, NCC.); and (3) Possession in good faith or possession in bad faith. (Art. 526, NCC.) 6. sion.

(a)

Distinguish between ownership and posses­

(b) Will an owner’s act of allowing another to occupy his house rent-free-create a permanent and indefeasible right of possession in the latter’s favor? ANS: (a) Possession and ownership are distinct legal concepts. Ownership exists when a thing pertaining to one person is completely subjected to his will in a manner not prohibited by law and consistent with the rights of others. Ownership confers certain rights to the owner, one of which is the right to dispose of the thing by way of sale. On the other hand, possession is defined as the holding of a thing or the enjoyment of a right. Literally, to possess means to actually and physically occupy a thing with or without right. Possession may be had in one of two (2) ways: possession in the concept of an owner and possession of a holder. Possessors in the concept of owners may be the owners themselves or those who claim to be so. On the other hand, those who possess as mere holders acknowledge in another a superior right which he believes to be ownership, whether his belief be right or wrong. (Tabuso vs. CA, G.R. No. 108558, June 21, 2001.)

(b) An owner’s act of allowing another to occupy hi house rent-free, does not create a permanent and indefeasible right 386

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Arts. 523-561

of possession in the latter’s favor. The occupation of the property by the latter is not in the concept of owner because the latter’s stay is merely tolerated. (Tabuso vs. Court of Appeals, G.R. No. 108558, June 21, 2Q01.) 7. O, the owner of a riceland, leases the same to L who, in turn, subleases it to S. S hires a kasama, K, who actually cultivates the land, but does not stay thereon. As a matter of fact, nobody lives on the land. Who among O, L, S, and K may be said to have possession of the rice land? Explain your answer. ANS: It is submitted that only S and K may be said to have possession of the rice land — the first, in the concept of a mere holder, but in his own name, and the second also in the concept of a mere holder, but in the name of another. There is not much of a question regarding the possession in fact by K. While it is true that he does not stay on the land, and, as a matter of fact, nobody lives there, yet he actually cultivates the land. Therefore, the doctrine of constructive possession can be applied to his case. (Ramos vs. Dir. o f Lands, 39 Phil. 175.) But then, what is the character of his possession? It must be noted that he is only a mere “kasama,” a laborer hired by the sublessee, S. He is therefore, merely an agent of S; his personality is merely an extension of that of S; he is not a real possessor, although he is exercising the possession of the real possessor. It is, therefore, submitted that he is in possession in the name of another, and at the same time, in the concept of a mere holder by virtue of his agreement with his principal, S. From what has already been stated, the only logical conclusion as far as S is concerned is that he is the real possessor, but only in the concept of a mere holder. His possession, however, is being exercised through his hired laborer, K. Although he is only a mere holder, he is possessing the property in his own name by virtue of his contract with the lessee. 8. What is meant by (a) a possessor in good faith? (b) a possessor in bad faith? What requisites must concur in order that one may be classified as a possessor in good faith or a possessor in bad faith? 387

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ANS: A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw or defect which invalidates it, while a possessor in bad faith is one who is aware that there exists in his title or mode of acquisition some flaw or defect which invalidates it. (Art. 526, NCC.) Requisites for possession in good faith. — (1) The possessor should have acquired the thing through some title or by some mode of acquisition recognized by law; (2) there must be a flaw or defect in such title or mode of acquisition; and (3) the possessor should not be aware of such flaw or defect. Requisites for possession in bad faith. — (1) The possessor should have acquired the thing through some title or by some mode of acquisition recognized by law; (2) there must be a flaw or defect in such title or mode of acquisition; and (3) the possessor should be aware of such flaw or defect. 9. acter?

When does possession in good faith lose this char­

ANS: Possession in good faith loses this character from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. (Art. 528, NCC.) If there are no facts from which the interruption of good faith may be determined, and an action is filed to recover possession, good faith ceases from the moment the possessor receives the judicial summons to appear at the trial. (Tacas vs. Tobon, 53 Phil. 356; Jison vs. Hernaez, 74 Phil. 66; Dianumon vs. Pangilinan, 46 Off. Gaz. 1645; 2 Tolentino, NCC, p. 215.) 10. How is possession acquired? ANS: Possession is acquired: (1) right; or

By the material occupation of a thing or the exercise of a

(2)

By subjecting a thing or right to the action of our will; or

(3)

By proper acts and legal formalities. (Art. 531, NCC.)

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11. How is possession lost? ANS: A possessor may lose his possession: (1)

By the abandonment of the thing;

(2) By an assignment made to another either by onerous or gratuitous title; (3) By the destruction or total loss of the thing, or because it goes out of commerce; (4) By the possession of another subject to the provisions of Article 537, if the new possession has lasted longer than one year. But the real right of possession is not lost till after the lapse of ten years (Art. 555, NCC.); or (5)

By the recovery of the thing by the legitimate owner.

12. In a petition for reconstitution of a lost or destroyed TCT, where the petitioner-owner states that she is in possession hut somebody else is residing in the property, is the petition defective? ANS: In the case of Republic vs. Alonte, (G.R. No. 162787, June 13, 2008), where the Office of the Solicitor General contended that Lady's petition was defective because Alona testified that she and her family, not Ludy, are the ones residing on the subject lot and that it was not Ludy who is in possession as alleged in the petition, the SC held that OSG was not correct. The fact that Alona, Ludy’s attomey-in-fact, testified that it is she and her family who are residing on the subject lot, does not negate the statement in the petition for reconstitution that it is Ludy who is in possession of the lot. After all, Art. 524 of the NCC provides that possession may be exercised on one’s own name or in that of another. Obviously, Alona was exercising possession over the land in the name of Ludy. This is supported by the Certification from the Office of the City Treasurer of Quezon City which states that the real property taxes on said property declared in the name of Ludy had been paid. 13. May possession acquired through violence ripen into ownership? ANS: No. (Art. 537, NCC.) 389

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14. In case of a conflict between two (2) persons re­ garding the possession of a certain property, who shall be preferred? ANS: Possession as a fact cannot be recognized at the same time in two (2) different personalities except in the case of co-posses­ sion. Should a question arise regarding the fact of possession: (1) the present possessor shall be preferred; (2) if there are two (2) possess­ ors, the one longer in possession; (3) if the dates of the possession are the same, the one who presents a title; and (4) if all these conditions are equal, the thing shall be placed injudicial deposit pending deter­ mination of its possession or ownership through proper proceedings. (Art 538, NCC.) 15. What are the remedies which are available to a possessor in order to protect his possession? ANS. The remedies which are available to a possessor in order to protect his possession are: (1)

With regard to immovable property:

(a) Action for forcible entry and unlawful detainer, which is an action to recover the material possession of the property, and which must be instituted within one year from the time the cause of action accrues in the proper municipal or justice of the peace court. (Rule 72, Rules o f Court.) In addi­ tion to the action for forcible entry, the plaintiff may within 10 days from the filing of the complaint present a motion to secure from the court a writ of preliminary mandatory injunction to restore him in his possession. The court shall decide the motion within 30 days from the filing thereof. (Art. 539, par, 2, NCC.) This accessory remedy is also available either in an action for forcible entry or in an action for unlawful detainer where an appeal is taken, if the higher court is satisfied that the appeal is frivolous or dilatory. The period of 10 days shall be counted from the time the appeal is perfected. (Art. 1674, NCC.) (b) Accion publiciana, which is a plenary action to re­ cover the possession of the property, and which must be in­ stituted in the proper Court of First Instance within 10 years after the possession has been lost. 390

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(c) Accion reinvindicatoria, which is an action to recover the possession of the property based on ownership, and which must be instituted in the proper Court of First Instance within 10 or 30 years, as the case may be, after the owner has been deprived of his property. (2)

With regard to movable property:

Action for replevin, which is an action for the manual delivery of personal property. (Rule 60, Rules of Court.) 16. Can jus possidendi be exercised as a right to the prejudice of a party whose possession is predicated on a contract like agency, trust, pledge or lease ? ANS: Under the law, jus possidendi is a necessary incident of ownership. However, the owner cannot exercise this right to the prejudice of a party whose possession is predicated on a contract like agency, trust, pledge or lease. In the case of Metro Manila Tran­ sit Corporation vs. D.M. Consortium, Inc., (G.R. No.147594, March 7, 2007), the SC held that under the Lease Purchase Agreement between MMTC and DMCI, the latter, as lessee, had a right of pos­ session over the buses and it may be deprived of said right Only if it failed to pay its dues for three (3) consecutive months. The trial court and the appellate court established that there was actually no default on the part of DMCI. MMTC cannot now use the principle of jus possidendi as an excuse for its unwarranted act. 17. What kind of possession can serve as title for acquiring dominion? Explain briefly. ANS: Art. 540 of the NCC declares that only possession acquired and enjoyed in the concept of an owner can serve as title for acquiring dominion. Thus, if the possessor acquired possession of the property by some mode recognized by law from someone who could transfer the right of ownership thereof, the law states that such possessor has in his favor the legal presumption that he possesses with a just title (titulo verdadero y valido) and he cannot be obliged to show or prove it. (Art. 541, NCC.) However, if he acquired possession by some mode recognized by law from someone who could not transfer the right of ownership thereof, it is possible that, eventually, he shall become the absolute owner of the property once all of the requisites 391

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for acquisitive prescription, whether ordinary or extraordinary, are present. In such a case, the law requires that his title must be just (titulo Colorado), true, valid and that it must be proved. (Arts. 1129, 1130,1131, NCC.) 18. Outline of the effects of possesion in good faith and possesion in bad faith. A.

B.

C.

Fruits received: 1.

Possessor in good faith entitled to fruits received while his possession is still in good faith. (Art. 544, NCC.)

2.

Possessor in bad faith shall reimburse fruits received or which legitimate possessor could have received, subject to Art. 443. (Art. 549, NCC.)

Pending fruits: 1.

Possessor in good faith and legitimate possessor shall be liable for expenses of cultivation and shall share in net harvest in proportion to the time of their possession. (Art. 545, par. 1, NCC.)

2.

Possessor in bad faith shall not have any right.

Charges: Possessor, whether in good or bad faith, and legitimate possessor shall share in proportion to the time of their possession. (Art. 545, par. 1, NCC.)

D.

Expenses: 1.

Necessary expenses — a.

b. 2.

Rights of possessor in good faith: (1)

Right of reimbursement. (Art. 546, par. 1, NCC.)

(2)

Right of retention. (Art. 546, par. 1, NCC.)

Rights of possessor in bad faith: Right reimbursement only. (Art. 546, par. 1, NCC.)

Useful expenses — a.

Rights of possessor in good faith: 392

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b. 3.

E.

Arts. 523-561

(1)

Right of reimbursement.

(2)

Right of retention. (Art. 546, par. 2, NCC.)

(3)

Limited right of removal. (Art. 547, NCC.)

Rights of possessor in bad faith: None.

Ornamental expenses — a.

Rights of possessor in good faith: Limited right of removal. (Art. 548, NCC.)

b.

Rights of possessor in bad faith: Limited right of removal. (Art. 549, NCC.)

Deterioration or loss: 1.

Possessor in good faith — No liability, unless due to his fault or negligence after he had become possessor in bad faith. (Art. 552, NCC.)

2.

Possessor in bad faith — Always liable, whether due to his fault or negligence or due to a fortuitous event. (Art. 552, NCC.)

19. If the possessor is ousted from his possession hy the true owner of the property, what are the rights of the two (2) parties with respect to fruits received or harvested hy the possessor? ANS: The rights of the two (2) parties shall depend upon the character of the possession of the possessor. If the possessor was in good faith, he is entitled to all of the fruits received before his possession was legally interrupted. Natural and industrial fruits are considered received from the time they are gathered or severed, while civil fruits are deemed to accrue daily and belong to the possessor in good faith in that proportion. (Art. 544, NCC.) The true owner of the property, on the other hand, shall be entitled to the fruits received by the possessor after the latter’s possession was legally interrupted by the service of the judicial summons. If the possessor was in bad faith, he shall reimburse not only the fruits which he had received, but also those which the true 393

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owner could have received with the exercise of due diligence (Art. 549, 1st sentence, NCC.), after deducting expenses which he might have incurred in their production, gathering and harvesting. (Arts. 549, 443, NCC.) 20. Under the problem stated in No. 17, what are the rights of the 2 parties with respect to pending natural and industrial fruits? ANS: The rights of the two (2) parties shall depend upon the character of the possession of the possessor. If the possessor was in good faith, then both parties shall share in the expenses of cultivation as well as in the net harvest in proportion to the time of their respective possession. The owner, should he so desire, may give the possessor in good faith the right to finish the cultivation and gathering of the growing fruits as an indemnity for his part of the expenses of cultivation and the net harvest. If the possessor in good faith for any reason whatever should refuse to accept this concession, he shall lose his right to be indemnified in any other manner. (Art. 545, NCC.) If the possessor was in bad faith, the true owner shall be entitled to all of the pending fruits in accordance with the principle of accession (Art. 449, NCC.) as well as damages. (Art. 451, NCC.) 21. Under the problem stated in No. 17, what are the rights of the two parties with respect to taxes on the property and other charges? ANS: Taxes and other charges shall be divided between the possessor and the owner in proportion to the time of their respective possession, irrespective of the good or bad faith of the former. (Art. 455, par. 2, NCC.) 22. What is meant by (1) necessary expenses, (2) useful expenses, and (3) ornamental expenses or expenses for pure luxury? ANS: Necessary expenses are those which are incurred for the preservation of the thing. Useful expenses are those which are incurred for the greater productivity or utility of the thing. Expenses for pure luxury are those which are incurred for the convenience and 394

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enjoyment of the possessor but which do not affect the existence, productivity, or utility of the thing itself. 23. Under the problem stated in No. 17, what are the rights of the two (2) parties with respect to (1) necessary expenses? (2) useful expenses? (3) expenses for pure luxury? ANS: The rights of the two (2) parties with respect to such expenses shall depend upon the character of the possession of the possessor. (1)

Necessary expenses:

If the possessor was in good faith, he shall have the right to demand from the owner reimbursement of all necessary expenses. In addition, he shall also have the right to retain the thing until he has been reimbursed therefor. (Art 546, par. 1, NCC.) If he was in bad faith, he shall have only the right to demand from the owner reimbursement of all necessary expenses without any right of retention. (Art. 546, par. 1, NCC.) (2)

Useful expenses:

If the possessor was in good faith, the owner or legitimate possessor shall have the option of reimbursing to such possessor the amount of all useful expenses or of paying the increase in value which the thing may have acquired by reason thereof. If the owner chooses either option, the possessor may retain the thing until he has been reimbursed therefore. (Art. 546, par. 2, NCC.) If the owner does not avail himself of either option, the initiative passes to the possessor, in which case such possessor shall have the option of demanding from the owner reimbursement of all useful expenses with the accessory right of retention (Art. 546, par. 2, NCC.) or of removing the useful improvements, provided that such removal can be made without damage to the principal thing. (Art. 547, NCC.) If the possessor was in bad faith, he shall not have any right whatsoever. Consequently, the owner shall be entitled to all of the useful improvements without any obligation on his part. (3)

Expenses for pure luxury:

As far as ornamental expenses or expenses for pure luxury are concerned, the possessor is entitled to only one right — a limited 395

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right to remove the ornaments with which he has embellished the principal thing. If such a possessor was in good faith, he may remove the ornaments, provided that the principal thing suffers no injury thereby, and that the owner or legitimate possessor does not prefer to retain such ornaments by reimbursing to the possessor the amount expended. (Art. 548, NCC.) If the possessor was in bad faith, he may remove the ornaments, provided that the principal thing suffers no injury thereby, and that the owner does not prefer to retain such ornaments by reimbursing to the possessor the value they may have at the time he enters into possession. (Art. 549, NCC.) 24. Assuming that a possessor of a lot is a possessor in bad faith, is he entitled to either the right of retention or the right of reimbursement for useful and ornamental improvements? ANS: As far as ornamental improvements are concerned, the NCC is explicit. Art. 549 declares that “the expenses incurred in improvements for pure luxury or mere pleasure shall not be refunded to the possessor in bad faith; but he may remove the objects for which such expenses have been incurred, provided that the thing suffers no injury thereby, and that the lawful possessor does not prefer to retain them by paying the value they may have at the time he enters into possession.” However, in the case of useful improvements, Arts. 546 and 547 seem to imply that the possessor in bad faith has neither the right of retention nor the right of reimbursement. But if the lawful possessor can retain the improvements introduced by a possessor in bad faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters into possession, as a matter o f equity, said possessor in bad faith should be allowed to remove the improvements, unless the legitimate owner or possessor chooses to pay for their value at the time when said improvements were made. (Carbonell vs. CA, 69 SCRA 99,119.) (Note: With due respect, we believe that the above ruling of the SC in Carbonell vs. CA is not correct. In addition to Arts. 546 and 547, Arts. 449 to 452 of the NCC are also applicable. I do not see

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any difference between the possessor in bad faith under Arts. 546 and 547 and the builder in bad faith under Arts. 449 to 452. Under these articles (Arts. 449 to 452.), the builder in bad faith has neither the right of retention of whatever useful improvement he might have constructed nor the right to a refund of the actual amount which he spent. As a matter of fact, he is even liable for damages. And if we are going to look at the problem from the point of view of equity, how about the lawful owner or possessor who has been illegally deprived of his property? What compensation shall be given to him?) 25. A, a squatter who is sought to be evicted by the landowner, B, seeks reimbursement from the latter for the improvements he made on the property, while B demands the value of all the fruits A gathered from the land during his occupancy thereof. Is A entitled to the indemnity he prays for? Is he bound to pay for the fruits he received? Why? (1983) ANS: It must be observed that under the NCC, “improvements” may be either necessary, useful or ornamental. It must also be observed that A is a squatter. He is, therefore, a possessor in bad faith. Our answer to the first question should, therefore, be qualified thus: When it comes to necessary improvements, A is entitled to an indemnity. According to the NCC, he can demand reimbursement of the necessary expenses which he had incurred for the preservation of the land but without any right of retention. When it comes to useful improvements, A is not entitled to any indemnity whatsoever. As a matter of fact, under the NCC, he is even liable for damages. When it comes to ornamental improvements, A is not also entitled to an indemnity. He is, however, entitled to remove them provided, that such removal shall not result in injury to the principal thing. There is, however, one instance where he is entitled to an indemnity. This will take place if the lawful owner or possessor of the land prefers to retain such improvements. In such case, said owner or possessor shall then pay to A the value such improvements may have at the time he enters into the possession of the land. 397

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As far as the second question is concerned, according to the NCC, A, who is in bad faith, shall reimburse not only the fruits which he had received, but also those which the true owner could have received with the exercise of due diligence, after deducting expenses which he might have incurred in their production, gathering and harvesting. {Note: The answer to the first question is based on Arts. 546, 547 and 549 in relation to Arts. 449, 450, 451, and 452 of the NCC. The answer to the second question is based on Arts. 549 and 443 of the NCC.)

26. Can the true owner recover a movable thing from a possessor who is in possession of such thing in concept of owner? ANS: It depends. If the possessor acquired the thing in bad faith, there is no question that the owner can recover it from him without any obligation whatsoever. If he acquired it in good faith, then the true owner cannot recover it because “possession of mov­ able property acquired in good faith is equivalent to a title*” (Art. 559, par. 1, NCC.) This rule is sometimes known as the doctrine of irreinvindicability. {Aznar vs. Yapdiangco, 13 SCRA 486.) Neverthe­ less, this rule is subject to the following exceptions: first, if the true owner has lost the movable; and second, if such owner has been un­ lawfully deprived thereof. In both of these cases, the true owner can still recover the movable from the possession of anyone without any obligation whatsoever, unless the latter had acquired such movable in good faith at a public sale, in which case, the owner, who had lost it or who had been unlawfully deprived of it, cannot recover it with­ out reimbursing the price paid therefor. (Art. 559, par. 1, NCC.) 27. Gregorio lost his ring. After a few days, he found it in the possession of Hospicio who had loaned money to Z and received the ring from the latter in good faith as security. Discuss the relative rights of Gregorio and Hospicio in the light of the principle that possession of movable property acquired in good faith is equivalent to a title. (1974) ANS: In the light of the principle that possession of movable property acquired in good faith is equivalent to a title as far as the possessor Hospicio is concerned, theoretically, he has a presumptive 398

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title sufficient to serve as a basis for acquisitive prescription. Thus, as distinguished from prescription of real property, in which the just title must be proved, in prescription of personal property such title need not be proved, because it is deemed to exist when the possession is in good faith. (2 Tolentino 292, citing Sanchez Roman, Manresa, Scaevola, De Buen and Ramos.) However, in the instant case, this right has become moot and academic, because according to the problem, the possession of Hospicio was only for “a few days.” On the other hand, the legitimate owner of the ring, Gregorio, may recover said ring from the possessor Hospicio provided that he had lost it or had been unduly deprived thereof. (Art. 559, NCC.) According to the problem, he had lost the ring. Consequently, pursuant to the article cited, he can now recover the ring from Hospicio without any obligation whatsoever. The fact that the ring was pledged to Hospicio by Z as security for a loan and that he had received it from Z in good faith are of no moment. It is evident that the contract of pledge cannot be the basis of any right of Hospicio, such as the right to demand for a refund of the amount for which the ring was pledged, because the contract is void since the pledgor is not the owner of the thing which was pledged. (Art. 2085, NCC; Dizon vs. Suntay, 47 SCRA 16.) 28. A, the owner of a Buick car, was approached hy B, a dealer in second hand cars, regarding the sale of the Buick to a prospective buyer. Since A had lost his certificate of registration when he delivered the car to B to be shown to the prospective buyer, he also gave to the latter a letter addressed to the Land Transportation Office asking for the issuance of a new certificate of registration. B however, falsified the letter, converting it into an absolute deed of sale. Subsequently, after obtaining a certificate of registration, he sold the car to C, who, in turn, sold it to D. Later, A brought an action against D for the recovery of the car. Will the action prosper? ANS: Yes, the action will prosper. A had been illegally deprived of the car because of the ingenious scheme utilized by B; consequently, applying the provisions of Art. 559 of the NCC, A can now recover the property from D. While it is very true that there is a common law principle that “where one of two (2) innocent parties must suffer by a fraud perpetrated by another, the law imposes the loss upon 399

1 Arts. 523-561

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the party who, by misplaced confidence, has enabled the fraud to be committed,” nevertheless, this principle cannot be applied to this case which is covered by an express provision of the NCC. Between a common law principle and a statutory provision the latter must prevail. (Cruz vs. Pahati, 98 Phil. 788; Aznar us. Yapdiangco, 13 SCRA 486; Alcantara-Pica vs. Carigo, 53 SCRA 512.) 29. A agreed to sell his car to B for P200,000, the price to be paid after the car is registered in the name of B. After the execution of the deed of sale, A together with B, proceeded to the Land Transportation Office where the registration of the car in B’s name was effected. When A asked for payment, B told him that he was P50,000 short, and informed him that he would get it from his mother. Upon entering the house, B told A to wait in the sala while he asked his mother for the money. In the meanwhile, on the pretext that he had to show his mother the registration papers of the car, A gave them to B who thereupon entered the supposed room of his mother, ostensibly to show her the papers. That was the last time A saw B or his car. In the meanwhile, B succeeded in selling the car to C, who bought the same in good faith and for value. Question: May A recover the car from C? Reasons. ANS: Yes, A can recover the car from C. By explicit mandate of Art. 559 of the NCC, a person who has lost a movable or has been unduly deprived thereof, may recover it from the person in possession of the same. True, C in the instant case is a purchaser in good faith and for value, and that there is a common law principle that where one of two (2) innocent parties must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by misplaced confidence, has enabled the fraud to be committed, nevertheless, this principle cannot be applied to this case which is covered by an express provision of the NCC. Between a common law principle and a statutory provision, the latter must prevail. (Aznar vs. Yapdiangco, 13 SCRA 486; Cruz vs. Pahati, 98 Phil. 788; De Garcia vs. CA, 37 SCRA 129.) 30. A, a diamond merchant, turned over a P50,00G diamond ring to B for sale on commission. Instead of selling it, the latter pledged it at a pawnshop owned and operated by C, for a loan of P30,000. Later, A found out what 400

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happened. Because of C’s refusal to give up the ring to him, A brought an action for recovery of said ring against C. The latter now contends that he is a pledgee in good faith and that even assuming that A can recover the ring because he had been unduly deprived thereof by the pledgor B, he must first reimburse to the pawnshop the amount of P30,000 plus interest for which the ring stands as security. Is C correct? Reasons. (1975,1977) ANS: C is not correct. Well-settled is the rule that the conflict between the right of the owner of movable property who has lost it or has been unduly deprived thereof and that of the creditor who has loaned money thereon and holds it in pledge cannot be decided against the owner, to whom the NCC grants a right of action to recover the property from whoever may be in possession. (Art. 559, NCC; Dizon vs. Suntay, 47 SCRA 160; Arenas vs. Raymundo, 19 Phil. 46; Del Rosario vs. Lucena, 8 Phil. 535.) And this is as it should be. In the first place, the law in Art. 559 of the NCC is explicit. The legitimate owner who had lost it or had been unduly deprived thereof can recover it from a possessor in good faith. Not even the common law principle that as between two (2) innocent parties, the one who gave occasion for the fraud to be committed by reason of misplaced confidence shall be the one who shall suffer the loss, can prevail against this rule. This is so because as between a principle of equity and a statutory provision, the latter shall prevail. In the second place, the only possible basis of the claim of the pawnshop owner for reimbursement would be a contract of pledge validly constituted. Here, the pledge is void from the beginning because the pledgor is not the owner of the thing pledged; neither has he been duly authorized to pledge it. Consequently, an essential requisite is lacking. (Art. 2085, NCC.) And in the third place, from the very nature of the business of a pawnshop, the operator must necessarily assume the corresponding risks. In exchange for the high and onerous interest which constitutes its enormous profits, the business of pawnshops is always exposed to the contingency of receiving in pledge jewels and other articles that have been robbed, stolen, or embezzled from their legitimate owners. (See Dizon vs. Suntay, supra.) 31. A valuable diamond ring belonging to X was stolen from her residence in 1952. In 1953, while dining at La Bulakena, she recognized the ring in the finger of A, owner 401

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PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Possession

of the restaurant. Three (3) days later, the two (2) went to La Rebullida. Mr. Rebullida identified the ring as the very ring bought from him by X in 1947. Because of A’s refusal to return the ring to her, X brought an action for recovery against A. Defendant interposed the defense that she bought the ring in good faith from B; B, against whom a third-party complaint was filed, claimed that she bought it in good faith from C; C, against whom a third-party complaint was filed, turned out to be a mysterious and ephemeral figure. She could not be located. Will the action prosper? Reason. (1978) ANS: The action will prosper. The controlling provision is Art. 559 of the NCC. X, having been unlawfully deprived of the diamond ring in question, is entitled to recover it from A who is in possession of the same. The only exception the law allows is when there is acquisition in good faith by the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. As authoritatively interpreted in Cruz vs. Pahati (98 PhiL 788 [1956]), the right of the owner cannot be defeated even by proof that there was good faith in the acquisition by the possessor. There is a reiteration of this principle in Aznar vs. Yapdiangco (13 SCRA 486). Thus: “Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the NCC, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction.” (De Garcia vs. C A , 37 SCRA 129.) 32. (a) Suppose that in the above problem, A interposed the defense that she bought the ring in good faith at a public sale and she can prove it, will that make a difference in your answer? (b) Suppose that she interposed the defense that she bought the ring in good faith from a jewelry store and she can prove it, will that make a difference in your answer? ANS: (a) I will have to modify my answer. X can still recover the ring from her, but with the obligation of reimbursing the latter 402

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Arts. 523-561

the price paid therefor. (Art. 559, par. 2, NCC; De Garcia vs. CA, supra.) (b) If A can prove that she bought the ring from a jewelry store, that will change my answer entirely. The action for recovery will certainly fail. The jewelry store is a merchant’s store within the meaning of Art. 1505 of the NCC as well as the Code of Commerce. As between the purchaser at a merchant’s store and the legitimate owner of the thing who has lost it or who had been unduly deprived of it, the right of the former is superior. 32* A person identifying himself as Prof. Cruz ordered 406 books by phone from EDCA payable on delivery. EDCA prepared the invoice and delivered the books for which Cruz issued a personal check covering the purchase price of P8,995.65. Cruz sold 120 of the books to Santos who, after verifying the seller’s ownership from the invoice, paid him P I,700. Meanwhile, EDCA became suspicious of Cruz. Even before clearing his check, EDCA made inquiries from De la Salle College where he claimed to be dean, and found out that there was no such person in its employ. EDCA had Cruz arrested and, with the help of the police, seized the 120 books in the store of Santos. Santos sued for recovery. EDCA contends that Santos has not established ownership because he has not produced a receipt to prove that he bought them. Is EDCA correct? Reasons. (1991) ANS: EDCA’s contention is untenable because: (1) Under Art. 559, “the possession of movable property acquired in good faith is equivalent to a title.” (2) Santos acquired the books in good faith because she first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz. (3) EDCA was not unlawfully deprived of the books even if the check issued by Cruz was dishonored. Under Arts. 1475, 1477 and 1478 of the NCC, ownership in the thing sold shall not pass to the buyer until full payment of the purchase price only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual constructive 403

Arts. 523-561

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Possession

delivery of the thing sold even if the purchase price has not been paid. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold effectively transferred ownership to the buyer who can, in turn, transfer it to another. (EDCA Publishing & Distributing Corp. vs. Santos, G.R. No. 80298, April 26,1990.) 34. A bought in good faith a diamond ring from B. It turned out that B has stolen the same ring from C, who instituted a criminal case against B for theft. While the criminal case was pending, C filed a motion praying the court to order A to return the ring to him. Decide the motion with reasons. (1973) ANS: The motion should be denied. True, from the view point of Civil Law, Art. 5611 of the NCC is applicable. Since C, the legitimate owner of the diamond ring, had been unduly deprived thereof by B, who had stolen it from him, he can, therefore, recover it even from A, who had acquired possession thereof in good faith, without any obligation whatsoever. But he should avail himself of the proper remedy of replevin. (Rule 60 o f the Revised Rules of Court.) He cannot take a short cut by merely filing a motion in the criminal case against B. In the first place, A is entitled to be respected in his possession until ruled otherwise by a competent court; in the second place, in the meantime, A is considered the owner of the ring, and therefore, should not be compelled to surrender it to one who claims to be the owner; in the third place, the mere filing of a criminal action against B for theft does not necessarily mean that theft has in fact been committed, thus, justifying the court in disturbing the possession of the possessor; and in the fourth place, A is not a party in the criminal case, and therefore, the court has no jurisdiction over him. (Chua Kai vs. Kapunan, 104 Phil. 110.) 35. A cow stolen from Pedro was impounded in a city pound for having been caught loose in a street in violation of a city ordinance and later on sold at public auction in order to collect the impound fees and adjudicated to Juan as the best bidder for the sum of P20,000.00. Later, Pedro, who finally located the cow, demanded it from Juan but the 404

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Possession

Aits. 523-561

latter refused to surrender it unless he is paid the sum of P20,000.00. Has Pedro the right to recover the possession of the cow without paying such amount to Juan on the ground that the cow was stolen from him? ANS: Pedro has no right to recover possession of the cow without reimbursing Juan the price paid therefor. This is so in spite of the fact that it was stolen from him. While it is true that under Art. 559 of the NCC, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same, nevertheless, this rule is modified in case the latter has acquired it in good faith at a public sale. According to the same article, the owner cannot obtain its return without reimbursing the price paid therefor. Therefore, Pedro must first reimburse Juan P20,000.00 before he can recover the cow. 36. What are the different cases or instances under the NCC whereby the owner of a movable who has lost it or who has been unduly deprived thereof can no longer recover it from the possessor? ANS: In the following cases the owner of a movable who has lost it or who has been unduly deprived thereof can no longer recover it from the possessor: (1) If recovery is no longer possible because of prescription (Art. 1132, NCC.); (2) If the possessor had acquired the thing from a person whose authority to sell the owner is by his conduct precluded from denying (Art. 1505, par. 1, NCC.); (3) If the possessor has acquired the thing from a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws (Art. 1505, No. 3, NCC.); (4) If the thing is a negotiable instrument or a negotiable document of little and the possessor is a purchaser in good faith and for value (Sec. 57, Act No. 2031; Art. 1518, NCC.); and (5) If the possessor is now the owner of the thing in accordance with the principle of “finders” keepers recognized in Art. 719 of the NCC. 405

Title VI USUFRUCT (Arts. 562-612) 1.

Define usufruct and give its requisites.

ANS: Usufruct is a real right by virtue of which a person is given the right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law provides otherwise. (Art. 562, NCC.) There are two requisites of usufruct — the essential and the accidental. The essential requisite is the right to enjoy the property of another, while the accidental requisite is the obligation of preserving the form and substance of such property. The latter is accidental because the title constituting the usufruct or the law may otherwise provide, as in the case of abnormal usufructs. (4 Manresa 322.) 2.

Distinguish usufruct from ownership.

ANS: While ownership has for its attributes: (1) the right to enjoy (jus utendi,jus fruendi,jus abutendi)} (2) the right to dispose (jus disponendi), and (3) the right to vindicate or recover the property (jus vindicandi), usufruct is limited merely to the enjoyment of the property (jus utendi and jus fruendi). 3.

Distinguish usufruct from lease. (1977)

ANS: Usufruct is distinguished from lease as follows: (1) As to nature of right — Usufruct is always a real right, whereas lease becomes a real right only when registered; (2) As to constitution — Usufruct is constituted by law, by the will of private persons expressed in acts inter vivos or in a last will and testament, and by prescription, whereas lease is as a rule constituted by contract; 406

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

Arts. 562-612

(3) As to the person constituting it — In usufruct, the person constituting it is the owner, whereas in lease, the person constituting need not be the owner; (4) As to extent — Usufruct includes the right to use and to enjoy the fruits (jus utendi and jus fruendi) of the thing, whereas lease is more limited; (5) As to repairs — The usufructuary is responsible for ordinary repairs, whereas the lessee is not; and (6) As to taxes — The usufructuary is responsible for taxes on the fruits, whereas in lease the lessee is not. 4.

How may usufruct be constituted?

ANS: A usufruct may be constituted: (1) by law, (2) by the will of private persons expressed in acts inter vivos, (3) by the will of private persons expressed in a last will and testament, and (4) by prescription. (Art. 563, NCC.) 5. Who shall be entitled to the natural, industrial and civil fruits of the property in usufruct? ANS: General rule — the usufructuary shall be entitled to all the natural, industrial and civil fruits of the property in usufruct. (Art. 566, NCC.) With respect to hidden treasure which may be found on the property, he shall be considered a stranger, (ibid.) Special rules with respect to natural and industrial fruits — (1) Natural or industrial fruits growing at the time the usufruct begins, belong to the usufructuary. In this case, such usufructuary has no obligation to refund to the owner any expenses incurred. (2) Those growing at the time the usufruct terminates, belong to the owner. In this case, such owner shall be obliged to reimburse at the termination of the usufruct, from the proceeds of the growing fruits, the ordinary expenses of cultivation, for seed, and other similar expenses incurred by the usufructuary. (Art. 567, NCC.) Special rules with respect to civil fruits. Civil fruits are deemed to accrue daily, and belong to the usufructuary in proportion to the time the usufruct may last. (Art. 569, NCC.) Thus 407

1 Arts. 562-612

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

(1) If the usufructuary has leased the property, and the usufruct should expire before the termination of the lease, he or his heirs or successors shall receive only a proportionate share of the rent. (Art. 568, NCC.) (2) If the usufruct consists either in the right to receive (a) rents, or (b) periodical pensions, or (c) the interests on bonds or securities payable to bearer or in the (d) enjoyment of benefits accruing from a participation in any industrial or commercial enterprise, the date of distribution of which is not fixed, such rents or pensions, or interests, or benefits, which are all considered civil fruits belong to the usufructuary in proportion to the time the usufruct may last. (Art. 570, NCC.) 6.

What are abnormal usufructs?

ANS: Abnormal usufructs are those where the usufructuary does not have the obligation of preserving the form and substance of the property which is the object of the usufruct. Thus, according to the following articles: Whenever the usufruct includes things which, without being consumed, gradually deteriorate through wear and tear, the usufructuary shall have the right to make use thereof in accordance with the purpose for which they are intended and shall not be obliged to return them at the termination of the usufruct except in their condition at that time; but he shall be obliged to indemnify the owner for any deterioration they may have suffered by reason of his fraud or negligence. (Art. 573, NCC.) Whenever the usufruct includes things which cannot be used without being consumed, the usufructuary shall have the right to make use of them under the obligation of paying their appraised value at the termination of the usufruct if they were appraised when delivered. In case they were not appraised, he shall have the right to return the same quantity and quality* or their current price at the time the usufruct ceases. (Art. 574, NCC.) 7.

May money be the object of usufruct?

ANS: Yes. (Art. 574, NCC; Alunan vs. Veloso, 52 Phil. 545; Vda. de Albar vs. Fabie, 106 Phil. 855J 408

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

8.

Arts. 562-612

May a right of usufruct be alienated?

ANS: We must distinguish. As far as voluntary usufructs are concerned, undoubtedly, they can be alienated. This is clear from the provisions of Art. 572 of the NCC. Excepted from this rule are purely personal usufructs and those which are subject to caution juratoria under Art. 587 of the Code. As far as legal usufructs are concerned, such as the usufruct which parents have over the property of their unemancipated children, because of their nature, it is evident that they cannot be alienated. 9.

What is meant by caucion juratoria?

ANS: Caucion juratoria refers to the case contemplated in Art. 587 of the NCC whereby the usufructuary, being unable to file the required bond or security, files a verified petition in the proper court asking for the delivery of the house and furniture necessary for himself and his family without any bond or security. The same rule can also be applied to the instruments or tools necessary for an industry or vocation in which the usufructuary is engaged. 10. What are the obligations of the usufructuary? ANS: The obligations of the usufructuary at the commencement of the usufruct are: (1)

To make an inventory of the property; and

(2)

To give the necessary security. (Art, 583, NCC.)

His obligations during the pendency of the usufruct are: (1) To take care of the property as a good father of a family (Art. 589, NCC.); ' (2) NCC.);

To make ordinary repairs on the property (Art 592,

(3) To notify the owner in case the need for extraordinary repairs on the property is urgent (Art. 593, NCC.); (4) To pay the annual charges and taxes and those considered as a lien on the fruits (Art. 596, NCC.); (5) To notify the owner of any act of a third person that may be prejudicial to the right of ownership (Art. 601, NCC.); and 409

Arts. 562-612

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

(6) To pay the expenses, costs and liabilities in suits with regard to the usufruct. (Art. 602, NCC.) His obligation upon the termination of the usufruct is to deliv­ er the thing to the owner, without prejudice to the right of retention pertaining to him or his heirs for taxes and extraordinary expenses which should be reimbursed. (Art. 612, NCC.) 11. When is the usufructuary excused from the obliga­ tion of giving a bond or security? ANS: There are four (4) instances when the usufructuary is excused from such obligation. They are: (1) When no one will be injured by the lack of a bond or security (Art. 585, NCCJ; (2) When the donor has reserved the usufruct of the property donated (AH. 584, NCC.); (3) In the case of parents who are usufructuaries of their unemancipated children’s property, except when the parents contract a second marriage (Ibid.); and (4) In the case of usufructs subject to caucion juratoria under Art. 587 of the NCC. 12. If the usufructuary incurs necessary, useful and ornamental expenses, what are his rights? ANS: The usufructuary shall have the right to demand reimbursement from the owner of all necessary expenses which he might have incurred for the preservation of the property. (Art. 546, NCC.) This right, however, is not available to him with regard to useful and ornamental expenses, but he may remove the improvements provided that it is possible to do so without damage to the property. (Art. 579, NCC.) In addition, he may set off such improvements against any damage to the same. (Art. 580, NCCJ 13. In usufructs, who is responsible for repairs and taxes? ANS: In the case of repairs, we must distinguish. As far as ordinary repairs, or those required by the wear and tear due to the natural use of the thing and are indispensable for its preservation, 410

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

Arts. 562-612

are concerned, the usufructuary is responsible; however, as far as extraordinary repairs, or those which are neither required by the wear and tear due to the natural use of the thing nor are indispens­ able for its preservation, are concerned, the naked owner is respon­ sible. (Arts, 592, 593, NCC.) In the case of taxes, again, we must distinguish. As far as those imposed upon or which constitute a lien on the fruits are concerned, the usufructuary is responsible; however, as far as those imposed directly upon the thing or capital itself are concerned, the naked owner is responsible. (Arts. 596, 597, NCC.) 14. Does the usufruct reserved by the vendor in the deed of sale over lots then vacant give the usufructuary the right to receive the rentals of building commercial building thereafter constructed thereon by the vendees with their own funds? Why? (1972) ANS: Assuming that the construction of the commercial building was made by the naked owners (the vendees in this case) with the express or implied consent of the usufructuary (the vendor in this case), it is submitted that the latter is not entitled to the rentals of such commercial building. Under Art. 595 of the NCC, the naked owner is allowed to make any construction or improvement of which the immovable usufruct is susceptible, provided that such construction does not cause a diminution in the usufruct or prejudice the right of the usufructuary. Here, it is evident that the construction of the commercial building has reduced the area of the land. To that extent has the value of the usufruct been diminished. Hence, in order not to prejudice the usufructuary, he should be properly indemnified by the naked owners. Thus, in Gaboya vs. Cui (27 SCRA 85), where this question was resolved for the first time by our Supreme Court, it was held that the naked owners should pay to the usufructuary a monthly rental for the area of the land occupied by their building, the amount of which shall be determined considering the rental value of lands in the neighborhood. 15. What are the modes of extinguishing usufructs? ANS: Usufruct is extinguished: (1) By the death of the usufructuary, unless a contrary intention clearly appears; 411

1 Arts. 562-612

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

(2) By the expiration of the period for which it was constituted, or by fulfillment of any resolutory condition provided in the title creating the usufruct; (3) person;

By merger of the usufruct and ownership in the same

(4)

By renunciation of the usufructuary;

(5)

By the total loss of the thing in usufruct;

(6) By the termination of the right of the person constituting the usufruct; and (7)

By prescription. (Art. 603, NCC.)

16. The subject matter of a certain litigation is a certain property located in Calle Ongpin, Manila, which was devised to A in naked ownership and to B in usufruct for life by the deceased owner. The building was destroyed during the battle for the liberation of Manila in 1945. C, a Chinaman, then offered to lease the property at a monthly rental of P500 and to construct a building thereon. The lease was finally perfected and the building constructed, but subject to a temporary compromise agreement between naked owner and usufructuary by which the former shall receive P100 of the rentals and the latter P400. Subsequently, the naked owner received from the War Damage Commission more than P8,000 as compensation for the building destroyed in 1945. Meanwhile, the usufructuary paid the real estate taxes due on the property. Because of disagreements with regard to the division of the rentals and the war damage claims, A finally brought an action against B, praying that judgment be rendered declaring the usufruct to have been terminated. If you are the judge, how will you decide the following questions — (1) Is the usufruct extinguished by the destruction of the building? (2) Who shall be entitled to the war damage claim? (3) Can the usufructuary demand reimbursement from the naked owner of real estate taxes paid by her on the property? ANS: (1) The usufruct was not extinguished by the destruction of the building. 412

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

Arts. 562-612

When B was given the life usufruct over the subject property by. mandate of the will of the original owner, his usufructuary right included not only the enjoyment of the building but also the enjoyment of the land on which the building is constructed. Hence, the monthly rentals belong to the usufructuary alone because it is a well-settled rule that rents constitute earnings of the capital invested in the acquisition of both land and building. There can be land without building, but there can be no building without land. It is clear, therefore, that when the original owner gave the life usufruct over the subject property to B, she meant to impose the encumbrance not only on the building but also on the land itself for indeed there can be no building without land. Therefore, in the case at bar, the things in usufruct are the building and the land on which the building is constructed. Under the NCC, in order that there will be an extinguishment of the usufruct, it is essential that the things in usufruct must be totally lost or destroyed. (Art. 603, No. 151, NCC.) Here, there was no total loss. The land remains intact. Therefore, pursuant to the law on usufructs (Art. 607, NCC.), B, the usufructuary, shall now have the right to make use of the land and the materials. This is a temporary measure calculated to maintain the usufruct until the building is reconstructed or replaced. (Vda. deAlbar vs. Fabie, 106 Phil. 855.) (2) As far as the amount paid by the War Damage Commission is concerned, the same should also be subject to the usufruct because it has not been used in the construction of the new building. Hence, the naked owner shall pay to the usufructuary the legal interest per annum during the whole period of the usufruct. There is, however, an alternative to this obligation. The naked owner, if she desires to be relieved of this encumbrance, may turn over the money to the usufructuary so that she may use it during her lifetime subject to the obligation to return it to the naked owner after her death. (Art. 612, NCC; Vda. de Albar vs. Fabie, supra.) (3) As far as the real estate taxes are concerned, we must distinguish between the taxes on the fruits and the taxes which are imposed directly on the capital. Under the NCC, while the first shall be at the expense of the usufructuary, the second shall be at the expense of the naked owner. (Arts. 596, 597.) Consequently, as far as the second is concerned, the usufructuary can demand reimbursement. 413

Arts. 562-612

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Usufruct

17. A sold a parcel of land with two (2) buildings there­ on to B for P50,000 subj ect to the condition that A shall re­ ceive from B by way of life pension 1/3 of the rents of the two (2) buildings. Without B’s fault, the two (2) buildings were to­ tally destroyed by fire. B now alleges that the right to receive a life pension was extinguished upon the loss of the build­ ings. Is such a contention valid? Reasons for your answer. (1978) ANS: Such a contention is not valid. In other words, A’s right to receive a life pension was not extinguished by the loss of the two (2) buildings. Under the conditions agreed upon by and between A and B that A shall receive from 3 by way of life pension 1/3 of the rents of the two (2) buildings, in reality, what was created or constituted was a life usufruct, with A as usufructuary, whereby A shall always be entitled during his lifetime to 1/3 of the rents of the two (2) buildings. It is well-settled that rents constitute earnings of the capital invested in the acquisition of both land and building. There can be land without building, but there can be no building without land. Therefore, in the case before us, the things in usufruct sire the two (2) buildings and the 1and itself. Under the NCC, in order that there will be an extinguishment of the usufruct, it is essential that the things in usufruct must he totally lost or destroyed. (Art. 603, No. [5], NCC.) Here, there was no total loss. The land remains intact. Therefore, pursuant to the law on usufructs, A, the usufructuary, shall now have the right to make use of 1/3 of the land and the materials thereon. This is a temporary measure to keep the usufruct alive until the very things destroyed are reconstructed or replaced. (Vda. deAlbar vs. Fabie, 106 Phil. 855.)

414

Title VII EASEMENTS OR SERVITUDES (Arts. 613-693) 1. Define easement or servitude. Is there any difference between easement and a servitude? ANS: An easement or servitude is an encumbrance imposed upon an immovable (servient estate) for the benefit of another immovable (dominant estate) belonging to a different owner. (Valdez vs. Tabisula, G.R. No. 175510, July 28, 2008). The immovable in favor of which the easement is established is called the dominant estate; that which is subject thereto, the servient estate. (Art. 613, NCC.) Servitudes may also be established for the benefit of a community or of one or more persons to whom the encumbered estate does not belong. (Art. 614, NCC.) In this jurisdiction, the terms ‘‘easement” and “servitude” are used interchangeably, strictly speaking, however, the first refers to the right, while the second refers to the encumbrance. 2.

What are the different classes of easements?

ANS: (1) As to recipient of benefit: Real, when the easement is in favor of another immovable, or personal, when it is in favor of a community, or of one or more persons to whom the encumbered estate does not belong. (Arts. 613, 614, NCC.) (2) As to source: Legal, if established by law, or voluntary, if established by will of the owners. (Art. 619, NCC.) Legal easements have for their object either public use or the interest of private persons. (Art. 634, NCC.) [Please note that as ruled in the case o f Valdez vs. Tabisula, GR. No. 175510, July 28, 2008, a document stipulating a voluntary

415

Arte. 613-693

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

easement must be recorded in the Registry o f Property in order not to prejudice third parties. (Arts. 708 and 709, NCC).

(3) As to its exercise: Continuous or discontinuous; apparent or non-apparent; positive or negative. Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. (Art. 615, par. 1, NCC.) Discontinuous easements are those which are used at intervals and depend upon the acts of man. (Art. 615, par. 2, NCC.) Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. (Art. 615, par. 3, NCC.) Non-apparent easements are those which show no external indication of their existence. (Art. 615, par. 4, NCC.) Positive easements are those which impose upon the owner of the servient estate the obligation of allowing something to be done or of doing it himself. (Art. 616, NCC.) Negative easements are those which prohibit the owner of the servient estate from doing something which he could lawfully do if the easement did not exist. (Art. 616, NCC.) 3.

What are the characteristics of easements?

ANS: The characteristics of easements are: (1) (2) aliena).

It is a real right (jus in re). It is a right imposed over another property (jus in re

(3) It is a limitation upon the servient owner’s right of ownership. (4)

It is a right constituted over an immovable.

(5) It is inseparable from the estate to which it actively or passively belongs. (6)

It is indivisible. 416

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

4.

Arts. 613-693

Emma bought a parcel of land from Equitable-PCI

B a n k , which acquired the same from Felisa, the original

owner. Thereafter, Emma discovered that Felisa had granted a right of way over the land in favor of the land of Georgina, which had no outlet to a public highway, but the easement was not annotated when the servient estate was registered under the Torrens system. Emma then filed a complaint for cancellation of the right of way, on the ground that it had been extinguished by such failure to annotate. How would you decide the controversy? (2001) ANS: The complaint for cancellation of easement of right of way must fall. The failure to annotate the easement upon the title of the servient estate is not among the grounds for extinguishing an easement under Art. 631 of the NCC. Under Article 617, easements are inseparable from the estate to which they actively or passively belong. Once it attaches, it can only be extinguished under Art. 631, and they exist even if they are not stated or annotated as an encumbrance on the Torrens title of the servient estate. (II Tolentino 326,1987 ed.) 5.

How are easements acquired?

ANS: Continuous and apparent easements are acquired either by virtue of a title or by prescription of ten years (Art. 620, NCC.), while continuous non-apparent easements and discontinuous easements, whether apparent or non-apparent, can only be acquired by virtue of a title, (Art. 622, NCC.) 6. Are the easements for right of way and of aqueduct acquirable by prescription? (1972) ANS: Easements for right of way and of aqueduct are not acquirable by prescription. An easement for right of way is not acquirable by prescription because, although it may be apparent, it is discontinuous in character. Under the NCC, only continuous and apparent easements can be acquired by prescription after ten years. (RonquiUo vs. Roco, 103 Phil. 84; Art. 620, NCC.) An easement of aqueduct, on the other hand, is not acquirable by prescription after 10 years because although it is continuous 417

Arts. 613-693

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

and apparent in character (Art. 646, NCC.), under the Water Code of the Philippines (P.D. No. 1067.), all waters belong to the State; therefore, they cannot be the subject of acquisitive prescription. (Art. 3, ibid.) Besides, a water right evidenced by a water permit is now mandatorily required by the law for the water appropriator. (Art. 5, et seq., ibid.) 7. How shall the period of possession be computed in order that an easement may be acquired by prescription? ANS: In order that an easement may be acquired by prescription, the time of possession shall be computed thus: In positive easements, from the day on which the owner of the dominant estate, or the person who may have made use of the easement, commenced to exercise it upon the servient estate; and in negative easements, from the day on which the owner of the dominant estate forbade, by an instrument acknowledged before a notary public, the owner of the servient estate, from executing an act which would be lawful without the easement. (Art, 621, NCC.) 8. X was the original owner of two (2) adjoining lots. He had constructed on one of the lots a house with windows overlooking the adjoining lot. In 1940, he sold the first lot, including the house to A and the second lot to B. In 1955, B applied for a permit to construct a house on his lot. A opposed the approval of the application. The application, however, was approved. Subsequently, A brought an action to restrain B from constructing the house, unless it is erected at a distance of not less than three (3) meters from the boundary line. A contends that he has acquired an easement of light and view in accordance with Art. 624 of the NCC, while B maintains that since he has never been formally prohibited by A from obstructing the light and view as required by Arts. 621 and 668 of the NCC, consequently, there can be no basis for the existence of an easement of light and view. Decide the case stating your reasons. ANS: A is correct. The case at bar falls squarely within the purview of Art. 624 of the NCC which declares that “the existence of an apparent sign of easement between two (2) estates, established or maintained by the owner of both, shall be considered, should either 418

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

Arts. 613-693

of them be alienated, as a title in order that the easement may continue actively and passively, unless, at the time the ownership of the two (2) estates is divided, the contrary should be provided in the title of conveyance of either of them or the sign aforesaid should be removed before the execution of the deed.” All of the requisites for the application of this rule are present in this case. In the first place, there is an apparent sign of an easement between two (2) estates originally owned by one and the same person; in the second place, the sign was established by the original owner; in the third place, one or both estates were subsequently alienated; and in the fourth place, the contrary was not provided in the title of conveyance; neither was the sign removed. (Gargantos vs. Tan Yanon, 108 Phil. 888.) 9. FS was the owner of a big lot in Dagupan Street, Tondo, Manila. On the southern portion of the lot was a house with doors and windows overlooking the northern portion of the lot on which a small house was standing. FS subdivided the lot into two (2), and sold the southern portion to JB and the northern portion to TY. TY demolished the small house and obtained a permit to construct a 4-storey building on his portion which would, thus, obstruct the view from the doors and windows of JB?s house. JB, therefore, filed an action to enjoin TY from constructing his building unless it is at a distance of not less than three (3) meters from the boundary line of the two (2) portions. Will the action prosper? Why? (1979) ANS: The action will prosper. According to the NCC, the existence of an apparent sign of an easement between two (2) estates established or maintained by the owner of both shall be considered, should either of them be alienated, as a title in order that the easement may continue actively and passively, unless, at the time the ownership of the two (2) estates is divided, the contrary should be provided in the title of conveyance of either of them or the sign should be removed before the execution of the deed. All of the requisites prescribed by the law are present in the instant case. There is an apparent sign of the existence of an easement of light and view involving two (2) estates originally owned by one and the same person. This is indicated by the doors and windows of the house in the southern portion overlooking the northern portion. The sign was established by the original owner. The southern portion 419

Arts. 613-693

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

was subsequently alienated to JB and the northern portion was also alienated to TY. Furthermore, nothing contrary to the easement was stated in the deed of conveyance; neither was the sign removed. Therefore, the easement of light and view shall now be protected by the law. TY cannot construct his building unless he complies with the 3-meter rule as provided by law. (Gargantos vs. Tan Yanon, 108 Phil 888.) 10. (a) What are the limitations upon the right of the owner of the dominant estate to exercise the easement once it is acquired either by title or by prescription? (b) A, owner of a sugar central, entered into a con­ tract with several sugar planters whereby he was given a right to construct a railroad passing through the estates of the latter. It was agreed that such railroad shall be used for transporting sugar canes to be milled in A’s sugar central. Although only sugar canes belonging to the owners of the servient estates were transported when the railroad com­ menced operating, subsequently, even sugar canes belonging to other planters were transported. Is there now a change in the exercise of the easement? ANS: (a) The limitations are as follows: first, that the owner of the dominant estate cannot use the easement except for the benefit of the immovable originally contemplated; and second, he cannot exercise it in another manner other than that previously established. (Art 626, NCC.) (b) It is submitted that there is no change in the exercise of the easement. This is so, because in the title constituting it, there is no limitation with respect to the quantity or ownership of the sugar canes to be transported. (Valderama vs. North Negros Sugar Co., 48 Phil. 492.) It would be different if there is an agreement that only sugar canes belonging to the owners of the servient estate shall be transported. In such case, there would be a change in the sense that the easement is now being used for the benefit of persons other than those originally contemplated, 11. X is granted an easement of right of way by Y to transport A’s sugarcane over his (X) railway in 10 railroad cars a day. The railway was constructed by X over the land of 420

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS Easements or Servitudes

Arts. 613-693

Y. Due to the failure of A to supply sufficient sugarcane, and because of the need of increasing his sugar milling production, X takes the sugar cane of B, C, and D, and using 20 railroad cars a day, transport them through the land of Y, to his sugar central. Has X violated the restrictions imposed by Y for the use of the easement? If not, why not? Give your reasons. ANS: Yes, X has violated the restrictions imposed by Y for the use of the easement. According to the title constituting the easement, only A’s sugar cane shall be transported over X’s railway at the rate of 10 railroad cars a day. Subsequently, X began transporting sugar cane belonging to B, C, and D. Not only that. He also began using 20 railroad cars a day. Clearly, there is now a violation of the two (2) limitations which the law, in Art. 626 of the NCC, imposes upon an easement once it is acquired — first, that the owner of the dominant estate cannot use the easement except for the benefit of the immovable originally contemplated, and second, that he cannot exercise the easement in any other manner than that previously established. (Although there is still a debate as to whether or not the doctrine enunciated in Valderama vs. North Negros Central, 48 Phil. 482, has been abrogated by Art. 626 of the NCC, the above problem does not fall within the purview of the controversy. Dr. Tolentino [Vol. 2, NCC o f the Philippines, pp. 354-355] and Justice Capistrano [Vol. 2, Civil Code, pp. 560-561], agree that there would be a violation in this case. Thus, according to Dr. Tolentino: a married eouple of French eitteenship but residents of the Philippines, went to Argentina and there executed a joint will mutually instituting each other as sole heir, which will is valid according to the law of the state. Subsequently, they returned to the Philippines where A died. May the joint and mutual will executed in Argentina be probated as valid in the Philippines? Reasons. (1971) ANS: The joint and mutual will executed in Argentina by A and B may be probated as valid in the Philippines. True, Art. 818 of the NCC prohibits two (2) or more persons from making a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person, and Art. 819 of the same Code extends this prohibition to joint wills executed by Filipinos in a foreign country, even though authorized by the laws of the

520

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Forms of Wills, Witnesses, and Codicils

Arts. 804-827

country where they may have been executed. But then, from the phraseology of Art, 819 itself, there is a clear implication that the prohibition does not apply to foreigners, and certainly, A and B are foreigners. Therefore, the provision of the 3rd par. of Art. 17 of the NCC which declares that prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated or by determinations or conventions agreed upon in a foreign country, cannot be applied in the instant case. What is applicable is the 1st par. of the same article, which declares that forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. (See also Art. 816, NCC.) 60. What is a codicil? What formalities are required in the execution of a codicil? ANS: A codicil is a supplement or addition to a will, made after the execution of a will and annexed to be taken as a part thereof, by which any disposition made in the original will is explained, added to, or altered. (Art. 825, NCC.) The formalities which are required in the execution of a codicil are the same as those required in the execution of a will. (Art. 826, NCC.) 61, May a will incorporate into itself by reference a paper or document? If so, what requisites should be present? ANS: Yes, but the following requisites should be 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 accounts or inventories. (Art. 827, NCC.)

521

Arts. 828-837

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

REVOCATION, REPUBLICATION AND REVIVAL OF WILLS (Arts. 828-837) 62. Can the revocation of a will be waived? Suppose that a will has already been admitted to probate during the testator’s lifetime, may it still be revoked? ANS: No, the revocation of a will can never be waived. (Art. 828, NCC.) As a matter of fact, even if a will has already been admitted to probate during the testator’s lifetime, it may still be revoked. This necessarily follows from the principle that “a testament is of force after men are dead; otherwise, it is of no strength at all while the testator liveth.” 63.

What law governs the revocation of wills?

ANS: According to Art. 829 of the NCC, “A revocation done outside of the Philippines, by a person who does not have his domicile in this country, is valid when it is done according to the law of the place where the will was made, or according to the law of the place in which the testator had his domicile at the time; and if the revocation takes place in this country, when it is in accordance with the provisions of this Code.” These rules may be restated as follows: (1) If the act of revocation takes place in the Philippines, it is essential that it must be done in accordance with the laws of the Philippines. This is true whether the testator is domiciled in this country or in same other country. (2) If the act of revocation takes place outside of the Philip­ pines by a testator who is domiciled in the Philippines, it is essential that it must be done in accordance with the laws of the Philippines. (3) If the act of revocation takes place outside of the Philip­ pines by a testator who is not domiciled in the Philippines, it is es­ sential that it must be done either in accordance with the laws of the place where the will was made or in accordance with the laws of the place where the testator had his domicile at the time of revocation. 64. What are the different modes of revocation? 1 ANS: No will shall be revoked except in the following cases:

522

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

(1)

Arts. 828-837

By implication of law; or

(2) By some will, codicil, or other writing executed as provided in case of wills; or (3) By burning, tearing, cancelling, or obliterating the will with the intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction. If burned, tom, cancelled, or obliterated by some other person, without the express direction of the testator, the will may still be established, and the estate distributed in accordance therewith, if its contents, and due execution, and the fact of its unauthorized destruction, cancellation, or obliteration are established according to the Rules of Court. (Art. 830, NCC.) 65, What are the different instances under the NCC when a will or a testamentary disposition is considered revoked by implication of law? ANS: Under the NCC, there are five (5) instances when a will or a testamentary disposition may be revoked by implication of law. They are: (1) When there is a decree of legal separation. In such case, provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law. (Art. 63, NCC.) (2) When there is 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 bom after the death of the testator. In such case, the preterition shall annul the institution of heirs. (Art. 854,NCC.) (3) When in the testator’s will there is a legacy of a credit against a third person or of the remission of a debt of the legatee, and subsequently, after the execution of the will, the testator brings an action against the debtor for the payment of his debt. In such case, the legacy is revoked. (Arts. 935, 936, NCC.) (4) When the testator transforms the thing bequeathed in such a manner that it does not retain either the form or denomination it had, or when he alienates by any title or for any cause the thing

523

Arts. 828-837

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

bequeathed or any part thereof, or when the thing bequeathed is totally lost during the testator’s lifetime or after his death without the heir’s fault. In such cases, the legacy is revoked. (Art. 957, NCC.) (5) When the heir, devisee or legatee commits any of the acts of unworthiness which by express provision of law will incapacitate a person to succeed. In such case, any testamentary disposition in favor of such heir, devisee or legatee is revoked. (Art. 1032, NCC.) 66. When is a will expressly or impliedly revoked? ANS: A will is expressly revoked when in a subsequent will, or codicil, or other writing executed as provided in case of wills, there is a revocatory clause expressly revoking the will or a part thereof. On the other hand, it is impliedly revoked when the provisions of the subsequent will or codicil are partially or absolutely inconsistent with those of the previous will. 67. A testator, a bachelor of 60, executed a will bequeathing a ricefield to the Church worth P100,000.00. The will further provided that “all other assets owned by me after death shall be equally divided among my two (2) brothers ‘A* and ‘B.’” The testator subsequently married a young woman, begot a son, and left another will designating his wife and son as his heirs in equal shares. The 2nd will did not expressly revoke the 1st will. He left an estate worth P300,000.00 (including the ricefield). A.

Who is entitled to the ricefield? Reasons. (1981)

ANS: It must be observed that the testator left two (2) wills. In his first will, he bequeathed the ricefield to the Church and instituted as heirs in equal shares his two (2) brothers “A” and “B” with respect to the rest of his estate. In his 2nd will,, he instituted his wife and his son as heirs in equal shares. Under our law on revocation of wills, a will may be revoked by another will. The revocation may be effected either expressly or impliedly. Since there is no express revocation, is there an implied revocation in the instant case? It is undeniable that there is an implied revocation if the testamentary dispositions found in the first will are totally or partially incompatible with those found in the second will. It is also undeniable that the incompatibility

524

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

Arts. 828-837

must be absolute in character in the sense that the testamentary dispositions cannot stand together. The real issue, therefore, is whether the two (2) testamentary dispositions found in the first will can stand together with the single testamentary disposition found in the second will. There are two (2) possible views. According to one view, reading the two (2) wills together, it is clear that the testatorial intention is that only the testator’s wife and son shall inherit. They are instituted as universal heirs with respect to the hereditary estate in its totality. Therefore, the second will in its totality cannot stand together with the 1st will in its totality. Consequently, the incompatibility between the testamentary dispositions found in the 1st will and those found in the second will is both total and absolute in character. Hence, the 1st will is impliedly revoked by the second will. The testator’s widow and his son are, therefore, entitled to the ricefield. According to second view, only the institution of “A” and “B” in the first will as heirs and that portion or part of the bequest given to the Church which will impair the legitime of the testator’s son and widow are revoked by the second will. The reason is that it iB only to that extent that there is absolute incompatibility between the testamentary dispositions found in the first will and those found in the second will- Consequently, the Church shall be entitled to the riasM d but only to the extent that it does not encroach upon the

legitime of fcho testator’s son and widow, (Note i The above answers are based on the law on revocation of . wills, such as Art. 830, et seq.> NCC and on well-settled principles in American jurisprudence. Thus, whether the bar candidate will solve the problem either in accordance with the first view or in accordance with the second view, it should be considered a correct answer.) B.

Who acquires the rest of the assets? Explain. (1981)

ANS: Suggested answer for those who adhere to the first view stated above: There are two (2) views with regard to the distribution of the entire estate, including the ricefield.

525

Arts. 828-837

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

According to one view, 1/2 shall be given to the testator’s son and the other 1/2 shall be given to the testator’s widow. This division would be more in conformity with the testatorial intention. According to another view, first satisfy the legitime of the two (2) heirs. The testator’s son shall be entitled to 1/2 of P300,000.00 or P150,000.00, while the testator’s widow shall be entitled to 1/4 or P75,000.00. The disposable free portion shall then be divided equally between the two (2). This would be more in conformity with the testatorial intention. (Note: Either answer should be considered correct.) Suggested answer for those who adhere to the second view stated above: The testator’s son shall be entitled to a legitime of 1/2 of the entire estate, or P150,000.00; the widow shall be entitled to a legitime of 1/4 of the entire estate, or P75,000.00. That means that the bequest in favor of the Church is inofficious to the extent of P25,000.00. Consequently, said bequest or devise should be reduced by 1/4. Therefore, the Church shall be entitled only to an undivided share of 3/4 of the ricefield. 68. A executed two (2) wills. The first was executed in 1950, while the second was executed in 1960. In the second will, there is an express revocatory clause wherein the testator categorically declared that he is revoking the will executed in 1950. In both wills, however, his wife, B, is the only beneficiary. After the death of A in 1962, the second will was presented for probate in the CFI of Manila, but it was disallowed for non-compliance with the formalities prescribed by law. In despair, B presented a copy of the will executed in 1950 for probate in the same Court. The probate is now contested by the nephews and nieces of the testator on the following grounds: 1st, that the will has already been revoked by the will executed in 1960; and 2nd, that granting, without admitting, that the 2nd will did not really revoke the will of 1950, yet the fact remains that when A executed the will of 1960, he destroyed the will of 1950 with intent to revoke. If you were the judge, how will you decide the case? Reasons.

526

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

Arts. 828-837

ANS: If I were the judge, I would decide in favor of the probate of the will which A executed in 1950. The two (2) grounds invoked by the oppositors for contesting the probate of the will may very well be invoked as the reasons for admitting the will to probate. (1) It should be noted that the will executed in 1960 was disallowed by the probate court. The effect of such disallowance is to render the will void. If the will is void, the revocatory clause is also void. Therefore, the will of 1950 was never revoked. (Samson vs. Naval, 41 Phil. 638; Molo vs, Molo, 90 Phil. 37.) (2) With regard to the second ground, it should be noted that, under the doctrine of dependent relative revocation, the objection will not lie. The doctrine may be stated as follows: If the testator revokes his will with the present intention of making a new one immediately and as a substitute, and the new will is not made, or if made, fails to take effect for any reason whatsoever, it will be presumed that the testator prefers the old will to intestacy; consequently, the old will can still be admitted to probate. In other words, the revocation is subject to a suspensive condition — that the testator will make a new will and that such will shall take effect. If such condition is not fulfilled, then there is no revocation. It is evident that under this doctrine, recognized by the SC and applied for the first time in this jurisdiction to a case with similar facts (Molo vs. Molo, 90 Phil. 37.), the will of A executed in 1950 can still be admitted to probate as his last will and testament. 69. What are the requisites which must concur in order that a will may be revoked by burning, tearing, cancelling, or obliterating? ANS: There are four (4) requisites which must concur. They are: (1) The testator should have testamentary capacity at the time of performing the act of physical destruction; (2) there should be an actual physical act of destruction; (3) the destruction should be performed with the intention of revoking the will (animus revocandi); and (4) the act of destruction should be performed by the testator himself or by some other person in his presence, and by his express direction. 70. “A” executed a will with his nephew, “B” who was living with him, as principal beneficiary. With intent to revoke

527

.

Arts. 828-837

DIFFERENT MODES OF ACQUIRING OWNERSHIP

Succession Revocation, Republication and Revival of WUIb

the will, he sent “B” to get it from his safe so that he could destroy it. “B,” however, knowing of the intent of his uncle, substituted another paper inside the envelope and hid the real will. It was this envelope which he gave to the testator. The latter, without investigating the contents, subsequently destroyed it by burning. After “A’s” death, “B” presented the will, which he had hidden, for probate. Is there a revocation in this case? Decide, stating your reasons. ANS: There is no revocation by burning because, although there was the intent to revoke, yet there was no actual act of physical destruction. Not all the intention in the world without the destruction can revoke a will; not all the destruction in the world without the intention can revoke a will. The two (2) must always gq together. But then, the act of “B” is classified as an act of unworthiness under No. 7 of Art. 1032 of the NCC. Consequently, “B” cannot inherit from “A.” Therefore, although there is no revocation of the will under No. 3 of Art. 830 of the NCC, there is a revocation of the testamentary disposition in favor of “B” by implication of law. 71. What is the effect of the revocation of a will upon the recognition of a natural child made in said will?

ANS: The recognition of an illegitimate child does not lose its legal effeet, even though the will where it was made sheuld be r@veked, (AH, 884> NCC,) 72. What is meant by the republication and revival of wills? Distinguish between the two (2). ANS: Republication of wills refers to the act of the testator either in reproducing in a subsequent will the dispositions contained in a previous one which is void as to its form or which has been revoked or in executing a codicil referring to a previous will. (Arts. 835, 836, NCC.) Revival of wills, on the other hand, refers to the restoration of validity of a previously revoked will by operation of law. From these definitions it is evident that while republication is effected by act of the testator, revival is effected by operation of law.

528

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Revocation, Republication and Revival of Wills

Arts. 828-837

73. A executed three (3) wills. The 2nd expressly re­ voked the 1st, while the 3rd also expressly revoked the sec­ ond. Is there a revival of the first will? ANS: There is no revival of the first will. (Art. 837, NCC.) 74. A executed two (2) wills. Under the first will, B is the only beneficiary, while under the second, C is the only beneficiary. Subsequently, he executed a codicil wherein he expressly revoked the second will. May the first will now be admitted to probate as his last will and testament? ANS: Yes, the first will may now be admitted to probate as the last will and testament of A. It is axiomatic that express revocation is superior to implied revocation. When A expressly revoked his second will by a codicil, the effect is that the will ceases to exist and is as inoperative as if it has never been written. Consequently, there is now only one will of A which remains — the first will which he had executed. It would, therefore, be inaccurate to say that the first will is revived since it has never been validly revoked in the first place. Besides, under the doctrine of dependent relative revocation, A is presumed to prefer the old will to intestacy. 75. Mr. Reyes executed a will which is completely valid as to form. A week later, however, he executed another will which expressly revoked his first will, following which he tore his first will. Upon the death of Mr. Reyes, his second will was presented for probate by his heirs, but it was denied probate due to formal defects. Assuming that a copy of the first will is available, may it now be admitted to probate and given effect? Why? (2003) ANS: The first will may be admitted to probate and given effect. When the testator tore the first will, he was under the mistaken belief that the second will was perfectly valid and he would not have destroyed the first,will had he known that the second will is not valid. The revocation by destruction is therefore dependent on the validity of the second will. Since it turned out that the second will was invalid, the tearing of the first will did not produce the effect of revocation. This is known as the doctrine of dependent relative revocation. (Molo vs. Molo, 90 Phil. 37.) (Answers to 2003 Bar Examination Questions.)

529

Arts. 838-839

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

ALLOWANCE AND DISALLOWANCE OF WILLS (Arts. 838-839) 76.

What is meant by the probate of wills?

ANS: The probate of wills is a special proceedings to establish the validity of a will. More specifically, it is a special proceedings for the purpose of proving before some competent court or tribunal vested with authority for that purpose that the instrument which is offered for probate is the last will and testament of the testator; that it has been executed in accordance with the formalities prescribed by law; and that the testator had the necessary testamentary capacity at the time of the execution of the will. 77.

What is the nature of probate proceeding?

ANS: The action of the court in admitting a will to probate has all the effect of a judgment; and as such is entitled to full faith and credit in other court. The proceedings by which this is accomplished is considered to be in the nature of a proceeding in rem, and upon this idea the decree of probate is held binding on all persons in interest, whether they appear to contest the probate or not. The proceeding is not a contentious litigation; and although the persons in interest are given an opportunity to appear and reasonable precautions are taken for publicity, they are not impleaded or required to answer. (Riera vs. Palmaroli, 40 Phil. 105.) 78. What are the characteristics of probate proceed­ ings? ANS: We can very well state the characteristics of a probate proceeding as follows: (1)

It is a special proceeding;

(2)

It is a proceeding in rem;

(3)

It is not a contentious litigation;

(4)

It is mandatory; and

(5)

It is imprescriptible.

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

Arts. 838-839

79. Does the probate court, after admitting the will to probate but before payment of the estate’s debts and obligations, have the authority: (1) to grant an allowance from the funds of the estate for the support of the testator’s grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of all properties of the estate to the executor of the will? ANS: (1) It is settled that allowances for support under Sec. 3 of Rule 83 of the Rules of Court should not be limited to the “minor or incapacitated” children of the deceased. Art. 188 of the NCC, the substantive law in force at the time of the testator’s death, provides that during the liquidation of the conjugal partnership, the deceased’s legitimate spouse and children, regardless of their age, civil status or gainful employment, are entitled to provisional support from the funds of the estate. The law is rooted on the fact that the right and duty to support, especially the right to education, subsist even beyond the age of majority. Be that as it may, grandchildren are not entitled to provisional support from the funds of the deceased’s estate. The law clearly limits the allowance to “widow and children” and does not extend it to the deceased’s grandchildren, regardless of their minority or incapacity. It was error, therefore, for the appellate court to sustain the probate court’s order granting an allowance to the grandchildren of the testator pending settlement of his estate.

(2) In settlement of estate proceedings, the distributi of the estate properties can only be made: (1) after all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax have been paid; or (2) before payment of said obligations only if the distributees or any of them gives a bond in a sum fixed by the court conditioned upon the payment of said obligations within such time as the court directs, or when provision is made to meet those obligations. The probate of a will is conclusive as to its due execution and extrinsic validity and settles only the question of whether the testator, being of sound mind, freely executed it in accordance with the formalities prescribed by law. Questions as to the intrinsic validity and efficacy of the provisions of the will, the legality of any devise or legacy may be raised even after the will has been authenticated.

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Arts. 838-839

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

The Rules of Court provide that if there is a controversy as to who are the lawful heirs of the decedent and their distributive shares in his estate, the probate court shall proceed to hear and decide the same as in ordinary cases. (3) The right of an executor or administrator to the possession and management of the real and personal properties of the deceased is not absolute and can only be exercised “so long as it is necessary for the payment of the debts and expenses of adminis­ tration.” Sec. 3 of Rule 84 of the Revised Rules of Court explicitly provides: “Sec. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed. — An executor or administrator shall have the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and expenses for administration.” (Estate ofHilario M. Ruiz vs. CA.) 80. A died in 1933 with a will, survived by L, a legitimate son, and N, a natural daughter, whom he had acknowledged in the will. In the will, he divided his properties between the two (2). Subsequently, without presenting the will (of which she was the custodian) for probate, N brought an action against L for the partition of the estate. In order to prove her status as an acknowledged natural daughter of A, she presented the will as evidence. Is the procedure followed by N in accordance with law? Reasons. ANS: The facts stated in the above problem are exactly the same as those in Rosario Guevara vs. Ernesto Guevara (74 Phil. 479). In this case, the SC held that the procedure adopted by N is contrary to law. Before there can be any partition of the estate of A, whether judicial or extrajudicial, it is indispensable that the will of A must first be presented for probate for the following reasons: (1) Art. 838 of the NCC as well as Sec. 1, Rule 75 of the Rules of Court, expressly provide that no will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court; and (2) The probate of a will which is a proceeding in rem} cannot be dispensed with and substituted by any other proceeding, judicial

532

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

Arts. 838-839

or extra-judicial without offending against public policy designed to effectuate the testator’s right to dispose of his property by will in accordance with law and to protect the rights of the heirs, legatees and devisees. Consequently, any partition which is effected without the previous presentation of the will for probate is void from the beginning. This is true even granting that the decedent left no debts and nobody raises any question as to the authenticity and due execution of the will. (See also Ventura vs. Ventura, 106 Phil. 1159.) 81. Since the SC in the above problem held that the procedure adopted by N is contrary to law, in 1945, N filed a petition for the probate of the will of A. L, however, filed a motion to dismiss on the ground that the petition for pro­ bate has already prescribed. How will you decide the mo­ tion? Reasons. ANS: The facts stated in the above problem are exactly the same as those in the corollary case of Ernesto Guevara vs. .Rosario Guevara, (98 PhiL 249). According to the trend of authority, the applicability of the statute of limitations to probate proceedings must be rejected on the ground that such proceedings are not established in the interest of the surviving heirs, but primarily for the protection of the testator’s expressed wishes. If the probate of validly executed wills is required by public policy, the State could not have intended the statute of limitations to defeat that policy. It is of course true that the rights of the parties should not be left hanging in uncertainty for periods of time far in excess of the maximum period of 10 years allowed by law, but the obvious remedy is for the other interested persons either: (1) to petition for the production of the will and for its probate, or (2) to inflict upon the guilty party the penalties prescribed by Rule 76 of the Rules of Court, or (3) to declare the unworthiness of the heir under Art. 1032 of the NCC for concealing or suppressing the will. (Ernesto Guevara vs. Rosario Guevara, supra.) 82. (a) What are the only questions which a probate court can determine? ANS: (a) Under our law, there are only three (3) possible questions which can be determined by the probate court. They are:

533

\rts. 838-839

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

(1) Whether or not the instrument which is offered for probate is the last will and testament of the decedent; in other words, the question is one of identity. (2) Whether or not the will has been executed in accor­ dance with the formalities prescribed by law; in other words, the question is one of due excecution. (3) Whether or not the testator had the necessary tes­ tamentary capacity at the time of the execution of the will; in other words, the question is one of capacity. Consequently, the probate court cannot inquire into the intrin­ sic validity of testamentary dispositions. (b) Does the probate court have the jurisdiction to adjudicate or determine title to properties claimed to be a part of the estate and which are equally claimed to belong to outside parties? ANS: (b) No. In Cuizon vs. Ramolete, the Court held that it is a well-settled rule that a probate court or one in charge of the proceedings, whether testate or intestate, cannot adjudicate or determine title to properties claimed to be part of the estate and which are equally claimed to belong to outside parties. All that the said court could do as regards said properties is to determine whether they should or should not be included in the inventory of properties. If there is dispute, the parties have to resort to an ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so. (Camaya vs. Patulandong, G.R. No. 144915, February 23, 2004.) 83. During the proceedings for the probate of the will of A, B, a natural child of A, filed a motion to intervene in the proceedings. Can the probate court require him to present evidence to prove his due filiation? ANS: According to the SC in the case of Reyes vs. Ysip (97 Phil. 11), a person intervening in the probate proceedings should be required to show interest in the will or in the property affected thereby. For such purpose, it is sufficient that he shows or produces prima facie evidence of his or her relationship to the testator, or his or her right to the latter’s estate. Such evidence once presented

534

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Allowance and Disallowance of Wills

Arts. 838-839

would only be for the purpose of justifying his or her intervention in the proceedings, and it would not be decisive of his or her right to inherit as an acknowledged natural child, as the final decision on the matter would be made only after hearing for the declaration of heirs. 84. Availing of the provisions of the NCC (Art. 838) which permit a testator to petition the proper court during his lifetime for the allowance of his will, the testator filed a petition for its approval. Oppositor, however, contested the petition alleging that she is the acknowledged natural daughter of petitioner but that she was completely ignored in said will, thus, impairing her legitime. Subsequently, the court issued an order allowing the will, but it set a date for the hearing of the opposition relative to the intrinsic validity of the will. After the hearing, it issued an order annulling the portion of the will which allegedly impairs the legitime of the oppositor. Has the probate court the power to issue such order? ANS: In Montatiano us. Suesa (14 Phil. 676), the SC said: “The authentication of the will decides no other questions than such as touch upon the capacity of the testator and the compliance with those requisites which the law prescribes for the validity of a will. It does not determine nor even by implication prejudge the validity of the provisions. The questions relating to these points remain entirely unaffected, and may be raised even after the will has been authenticated.” On the other hand, “after a will has been probated during the lifetime of a testator, it does not necessarily mean that he cannot alter or revoke the same before his death. Should he make a new will, it would also be allowable on his petition, and if he should die before he had a chance to present such petition, the ordinary probate proceedings after the testator’s death would be in order.” (Report of the Commission, pp. 53-54.) The reason for this is that the rights to the succession are transmitted from the moment of the death of the decedent. (Art. 777, CCJ The probate court, therefore, erred in entertaining the opposition and in annulling the portion of the will which allegedly impairs the legitime of the oppositor on the ground that she is an acknowledged natural daughter of the testator. This is an extraneous matter which should be threshed out

535

Arts. 838-839

DIFFERENT MODES OF ACQUIRING OWNERSHIP

Succession Allowance analJisallowance of Wills in a separate action. (.Palacios vs. Catimbang Palacios, 106 Phil. 739.) 85. What is the effect of the allowance of a will? ANS: 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, par. 4, NCC.) 86. A presented a will purporting to be the last will and testament of his deceased wife for probate. The will was admitted to probate without any opposition. Sixteen months later, the brothers and sisters of the deceased discovered that the will was a forgery. Can A now be prosecuted for the criminal offense of forgery? Reasons. ANS: A can no longer be prosecuted for the criminal offense of forgery. This is so because, according to the last paragraph of Art. 838 of the NCC, 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. Since 16 months have already elapsed from the allowance of the will to the time when the forgery was discovered, there is now no possible remedy of impugning the validity of the will. Even a petition to set aside a judgment or order of a CFI on the ground of fraud in accordance with Secs. 2 and 3 of Rule 38 of the Rules of Court is no longer possible because more than six (6) months from the time of the promulgation of the judgment or order have already elapsed. (Mercado vs. Santos, 66 Phil. 215.) (Note: In connection with the above problem, the following excerpt from Gallanosa vs. Arcangel, 83 SCRA, 676, 685, should be self-explanatory: “It is a fundamental concept in the organization of every jural system, a principle of public policy, that, at the risk of occasional errors, judgment of courts Bhould become final at some definite date fixed by law. “Interest rei publicae ut sit finis litum.” “The very object for which the courts were constituted was to put an end to controversies.” “After the period for seeking relief from a final order or judgment under Rule 38 of the Rules of Court haB expired, a final order or judgment can be set aside only on the grounds of (a) lack of jurisdiction or lack of due process of law or(b) that the judgment was

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DIFFBI&NT MODES OF ACQUIRING OWNERSHIP ' Succession Allowance ahd Disallowance of

Arts. 838-839 $

otytamed \ylk$ans of extrinsic or collateral firaud. In the latter case, the period for annulling theljudgment is four years from the discovery of the fraud.”) , * '■ ’

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87. X, 80 years old and without any compulsory heir, executed a win wherein he left all of his properties to a stepson, A, and^helatt&’k B. After X’s death in 1939, A and B presentea t^ewmofprobate. The probate was opposed by Y, a brother of X. An order of allowance was promulgated and in 1943, the project of partition was approved and implemented. Y aid not appeal. In 1967, Y brought an action against A and B tfor the “annulment” of the will of X and for recovery of the properties which were adjudicated to A and B, A motion for \reconsideration was filed by Y. The court granted the motion on the ground that under Art. 1410 of the NCC, an action fm* annulment of wills is imprescriptible. Is this correct? 'jtfSUt,

J

ANS: That ruling is a glaring error. Art. 1410 of the NCC cannot possibly apply to last wills and testaments. An elementary knowledge of civil law could have alerted the trial court to the egregious error of plaintiffs counsel in arguing that the article is applicable. At any rate, our procedural law does not sanction an action for “annulment” of a will. In order that a will may take effect, it has to be probated. Such probate is mandatory. In the instant case, both from the point of view of res judicata and Art. 838 of the NCC, Y has no longer any remedy. The last paragraph of Art. 838 is clear. Subject to the right of appeal, says the Code, “the allowance of the will during the lifetime of the testator or after his death, shall be conclusive as to its due execution.” (Gallanosa vs. Arcangel, 83 SCRA 676.) 88. What are the grounds for the disallowance of a will? ANS: 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

537

Arts. 840-856

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

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. (Art. 839, NCC.) Section 2. INSTITUTION OF HEIRS (Arts. 840-856) 89. What is meant by institution of heir? ANS: 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.) 90. X died in 1970, survived by his two (2) legitimate children, A and B, and by his three (3) grandchildren; D, E and F, legitimate children of C, a legitimate child of X who pre-deceased him. In his will, he instituted A, B, “the children of C,” and a friend, M, as heirs without designating their shares. The residue of his estate is P 180,000. How shall the distribution be made? ANS: There are two (2) provisions of the NCC which must be applied — first, Art. 846 which declares that heirs instituted without designation of shares shall inherit in equal parts, and second, Art. 847, which declares that when the testator institutes some heirs individually and others collectively as when he says, “I designate as my heirs A and B, and the children of C,” those collectively designated shall be considered as individually instituted, unless it clearly appears that the intention of the testator was otherwise. Manresa, commenting on these provisions, maintains that where there are compulsory heirs among the heirs instituted, or where all of them are compulsory heirs, the provision of Art. 846 should be applied only to the disposable free portion. (6 Manresa, 7th Ed., pp. 116-117.) It is submitted that this is the correct view. Consequently, the distribution shall be made as follows:

538

D lW E R E ^ i« 6 D B S OF ACQUIRING OWNERSHIP Succession i Institution of Heirs

Arts. 840-856

First, satisfy the legitime of A, B, D, E, and F, A and B shall be entitled to P30>000 each, in their own right, while D, E and F shall be entitled to $10,000 each, by right of representation. Then, the free portion of If90,000 shall be divided among the instituted heirs, A, B, D, E, F, anti M ia ^ u a l parts in accordance with Arts. 846 and 847 of the Code. Therefore, the shares of each will be: A ...............................

P30,000, as compulsory heir P I5,000, as voluntary heir

B ...............................

P30,000, as compulsory heir P15,000, as voluntary heir

D ...............................

P10f000, by right of representation P15,000, as voluntary heir

E ...............................

PI0,000, by right of representation P15,000, as voluntary heir

F ...............................

P I0,000, by right of representation P15,000, as voluntary heir

M...............................

P15,000, as voluntary heir

91. “A” instituted “B” (his son) and his brothers “ C” and “D” as his heirs to an estate of P600,000. Distribute the estate. Reasons. (1972) ANS: Art. 846 of the NCC which declares that heirs instituted without designation of shares shall inherit in equal parts, is applicable. It must be noted, however, that one of the instituted heirs (“B”) is a compulsory heir while the other two (2) (“C” and “D”) are voluntary heirs. All commentators in this country agree that the rule enunciated in Art. 846 is applicable only to the disposable free portion and not to the legitime of compulsory heirs. Therefore, the estate of P600,000 of “A” shall be divided as follows: “B,” being the son of the testator, shall be given his legitime of 1/2 of the estate, or P300,000. That leaves a disposable free portion of 1/2 of the estate, or P300,000. It is this portion which will be divided in equal parts among the 3 instituted heirs pursuant to Art. 846 of the NCC. Thus, the division will be as follows: “B” ............................

P300,000, 100,000,

539

as compulsory heir as voluntary heir

Arts. 840-856

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

“C” ............................

100,000,

as voluntaiy heir

“D” ............................

100,000,

as voluntary heir

P600,000 92. Suppose that an institution of heirs is based on a false cause, what is the effect of the falsity of such cause? ANS: As a general rule, there would be no effect. This is clear from the provision of Art. 850 of the NCC which declares that the statement of a false cause shall be considered as not written. But if it appears from the will that the testator would not have made the institution if he had known of the falsity of such cause, then the result would be different. The institution would be annulled. However, it is essential that the following requisites must concur: first, the cause for the institution of heirs must be stated in the will; second, the cause must be shown to be false; and third, it must appear from the face of the will that the testator would not have made the institution if he had known the falsity of the cause. (Austria vs. Reyes, 31 SCRA 754.) 93. What is meant by preterition? What are its requi­ sites? (1988) ANS: Preterition or pretermission, as it is sometimes called, may be defined as the omission in the testator’s will 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 bom after the death of the testator. (Art. 854, NCC.) Stated in another way, it consists in the omission in the testator’s will of the compulsory heirs in the direct line, or of anyone of them, either because they are not mentioned therein, or, though mentioned, they are neither instituted as heirs nor expressly disinherited. (Neri vs. Akutin, 74 Phil. 185; Nuguid vs. Nuguid, 17 SCRA 449.) Its requisites are: (1)

The heir omitted must be a compulsory heir in the direct

line; (2) The omission must be total and complete in character in such a way that the omitted heir does not and has not received anything at all from the testator by any title whatsoever; and (3)

The omitted heir must survive the testator.

540

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

Arts. 840-856

94. A died with a will in 1970. In the will, he instituted his legitimate son, B, as sole heir, omitting N, an acknowledged natural son, completely. In 1960, however, A had donated to the latter a parcel of land worth P20,000. The residue of A’s estate is P 100,000. Is there a preterition which will result in the total annulment of the institution of heir? What is the remedy of N? ANS: It is submitted that there is no preterition. Although there is no question that N is a compulsory heir in the direct line, yet he had received a donation inter vivos of P20,000 from the testator. In order that there will be a preterition as contemplated by Art. 854 of the NCC, it is indispensable that the omission of the heir should be total and complete in such a way that he has not received anything from the testator by any title whatsoever. This is so because the essence of preterition is that the omitted heir must be totally deprived impliedly of his legitime. Here there is no total deprivation. If there is an impairment of N’s legitime, his remedy is found in Art, 906 of the NCC. He can demand for its completion. In order to determine such impairment, if there is any, we must collate the value (P20,000) of the property donated to the residue (P100,000) of the estate. The result is P120,000. The legitime of B is 1/2 of P120,000, or P60,000, while the legitime of N is 1/2 of the legitime of B, or P30,000. Consequently, N can still demand for P I0,000 in order to complete his legitime. 95. X died, survived by two (2) natural children, A and B. In his will he instituted A, whom he expressly recognized as his natural daughter, as heir with respect to properties valued at about half a million pesos. To B, whom he declared as not related to him at all, he left a legacy of P3,600. Subsequent to , X’s death, however, B was declared judicially as X’s natural child. In the partition proceedings which followed, the trial court divided X’s estate equally between the two on the ground that there is a preterition which has resulted in total intestacy. Is this order of the court correct? ANS: The order of the court is not correct. There is no preterition here. The deprivation of B of her legitime is not complete and total. Consequently, Art. 906 of the NCC is applicable, and not Art. 854.

541

Arts. 840-856

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

Therefore, the partition of X’s estate must be made in such a way that B shall be given her legitime which is 1/4 of the entire estate, while A shall be given her legitime, which is also 1/4 of the entire estate, plus the entire disposable free portion, which is 1/2 of the entire estate. (Aznar vs. Duncan, 17 SCRA 590.) 96. If an adopted child is omitted in the testator’s will, would there be a heirs is not included in the will within the meaning of Art. 854? If it is the spouse who is omitted, would there be a preterition? ANS: If an adopted child is omitted in the testator’s will, there would be a preterition within the meaning of Art. 854. Under our law, an adopted child is considered by legal fiction a compulsory heir in the direct line. This is clear from Arts, 979 to 984 of NCC, under the subsection “Descending Direct Line.” Besides, one of the effects of adoption is that the adopted child shall be entitled to the same successional rights of a legitimate child. These rights are protected by our law. It would be illogical and unjust indeed if the provision of Art. 854 which is intended to protect the rights of compulsory heirs in the direct line shall not be extended to an adopted child. If the husband or wife is omitted in the testator’s will, there will be no preterition within the meaning of Art. 854. Such husband or wife is not a compulsory heir in the direct line. However, such omission will result in a partial annulment of the institution of heirs to the extent that the legitime of such husband or wife is prejudiced. 97. H executed a will whereby he gave all his shares in the conjugal property to his brother B. In case B predeceases H, all his shares were to be given to B’s children. B predeceased H. Thus, C and his brothers and sisters, the children of B, filed a petition for probate of H’s will claiming the property as H’s heirs. During the petition for probate, A, a legally adopted daughter of H and the latter’s widow, W, moved to dismiss on the following grounds: (1) C has no legal capacity to institute these proceedings; (2) he is merely a universal heir, and (3) the widow and adopted daughter have been preterited. The trial judge denied the motion. The Intermediate Appellate Court granted A’s petition and ordered the trial court to

542

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

Arts. 840*856

dismiss the petition for probate of H’s will. Whether or not A, the legally adopted daughter and W, the widow have been preterited? ANS: In Constantino Acain vs. I AC (G.R. No. 72706, October 27, 1987), the Supreme Court held that insofar as the widows concerned, Article 854 of the NCC may not apply as she does not ascend or descend from the testator, although she is a compulsory heir. Stated otherwise, even if the surviving spouse is a compulsory heir, there is no preterition even if she is omitted from the inheritance, for she is not in the direct line. (Art. 8541NCC.) However, the same thing cannot he said of the adopted daughter, whose legal adoption by the testator has not been questioned. Under Article 39 of P.D. No. 603, known as the Child and Youth Welfare Code, adoption gives to the adopted person the same rights and duties as if he were a legitimate child of the adopter and makes the adopted person a legal heir of the adopter. (Note: Art. 39, P.D. No. 603 was repealed by E.O. Nos. 209 and

227. See also Arts. 189 and 190 of FC.) It cannot be denied that she was totally omitted and preterited in the will of the testator and that both adopted child and the widow were deprived of at least their legitime. Neither can it be denied that they were not expressly disinherited. Hence, this is a clear case of preterition of the legally adopted child. Preterition annuls the institution of an heir and annulment throws open to intestate succession the entire inheritance. (Nuguid vs. Nuguid, 17 SCRA 450 [1966]; Maninang vs. CA, 114 SCRA 478 [1982].) The universal institution of petitioner, together with his brothers and sisters, to the entire inheritance of the testator results in totally abrogating the will because the nullification of such institution of universal heirs — without any other testamentary disposition in the will — amounts to a declaration that nothing at all was written. No legacies nor devises having been provided in the will, the whole property of the deceased has been left by universal title to said heirs and his brothers. The effect of annulling the institution of heirs will be, necessarily, the opening of a total intestacy except that proper legacies and devises must be respected.

543

Arts. 840-856

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

(Note: In the opinion of Justice Melencio-Herrera, which is noteworthy, who concurred only in the result in Acain us. IAC, G.R. No. 72706, October 27, 1987, stated that one must distinguish whether the omission of a forced heir in the will of the testator is by mistake or inadvertence, or voluntary or intentional. If by mistake or inadvertence, there is true preterition and total intestacy results. The reason for this is the “inability to determine how the testator would have distributed his estate if none of the heirs had been omitted or forgotten.” On the other hand, if the omission is intentional, the effect would be a defective disinheritance covered by Article 918 of the NCC in which case the institution of heir is not wholly void but only insofar as it prejudices the legitime of the person disinherited, i.e., the nullity is partial unlike in true preterition where the nullity is total. Preterition is presumed to be only an involuntary omission. For example, that if the testator had known of the existence of the compulsory heir at the time of the execution of the will, he would have instituted such heir. On the other hand, if the testator attempts to disinherit a compulsory heir, the presumption of the law is that he wants such heir to receive as little as possible from the estate.)

98. What is the effect of preterition? (1988) ANS: Hie effect is to annul entirely the institution of heirs; but legacies and devises shall be valid insofar as they are not inofficious. (Art 854, NCC.) 99. A executed a holographic will prior to her death. The will contains only the testamentary disposition whereby she instituted her sister B as universal heir. When the will was presented for probate, her parents, F and M, who were her only surviving compulsory heirs, opposed the probate on the ground of preterition. B, however, contended that the question of preterition is outside of the jurisdiction of the probate court. The court held that the will is a complete nullity resulting in total intestacy. Is this decision correct? ANS: The decision of the probate court is correct. While it is true the court’s area of inquiry is limited to an examination of, and resolution on, the extrinsic validity of the will, a peculiar situation is created in the instant case. If there is a preterition, the effect would be the total annulment of the institution of B resulting in total intestacy. So, in order to save time, effort, expense, and anxiety,

544

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

Arts. 840-856

since there is only one testamentary disposition here, the court might as well meet head-on the issue of whether or not there is a preterition which will result in the total annulment of the institution of B. Consequently, the entire will is void resulting in total intestacy. (Nuguid vs. Nuguid, 17 SCRA 449; See also Neri vs. Akutin, 14 PhiL 185.) 100. Jandon is twice a widower. He has three (3) chil­ dren by his first marriage, and two (2) children by his second marriage. In his will, Jandon institutes as his exclusive heirs the children of his second marriage. What is the effect on the will of the preterition of Jandon’s children by the first mar­ riage? Upon Jandon’s death, how will the hereditary estate be divided? (1974) ANS: The preterition of Jandon’s children by the first marriage in his will shall annul entirely the institution of heirs as ordained by Art. 854 of the NCC. All of the three (3) requisites of preterition or pretermission are present. The omitted heirs are compulsory heirs in the direct line; the omission is total and complete; and the omitted heirs have survived the testator. Assuming then that there are no legacies and devises in Jan don's will and that the only testamentary disposition thereof is the institution of the children of the second marriage, since such institution is void, the will itself, as far as the distribution of the hereditary estate is concerned, becomes useless. Total intestacy results. (Nuguid vs. Nuguid, 17 SCRA 449.) The estate, therefore, shall be divided among the three (3) children of the first marriage and the two (2) children of the second marriage in accordance with the rules of intestate succession. Each of the five (5) shall be entitled to 1/5 of the entire estate. (Art. 980, NCC.) 101. Prior to his death, X executed a will wherein he instituted as universal heir an adulterous daughter. A, with respect to all of his personal and real properties, except for five parcels of land, which he devised to A’s mother, M, in usufruct. Two other adulterous children of the testator, B and C, were omitted entirely in X’s will. What is the effect of the preterition of B and C? Amplify. ANS: In Solano vs. CA (L-41971, November 29, 1983), the Su­ preme Court held that the effect of the preterition of B and C is to

545

Arts. 840-856

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Institution of Heirs

annul the institution of heir only insofar as the legitime of the omit­ ted heirs is impaired. It is obvious that the intention of X was to favor A with certain portions of his property, which under the law, he had a right to dispose of by will, so that the disposition in her favor should be upheld as to the 1/2 portion of the property that the testator could freely dispose of. Since the legitime of the illegitimate children consists of 1/2 of the hereditary estate, B, C and A each have a right to participation therein in the proportion of 1/3 each. A’s hereditary share will, therefore, be 1/2 plus (1/3 of 1/2), or 4/6 of the estate, while B and C will respectively be entitled to 1/3 of 1/2 or 1/6 of the value of the estate. In the case of the usufruct given to M, since, evidently, it is not inofficious, therefore, it is valid and should be respected. We believe, however, that the above ruling of the Supreme Court is not correct. As a matter of fact, many commentators on the NCC have criticized it. According to them, the effect of the preterition of B and C is to annul entirely the institution of A, applying literally the provision of Art. 854 of the NCC. In the case of the usufruct given to M, since, evidently, it is not inofficious, it is valid and should be respected. 102. Suppose that the instituted heir dies before the testator, or is incapable of succeeding from the testator, or repudiates the inheritance, would he be able to transmit his right to his own heirs? ANS: I distinguish. If he is a compulsory heir, he would be able to transmit his right to his legitime to his own heirs in the direct line who can represent him, but only in case of predecease or incapacity, and not in case of repudiation. (Arts. 856, 970, 977, NCC.) If he is a voluntary heir, he cannot transmit any right to his own heirs. (Art. 856, NCC.) 103. In his will, widower Kano instituted his only child Luis and a friend Mario as his heirs. Mario died ahead of Kano. If Kano dies without changing his will, would the children of Mario step into the shoes of their father and inherit from Kano? (1974) ANS: The children of Mario cannot step into the shoes of their

546

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

Arts. 857-870

father and inherit from Kano. In other words, they cannot inherit from. Kano by right of representation. The following reasons are decisive: (a) In testamentary succession, only a compulsory heir may be represented. Mario is not a compulsory heir; he is merely a voluntary heir whose share is chargeable against the free portion. Under the law, a voluntary heir who dies before the testator transmits nothing to his heirs. (Art.$56, NCC.) (b) The above case is one involving accretion and not representation. It must be observed that had Mario survived the testator, Luis would have been entitled to his legitime of 1/2 of the hereditary estate in his capacity as compulsory heir and 1/2 of the 1/2 disposable free portion in his capacity as voluntary heir; Mario, on the other hand, would have been entitled also to 1/2 of the 1/2 disposable free portion as voluntary heir. But then, the latter died before the testator. Therefore, the provisions of the NCC on accretion (Arts. 1015, et. seq.) are applicable and not the provisions on representation. (Arts. 970, et. seq.) Since the requisites of accretion in testamentary succession are present, Mario’s share shall now accrue to Luis. Section 3. SUBSTITUTION OF HEIRS (Arts. 857-870) 104. What is meant by substitution of heirs? ANS: Substitution is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted. (Art. 857, NCC.) 105. Give and define the different kinds of substitution. ANS: According to Art. 858 of the NCC, substitution may be: (1) simple or common; (2) brief or compendious; (3) reciprocal; or (4) fideicommiss ary. Simple or common (vulgar) substitution is that which takes place when the testator designates one or more persons to substi­ tute the heir or heirs instituted in case such heir or heirs should die

547

Arts. 857-870

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

before him, or should not wish, or should be incapacitated, to accept the inheritance. Where there are two (2) or more persons designated by the testator to substitute for only one heir, the substitution is called brief, but when there is only one person designated to substi­ tute for two (2) or more heirs, it is called compendious. When two (2) or more persons are not only instituted as heirs, but are also mutually or reciprocally substituted, the substitution is called recip­ rocal. Fideicommissary substitution, or indirect substitution as it is sometimes called, on the other hand, is that which takes place when the fiduciary or first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole or part of the inheritance, provided such substitution does not go beyond one de­ gree from the heir originally instituted, and provided further, that the fiduciary or first heir and the second heir are living at the time of the death of the testator. (See Arts. 859, 860, 861, 863; NCC.) 106. What are the distinctionbetweenmodal substitution and conditional testamentary disposition? ANS: Distinctions are:

(1) A mode imposes an obligation upon the heir or legatee but it does not affect the efficacy of his rights to the succession; while in a conditional testamentary disposition, the condition must happen or be fulfilled in order for the heir to be entitled to succeed the testator; (2) The condition suspends but does not obligate; while the mode obligates but does not suspend. To some extent, it is similar to a resolutory condition. (Johnny Rabadilla vs. CA, G.R. No. 113725, June 29, 2000.) 107. What are the requisites of fideicommissary substi­ tution? ANS: In the case of Perez vs. Garchitorena, 54 PhiL 431, the Supreme Court gives the following as the essential requisites of a fideicommissary substitution: (1) estate. (2)

A first heir called primarily to the enjoyment of the A second heir.

548

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

Arts. 857-870

(3) An obligation clearly imposed upon the first heir to pre­ serve and transmit to the second heir the whole or a part of the estate, 108. What are the different limitations imposed by law upon fideicommissary substitution? (1988) ANS: There are four (4) limitations. They are: (1) The substitution must not go beyond one degree from the heir originally instituted. (Art. 863, NCC.) (2) The fiduciary and the fideicommissary must be living at the time of the death of the testator. (Ibid.) (3) The substitution must not burden the legitime of compulsory heirs. (Art. 864, NCC.) (4) The substitution must be made expressly. (Art..865, par. 1, NCC.) 109. What is meant by the limitation that the substitution must not go beyond one degree from the heir originally instituted? ANS: There are two (2) views. According to one view, "decree" means generation or relationship. Under this view, when the law says that the substitution must not go beyond one degree from the heir originally instituted, what is meant is that the fideicommissary substitute must not go beyond one degree of relationship from the fiduciary heir. Consequently, only the parent or child of the latter can be appointed as fideicommissary heir. This view is advocated by Manresa. In the Philippines, it is advocated by Dr. Tolentino, Dr. Padilla and the members of the Code Commission. According to a second view, "degree” is the equivalent of designation or transfer. Under this view, when the law says that the substitution must not go beyond one degree from the heirs originally instituted, what is meant is that the substitution must not extend beyond one degree of designation or transfer from the heir originally instituted. Consequently, any person, whether natural or juridical, may be appointed as fideicommissary heir. This view was upheld

549

Arts. 857-870

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

by the Supreme Tribunal of Spain in decisions promulgated in 1944 and 1949. In the Philippines, it is advocated by Justice J.B.L. Reyes and some commentators on the NCC. Which of these two (2) views is correct? We believe that the second is more sound for the following reasons: (1) It is more in conformity with public policy which is designed to increase the greater circulation or socialization of wealth. (2) The law itself says that the “substitution” (it does not use the word substitute”) must not go beyond one degree from the heir originally instituted. If we accept the first view, the law would read as follows: “provided that the substitution does not go beyond one degree of relationship from the heir originally instituted,” which would not make any sense at all, whereas if we accept the second view, the law would read as follows: “provided that the substitution does not go beyond one degree of transfer from the heir originally instituted,” which would certainly make sense. (3) Finally, construing No. 3 of Art. 867 in relation to Art. 863, it is clear that the only way by which the first limitation prescribed in the latter article can possibly be violated by the testamentary disposition referred to in the former would be to interpret the phrase “one degree as one degree of transfer’' and not as “one degree of relationship.” ' In a comparatively recent case, however, the Supreme Court ruled that the word ‘degree’ means generation. (Testate Estate of Jose Ramirez vs. Vda. de Ramirez, 111 SCRA 704.) Speaking through Justice Abad Santos, the Court held: What is meant by “one degree” from the first heir is ex­ plained by Tolentino as follows: “Scaevola, Maura, and Traviesas construe ‘degree’ as des­ ignation, substitution, or transmission. The SC of Spain has decidedly adopted this construction. From this point of view, there can be only one transmission or substitution, and the substitute need not be related to the first heir. Manresa, Morell, and Sanchez Roman, however, construe the word ‘degree’ as generation, and the present Code has obviously followed this interpretation, by providing that the substitution shall not go beyond one degree ‘from the heir originally instituted.’ The

550

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

Arts. 857-870

Code thus clearly indicates that the second heir must be re­ lated to and be one generation from the first heir. From this, it follows that the fideicommissary can only be either a child or a parent of the first heir. These are the only relatives who are one generation or degree from the fiduciary.” (Op. cit., pp. 193-194.) (Note: In the above-stated case, there was an incidental question which is quite interesting. The Philippine Constitution declares that aliens cannot acquire or hold private agricultural lands save in case of hereditary succession. Does the exception extend to testamentary succession? The Court ruled in the negative. Otherwise, the prohibition will be meaningless. An alien would be able to circumvent the prohibition by paying money to a Philippine land owner in exchange for a devise of a piece of land.)

110. X died in 1955 with a will. In her will, she devised 1/2 of a big parcel of land to her brothers. Y and Z, and the other 1/2 to a grandniece, A, subject to the condition that upon A’s death, whether before or after that of the testatrix, said 1/2 of the property devised to her shall be delivered to Y and Z, or their heirs should anyone of them die before X. After the will was admitted to probate, A demanded for the partition of the property. Y and Z, however, contended that since she is only a fiduciary heir or a usufructuary she cannot demand for the partition of the property. Is this contention tenable? ANS: This contention is untenable. Art. 865 of the NCC provides that a fideicommissary substitution shall have no effect unless it is made expressly either by giving it such name or by imposing upon the first heir the absolute obligation to deliver the inheritance to the second heir. The testamentary clause under consideration does not call the institution a fideicommissary substitution nor does it contain a clear statement that A enjoys only usufructuary right, the naked ownership being vested in the brothers of the testatrix. The willf therefore, establishes only a simple or common substitution (sustitucion vulgarj, the necessary result of which is that A, upon the death of the testatrix, became the owner of an undivided half of the property. Being a co-owner, she can therefore demand for a partition of the property. (Crisologo vs. Singson, 4 SCRA 491.)

551

Arts. 857-870

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

111. (a) What is the nature of the rights of the fiduciary heir and the fideicommissary substitute with respect to the property which is the subject matter of the substitution? (b) What are the obligations of the fiduciary heir? When shall the property be transmitted to the fideicommissary substitute? ANS: (a) Upon the death of the testator or fideicomitente, the fiduciary heir acquires all of the rights of a usufructuary until the moment of delivery to the fideicommissary substitute. In other words, pending the transmission or delivery, he possesses the beneficial ownership of the property, although the naked ownership is vested in the fideicommissary substitute. (6 Manresa 174,178-179.) (b) The obligations of the fiduciary heir are as follows: (1) Preservation of the property. Corollary to this obligation is the obligation to make an inventory of the property. Because of this obligation to preserve, he can­ not alienate the property itself, although he may alienate his usufructuary right over the property. (2) Transmission of the property to the fideicom­ missary substitute. The time of transmission shall de­ pend upon the will of the testator. If such time is not designated, then the transmission shall take place upon the death of the fiduciary heir.

112. Distinguish a fiduciary in fideicommissary substi­ tution from a trustee in a trust. (1971) ANS: A fiduciary and a trustee may be distinguished from each other in the following ways: (1) As to constitution or designation: A fiduciary can only be designated expressly by means of will, while a trustee may be designated either expressly through acts which may be either inter vivos or mortis causa or impliedly by operation of law. (2) As to right of enjoyment: A fiduciary is entitled to all of the rights of a usufructuary, while a trustee has no usufructuary right over the property which he holds in trust. (3)

As to right of disposition: A fiduciary may alienate his right

552

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Substitution of Heirs

Arts. 857-870

of usufruct over the property but always subject to his obligation of preserving and transmitting it to a second heir, while a trustee cannot alienate anything whatsoever. (4) As to obligations: While essentially both have the same obligations of preservation and transmission, the obligation of the latter is broader because it extends not only to the property itself but also to the fruits.

113. X died in 1965 with a will. In his will, he devised a house and lot to his friend, A, as fiduciary heir and to A’s son, B, as fideicommissary substitute without specifying the time or period when A shall deliver the property to B. B died intestate in 1970 survived by his two (2) children, E and F. A also died intestate in 1980 survived by his two (2) sons, C and D, and his two (2) grandsons, E and F. In the intestate proceedings for the settlement of the estate of A, E and F filed a motion for the exclusion of the house and lot originating from X on the ground that they are the exclusive owners of the property. C and D filed an opposition on the ground that B predeceased A; therefore, the fideicommissary substitution did not produce any effect as far as B and his two (2) sons are concerned. Should the opposition be sustained? Why? ANS: The opposition should not be sustained. The governing law is found in Art. 866 of the NCC which declares that “the 2nd heir (B in the instant case) shall acquire a right to the succession from the time o f the testator’s (X^) death, even though he (B) should die before the fiduciary (A). The right of the 2nd heir (B) shall pass to his heirs (E and F).wIt must be observed that B inherited from X as fideicommissary substitute when the latter died in 1965. Therefore, when he died in 1970, he was able to transmit his right to his own heirs, E and F. Consequently, when A also died in 1980, the right of E and F over the subject property became absolute.

114. What are the different dispositions related or anal­ ogous to fideicommissary substitutions which the law con­ siders as void? ANS: The following shall not take effect: (1) Fideicommissary substitutions which are not made in an express manner, either by giving them this name, or imposing

553

Arts. 871-885

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Testamentary Dispositions

upon the fiduciary the absolute obligation to deliver the property to a second heir; (2) Provisions which contain a perpetual prohibition to alien­ ate, and even a temporary one, beyond the limit fixed in Art, 863; (3) Those which impose upon the heir the charge of paying to various persons successively, beyond the limit prescribed in Article 863, a certain income or pension; (4) Those which leave to a person the whole or part of the hereditary property in order that he may apply or invest the same according to secret instructions communicated to him by the testator. (Art. 867, NCC.)

115. A died in 1970 with a will. In the will, he devised a house and lot to B as fiduciary heir and to the latter’s son, C, as fideicommissary substitute, declaring that said property shall not be alienated for 100 years. B died in 1985. May C now validly alienate the property? ANS: No. 3 of Art. 867 of the NCC provides that provisions which contain a perpetual prohibition to alienate, and even a temporary one, beyond the limit fixed in Art. 863 shall not take effect. There are only two (2) limitations stated in Art. 863. They are: 1st, that the substitution must not go beyond one degree from the heir originally instituted, and 2nd, that both the first heir and the second heir must be living at the time of the death of the testator. It is evident that in testamentary dispositions which contain a perpetual or temporary prohibition to alienate, neither one nor the other can possibly be violated. The only limitation which is violated is that provided for in Art. 870. The prohibition to alienate is good for 20 years. Beyond that, it is void. We believe that this is what is really meant by the law. Therefore, in the instant problem, C must still wait for 1990 before he can validly alienate the property.

Section 4. TESTAMENTARY DISPOSITIONS (Arts. 871-885) 116. What is the effect of an impossible condition when it is attached to a testamentary disposition? How does this 554

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Testamentary Dispositions

Arts. 871-885

differ from the effect of an impossible condition which is attached to a civil obligation? ANS: When attached to a testamentary disposition, an impossible condition shall be considered as riot imposed and shall in no manner prejudice the heir, legatee or devisee, even if the testator should otherwise provide. (Art. 873, NCC.) However, when it is attached to a civil obligation in such a manner that such obligation shall depend upon the fulfillment of such condition for its perfection, the very existence of said obligation is affected; according to the law, it is annulled. (Art. 1183, NCC.)

117. What is the effect of an absolute condition not to contract a first or subsequent marriage? If the condition is not absolute but relative, will that make any difference in your answer? ANS: Whether the condition attached to a testamentary disposition is an absolute condition not to contract a first marriage or an absolute condition not to contract a subsequent marriage, according to the law such a condition shall be considered as not written. The rule with respect to absolute prohibitions to contract a first marriage is absolute in character; there are no exceptions whatsoever. However, the rule with respect to absolute prohibitions to contract a subsequent marriage is subject to the following exceptions: 1st, when it is imposed by the deceased spouse; 2nd, when it is imposed by an ascendant of the deceased spouse; and 3rd, when it is imposed by a descendant of the-deceased spouse. (Art. 874, NCC.) Nevertheless, whether the beneficiary is unmarried or already married, personal prestations, such as the right of usufruct or an allowance may be devised or bequeathed to such person for the time during which he or she should remain unmarried or in widowhood. (Ibid.) If the condition not to contract a first or subsequent marriage is merely relative with respect to persons, time and place, the rule stated in Art. 874 of the NCC does not apply; in other words, the condition is perfectly valid. Thus, if the testator institutes a certain person as heir subject to the condition that she will not get married to anybody belonging to a certain party or sect, or that she will not get married until she reaches the age of 25, or that she will not get

555

Arts. 871-885

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Testamentary Dispositions

married in Manila, the condition, being merely relative, is perfectly valid.

118. What is meant by disposition captatoria ? ANS: The condition that the heir shall make some provision in his will in favor of the testator or of any other person is what is known as a condition captatoria. Consequently, if the testator makes a testamentary disposition in his will subject to such a condition, it is known as a disposicion captatoria. Under our law, not only the condition but the entire testamentary disposition shall be void. (Art. 875, NCC.) The reason for this is that succession is an act of liberality and not a contractual agreement* Besides, to permit it would impair the heirs freedom of disposition with respect to his own property. Furthermore, it would be equivalent to allowing the testator to dispose of the property of another after the latter’s death. (6 Manresa 241.)

119. What is the effect if an heir, legatee or devisee is instituted subject to a suspensive or a resolutory condition? ANS: If an heir, legatee, or devisee is instituted subject to a suspensive condition, what is acquired is only a mere hope or expectancy. It is, however, a hope or expectancy that is protected by the law. The inheritance, legacy or devise shall be placed under administration until the condition is fulfilled, or it becomes certain that it cannot be fulfilled. (Art. 880, NCC.) Thus, if A devised a house and lot to his nephew/‘B, subject to the condition that he must pass the bar examination in his first attempt, such condition is suspensive. The property, therefore, shall be placed under administration after A’s death pending the fulfillment or non-fulfillment of the condition. If B finally passes the examinations in his first attempt, he can demand immediately for the conveyance of the property to him. If an heir, legatee, or devisee is instituted subject to a resolutory condition, he acquires a right to the inheritance, legacy or devise immediately upon the testator’s death. This right, however, is subject to the threat of extinction. If the condition is fulfilled or violated, such right is extinguished. Thus, if A, prior to his death, had executed a will leaving the entire free portion of his estate to his wife, B, subject to the condition that she must not remarry, such condition

556

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Testamentary Dispositions

Arts. 871-885

is resolutory. Upon A’s death, B can demand immediately for the conveyance of the entire free portion of the estate to her. However, since the condition is both potestative and negative in character, she must have to file a bond or security known as caucion muciana. If she violates the condition, she will be compelled to return whatever she may have received, together with its fruits and interests. (Art 879, NCC.)

120. What is the effect if an heir, legatee, or devisee is instituted subject to the fulfillment of a mode or obligation? ANS: According to the law, if the testator attaches to an institution of heir, legacy or devise a statement of the object of the institution, legacy or devise, or the application of the property left by him, or the charge imposed by him, the institution is modal, not conditional, in character. This kind of institution is what is sometimes known as institucion modal or sub modo. That which has been left in this manner may be claimed at once upon the death of the testator. The beneficiary, however, must have to file a bond or security (caucion muciana). If he fails to comply with the obligation, he must return whatever he may have received, together with its fruits and interest. (Art 882, NCC.)

121. What is the effect if an heir, legatee, or devisee is instituted subject to a suspensive (ex die) or resolutory (in diem) term or period? ANS: If the term or period is suspensive (ex die), the rights of the instituted heir, legatee, or devisee are suspended until the arrival of the date or time designated by the testator. Pending the arrival of such date or time, the inheritance, legacy or devise shall be given to the legal heirs of the testator. (Art. 885, NCC.) Such legal heirs, however, must file a bond or security (Ibid.); if they cannot, the property shall be placed under administration. (Art. 880, NCC.) Upon arrival of the date or time designated by the testator, the instituted heir, legatee, or devisee can demand immediately for the conveyance of the property to him. If the term or period is resolutory (in diem), the rights of the instituted heir, legatee, or devisee are immediately demandable, although they are extinguished upon the arrival of the date or time

557

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

designated by the testator. The property shall then pass to the legal heirs of such testator. (Art. 885, NCC.)

Section 5. LEGITIME (Arts. 886-914) 122. Define Legitime. ANS: Legitime is that part of the testator’s property which he cannot dispose of because the law has reserved it for certain heirs who are, therefore, called compulsory heirs. (Art, 886, NCC.)

123. Who are compulsory heirs? ANS: In general, compulsory heirs are those for whom the law has reserved a portion of the testator’s estate which is known as the legitime. In particular, the following are compulsory heirs: (1) Legitimate children and descendants, with respect to their legitimate parents and ascendants; (2) In default of the foregoing, legitimate parents and ascen­ dants, with respect to their legitimate children and descendants; (3)

The widow or widower;

(4)

Illegitimate children.

Compulsory heirs mentioned in Nos. 3 and 4 are not excluded by those in Nos. 1 and 2; neither do they exclude one another. In all cases of illegitimate children, their filiation must be duly proved. The father or mother of illegitimate children of the classes mentioned shall inherit from them in the manner and to the extent established by the NCC. (Art. 887, NCC.) (Note: The FC limits the classification of children to legitimate and illegitimate, thereby eliminating the classes of the acknowledged natural children and the natural children by legal fiction as well as the other illegitimate children referred to in Art. 287 of the NCC.

558

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

Illegitimate children, like legitimate children, are given under the F C their status as such from the moment of birth. Hence, there is no need for an illegitimate child to file an action for recognition if he has been recognized by his parent by any of the evidences mentioned in Art. 17 2 of the FC . An illegitimate child may establish his illegitimate filiation in the same way and on the same evidence as the legitimate child. Thus, the following children are illegitimate under Art. 16 5 of the FC: (1) Children bora of couples who are not legally married, or of common-law marriages; (2) (3) parents;

Children bom of bigamous or polygamous marriages; Children born of adulterous relations between the

(4) Children bom of couples below 18, whether they are married (which marriage is void) or not; (5)

Children of other void marriages under Art. 3 5 of the FC;

(6)

Children bom of incestuous marriages under Art. 37 of the

FC; (7) Children bom of marriages void for reasons of public policy under Art. 38 of FC. Children of marriage void under Art. 36 [because of the psychological incapacity of one of the spouses] and Art. 53 [such as the second marriage of a widow or widower who has not delivered to his or her children by his or her first marriage the legitime of said children are, however, legitimate].)

124. If the testator is a legitimate person, who are his compulsory heirs? ANS: They are: (1)

Legitimate children and descendants;

(2) In default of legitimate children and descendants, legitimate parents and ascendants; (3)

The widow or widower;

(4)

Illegitimate children.

559

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

125. If the testator is an illegitimate person, who are his compulsory heirs? ANS: They are: (1)

Legitimate children and descendants;

(2) In default of children and descendants, whether legitimate or illegitimate, the natural father and mother; (3)

The widow or widower;

(4)

Illegitimate children.

126. (a) What is meant by primary and secondary compulsory heirs? (b) What is meant by fixed and variable legitimes? ANS: (a) Primary compulsory heirs are those who are always entitled to their legitime as provided by law regardless of the class of compulsory heirs with which they may concur. Legitimate children or iescendants, the surviving spouse and illegitimate children (whether natural or not) are primary compulsory heirs. Secondary compulsory leirs, on the other hand, are those who may be excluded by other classes of compulsory heirs. Thus, if the testator is a legitimate verson, his legitimate parents or ascendants are excluded by the presence of a legitimate child or descendant. If he is an illegitimate verson, his parents by nature are excluded by the presence of any :hild or descendant, whether legitimate or illegitimate. (b) The legitime of compulsory heirs may be either fixed >r variable. It is fixed if the aliquot part of the testator’s estate to vhich a certain class of compulsory heirs is entitled is always the iarae whether they survive alone as a class or they concur with other lasses of compulsory heirs. It is variable if the aliquot part changes lepending upon whether they survive alone as a glass or they concur vith other classes of compulsory heirs. Examples of the first are he legitimes of legitimate children or descendants and legitimate larents or ascendants. Examples of the second are the legitimes of he surviving spouse and illegitimate children.

127. In order that illegitimate children can inherit as ompulsory heirs, is voluntary or compulsory recognition by he decedent necessary? 560

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

ANS: The FC has limited the classification of children to legitimate and illegitimate, thereby eliminating the classes of the acknowledged natural children and natural children by legal fiction. Illegitimate children, like legitimate children, are given under the FC their status as such from the moment of birth. Hence, there is no need for an illegitimate child to file an action for recognition if he has already been recognized by his parent by any of the evidences provided for in Art, 172 of the FC.

128. CODE.

TABLE OF LEGITIMES UNDER THE NEW CIVIL

Survivors

(1)

(2)

Legiti­ mate Descen­ dants

Legiti­ mate Ascen­ dants

(3)

(4)

(5)

Ac. Nat. and/or Nat. Children By Legal Fiction

Ack. Illeg. Children Not Natural

A. Any class alone

172

unless the testator and the surviving spouse were married in articulo mortis and the testator died within 3 months from the time o f such marriage, in which case the legitime of the spouse as sole heir is 1/3.

B. All classes — but only one legiti­ mate descendant

172

Excluded

C. All classes — but several legitimate descendants

172

Excluded

D (a) Legitimate ascendants

1/2*

1/4

1/2 of that of a LD*

Equal to that of a LD 1/8

1/4 (5:4)

(b) Surviving spouse (c) Illegitimate children E (a) Legitimate ascendants

1/2**

(b) Surviving spouse

561

1/4 (5:4)

2/5 o f that o f a LD*

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

F (a) Legitimate ascendants

1/2***

1/4 (5:4)

(b) Illegitimate children G (a) Surviving spouse

1/3

1/3 (5:4)

(b) Illegitimate children

*

If the portion available for distribution is not sufficient, it shall be distributed among the acknowledged natural children or natural children by legal fiction and the spurious children in the proportion of 5:4.

**

If the testator is an illegitimate person, his natural parents are also excluded by presence of illegitimate children.

***

If natural parents concur with the surviving spouse, the legitime of the former is 1/4, while that of the latter is also 1/4.

129. CODE.

TABLE OF LEGITIMES UNDER THE FAMILY

Survivors

(1)

(1)

(1)

(1)

Legitimate Descendants

Legitimate Ascendants

Surviving Spouse

Illegitimate Children

A. Any class alone

1/2

unless the testator and the surviving spouse were married in articulo mortis and the testator died within 3 months from the time of such marriage, in which case the legitime of the spouse as sole heirs is 1/3.

B. All classes — but only one legiti-mate descendant

1/2

Excluded

C. All classes — but several legitimate descendants

1/2

Excluded

562

1/4

Equal to that of a LD

1/2 of that of a LD*

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

D (a) Legitimate ascendants

1/2*

1/8

1/2**

1/4

Arts. 886-914

1/4

(b) Surviving spouse (c) Illegitimate children E (a) Legitimate ascendants (b) Surviving spouse 1/2***

F (a) Legitimate ascendants

1/4

(b) Illegitimate children 1/3

G (a) Surviving spouse

1/3

(b) Illegitimate children

*

If the portion available for distribution is not sufficient, it shall be distributed among the illegitimate children equally.

**

If the testator is an illegitimate person, his natural parents are also excluded by presence of illegitimate children.

***

If natural parents concur with the surviving spouse, the legitime of the former is 1/4, while that of the latter is also 1/4.

130. Distinguish between the free portion and the disposable free portion. ANS: If there is only one compulsory heir or if there are two (2) or more compulsory heirs surviving the testator but they belong to the same class, generally, the NCC declares that 1/2 of the hereditary estate shall be the legitime of such compulsory heir or heirs and the other 1/2 shall be the free portion which is at the testator’s free disposal. In such cases, there is no distinction between the free portion and the disposable free portion. However, if the only survivors are legitimate children or descendants, or in default thereof legitimate parents or ascendants, there would then be a clear distinction between the two (2) if such descendants or ascendants will concur with the surviving spouse and/or illegitimate children or

563

Arts. 886-914

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descendants. In such cases, the legitime of such legitimate children or descendants, or in default thereof* of such legitimate parents or ascendants, is 1/2 of the hereditary estate, while the free portion is the other 1/2. But this free portion is not really free in the sense that it is at the testators free disposal. It is still subject to the satisfaction of the legitimes of the surviving spouse and illegitimate children or descendants, whether natural or not natural. After satisfying such legitimes and there is still a balance remaining, such balance is what is known as the disposable free portion.

131. When can the testator freely dispose of by will: (1) His entire estate? (2)

1/8 of his estate?

(3)

1/3 or his estate?

(4)

2/3 of his estate?

(5) Nothing of his estate? ANS: The testator can freely dispose of by will: (1)

His entire estate — if he has no compulsory heirs.

(2) 1/8 o f his estate — if he is survived by legitimate parents or ascendants, the surviving spouse, and illegitimate children. (Art. 899, NCC,) (3) 1/3 o f his estate — if he is survived by the surviving spouse and illegitimate children. (Art. 894, NCC.) (4) 2/3 o f his estate — if he is survived by the surviving spouse only, provided that their marriage was solemnized in articulo mortis, and the testator died within three (3) months from the time of the marriage. (Art, 900, par. 1, NCC.) (5) Nothing o f his estate — if he is survived by legitimate children or descendants, the surviving spouse, and several illegitimate children so that there is nothing left for free disposal (Art. 895, NCC.), such as when there is a concurrence of one legitimate child, the surviving spouse, and two (2) or more illegitimate children.

564

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

132. What is the legitime of the surviving spouse? ANS: The successional rights of the surviving spouse with respect to hi£ or her legitime may be summarized as follows: (1)

Surviving alone — (a)

General rule — 1/2 of estate

(b) Exception — 1/3 of estate, if the marriage was sol­ emnized in articulo mortis and the testator died within three months from the time of such marriage. (c) Exception to exception — 1/2 of estate, if the mar­ riage was solemnized in articulo mortis and the testator died within three (3) months from the time of such marriage, but they have been living as husband and wife for more than five (5) years. (2)

Surviving with legitimate descendants — (a) . 1/4 of estate, if there is only one child.

(b) the same as that of each child, if there are two (2) or more children. (3)

Surviving with ascendants — 1/4 of estate.

(4)

Surviving with illegitimate children — 1/3 of estate.

(5) Surviving with legitimate descendants and illegitimate children — (a)

1/4 of estate, if there is only one legitimate child.

(b) the same as that of each legitimate child, if there are two (2) or more legitimate children. (6)

Surviving with ascendants and illegitimate children — (a)

1/8 of estate, if testator is a legitimate person.

(b)

1/3 of estate, if testator is an illegitimate person.

133. What is the legitime of illegitimate children? ANS: The successional rights of illegitimate children classified as such under the FC (and no longer as acknowledged natural or natural by legal fiction, or acknowledged illegitimate children who

565

krts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

ire not natural) with respect to their legitime may be summarized is follows: (1) Surviving alone as a class — 1/2 of the estate to be divided jqually among the illegitimate children pursuant to Art. 176, 2nd sentence of the FC. (2) Surviving with legitimate descendants — 1/2 of the egitime of a legitimate child. (3) Surviving with parents or ascendants — 1/4 of the estate f testator is a legitimate person, and 1/2 of the estate if testator is m illegitimate person. (4)

Surviving with spouse — 1/3 of the estate.

(5) Surviving with legitimate descendants and surviving spouse — 1/2 of the legitime of a legitimate child. (6) Surviving with parents or ascendants and surviving >pouse — 1/4 of estate if testator is a legitimate person, and 1/3 of estate if testator is an illegitimate person. 134. Don died after executing a Last Will and Testament leaving his estate valued at P12 Million to his common-law svife Roshelle. He is survived by his brother Ronie and his iialf-sister Michelle. (1) Was Don’s testamentary disposition of his estate in accordance with the law on succession? (2) Assuming further that he died intestate, survived by bis father, Juan, his brother, Ronie, his half-sister, Michelle, and his legitimate son, Jayson , how will you distribute his estate? Explain.( 2006) ANS: (1) Yes. Don’s testamentary disposition of his estate is in accordance with the law on succession. Don has no compulsory heirs not having ascendants, descendants nor a spouse. (Art, 887, NCCJ Brothers and sisters are not compulsory heirs. Thus, he can bequeath bis entire estate to anyone who is not otherwise incapacitated to inherit from him. A common-law wife is not incapacitated under the law as Don is not married to anyone. (2) Jayson will still be entitled to the entire P12 Million as the father, brother and sister will be excluded by a legitimate son

566

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

of the decedent. (Art. 887, NCC.) This follows the principle that the descendants exclude the ascendants from inheritance. (Suggested Answers to the 2006 Bar Examination Questions, PALS) 135. The testator "T ” is survived by his widow, “W,” his legitimate children, “A” and M B ” and his acknowledged natural children, “C” and “D.” The net value of his estate is P40,000. What is the legitime of each of the survivors? ANS: According to Art. 888, the legitime of “A” and “B” is 1/2 of the estate. They are, therefore, entitled to P10,000 each. The surviving spouse, “W,” under Art. 897 of the NCC is entitled to a legitime equal to the legitime of either "A” or “B” which must be taken from the free portion. Hence, her legitime is also P10,000. Under the first paragraph of Art. 895, the legitime of each of the acknowledged natural children shall consist of one-half (1/2) of the legitime of each of the legitimate children or descendants. However, the FC has limited the classification of children to only the legitimate and the illegitimate children, thereby eliminating the categories of natural children by legal fiction and spurious children. Under Art. 176, second sentence of the FC, the legitime of each illegitimate child shall consist of 1/2 of the legitime of the legitimate child. Hence, the acknowledged natural children “C” and “D” now classified as illegitimate children shall each receive P5,000 as their legitime. Nothing remains for free disposal. 136. Suppose that in the above problem there are four (4) acknowledged natural children instead of two (2). How shall their legitime be satisfied since it is evident that the free portion would not be sufficient to cover said legitime in addition to that of the surviving spouse? ANS: The solution is found in the provision of the last paragraph of Art. 895. The legitime of the surviving spouse must first be fully satisfied. That means that only P I0,000 remains for distribution among the four (4) acknowledge natural children, classified as illegitimate children under the FC. However, in no case shall the legitime exceed the free portion. Hence, the P I0,000 shall be divided equally among them. Each of them shall, therefore, be entitled to a legitime of P2,500.

567

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

137. The testator is survived by his wife, “W,” his legitimate children, “A” and “B,” and his illegitimate children, “C” and “D.” MC” is an acknowledged natural child, while “D” is an adulterous child. The net value of the estate is P40,000. What is the legitime of each survivor? ANS: The legitime of “A” and “B” is P20,000. (Art. 888, NCC.) or P10,000 each. “W” is also entitled to a legitime of P10,000 which shall be taken from the free portion. From this amount shall be taken the legitime of “C” and “D.” Pursuant to the provisions of the FC, the legitime of the acknowledged natural children and the adulterous children, now both classified as illegitimate children, shall be the same; that is, 1/2 of the legitime of a legitimate child. Therefore, the legitime of the illegitimate child shall be 1/2 of the legitime of a legitimate child which must be P5,000 (P10,000 x 1/2). The remaining free portion shall, therefore, be divided equally between “C” and “D” who shall be entitled to only P5,000 each. (The Family Code repealed the old law [Art. 895, NCCJ where the legitime of “C” is 1/2 that of “A” or “B”; and “D’s” legitime, on the other hand, is 4/5 that of “C” or 2/5 that of either “A” or “B.”) 138. The testator is survived by his wife, “W,” his legiti­ mate children “A” and “B,” his acknowledged natural chil­ dren, “C” and “D,” and his adulterous children, “E” and “F.” Net value of the hereditary estate is P72,000. What is the legi­ time of each survivor? ANS: The legitime of “A” and “B” is 1/2 of the whole estate, or P36,000, which they shall divide equally. The legitime of “W” is P18,000 which shall be taken from the free portion. (Arte. 897 and 898, NCC.) Only P18,000 remains out of the free portion. Pursuant to the provisions of the FC, the legitime of the acknowledged natural children and the adulterous children, now both classified as illegitimate children, shall be the same; that is, 1/2 of the legitime of a legitimate child. Therefore, the legitime of the illegitimate child shall be 1/2 of the legitime of a legitimate child, which must be P9,000 (P18,000 x 1/2). But since the free portion of P18,000 is not sufficient to satisfy the legitime of the four illegitimate children, the remaining free portion shall be divided equally among them. Consequently, “C,” “D,” “E” and “F” shall be entitled to only P4,500 each.

568

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

The F C repealed the old law where the legitime of an illegitimate child who is neither an acknowledged natural, nor a natural child by legal fiction, shall be equal to 4/5 of the legitime of an acknowledged child and distribution thereof shall be in the proportion of 5:4.

139. The deceased, A, left a gross estate worth P360,000 and debts amountingto P60,0()0.He was survivedby his widow, three (3) legitimate children, an acknowledged natural child and an adulterous child. In his will, he bequeathed P6,000 to a friend, leaving the remainder of his estate to his widow and children, legitimate as well as illegitimate. Divide A’s estate among the persons entitled thereto. Give reasons for your division. (1983) ANS: First, the debts amounting to P60,000 will be paid. That leaves a balance of P300,000. With this balance as basis, we can now determine the legitime of A’s three (3) legitimate children, his widow, his acknowledged natural child and bis adulterous child. The legitime of the three (3) legitimate children is 1/2 of the hereditary estate which they shall divide in equal shares or P50,000 each; the legitime of the widow, which shall be taken from the free portion of one-half (1/2), shall be equal to that of each of the legitimate children, or P50,000; and under the FC, the legitime of the acknowledged natural child and adulterous child, both classified as illegitimate children, shall be the same, which is (1/2) of the legitime of a legitimate child. Therefore, in the above problem, the legitime of the children and the widow shall be as follows: First legitimate child.................. P50,000.00 Second legitimate child.......................... .

50,000.00

Third legitimate child

50.000.00

Widow.................... ....

50.000.00

Illegitimate child.......

25.000.00

Illegitimate child.......

25.000.00 P250,000.00

Thus, there will still be a balance of P50,000 which we call the disposable free portion and over which A has absolute testamentary control. Out of this portion, the legacy o f P6,000 to a friend will then

569

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

be paid. That leaves a balance of P44,000 which will be divided in equal shares among the legitimate children, the widow and the illegitimate children. This is so because, they are all instituted as heirs thereof without designation of shares. Accordingly, the instituted heirs shall inherit in equal shares. The FC repealed the old law where the legitime of the acknowledged natural child shall be 1/2 of that of each of the legitimate children, while the legitime of the adulterous child shall be 4/5 of the legitime of the acknowledged natural child.

140. The testator is survived by his legitimate parents, “F” and “M,” his wife, “W,” and two (2) illegitimate children, “A” and “B,” “A” is an acknowledged natural child, while “B” is an adulterous child. The net value of the estate is P72,000.00. What is the legitime of the survivors? ANS: The legitime of “F” and “M” is 1/2 of the estate (Art. 889), or P36,000.00, which they shall divide equally. (Art. 890.) The legitime o f ‘T is 1/8, or P9,000.00. (Art. 899.) The legitime of “A” and “B” is 1/4, or P18,000.00. (Art. 899.) Under the FC, the legitime of the acknowledged natural child and the adulterous child, both classified as illegitimate children, shall be the same, which they shall divide equally. The amount of P18,000.00 must, therefore, be divided between the illegitimate children equally. Consequently, “A” shall be entitled to P9,000.00 and “B” shall also be entitled to P9,000.00. That leaves P9,000.00 of the entire amount of P72,000.00 at the testator’s free disposal. In view of the FC, the amount of P I8,000.00 is no longer required to be divided between the two (2) illegitimate children in the proportion of 5:4.

141. The testator has three (3) children “A,” “B,” and “C,” a wife “W,” a father “F,” an acknowledged natural child “N,” and an adulterous child “T.” “A” is a handicapped child, and the testator wants to leave to him as much of his estate as he can legally do under the law. State the specific aliquot parts of the estate that the testator can leave to his son “A” as well as to his other aforementioned relatives. State how you

570

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

Arts. 886-914

arrived at the result. (Assume a net estate of PI,200,000.00 and that all of the above-named relatives survived the testator.) (1982) ANS: Under the law on legitime, the survivors shall be entitled to the following legitime: (1) “A,” “B” and “C” — 1/2 of the estate which they shall divide in equal shares. Since the net value of the estate is PI,200,000.00, each of them shall, therefore, be entitled to P200,000.00. (2) “W” — the same as each of the legitimate children, or P200,000.00. (3) “F” none. “F” cannot participate in the succession because he is excluded by the legitimate children of the testator. (4 ) “N” _ 1/2 of the legitime of each of the legitimate children, or P100,000.00. (5 ) “T” — 1/2 of the legitime of each of the legitimate children, or P100f000.00 (by virtue of the FC). Thus, the disposable free portion is P200,000.00. If the testator so desires, he can leave this disposable portion to his son “A.” 142. X died testate in 1974, survived by two grandchil­ dren, B and C, children of A, a legitimate son of X, who died in 1970. B is legitimate, while C is acknowledged natural. Can the two represent A with respect to the legitime to which the latter would have been entitled had he survived the testa­ tor? ANS: Only B would be able to represent his father, A, but not C. Undoubtedly, B would be able to represent his father A, since the law expressly gives to him that right. (Arts. 856, 970, 902, NCC.) C, however, cannot because of the principle of absolute separation existing between members of the legitimate family and members of the illegitimate in succession which is effected by operation of law. (Art 992, NCC.)

571

Arts. 886-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legitime

143. Suppose that in the above problem, A is an acknowledged natural child, would that make a difference in your answer? ANS: Yes, that would make a difference in my answer. Since the principle of absolute separation between members of the legitimate family and members of the illegitimate family is not applicable here, B and C shall represent their father, A, with respect to the legitime which is 1/2 of the hereditary estate, to which the latter would have been entitled had he survived the testator. As a matter of fact this is expressly recognized in Art. 902 of the NCC which declares that the rights of illegitimate children with respect to their legitime sire transmitted upon their death to their descendants, whether legitimate or illegitimate. However, since B is a legitimate child and C is an acknowledged natural child, such legitime to which they are entitled by right of representation shall have to be divided between them in the proportion of two is to one (2:1) in accordance with Art. 895 of the NCC. In other words, B shall be entitled to 2/3 of the legitime, while C shall be entitled to 1/3. 144. The testator, an illegitimate person, is survived by his parents by nature, “F” and “M,” and his widow, “W.” The net value of his estate is P80,000, What is the legitime of the survivors? ANS: The legitime of “F” and “M” is 1/4 of the entire estate, or P20,000, while that of “W” is also 1/4 of the entire estate, or P20,000. (Art. 903, NCC.) That leaves 1/2 of the entire estate, or P40,000 at the testator’s free disposal. 145. Would it be possible for the testator to impair the legitime of compulsory heirs or to deprive such heirs of their legitime or to impose upon the same any burden, encumbrance, condition or substitution? ANS: The testator cannot deprive his compulsory heirs of their legitime. (Art. 904, NCC.) The only exception is when he disinherits a compulsory heir for a cause expressly stated by law. (Art. 915, NCC.) Neither can he impose upon the same any burden, encumbrance, condition or substitution of any kind whatsoever. (Art. 904, NCC). The only exception is when he expressly prohibits the partition of

572

Art. 891

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

the hereditary estate for a period which shall not exceed 20 years. (Art 1083, NCC.) 146. MN, a wealthy haciendero, died leaving to his four (4) legitimate children and his widow an estate worth about P2 million. When the proceedings for the settlement of his estate were pending, Rosie, a child he begot with his lavandera, filed a claim for a share in the estate. The widow and four (4) children contested the claim on the ground that in a previous action for support filed by the lavanderawhen Rosie was still a minor, the lavandera agreed to dismiss the case and signed an agreement acknowledging that the sum of P50,000.00 paid thereunder included payment for whatever inheritance Rosie was to have. Should Rosie’s claim be granted? Why? (1979) ANS: Rosie’s claim should be granted, but subject to the condition that the portion of the P50,000.00 paid to her mother as her inheritance shall be brought to collation. It must be observed that the agreement is actually a renunciation or compromise as regards a future legitime or inheritance between the person owing it and a compulsory heir. According to the NCC, such a renunciation or compromise is void, and the latter may claim the same upon the death of the former but he must bring to collation whatever he may have received by virtue of the renunciation or compromise. (Art. 905, NCC.) RESERVA TRONCA] (Art. 891) 147. What is meant by reserva troncaV?

^

ANS: Reserva troncal (reserva lineal) is a system of reserva 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, NCCJ

573

Art. 891

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

148. Why is reserva troncal sometimes known as reserva extraordinaria? ANS: Reserva troncal or lineal is sometimes known as reserva extraordinaria because it constitutes an exception both to the system of legitime and the order of intestate succession. Instead of the property passing to the compulsory heirs if the succession is testamentary or to the legal heirs if the succession is intestate, it passes automatically and by operation of law to the relatives of the descendant-propositus who are within the third degree and who belong to the line from whence it came. 149. What are the personal elements of reserva troncal? ANS: Reserva troncal presupposes a great complexity of personal elements. They are as follows: (1) The ascendant, brother or sister, otherwise known as the origin of the property, from whom the descendant-propositus has acquired the property by gratuitous title; (2) The descendant-propositus, from whom the ascendantreservista in turn had acquired the property by operation of law; (3) The ascendant-reservista who is obliged to reserve the property; and (4) The relatives of the propositus, otherwise known as the reservatarios, who are within the third degree and who belong to the line from which the property came and for whose benefit the reservation is constituted- (DeBuen, EnciclopediaJuridicaEspafiola, Vol. 17, p. 349, quoted in Dir. o f Lands vs. Aguas, 63 Phil. 279.) 150. What are the essential requisites of reserva troncal? (1973) ANS: In order that there will be a reservation of property in accordance with the provision of Art. 891, the following requisites must concur: (1) The property should have been inherited by operation of law by an ascendant from his descendant upon the death of the latter;

574

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

Art. 891

(2) The property should have been previously acquired by gratuitous title by the descendant from another ascendant or from a brother or sister; and (3) The descendant should have died without any legitimate issue in the direct descending line who could inherit from him. A fourth requisite is sometimes added — that there must be relatives of the descendant who are within the third degree and who belong to the line from which the property came. It is submitted that this is not a requisite, but merely a resolutory condition to which the reserva is subject. As stated by Morell, “the ascendant acquires the property with a condition subsequent, to wit: whether or not there exist at the time of his death relatives within the third degree of the descendant x x x in the line from whence the property proceeds. If such relatives exist, they acquire ownership of the property at the death of the ascendant. If they do not exist, the ascendant can freely dispose thereof,” (Morell, Estudios Sobre Bienes Reservables, pp. 304-305, quoted in Edroso vs. Sablan, 25 Phil. 295, and in Nono vs. Nequia, 93 Phil. 120.) However, in Chua vs. CFl o f Negros Occidental (78 SCRA 412), the above condition to which the reserva is subject was added as a requisite. 151. (1) What is the reason or rationale for reserva troncal? (1982)

(2) May the reservor (reservista) dispose of th reservable property — (a) By acts inter vivos? (b) By acts mortis causa? ANS: (A) The reason or rationale for reserva troncal is evident: it is to reserve certain property in favor of certain relatives. Hence, its name reserva lineal or troncal. It seeks to prevent persons outside a family from securing, by some special accident of life, property that would otherwise remain therein. Its principal aim is to maintain as absolutely as is possible, with respect to the property to which it refers, a separation between the paternal and maternal lines, so that property of one line may not pass to the other, or through them to strangers.

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

CNote: The above answer is lifted from 6 Sanchez Roman 1015 and 14 Scaevola 213.)

(2) (a) The reservista may dispose of the reservable property by acts inter vivos. This is logical because he acquires the ownership of the reservable property upon the death of the descendant'propositus subject to the resolutory condition that there must exist at the time of his death relatives of the descendant who are within the third degree and who belong to the line from which the property came. He can therefore, alienate or encumber the property if he so desires but he will only alienate or encumber what he has and nothing more. As a consequence, the acquirer will only receive a limited and revocable title. Therefore, after the death of the reservista, the reservatorios may then rescind the alienation or encumbrance, because the resolutory condition to which the reserva is subject has already been fulfilled. (Note: The above answer is based on Edroso us, Sablan, 26 Phil. 295 and Lunsod vs. Ortega, 46 Phil. 664. It is also based on comments of recognized commentators.)

(b) The reservista cannot dispose of the reservable property by acts mortis causa. The reason is crystal clear. Upon the death of said ascendant-reserwsfo, the reservable property does not belong to his or her estate. Because the resolutory condition to which the reserva is subject has already been fulfilled, therefore, the reservatarios or reservees nearest the descendant-proposiiws have already become automatically and by operation of law owners of the reservable property. (Note: The above answer is based on Cano vs. Director o f Lands [105 Phil. 1] and on Gonzales vs. Legarda [104 SCRA 479].)

152. Anacleto got married to Maria in 1930. They had only one daughter, Juliana. Maria died in 1940, survived only by her husband, Anacleto, her daughter, Juliana, and her sisters, Leona and Evarista. In 1941, Anacleto got married to Andrea. They had six (6) children. In 1950, Juliana died without issue. In 1955, Anacleto also died. After his death, Andrea and her six children took possession of all his properties, including a parcel of land which Anacleto and

576

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

Art. 891

Maria had acquired by purchase in 1935. Who is now entitled to this property? ANS: Leona and Evarista are now entitled to 1/2 of the property, while Andrea and her six (6) children are entitled to the other 1/2 which they shall divide in equal shares. Undoubtedly, 1/2 of said property is reservable in accordance with Art. 891 of the NCC, It is admitted that it belonged to the conjugal partnership of Anacleto and Maria; that upon the death of the latter, Juliana inherited in accordance with the laws of intestate succession then in force 1/2 of the property, the other half pertaining to her father; that upon the death of Juliana, her father, Anacleto, inherited from her 1/2 portion of said property. Therefore, pursuant to Art. 891 of the NCC, Anacleto was obliged to reserve the portion he had thus inherited from his daughter for the benefit of Leona and Evarista, aunts of Juliana in the maternal side, who are her relatives within the third degree belonging to the line from which said property came. (Aglibot vs. Manalac, 4 SCRA 1030J 153. A, a very wealthy man, got married to B. They had seven (7) children, C, D, E, F, G, H and L In 1933, A died intestate survived by B and their seven (7) children. In 1943, F died intestate without any issue in the direct descending line who could inherit from her. As a consequence, her entire estate consisting only of the properties which she had inherited from her father, A, passed to her mother, B. In 1953, B executed a holographic will disposing all of said properties to 16 of her grandchildren. In 1967, B finally died survived by her six children and several grandchildren. (a) Are the properties which B had inherited from her daughter F reservable under Art. 891 of the NCC? (b) Assuming that they are reservable, can B dispose of such reservable properties by means of a last will or testament? ANS: (a) The properties which B had inherited from F are reservable within the meaning of Art. 891 of the NCC. In reserva troncal or lineal, there are always four (4) personal elements. They are: first, the origin of the property, who must be an ascendant or a brother or sister of the descendant-proposifus;

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

second, the descendant-proposifws, who should have acquired the property from the origin by gratuitous title and who should have died without any legitimate issue in the direct descending line who could inherit from him; third, the ascendant-reservista or reservor, who should have inherited the property by operation of law from the descendant-proposjtfws; and fourth, the reservatario or reservatarios (reservee or reservees), who must be relatives of the, descendantpropositus within the third degree, and at the same time, must belong to the line from which the property came. All of these elements are present in the instant case. A is the origin; F is the descendantpropositus; B is the ascendant-resem’sta or reservor; and the six (6) surviving children of A and B are the reservatarios or reservees. As a consequence of the fact that there are 4 personal elements of reserva troncal, there must also be three (3) transfers of the property. They are: first, the transfer from the origin to the descendant-joropositus which must be gratuitous in character; second, the transfer from the descendant-proposing to the ascendant-neseruisifa or reservor which must be effected through succession by operation of law; and third, the final transfer from the ascendant-reseruisfa or reservor to the reservatarios or reservees, which takes place upon the death of the ascendant-reserwsfa or reservor automatically and by operation of law. Applied to the instant case, the first transfer took place in 1933 when A died and F inherited the subject properties from him; the second transfer took place in 1943 when F died without any legitimate issue who could inherit from her, and as a consequence, the subject properties passed to her mother B by intestate succession; and the third or final transfer took place in 1967 when B died, and as a consequence, the subject properties passed automatically and by operation of law to the reservees, C, D, E, G, H and I. Therefore, the subject properties are clearly reservable under Art. 891 of the NCC. (See Gonzales vs. Legarda, 104 SCRA 479.) (b) B cannot dispose of the properties by means of a last will or testament. The subject properties are reservable under Art. 891 of the NCC. From the time of the death of F in 1943 up to the time of the death of B in 1967, the latter was merely a usufructuary. She was holding the properties for the benefit of the relatives of F who are within the third degree and who belong to the line from which said properties came. Therefore, when she died in 1967, said properties did not form a part of her estate. They had already passed automatically to B’s children, C, D, E, G, H and I. (Ibid.)

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154. A died intestate leaving P60,000 worth of properties. His widow, B, gave birth to a son, C, 6 months after A’s death. C died 48 hours after he was born. The widow died 24 hours after the death of the child. The inheritance left by A is now claimed by the legitimate parents of A and by the l e g i t i m a t e parents of B. There are no other relatives. Who are entitled to the inheritance? Reasons. ANS: Under the facts stated in the problem, it is evident that when A died, he left only two (2) heirs — his widow, B, and his posthumous child, C. His estate must therefore be divided between the two in accordance with the rules of intestate succession. Consequently, B shall be given 1/2 of A’s estate, or P30,000, while C shall also be given 1/2, or P30,000. (Art. 996, NCC.) When C died 48 hours after his delivery, his 1/2 share in the estate passed by operation of law to his mother, B. From the foregoing, it is clear that the 1/2 share which C had acquired through succession from A, and which B, in turn, had acquired by operation of law from C, is reservable in accordance with" Art. 891 of the NCC. All of the requisites of reserva troncal are present. In the first place, B, the reservista, or person obliged to make the reservation, had acquired the property by operation of law from a descendant; in the second place, C, the descendant-proposita-s, had previously acquired the property from another ascendant, A, by gratuitous title; and in the third place, C, the descendant-proposif«s> died without any legitimate issue in the direct descending line. Consequently, when the reservista, B, died 24 hours after the death of her son, C, the 1/2 share, which she had acquired by operation of law from C, shall pass automatically and by operation of law to the reservatarios or relatives of the descendant-/? ropositus who are within the third degree and who belong to the line from whence the reservable property came. Only the legitimate parents of A can qualify. With regard to the other 1/2 share, which B had acquired directly through succession from her husband, A, since such property is free property and not reservable, it is evident that such property shall pass to her legitimate parents in a c c o r d a n c e with the normal rules of succession. 155. X died in 1960 with a will wherein he i n s t i t u t e d his mother, M, as universal heir. His estate consisted properties valued at P80,000. In 1962, M died intestate with

579

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all of these properties still intact. There are now two (2) claimants to these properties. They are A, maternal aunt of X, and B, paternal uncle of X. (a) Suppose that X had inherited all of these properties from his father, F, in 1955, to whom shall you adjudicate them? (b) Suppose that 1/2 of these properties had been acquired by X through succession from his father, F, in 1955, and the other half through his own effort or industry from 1955 to 1960, to whom shall you adjudicate them? ANS: (a) I would adjudicate 1/2 undivided share of all the properties to A in accordance with the normal rules of intestate succession and the other 1/2 undivided share to B in accordance with Art. 891 of the NCC. The reason for this is that only 1/2 undivided portion of the properties in the instant case is reservable. Under Art. 891 of the NCC, the law requires that the ascendant-reseryista should have inherited the property from the descendant-propositas ‘by operation of law.” In testamentary succession, the expression ‘by operation of law” can be applied only to the transmission of the egitime and not to the transmission of the free portion. Therefore, mly 1/2 undivided portion in the properties, which is the legitime )f M„ is reservable, while the other 1/2, which is the free portion, is ree property. Consequently, when M died in 1962, the 1/2 undivided portion of said properties which is reservable passed automatically md by operation of law to B in accordance with Art. 891 of the NCC, vhile the other 1/2 which is free passed to A in accordance with the lormal rules of intestate succession. (b) Since it is clear that a reservation is established in iccordance with Art. 891 of the NCC, the question that is actually isked here is — what is the extent of the reservation? There are two 2) divergent views which had been advanced in order to resolve this [uestion. They are as follows: First: According to one view, known as reserva maxima, all of the >roperties which the descendant-propositas had previously acquired >y gratuitous title from an ascendant or from a brother or sister aust be included in the ascendant-reseruisto’s legitime, insofar as uch legitime can contain them. (14 Scaevola 236; 6 Manresa 368.) applied to the instant case, since the legitime of the reservista, M,

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is 1/2, and since 1/2 of the entire estate had been previously acquired by gratuitous title by the propositus, X, from his father, F, therefore, all of the properties so acquired must be placed in the legitime. All of these properties are as a consequence reservable. On the other hand, those properties acquired by X through his effort or industry must be placed in the 1/2 free portion. All of these properties are as a consequence free property. Therefore when the reservista, M, died in 1962, all of the properties which X originally acquired by gratuitous title from his father F shall pass automatically and by operation of law to B in accordance with Art. 891 of the NCC, while all of the properties which X originally acquired through his effort or industry shall pass to A in accordance with the normal rules of intestate succession. Second: According to another view, known as reserva minima or proportional reserva, which is supported by the great majority of Spanish and Filipino commentators, and which we believe is the correct view, all of the properties which the descendant-propositus had previously acquired by gratuitous title from an ascendant or from a brother or sister must be considered as passing to the ascendant-reseruista partly by operation of law and partly by force of the descendant’s will. (6 Manresa 368-374; 6 Sanchez Roman, 10271028,) As applied to the instant case, since 1/2 of the estate of the propositus, X, had been previously acquired by gratuitous title from his father, F, 1/2 of such properties so acquired shall be included in the legitime of the reservista, M, while the other half shall be included in the free portion. Consequently, only the half which is included in the legitime is reservable, while the other half which is placed in the free portion is free property. Therefore, when the reservista, M, died in 1962, only 1/2 undivided share of all of the properties which X originally acquired from his father, F, by gratuitous title shall pass automatically and by operation of law to B in accordance with Art. 891, while the other 1/2 undivided share of such properties as well as all of the properties which X originally acquired through his effort or industry shall pass to A in accordance with the normal rules of intestate succession. 156. In order that the relatives of the descendantpropositus can qualify as reservatarios, what are the different requisites which must concur? ANS: The requisites which must concur are the following: 581

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(1) They must be legitimate relatives of the descendantpropositus and of the origin of the property. (2) They must be related to the descendant-propositus within the third degree. (3) They must belong to the line from which the reservable property came. (4)

They must survive the ascendant-resemsta.

157. Don Jose Reyes, before his death in 1945, donated to his grandson, Ramon Reyes, a child of his deceased son, Arturo Reyes, a house and lot worth P60,000. In 1950, Ramon Reyes died with a will instituting his mother, Dona Maria Unson Vda. de Reyes, as his sole heir. His estate consisted entirely of the house and lot which he had received from Don Jose. In 1960, Dona Maria also died but without a will. The house and lot is now claimed by the following: (1) Dona Juana Vda. de Reyes, widow of Don Jose and grandmother of Ramon; (2) Don Juan Reyes, son of Don Jose and Dona Juana and uncle of Ramon; and (3) Dona Alicia Unson, sister and only living relative of Dona Maria. If you were the judge, to whom shall you adjudicate the property? ANS: If I were the judge, I would give 1/2 undivided share of the property to Don Juan Reyes and the other half to Dona Alicia Unson. It must be observed that Ramon Reyes, the propositus, died with a will instituting his mother Dona Maria as sole heir. Consequently, only 1/2 of the property passed to her by operation of law since that is her legitime, while the other half passed to her by will. Under Art. 891 of the NCC, only that property which passes by operation of law to the ascendant-reserwsta is reservable. With this as a starting proposition, we can now decide the claim of each of the respective claimants. (1) Dona Juana, although a relative of the propositus in the second degree, is merely related by affinity to the ascendant from 582

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Art. 891

whom the property came. She does not, therefore, belong to the “line from which the property came” as required by Art. 891. According to Sanchez Roman, the reservatario must not only be related by consanguinity to the descendant-propositas within the third degree, but he must also be related by consanguinity to the ascendant from whom the property came. (6 Sanchez Roman 1015.) Consequently, Dona Juana is not entitled to the reservable part of the property. (2) It follows, therefore, that the reservable part of the property shall be adjudicated to Don Juan Reyes, since he is not only a third degree relative by consanguinity of the propositus, but he also belongs to the line from which the property came. (3) Dona Alicia, on the other hand, is entitled to the part of the property which is not reservable in accordance with the ordinary rules of intestate succession. 158. (a) If the origin of the reservable property in reserva troncal is a brother or sister, how do you determine the line from which the reservable property came?

(b) D, the only daughter of B, got married to E, th only son of A, in 1941. A son, X, was born to the couple in 1942. E was killed by the Japanese in 1944. In 1945, D got married to F, the only son of C. A son, Y, was born in 1946. D was killed in a vehicular accident in 1949. In 1968, X, who was very sickly, donated to his half-brother, Y, a parcel of land valued at V 100,000. One year later, he died. In 1970, Y also died. He died intestate and without any surviving issue. The land which he had acquired from X was inherited by his father, F, who was his only legal heir. The latter died intestate in 1972, survived only by his father, C. However, the land which had originated from X is now being claimed by A and B also on the ground that it is reservable in accordance with Art. 891 of the NCC. Who among the 3 grandfathers is entitled to the property? Reasons. ANS: (a) If the origin of the reservable property is a brother or sister of the full blood, the question of line is unimportant. This is so because in such case there is no way by which we would be able to determine the “line from which the property came ” This does not mean that the property is not reservable. It is still reservable, 583

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provided that all of the requisites of reserva troncal are present. This view is accepted by all commentators especially Manresa. (6 Manresa 334.) However, if the origin is a brother or sister of the half-blood, the common parent or ascendant must always be considered. If the common ascendant is the father, the property is reserved only for the relatives on the father’s side; if the common ascendant is the mother, the property is reserved only for the relatives on the mother’s side. (Ibid.) (b) B alone is entitled to the property. A and B are, of course, correct in contending that the subject property is reservable under Art. 891 of the NCC. All of the three (3) essential requisites of reserva troncal are present. In the first place, the property had been acquired by operation of law by an ascendant (F) from his descendant (Y) upon the death of the latter; in the second place, the property had been previously acquired by gratuitous title by the descendant (Y) from a brother (X); and in the third place, the descendant (Y) died without any legitimate issue in the direct descending line who can inherit from him. Consequently, when the property passed by operation of law to F, the latter was obliged to reserve it for the benefit of relatives of Y, who are within the third degree and who belong to the line from which the reservable property came. The real question, therefore, is — who, among the three (3) claimants, can qualify as a reservatario? In order to answer this question, two (2) tests should be applied. They are: first, is the claimant a relative of the descendant-proposztas within the third degree?; and second, does he belong to the line from which the reservable property came? Applying these tests to the case at bar, it is clear that A cannot qualify because he is not even a relative of the descendant-proposifws, Y. Neither can C qualify because he does not belong to the line from which the property came. He is not related by consanguinity to X. Only B can qualify. He is not only a relative of Y within the third degree; he also belongs to the line from which the reservable property came. Therefore, he alone shall be entitled to the property.

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Art. 891

159, (a) A inherits from his son B, who died without issue, property which was donated to the latter by his brother C. Is A bound to reserve said property? If so, in whose favor?

(b) A sold the property mentioned in (a) to D, B sister. Is the sale valid? Explain your answer. ANS: (a) Yes, A is bound to reserve the property. Said property is clearly reservable under Art. 891 of the NCC. In order that there will be a reserva troncal under the abovementioned article, the following requisites must concur: (1) The property should have been inherited by operation of law by an ascendant (reservista) from his descendant (propositus) upon the death of the latter; (2) the property should have been previously acquired by gratuitous title by the descendant (propositus) from another ascendant or from a brother or sister; and (3) the descendant (propositus) should have died without any legitimate issue in the direct descending line who could inherit from him. All of these requisites are present in the instant case. Consequently, A is now bound to reserve the property for the benefit of relatives of B, who are within the third degree and who belong to the line from which said property came. (Art. 891, NCC.) We are, of course, aware of the view of Justice Paras that the origin of the property must be a half-brother or half-sister, thus implying that the said property is not reservable within the meaning of Art. 891 of the NCC. (3 Paras 232.) It is respectfully submitted, however, that the law does not make such a distinction. As far as the origin of the property is concerned, it speaks only of “another ascendant, or a brother or sister.” Hence, even if the origin is a brother or sister of the full blood, the property is still reservable although the question of line becomes unimportant. This is the view of all Spanish commentators. (See 6 Manresa, 7th Ed., p. 334.) Hence, assuming that C in the above problem is B’s brother of the full blood, and assuming further that all of A’s children (B, C and D) die before him, and subsequently, he himself dies, survived only by a paternal uncle and a maternal aunt, it is clear that the subject property will then pass automatically and by operation of law to such paternal uncle and maternal aunt of B pursuant to Art. 891 of the NCC. This conclusion is in line with the declaration of the Supreme Court in Padura vs. Baldovino (104 Phil. 1065) that the

585

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

reservatarios or reservees do not inherit from the reservista, but from the descendant-propos&tas, of whom the reservatarios are the heirs mortis causa, subject to the condition that they must survive the reservista. (b)

The sale is valid. This is well-settled in this jurisdic­

tion. Since the ascendant-reservista actually acquires the reservable property upon the death of the descendant-proposiiws, subject to the resolutory condition that there must exist at the time of his death relatives of the descendant who are within the third degree and who belong to the line from which the property came, it is clear that all of the attributes of the right of ownership, such as enjoyment, disposal, and recovery, belong to him exclusively, although conditional and revocable. (See Edroso vs. Sablan, 25 Phil. 285.) He can, therefore, alienate or encumber the property if he so desires, but he will only alienate or encumber what he has and nothing more, because no one can give what does not belong to him. As a consequence, the acquirer will only receive a limited and revocable title. Therefore, after the death of the ascendant, the reservatarios may then rescind the alienation or encumbrance, because the condition to which it is subject has already been fulfilled. (Edroso vs. Sablan, 25 Phil. 255; Lunsod vs. Ortega, 46 Phil. 664.) 160. Suppose that there are several persons who can qualify as reservatarios, to whom shall the reservable prop­ erty be adjudicated? ANS: In such a case, the rules of intestate succession shall apply. This is so because Art. 891 merely determines the group of relatives to whom the reservable property should be returned; it is silent with regard to the individual right of such relatives to the property. Thus — (1) If some of the claimants are in the direct ascending line and others are in the collateral line, the principle of preference between lines shall apply. In other words, relatives of the descendantpropositus in the direct ascending line shall exclude his relatives in the collateral line. Example: If the claimants are (a) grandparents and (b) brothers or sisters of the propositus, the grandparents are preferred.

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Art. 891

(2) If all of the claimants belong to the same line, the principle of proximity shall apply. In other words, relatives of the descendantpropositus nearest in degree shall exclude the more remote ones. Example: If the claimants are (a) brothers or sisters and (b) uncles or aunts of the propositus, the brothers and sisters are preferred. (3) If some of the claimants are brothers and sisters of the descendant-proposziz/s and others are nephews and nieces, children of brothers and sisters of the propositus who died before the reservista, the principle of representation shall apply. Even the right of representation is recognized in reserva troncal, provided that the representatives are relatives of the propositus within the third degree. (Florentino vs. Florentino, 40 Phil. 489-490.) (4) If all of the claimants are brothers and sisters of the descend&nt-propositus and some of them are of the full blood and others are of the half blood, the principle of double share for full blood collaterals shall apply. In other words, those of the full blood shall be entitled to double the share of those of the half blood. The same principle is applicable if all of the claimants are nephews and nieces of the descendant-propos itas and some of them are of the full blood and others are of the half blood. (Padura vs. Baldovino, 104 Phil 1065.) 161. During the lifetime of the reserva, would it be possible for the person who is obliged to make the reservation to alienate the reservable property? ANS: Since the ascendant-reserwsfa actually acquires the ownership of the reservable property upon the death of the descendant-propositus subject to the resolutory condition that there must exist at the time of his death relatives of the descendant, who are within the third degree and who belong to the line from which the property came, it is clear that all of the attributes of the right of ownership, such as enjoyment, disposal and recovery, belong to him exclusively, although conditional and revocable. (See Edroso vs. Sablan> 25 Phil. 295.) He can, therefore, alienate or encumber the property if he so desires, but he will only alienate or encumber what he has, and nothing more because no one can give what does not belong to him. As a consequence, the acquirer will only receive a limited and revocable title. Therefore, after the death of the ascendant, the reservatarios may then rescind the alienation

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or encumbrance, because the condition to which it is subject has already been fulfilled. (Edroso vs. Sablan, 25 Phil. 295; Lunsod vs. Ortega, 46 Phil. 664.) 162, The lot in question originally belonged to A. With his first wife, B, A had four (4) children, D, E, F, and G, while with his second wife, C, he had only one child, H. Upon his death in 1950, said lot was left to H. When H died in 1952, single and without any descendant, his mother, C, sold the property to X. Subsequently, D, E, F, and G sold the same property to Y. Several years later, C died. (a)

Is the property reservable?

(b) How about the two (2) sales which were executed — are they valid or not? (c)

Who is now entitled to the property?

ANS: (a) In order that the property shall be considered as reservable under Art. 891 of the NCC, it is necessary that the following requisites must concur: (1) The property should have been inherited by operation of law by an ascendant from his descendant upon the death of the latter; (2) the property should have been previously acquired by gratuitous title by the descendant from another ascendant or from a brother or sister; and (3) the descendant should have died without any legitimate issue in the direct descending line who could inherit from him. It is clear that all of these requisites are present in the instant case. Consequently, when H died in 1952, and the property passed by operation of law to his mother, C, it became reservable. In other words, C, who is the reservista, must reserve the property for the benefit of the relatives of H who are within the third degree and who belong to the line from which the property came. This reservation, however, is subject to two resolutory conditions, namely, (1) the death of the ascendantreservista, and (2) the survival, at the time of his death, of relatives of the descendant-proposes who are within the third degree and who belong to the line from which the reservable property came. (6 Manresa 268-269; 2 Sanchez Roman 1934; Sienes vs. Esparcia, 1 SCRA 750.) (b) As far as the first sale is concerned, undoubtedly, it is valid, but the reservista can only alienate that which he has

588

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Art. 891

and nothing more — a limited and revocable title to the reservable property. Hence, the alienation transmits only the conditional and revocable title of the reservista, the rights acquired by the transferee being revoked or resolved by the survival of reservatarios at the time of the death of the reservista. (Edroso vs. Sablan, 25 Phil. 295; Lunsod vs. Ortega, 46Phil. 664; Florentino vs. Florentino, 40Phil. 279; Sienes vs. Esparcia, supra.) Consequently, in the instant case, inasmuch as the reservatarios, D, E, F, and G, were still alive at the time of the death of the reservista, C, the conclusion becomes inescapable that the previous sale made by such reservista in favor of X became of no legal effect, and as a consequence, the reservable property passed automatically and by operation of law to the reservatarios. But then, the reservatarios had also alienated their right or expectancy over the reservable property during the pendency of the reserva. Was this sale valid? This question was answered in the affirmative by the Supreme Court in Sienes vs. Esparcia (supra). But, of course, it is subject to the same conditions to which the previous sale is subject. (c) In view of what has been stated, it is clear that Y now entitled to the reservable property. 163. Two parcels of land were registered in 1951 in the name of A, with an annotation of the right of X as reservatario in the Certificate of Title. A died in 1958, survived by several children. Upon his death, X filed a motion with the Registration Court, praying for the cancellation of the original Title and for the issuance of a new one in his name. This was opposed by the children of A, who contended that the claim of the reservatario should be decided in an ordinary intestate proceeding. (1) of X?

If you are the judge, how will you decide the motion

(2) Suppose that there are creditors of A, can they proceed against the reservable property? ANS: (1) The right of the reservatario was expressly recognized by the decree of registration issued by the court. This decree having become final, all persons are now barred from contesting the right. The only requisites for the passing of title from the reservista to the reservatario are: (a) the death of the reservista, and (b) survival of

589

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:

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

the reservatario. The contention that the right of the reservatario must be decided in an intestate proceeding is, therefore, untenable. The reservatario is not the reservista’s successor mortis causa nor is the property part of the reservista’s estate. The reservatario receives the property as conditional heir of the descendant-propositos, said property merely reverting to the line of origin from which it had temporarily and accidentally strayed during the reservista’s lifetime. As a consequence, upon the death of the reservista, the reservatario nearest the propositus becomes automatically and by operation of law the owner of the reservable property. (Cano vs. Director o f Lands, 105 Phil. 1.) (2) The creditors of A cannot proceed against the reservable property because such property is not a part of his estate. Upon the death of A, the property passed automatically and by operation of law to X. (Cano vs. Director o f Lands, supra.) 164. troncal?

What are the causes which will extinguish reserva

ANS: The different causes for the extinguishment of reserva troncal are as follows: (1)

Death of the ascendant-reserwsfo;

(2) Death of all relatives of the descendant-propositus within the third degree who belong to the line from which the reservable property came; (3) Loss of the reservable property for causes not due to the fault or negligence of the ascendant-resert>ss£a; (4)

Renunciation by the reservatarios;

(5) Acquisition by the reservista or by a third person of the reservable property by prescription; (6) Acquisition by the reservista of the reservable property through laches on the part of the reservatarios; and (7) Registration of the reservable property under the Land Registration Law aa free property. (See 6 Manresa 390-393; 6 Sanchez Roman 1040-1041; Maghirang vs. Balcita, 46 Phil. 551; CariUo vs. De Paz, 18 SCRA 467; Arroyo vs. Gerona, 58 PhiL 226; De los Reyes vs. Paterno, 43 PhiL 420.)

590

1

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Reserva Troncal

Arts. 908-914

165. A married B in 1950 bringing into the marriage a 10-hectare piece o f unregistered land in Antipolo which he inherited from his father. Of the marriage, two (2) daughters were born. On February 10,1955. A and his two (2) daughters went to Baguio. On the way they met an accident and A died instantly on the spot while the two (2) daughters died two (2) days later in the hospital where they were brought. In 1960, B sold the land to C. In 1977, B died so D, the only brother of A, asked C to reconvey the land to him. Upon C’s refusal, D filed a complaint for recovery of the land. C raised the defense of prescription. Should the defense be sustained? Why? (1979) ANS: The defense should be sustained but only with respect to one-third of the subject property; however, with respect to the other two-thirds, it should not be sustained. It must be observed that when A died, the subject property passed by intestate succession to his wife B and his two (2) daughters in the proportion of 1/3 for each. When the two (2) daughters died two (2) days later, their 1/3 shares passed by intestate succession to their mother B. These shares which B acquired by operation of law from her two (2) daughters become reservable. In other words, by mandate of the law, upon acquiring the 2/3 share of her daughters, she was obliged to reserve such share for the benefit of relatives of her two (2) deceased daughters who are within the third degree and who belong to the line from whence the reservable property came. All of the requisites of reserva ti'oncal are, therefore, present. In the first place, the property was acquired by a descendant from an ascendant or from a brother or sister by gratuitous title; in the second place, said descendant died without any legitimate issue in the direct descending line who can inherit from him;'in the third place, the property is inherited by another ascendant by operation of law; and in the fourth place, there are relatives of the descendant who are within the third degree and who belong to the line from which said property came. Consequently, when C bought the subject property from B in 1960, he acquired only that which B had and nothing more. In other words, when B, the ascendant-reservista, sold the property to C in 1960, the latter acquired the 2/3 share which B had inherited from A without any condition whatsoever. However, with respect to the other 2/3 share which is reservable, C acquired a limited and revocable title only. Therefore, when B, the 591

Arts. 908-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

ascendant-resermsfa-vendor finally died in 1977, automatically, by operation of law, the 2/3 share which is reservable passed to D, who is the reservatario. Premises considered, the defense of prescription can only be sustained with respect to the 1/3 share of B which she had inherited from A in 1955. The computation of the 10-year period of prescription must commence from 1960. In the case of the 2/3 share which is reservable, the computation must commence from 1977 when B, the ascendant~resen.>/s£et, died. When D, the reservatario, therefore, filed his action after the death of B, he was very much in time to do so. (Chua vs. CF1, 78 SCRA 412; Maghirang vs. Balcita, 46 Phil. 551; Carillo vs. De Paz, 18 SCRA 467.) DISTRIBUTION OF ESTATE IF THERE ARE DONATIONS (Arts. 908-914) 166. What is the procedure to be followed in the distri­ bution of the hereditary estate in testamentary succession if there are donations inter vivos? ANS: There are seven (7) distinct steps in the distribution of the hereditary estate if there are donations inter vivos. They are: (1) The determination of the value of the estate at the time of the testator’s death; (2) The determination of all deductible debts and charges which are chargeable to the testator’s estate; (3) The determination of the net hereditary estate by deducting all of the debts and charges from the value of the estate;

(4)

The collation or addition of the value of all donations inter

vivos to the net value of the estate; (5) The determination of the amount of the legitime from the total thus found in accordance with the rules established in Arts. 888 to 903 of the NCC; (6) Imputation of the value of the donation inter vivos against the legitime of the donee, if made to a compulsory heir, or against the free portion, if made to a stranger; and finally

592

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

Arts. 908-9X4

(7) Distribution of the net estate in accordance with the will of the testator. 167. What is meant by collation? ANS: Collation, as it is used in the NCC, has three (3) different but interrelated acceptations. In one sense, it is understood as a fictitious mathematical process of adding the value of the thing donated to the net value of the hereditary estate. It is applicable both to donations inter vivos to compulsory heirs and to donations inter vivos to strangers. This is the sense in which it is used in Art. 908: Its immediate purpose is to enable the computation of the legitime of compulsory heirs as well as of the disposable free portion. In another sense, it refers not only to the process of adding the value of the thing donated to the net value of the estate but also includes the subsequent act of charging or imputing such value of the thing donated against the legitime of the compulsory heir to whom the thing was donated. This is the sense in which it is used in Arts. 1061 to 1077 of the NCC. Naturally, in this sense, only donations made to compulsory heirs shall be brought to collation. The immediate purpose is “to take the donation in the account of the partition” in order to equalize the shares of the compulsory heirs as much as possible. In still another sense, which we might as well call its popular sense, it refers to the actual act of restoring to the hereditary estate that part of the donation which is inofficious in order not to impair the legitime of compulsory heirs. The immediate purpose is to protect such legitime. This is the one that is regulated by Arts. 771 to 773 of the NCC. 168. Shall the proceeds of a life insurance policy be brought to collation for the purpose of determining the legitime of compulsory heirs? ANS: In Del Val vs. Del Val (29 Phil. 534), where the beneficiary was a third person, it was held that the proceeds of an insurance policy belong exclusively to such beneficiary and not to the estate of the insured; consequently, the provisions of the NCC with regard to collation cannot apply. It is believed that the same principle can be applied where the beneficiary is a compulsory heir. As far as the premiums are concerned, although they partake of the nature of donations, commentators sustain the view that so long as they are

593

Arts. 908-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

paid from the income of the insured and are not excessive, they are not subject to collation. (3 Tolentino, NCC, p. 905, citing 5 Planiol & Ripert 349.) 169. Estrellita, wife of Lauro, purchased from her father a parcel of land in Valenzuela for a consideration of PI35,000.00 and a new title was issued in her name. Estrellita sold the same land for P3 million out of which she bought a house and lot in BF Homes Paranaque. On June 10, 1991, Estrellita and her two (2) daughters were killed. It was disclosed that Estrellita died ahead of her daughters. In spite of the fact that Lauro is the sole heir of his daughters, he entered into an extrajudicial settlement of the estate of Estrellita with waiver of shares, with Rafael and Salud, parents of Estrellita. Lauro got 50% while Rafael the other 50%. The Paranaque house and lot and car were given to Lauro, and Rafael and Salud waived all claims as heirs in the said properties. On the following year, Rafael died. In the judicial set­ tlement of his estate filed by his daughter Teresita, Ramon prayed to be appointed as guardian of his now senile mother. He also sought the court’s intervention to determine the le­ gality of the inter vivos donation to Estrellita. He also sought therein collation of all properties distributed by his father to his children. He included Lauro as one of RafaePs children by right of representation as the widower of Estrellita. Lauro filed a manifestation stressing that he was neither a compulsory heir nor an intestate heir of Rafael and he had no interest to participate in the proceedings. This was opposed by Teresita and Ramon contending that the Paranaque property should be subject to collation. Decide whether the Paranaque property should be brought to collation. ANS: The attendant facts in this case do not make a case for collation of the following reasons: First: Lauro is a son-in-law of Rafael and is not one of compul­ sory heirs as provided for by Art. 887 of the NCC. With respect to Rafael’s estate, Lauro is considered a third person or a stranger.

594

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

Arts. 908-914

Second: The basic principle on collation is provided for by Art. 1061 of the NCC. It is only required of compulsory heirs succeeding with other compulsory heirs and involves property rights received by donation or gratuitous title during the lifetime of the decedent. The probate court cannot decide to determine the validity of the sale of the Valenzuela property between Rafael and Estrellita nor can it rule that the subject property was gratuitous. These are matters of a separate action to resolve title. Third: Under Art. 1035 of the NCC, the donations received by the donee must be inofficious in whole or in part such that the donations prejudiced the legitime as the hereditary portion of the heirs. However, in the case at bar, collation is premature. The proceedings is only in its initial stage. Further, the legitime of the heirs herein are not impaired to warrant collation. Fourth: What was transferred to Estrellita is the Valenzuela property. The Paranaque property has no statutory basis for collation. Rafael has no participation in the Paranaque property. Finally: Estrellita died ahead of Rafael. In fact it was Rafael who inherited from Estrellita an amount more than the value of the Valenzuela property. In the extra-judicial settlement, Rafael received 50% shares more than the value of the Paranaque. (Vizconde vs. CA, February 11, 1998.) 170. The value of the testator’s estate at the time of his death is P40,000. However, the claims against his estate based on obligations incurred by him during his lifetime amounted to P10,000. During his lifetime, he had also made two (2) donations — P15,000 to a legitimate child, “A,” and another P 15,000 to a friend, “F.” In his will, he instituted his two (2) legitimate children, A and B, as his heirs. How shall his estate be distributed? ANS: First, deduct the debts amounting to P10,000 from the value of the testator’s estate, thus leaving a net remainder of P30,000. To this remainder collate the two (2) donations, thus making a total of P60,000. It is from this amount that the legitime of A and B shall be determined. Their legitime is 1/2 of P60,000, or P30,000, or P I5,000 each. The disposable free portion is also P30,000. Since the donation of P15,000 to A is a donation to a compulsory heir, it shall be imputed or charged to the legitime of the heir or donee. (Art. 909,

595

Arts. 908-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

par. 1.) There is neither a balance nor an excess. Hence, it is presumed that the testator in making the donation had merely advanced the legitime of A. The P I5,000 donation to F, on the other hand, shall be imputed or charged to the disposable portion. (Art. 909, par. 2.) There is a balance of P15,000. This balance shall be distributed equally between A and B. Thus, A shall retain the P15,000 donation and, at the same^me, shall received 1/2 of P15,000, or P7,500; B shall receive P]j^000 as legitime plus 1/2 of P15,000, or a total of P22,500. 171. What is the rule in case a donation inter vivos made by the testator is inofficious? ANS: A donation made by the testator during his lifetime to a compulsory heir is inofficious if it exceeds not only the latter’s legitime but also the portion at the testator’s free disposal, thus impairing the legitime of other compulsory heirs. If the beneficiary or donee is a stranger, the donation is considered inofficious if it exceeds the portion at the testator’s free disposal, thus impairing the legitime of compulsory heirs. (See Art. 752, NCC.) Whether the beneficiary or donee is a compulsory heir or a stranger, the rule with respect to inofficious donations is to reduce said donations insofar as they may exceed the disposable portion in accordance with the rules established in Arts. 911 to 913 of the NCC. 172. The estate of the testator is worth P20,000 after deducting all debts and charges. He is survived by five (5) legitimate children and one acknowledged natural child. During his lifetime, he had donated to the latter P40,000 worth of properties. Is the donation inofficious? ANS: The problem can be resolved only by determining the legitime of the survivors and the disposable portion. The procedure is as follows: Collate or add the donation of P40,000 to the net value of the estate. The result is P60,000. It is this value that will be the basis for determining the legitime of the five (5) legitimate children and the disposable free portion. (Art. 908, NCC.) The legitime of the five legitimate children is P30,000, or P6,000 each. (Art. 888, NCC.) The legitime of the acknowledged natural child, which must be taken from the free portion of P30,000, is P3,000. (Art. 895, par. 1, NCC.) The portion at the testator’s free disposal is, therefore, P27,000. According to the first paragraph of Art. 910 of the NCC, the donation

596

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

Arts. 908-914

to the acknowledged natural child shall be imputed or charged to his legitime of P3,000. There is an excess of P37,000 which must be imputed or charged to the P27,000 at the testator’s free disposal. Even this portion is not enough to cover the excess. Therefore, the donation is inofficious and must be reduced by P10,000. 173. The estate of the testator, A, is worth P20,000 after deducting all debts and charges. He is survived by four (4) legitimate children, B, C, D, and E. Before his death, A had made two (2) donations. One, valued at P20,000, was made in 1958 to his eldest child, B, while the other, valued at P40,000, was made in I960 to a friend, F. Are these donations inofficious? ANS: The procedure for determining whether these donations are inofficious or not is as follows: Collate or add the value of the two donations to the net value of the estate. (Art. 908, NCC.) The sum is P80,000. The legitime of the children is, therefore, P40,000, or P10,000 each, while the free or disposable portion is also P40,000. (Art. 888, NCC.) The donation of P20,000 to B is then charged to his legitime of P10,000. (Art. 909, par. 1, NCC.) There is an excess of P10,000. This excess will be placed in the same category as a donation made to a stranger. Consequently, such excess plus the donation of P40,000 given to F shall be charged to the free or disposable portion of P40,000, (Art. 909, par. 2, NCC.) It is evident that such portion is not sufficient to cover both. Hence, the rule stated in Art. 773 of the NCC shall be applied: “Those of the more recent date shall be suppressed or reduced with regard to the excess.” Since the donation given to B was executed in 1958, while that given to F was executed in 1960, the excess of P10,000 given to the former shall be the first to be charged to the free or disposable portion P40,000. There is a balance of P30,000. This balance is not sufficient to cover the donation of P40,000 given to F. Therefore, it must be reduced by P10,000. 174. Suppose that in the above problem, the donation given to B was executed in 1960, while that given to F was executed in 1958, would that make a difference in your an­ swer? ANS: That would make a great difference in my answer. In such case, applying the rule stated in Art. 773 of the NCC, the donation

597

Arts. 908-914

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

^iven to F shall be the first to be charged to the free or disposable portion of P40,000. There is no balance. Neither is there an excess. Therefore, it is not inofficious. However, the excess of P10,000 of the donation given to B is absolutely inofficious. Hence, it must be reduced to that extent. In other words, B can now be compelled by the other compulsory heirs to restore actually to the estate of the testator P10,000 in order that there will be no impairment of their legitime. 175. Suppose that the legitime of compulsory heirs is unpaired by inofficious testamentary dispositions (legacies and devises) and inofficious donations inter vivos, which must be the first to be reduced or suppressed — the former or the latter? ANS: As between donations or dispositions mortis causa (legacies and devises) and donations inter vivos, preference is always given to the latter. Therefore, in case of concurrence of the two (2) and the disposable portion is not sufficient to cover both of them, the testamentary dispositions, such as legacies and devises, are the first to be reduced or even suppressed if necessary. If after such suppression, the value of the donation inter vivos cannot still be covered by the disposable portion, then such donation shall be reduced in order to preserve the legitime of the compulsory heirs. 176. What is the procedure for the reduction of inofficious legacies or devises? ANS: Under Art. 911 of the NCC, the order of preference is as follows: (1) Legitime of compulsory heirs; (2) donations inter vivos; (3) preferential legacies or devises; and (4) all other legacies or devises. If after satisfying the legitime of compulsory heirs the disposable portion is sufficient to cover donations inter vivos, but not sufficient to cover legacies or devises, the rule is that such legacies or devises shall be reduced pro rata, after first satisfying all of those which the testator has declared to be preferential. The formula for such reduction is as follows: Reduced Legacy

_

Legacy to be reduced

Disposable portion

Total legacies

598

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Distribution of Estate If There are Donations

Arts. 908-914

177. The net value of the testator’s estate after his death is P40,000. During his lifetime, he donated to a friend, F, P I0,000. In his will, he bequeathed to his three nephews, X, Y and Z, P10,000, P5,000 and P5,000 respectively. He has two legitimate children, A and B. Distribute the estate. ANS: Collate or add the P10,000 donation to the net value of the testators estate. The sum is P50,000. Therefore, the legitime of A and B is P25,000, while the disposable free portion is also P25,000. The aggregate sum of the donation and legacies is P30,000, which is more than the disposable free portion. Since the P I0,000 can easily be covered, it shall not be reduced. However, the amount left out of the disposable free portion is only P I5,000 which is less than the total amount of legacies. Hence, it shall be necessary to reduce such legacies in accordance with the following formula: Let X P15,000 P10,000 P20,000

= = =

x

reduced amount of legacy to X; amount for free disposal; value of legacy to X which must be reduced; total value of all legacies. 10,000

15,000

=

20,000

x

=

P7,500

Following the same procedure for Y and Z, their reduced legacies shall be P3,750 each. 178. Emil, the testator, has three (3) legitimate children, Tom, Henry and Warlito; a wife named Adette; parents named Pepe and Pilar; an illegitimate child named Ramon; brother Mark; and a sister, Nanette. Since his wife Adette is well-off, he wants to leave his illegitimate child as much of his estate as he can legally do. His estate has an aggregate net amount of PI ,200,000.00, and all the above-named relatives are still living. Emil now comes to you for advice in making a will. How will you distribute his estate according to his wishes without violating the law on testamentary succession? (2005) ANS: P600,000.00 - legitime to be divided equally among Tom, Henry and Warlito as the legitimate children. Each will be entitled to P200,000.00 [Art. 888, NCC].

599

Arts. 915-923

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

P100,000.00 - share of Ramon, the illegitimate child. This is equivalent to 1/2 of the share of each legitimate child [Art. 176, NCC]. P200,000.00 - Adette, the wife. Her share is equivalent to the share of one legitimate child [Art. 892, par.2, NCC]. Pepe and Pilar, the parents are only secondary compulsory heirs and they cannot inherit if the primary compulsory heirs (legitimate children) are alive [Art. 887, par.2, NCC]. Brother Mark and sister Nanette are not compulsory heirs since they are not included in the enumeration under Art. 887 of the NCC. The remaining balance of P300,000.00 is the free portion which can be given to the illegitimate child as an instituted heir. (Art. 914, NCC.) If so given by the decedent, Ramon would receive a total of P400,000.00. (Suggested Answers to the 2005 Bar Examination Questions). Section 6. DISINHERITANCE (Arts. 915-923) 179. Define disinheritance. ANS: Disinheritance is the act of the testator in depriving a compulsory heir of his inheritance for causes expressly stated by law. (Art. 915, NCC.) 180. What are the requisites of a valid disinheritance? ANS: The essential requisites of a valid act of disinheritance are as follows: (1) by law; (2)

The disinheritance must be for a cause expressly stated It must be effected only through a will;

(3) The legal cause for the disinheritance must be specified in the will itself; (4)

The cause must be certain and true;

600

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

(5)

The disinheritance must be total; and

(6)

The disinheritance must be unconditional.

Arts. 915-923

181. What is meant by imperfect disinheritance? Distin­ guish it from preterition. ANS: Imperfect disinheritance refers to a disinheritance without a specification of the cause, or for a cause the truth of which, if contradicted, 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. Imperfect disinheritance and preterition may he distinguished from each other in the following ways: (1) In the first, the disinherited heir may be any compulsory heir, whereas in the second the omitted heir must be a compulsory heir in the direct line. (2) In the first, the attempt to deprive a compulsory heir of any participation in the inheritance is always expressed, whereas in the second, it is always implied. (3) In the first, the disinheritance is always intentional, whereas in the second the omission may or may not be intentional. (4) The first always results in the partial annulment of the institution of heirs to the extent that the legitime of the disinherited heir is prejudiced, whereas the second always results in the total annulment of the institution of heirs. 182. A had two (2) legitimate children, namely, B and C. He made a will, instituting C and a friend, D, as his heirs and giving a P 10,000 legacy to E, his former driver. He, however, expressly disinherited B without specifying the reason therefore. Assuming that A’s net estate is worth P100,000 upon his death, how will it be distributed? ANS: The disinheritance of B is defective or imperfect because there is no specification of the cause in the will as required by law. However, the institution of heirs will only be partially annulled

601

Arts. 915-923

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

insofar as it may prejudice his legitime. (Art. 918, NCC.) Therefore, B will still be entitled to his legitime which is 1/2 of 1/2 of P100,000, or P25,000. The legacies, however, are valid so long as they are not inofficious. (Ibid.) It is obvious that the legacy of P10,000 given to E is not inofficious because it can easily be contained in the free portion of P50,000. Therefore, E will be entitled to such legacy. Since A had instituted as heirs his child C and his friend D as heirs without designation of shares, therefore, applying the view of Manresa, which has been adopted by commentators in this country, Tolentino among them (6 Manresa 98-99; 3 Tolentino 161; Art. 846, CCJ, the legitime of C, which is 1/2 of 1/2 of P100,000, or P25,000, must first be separated and allotted to him because the testator cannot deprive him of it. Then, the remainder of P40,000, which is the disposable free portion, will be divided equally between C and D, the two instituted heirs. Consequently, the estate of P I00,000 will be distributed as follows: B

—

P25,000 as compulsory heir;

c

—

P25,000 as compulsory heir; P20,000 as voluntary heir;

D

—

P20,000 as voluntary heir;

E

—

P10,000 as legatee.

183. A died leaving a will containing three (3) testamen­ tary clauses. In the first clause he instituted his two legiti­ mate children, B and C, as his universal heirs; in the second clause he disinherited his legitimate child, D, without speci­ fying the cause; and in the third clause he left a legacy of P10,000 to a third person, E. The net remainder of his estate is P60,000. How shall such estate be distributed? ANS: In the first place, since the only compulsory heirs surviving the testator are three (3) legitimate children, B, C, and D, therefore, 1/2 of the net remainder of the estate, or P30,000, is reserved as their legitime, while the other half, or P30,000, is free or disposable. (Art. 888, NCC.) In the second place, the disinheritance of D is imperfect because there is no specification of the cause; consequently, it shall result in the partial annulment of the institution of B and C as heirs insofar as D’s legitime of P10,000 is prejudiced. (Art. 918, NCC.) In

602

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

Arts. 915-923

the third place, is legacy of P I0,000 to E is not inofficious since it can easily be contained within the free portion of P30,000; hence, it does not impair the legitime of the three compulsory heirs which in the instant case is also P30,000. (Art. 918, NCC.) Therefore, the estate shall be distributed as follows: B

P10,000 P10,000

— —

as compulsory heir as voluntary heir

C

..........

P10,000 P10,000

— —

as compulsory heir as voluntary heir

D E

.......... ........ .........

P10,000 P10,000

— —

as compulsory heir as legatee

P60,000 184. What are the legal causes for the disinheritance of compulsory heirs? ANS: The following shall be sufficient causes for the disin­ heritance of children and descendants, legitimate as well as illegiti­ mate: (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 (6) 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, intimi­ dation, 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;

603

Arts. 915-923

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

(8) Conviction of a crime which carries with it the penalty of civil interdiction. (Art. 919, NCC.) 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 (6) 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) NCC;

The loss of parental authority for causes specified in the

(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.) The following shall be sufficient causes for 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 for six (6) years or more, and the accusation has been found to be false; (3) When the spouse by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made;

604

I

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

(4)

Arts. 915-923

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.) (7) When the spouse, in bad faith, remarry in accordance with Art. 41, FC (absent spouse). (Art. 43, FC.) 185. Is loss of parental authority an absolute ground for the disinheritance of parents or ascendants? ANS: We believe that it is not an absolute ground. Otherwise, we would be forced to witness the absurd spectacle of a child or descendant being allowed to disinherit a parent or ascendant just because he has already attained the age of 21, or because, for his protection, his parent had given his consent to his adoption, or because a general guardian had been appointed to take care of his person and property by reason of the insanity of the parent, or because the widowed mother remarried in order to protect her family. It is, therefore, submitted that when the-law speaks of the right of a child or descendant to disinherit a parent or ascendant if there is loss of parental authority “for causes specified in the Code,” the causes referred are those specified in Arts. 330 and 332 of the NCC and not those specified in Arts. 327 and 329. In other words, the loss should have been effected either: (I) by final judgment in a criminal case, or (2) by final judgment in a legal separation proceedings, or (3) by judicial order due to excessive harshness, corrupting orders or examples or counsels, making the child beg, or abandonment, 186. Suppose that a parent has already been disinherited on the ground of loss of parental authority, but subsequently, there is a restoration of his authority over the testator, such as where there is an absolute pardon in case of criminal conviction or where there is a reconciliation in case of legal separation. What is the effect upon the disinheritance? ANS: There are two (2) views. One view maintains that there is no effect upon the right to disinherit or upon the disinheritance if it has already been made, because the basis for the disinheritance is not actually the loss of parental authority, but the offense committed

605

Arts. 924-959

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Disinheritance

by the offender, (6 Sanchez Raman 1120.) Another view holds that it would have the effect of depriving the child or descendant of his right to disinherit the parent or of rendering the disinheritance ineffectual if it has already been made, because the legal basis for disinheritance would no longer exist. (6 Manresa 688.) We believe that the first view is more logical. In the 1st place, the law does not make any qualification similar to that found in Art. 922. In the 2nd place, in disinheritance, what the law allows the testator to punish is not the consequence of the offense, but the offense itself. Hence, even if there is a restoration of parental authority brought about by absolute pardon or by reconciliation of the spouses, although that will have the effect of erasing the existence of the offense as far as the State or the innocent spouse is concerned, it cannot erase the existence of the offense against the testator. Of course, this conclusion is predicated upon the fact that there is no reconciliation between the offended and the offender, because otherwise, the provision of Art. 922 of the NCC shall apply. 187. If the ground for disinheritance is attempted or frustrated parricide, is a previous criminal conviction an essential requisite? ANS: If the offender is a child or descendant or a parent or ascendant, previous criminal conviction is an essential requisite for disinheritance. This is clear from the provisions of No. 1 of Art. 919 and No. 2 of Art. 920 of the NCC. However, if the. offender is the spouse of the testator, we must distinguish. If the offended is the testator himself, previous criminal conviction is not an essential requisite, but if the offended is a descendant or an ascendant of the testator, such previous criminal conviction would then become an essential requisite. The basis for this distinction is found in Nos. 1 and 4 of Art. 921 of the NCC. In the 1st (No. 1), conviction is essential, while in the 2nd (No. 4), such conviction is not essential, because a mere attempt made by one spouse against the life of the other is certainly a ground for legal separation. (Art 97, NCC.) There is, therefore, a partial conflict between the two (2) provisions, which we can resolve, applying the rules of statutory construction, by saying that the first provision (No. 1) has been partially rendered useless by the second provision (No. 4) partially because, undoubtedly, the first provision still applies when the spouse of the testator makes an attempt against a descendant or an ascendant of the latter.

606

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legacies and Devises

Arts. 924-959

Section 7. LEGACIES AND DEVISES (Arts. 924-959) 188. What is meant by a legacy and devise? ANS: A legacy may be defined as a testamentary disposition by virtue of which a person is called by the testator to inherit an individual item of personal property, while a devise may be defined as a testamentary disposition by virtue of which a person is called by the testator to inherit an individual item of real property. 189. Who may be charged by the testator with the payment or delivery of a legacy or devise? ANS: The following may be charged by the testator with the payment or delivery of a legacy or devise: (1) Any compulsory heir, (2) any voluntary heir; (3) any legatee or devisee; and (4) the estate, represented by the executor or administrator. 190. (a) Is the legacy or devise of a thing belonging part­ ly to the testator and partly to a third person valid or void? If it is valid, how shall it be complied with? (b) Is the legacy or devise of a thing belonging entirely to a third person valid or void? If it is valid, how shall it be complied with? (c) Is the legacy or devise of a thing belonging entirely to the legatee or devisee valid or void? ANS: (a) The legacy or devise of a thing belonging partly to the testator and partly to a third person is valid. In such a case, the legacy or devise shall be limited only to the interest of the testator in the thing. There is, however, an exception to this and that is if the testator expressly declares in the will itself that he is bequeathing or devising the thing in its entirety. This is, of course, predicated on the fact that he is aware that the thing belongs partly to himself and partly to a third person. (Art. 929, NCC.) As far as the general rule is concerned, the legacy or devise can easily be complied with by the delivery of the interest of the testator in the thing to the legatee or devisee. This obligation shall be performed by the estate or the person charged by the testator. The exception, however, is different. After the testator has executed

607

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the will, he may acquire the interest of the third person in the thing. If he does not, then such obligation shall be performed by the estate or by the person charged. If the third person refuses to alienate his interest or demands an excessive price, then the estate or the person charged shall merely deliver to the legatee or devisee the interest of the testator plus the just value of the interest of the third person. (Arts. 930, 931, NCC.) (b) The validity of a legacy or devise of a thing belonging entirely to a third person shall depend upon whether the testator erroneously believed that the thing pertained to him or knew that the thing belonged to another. If the testator erroneously believed that the thing pertained to him, the legacy or devise is void. There is, however, an exception to this rule. If afterwards, the thing becomes his, by whatever title, the legacy or devise would be valid. In such a case, there would then be no question at all with regard to how it can be complied with. (Art. 930, NCC.) On the other hand, if the testator knew that the thing belonged to another, the legacy or devise is valid. In such a case, he may acquire the thing from the third person before he dies. If he does not, then such obligation shall be performed by his estate or by the person charged by him. If the 3rd person refuses to alienate the thing or if he demands an excessive price, then the estate or the person charged shall merely pay to the legatee or devisee the just value of the thing. (Arts. 930, 931, NCC.) (c) The legacy or devise of a thing belonging entirely to the legatee or devisee is void. This is clear from the provisions of Arts. 932 and 933 of the NCC. Manresa, however, mentions one exception to this rule and that is when the testator himself before his death acquires the thing by whatever title. In this exceptional case, the legacy or devise would be valid, applying the provision of Art. 930 of the NCC. 191. 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? ANS: If the estate should not be sufficient to cover all the legacies or devises, their payment shall be made in the following order:

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Legacies and Devises

(1)

Arts. 924-959

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, NCCJ

192. If there are several legacies and devises and the estate of the testator is not sufficient to satisfy them, according to Art. 911 of the NCC, they shall be reduced pro rata, while according to Art. 950 of the same Code, a specified order of payment shall be followed. How can you reconcile the apparent conflict between the two (2) provisions? ANS: As Dr. Tolentino has succinctly stated, Art. 911 applies in the following cases: (a) when the reduction is necessary to preserve the legitime of compulsory heirs from impairment whether there are donations inter vivos or not; and (b) when, although the legitime has been preserved by the testator himself by leaving to the compulsory heirs sufficient property to cover their legitime, there are donations inter vivos concurring with the legacies and devices within the free portion. (3 Tolentino, NCC, p. 313 J In all other cases not included within the scope of Art. 911, Art, 950 applies. More specifically, the latter applies to all cases where the conflict is exclusively among the legatees or devisees themselves. This is possible in either of two (2) cases, to wit: (1) When there are no compulsory heirs and the entire estate is distributed by the testator as legacies or devises; or (2) When there are compulsory heirs, but their legitime has already been provided for by the testator and there are no donations inter vivos. 193. X, prior to his death, executed a will wherein he gives to his legitimate children, A and B, only their legitime. He bequeaths P5,000 to a friend R as remuneration for past

609

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services, P10,000 to S for support, P15,000 to E for education, and P10,000 to F as ordinary legacy. The net value of his estate is only P40,000. How shall the estate be distributed? ANS: Since the legitime of the two (2) children has already been provided for by the testator, it is evident that the conflict with regard to the disposable free portion is exclusively among the legatees. Hence, Art. 950 of the NCC shall apply. The legacy to R shall be satisfied ahead of the others. That leaves only P15,000 out of the free portion. The legacy to S shall then be satisfied. That leaves only P5,000 out of the free portion, all of which shall go to E. Hence, nothing remains for F. 194. Fr. R, a Roman Catholic priest and a native of Victoria, Tarlac, died in 1935, leaving a will wherein, among others, he devised 40 hectares of rice lands to his nearest male relative who shall study for the priesthood and shall become a priest. Pending fulfillment of the condition, the parish priest of Victoria shall administer the property. At the time of his death, his nearest relatives were three (3) sisters, a nephew and several grandnephews and grandnieces. Not one of the male relatives became a priest. Now, more than 40 years after the death of the testator, the parish priest of Victoria, Fr. X, contends that Fr. R intended to create a public charitable trust with the parish priest of Victoria as trustee or substitute devisee. Besides, the condition may yet be fulfilled. Should these contentions be sustained? Why? ANS: These contentions should not be sustained. The will of the testator is the first and principal law in the matter of testaments. A reading of the testamentary provisions regarding the disputed bequest does not support the view that the parish priest of Victoria is a trustee or substitute devisee in the event that the testator is not survived by a male relative who became a priest. That such was the intention of the testator cannot even be deduced or inferred. As far as the view that the condition may yet be fulfilled is concerned, it must be observed that the NCC provides: “In order to be capacitated to inherit, the heir, devisee or legatee must be living at the moment the succession opens, except in case of representation, when it is proper.” (Art. 1025.) To construe the testamentary provisions so that the condition may be complied with even long after the testator’s

610

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Arts. 924-969

death would render the provisions difficult to apply and create uncertainty with regard to the disposition of the estate. That could not have been the intention of the testator. In reality, since the bequest has become inoperative because no male relative of the testator became a priest, the provisions of Arts. 888 (now Art. 956), and 912(2), (now Art. 960), of the NCC are now applicable. The subject property shall now be merged into the estate and shall be given to the legal heirs of the testator in accordance with the rules of intestate succession. (Parish Priest o f Victoria us. Rigor, 89 SCRA 493J 195. In his will, Reverend Father “R” devised a parcel of riceland in favor of “his nearest male relative who would study for the priesthood.” The will was duly probated. No nephew of the testator claimed the devise and the testate proceeding remained pending. In the interim, the riceland was to be administered by the Parish Priest of the locality pursuant to a project of partition approved by the Probate Court. Twenty-one years after the testator’s death, the Parish Priest filed a petition before the Court for delivery of the riceland to the Church as trustee. The legal heirs of Father “R” objected and prayed instead that the bequest be declared inoperative and that they be adjudged entitled to the riceland. It also turned out that the testator had a grandnephew (a grandson of his first cousin) who was taking the holy order in a seminary. Would you construe the testamentary provision liberally so as to render the trust operative and to prevent intestacy, or would you declare the bequest inoperative and the legal heirs entitled to the riceland? (1980) ANS: It depends. If the seminarian, who is presently studying for the priesthood, was born or conceived before the death of Father “R,” it is submitted that the testamentary provision should be liberally construed so as to prevent intestacy. Therefore, the land should be delivered to the Parish Priest as trustee or administrator pending fulfillment of the condition. The reason is obvious. There is the possibility that the

611

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seminarian might not become a priest. True, Father “R” devised the land to his nearest male relative who would study for the priesthood. Apparently, the condition has already been fulfilled. It is, however, submitted that the testatorial intention is crystal clear. The devisee must not only study for the priesthood; he must become a priest. Once he becomes a priest, the land should then be delivered to him. If the seminarian was conceived after the death of Father “R,” the bequest is certainly inoperative because of non-fulfillment of the condition imposed by the testator. Therefore, pursuant to the NCC, the legal heirs of the testator shall be entitled to the land. In other words, the land shall be merged in the mass of the hereditary estate, and from there, it shall pass to the legal heirs in accordance with the rules of intestacy. The reason is crystal clear. The seminarian cannot inherit from Father “R.” Under our law, in order to be capacitated to inherit, the heir, legatee or devisee must be living at the moment the succession opens, except in case of representation when it is proper. (Note: The above problem is a modification of the actual problem resolved in Parish Priest of Victoria vs. Rigor, 89 SCRA 493. Hence, the above answer is also a modification of the decision of the Supreme Court in that case. Despite the modification, however, the same provisions of the NCC applied in the actual case are also applied in the suggested answer. Thus, with regard to the capacity or incapacity of the seminarian to inherit from the testator, Art. 1025 of the NCC is applicable, and with regard to the effect in case the seminarian is incapacitated to inherent from the testator, Arts. 956 and 960[2], of the NCC are applicable.)

196. tion of law?

When may a legacy or devise be revoked by opera­

ANS: A legacy or devise is revoked by operation of law in the following cases: (1) If the testator transforms the thing bequeathed or devised in such a manner that it does not retain its form and denomination. (2) If the testator by any title or for any cause, alienates the thing bequeathed or devised or any part thereof

612

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Arts. 924-959

(3) If the thing bequeathed or devised is totally lost during the lifetime of the testator, or after his death without the heir’s fault. (4) If the legacy is a credit against a third person or the remission of a debt, and the testator, subsequent to the making of the will, brings an action against the debtor for payment. (Arts. 957, 935, 936, NCC.) 197. Before his death in an automobile accident, A was able to execute a will which contains the following disposi­ tion: “I leave all my properties to all of my relatives.” The net remainder of the estate is P8O,O0O. The claimants are the following: (a) W, his widow; (b) B, his brother; and (c) C and D, children of a deceased sister. How shall the inheritance be distributed? Explain, stating your reasons. ANS: The provision that is applicable in the instant case is that of Art. 959 of the NCC. According to this article, a disposition made in general terms in favor of the testator’s relatives shall be understood to be in favor of those nearest in degree. Hence, what is contemplated by this article is different from that of intestacy. Therefore, in distributing the estate, the following rules must always be borne in mind. If there are no compulsory heirs among the surviving relatives of the testator, apply one rule and that is the rule of proximity. Relatives nearest in degree shall exclude the more remote ones. If there are compulsory heirs, first satisfy their legitime and then apply the rule of proximity to the disposable free portion. In the above problem, it is evident that W is the only compulsory heir. She is, therefore, entitled to a legitime of P40,000. (Art. 900, NCC.) Hence, the remaining free portion of P40,000 shall be given to the relatives nearest in degree. W is not a relative by consanguinity. (3 Castan 434.) Therefore, she will no longer participate in the free portion. C and D, nephews of the testator, are excluded by B, brother of the testator. They cannot inherit by right of representation because under Art. 959, there is only one rule that is applicable and that is the rule is proximity. As a matter of fact, this doctrine was expressly recognized by the Supreme Court in Belen vs. Bank o f the P.I., (109 Phil. 1008). According to the Court, the history of what is now Art. 959 of the NCC shows that the right of representation was

613

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Intestate Succession

deliberately suppressed. Consequently, B alone shall be entitled to the entire free portion of P40,000.

Chapter 3 INTESTATE SUCCESSION Section 1. GENERAL PROVISIONS (Arts. 960-969) 198. place?

When does legal or intestate succession take

ANS: Legal or intestate succession takes place: (1) If a person dies without a will, or with a void will, or one which has subsequently lost its validity. (2) When the will does not institute an heir to, or dispose of, all the property belonging to the testator. In such case, legal succession shall take place only with respect to the property of which the testator has not 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 NCC. (5) When there is a preterition of a compulsory heir in the direct line. (6) If the testamentary disposition is subject to a resolutory condition and such condition is fulfilled. (7) If the testamentary disposition is subject to a resolutory term and such term expires. (8) In cases of ineffective testamentary dispositions. (Arts. 960, 854, NCC; 7 Manresa 53 J

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Intestate Succession

Arts. 960-969

199. What is meant by the principle of preference of lines in intestate succession? ANS: The principle of preference of lines in intestate succession merely refers to the principle by virtue of which relatives of the decedent who are in the direct descending line shall exclude those who are in the direct ascending or in the collateral line, while those who are in the direct ascending line, on the other hand, shall exclude those who are in the collateral line.

200. What is meant by the principle of proximity? Is there any exception to this principle? ANS: The principle of proximity merely refers to the rule by virtue of which relatives of the decedent nearest in degree shall exclude the more remote ones, (Art. 962, NCC.) This rule, however, presupposes the fact that all of the relatives involved should belong to the same line. In other words, it is subject to the principle of preference between lines. There is one exception to this rule, and that is when the right of representation properly takes place. (Ibid.) The reason for this is that in representation, the representative is raised by legal fiction to the place and degree of the person represented so that he acquires the rights which the latter would have if he were living or if he could have inherited.

201. What are the exceptions to the rule that relatives of the same degree shall inherit in equal shares? ANS: The exceptions to the rule that relatives of the same degree shall inherit in equal shares are the following: (1) When the inheritance is divided between paternal and maternal grandparents. In this case, if the decedent, for instance, is survived by two (2) grandparents in the paternal line and by one grandparent in the maternal line, under the 2nd paragraph of Art. 987 of the NCC, 1/2 of the estate shall pass to the two (2) grandparents in the paternal line, while the other 1/2 shall pass to the surviving grandparent in the maternal line. (2) When the inheritance is divided among brothers and sisters, and some of whom are of the full blood and others of the half blood. In this case, according to Art. 1006 of the NCC, those of the

615

Arts. 960-969

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Intestate Succession

full blood shall be entitled to double the share of those of the half blood. (3) In certain cases when the right of representation takes place. In this case, the division of the inheritance is per stirpes and not per capita. (Art. 974, NCC.)

202. What is meant by degree? What is meant by line? Give and define the different kinds of line. ANS: Proximity of relationship is determined by the number of generations. Each generation forms a degree. (Art. 963, NCCJ Line refers to a series of degrees which may be either direct or collateral. A direct line is that constituted by the series of degrees among ascendants and descendants. A collateral line, on the other hand, is that constituted by the series of degrees among persons who are not ascendants and descendants, but who come from a common ancestor. (Art. 964, NCC.) The direct line, in turn, may be either descending or ascending. The former unites the head of the family with those who descend from him. The latter binds a person with those from whom he descends. (Art. 965, NCC.)

203. X died intestate survived by: (1) A, B, C, D and E, his legitimate children; (2) F, G, H and I, legitimate children of B; (3) J and K, legitimate children of C; (4) L and M, legitimate children of D; and (5) N and O, legitimate children of E. B, C, D and E, however, are incapacitated to inherit from X. If the net value of the hereditary estate is P400,000, how shall it be divided? Reasons. ANS: A shall inherit in his own right, while the legitimate children of those who are incapacitated shall inherit by right of representation. (Arts. 968, 981, 982,1035, NCC.) Consequently>the hereditary estate shall be divided per stirpes. (Art 974, NCC.) In other words, F, G, H, I, J, K, L, M, N and O shall be subrogated to the rights of their parents had the latter not been incapacitated. Therefore, the division is as follows: A

..................

F

..................

G

..................

20,000, as representative of B r 20,000, as representative of B

H

..................

20,000, as representative of B

P80,000, in his own right V

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DIFFERENT MODES OF ACQUIRING OWNERSHIP

Succession Intestate Succession

Arts. 960-969

I

...................

20,000, as representative of B

J

...................

40,000, as representative of C

K

...................

40,000, as representative of C

L

...................

40,000, as representative of D

M

...................

40,000, as representative of D

N

...................

40,000, as representative of E

O

40,000, as representative of E P400,000

204. Suppose that in the above problem B, C, D and E have the necessary capacity to inherit from X but they repudiated their inheritance, how shall the P400,000 estate be divided? ANS: In such a case, since B, C, D and E cannot be represented by their children (Art. 977, NCC.), their shares which are rendered vacant shall pass to A by right of accretion. (Arts. 978,1018, NCC.)

205. Suppose that in the above problem, all of the children of X are incapacitated to inherit from him, how shall the P400,000 estate be divided? ANS: In such a case, the grandchildren shall inherit by right of representation. (Arts. 982, 1015, NCC.) Consequently, the division of the estate shall be per stirpes and not per capita. (Art 974, NCC.) Disregarding A altogether because his share which is rendered vacant by incapacity will be merged in the hereditary estate, the division is as follows: F

...................

P25,000, as representative of B 25,000, as representative of B

G

...................

H I

........ ........... 25,000, as representative of B .............. 25,000, as representative of B

J

...................

50,000, as representative of C

K L

................... ...................

50,000, as representative of C 50,000, as representative of D

M

...................

50,000, as representative of D

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Arts. 970-977

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

N

50.000, as representative of E

O

50.000, as representative of E P400,000

206. Suppose that in the above problem, all of the children of X have the necessary capacity to inherit from him but all of them repudiated their inheritance, how shall the P400,000 estate be divided? ANS: This is the only exceptional case where grandchildren can inherit in their own right and not by right of representation. Representation in the instant case is, of course, impossible because of the principle that an heir who repudiates his inheritance cannot be represented. (Arts. 969, 977, NCC.) Therefore, the division of the P400,000 estate shall be per capita and not per stirpes. Consequently, each of the grandchildren shall inherit P40,000.

REPRESENTATION (Arts. 970-977) 207. Define representation. ANS: Representation is a right created by fiction of law, by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited. (Art. 970, NCC.)

208. In what line or lines shall the right of representation take place? ANS: The right of representation takes place in the direct , descending line, but never in the ascending. In the collateral line, it takes place only in favor of the children of brothers or sisters, whether they be of the full or half blood. (Art. 972, NCC.) When children of one or more brothers or sisters of the deceased survive, they shall inherit from the latter by representation, if they survive with their uncles or aunts. But if they alone survive, they shall inherit in equal portions. (Art. 975, NCC.)

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Arts. 970-977

209. When does the right of representation take place? ANS: The right of representation shall take place in the following cases: (1)

In testamentary succession:

(a) In case a compulsory heir in the direct descending line dies before the testator survived by his children or descen­ dants. (Art. 856, NCC.) (b) In case a compulsory heir in the direct descending line is incapacitated to succeed from the testator and he has children or descendants. (Ants. 856, 1035, NCC.) (c) In case a compulsory heir in the direct descending line is disinherited and he has children or descendants. (Art. 923, NCC.) (2)

In intestate succession:

(a) In case a legal heir in the direct descending line dies before the decedent survived by his children or descendant (Arts. 981, 982, NCC), or in the absence of other heirs who can exclude them from the succession, a brother or sister dies be­ fore the decedent survived by his or her own children. (Arts. 972, 975, NCC.) (b) In case a legal heir in the direct descending line is incapacitated to succeed from the decedent and he has children or descendants (Art. 1035, NCC.), or in the absence of other heirs who can exclude them from the succession, a brother or sister is incapacitated to succeed from the decedent and he or she has children. (Arts. 972, 975,1035, NCC.)

210. Can an heir who repudiates his inheritance be represented? ANS: No, he cannot. According to the law, an heir who has repudiated his inheritance may not be represented. (Art. 977, NCC.)

211. Can a voluntary heir or a legatee or devisee who dies before the testator or who is incapacitated to succeed be represented? 619

Arts. 970-977

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

ANS: No. (Art. 856, par. 1, NCCJ A voluntary heir is an heir who is called to the whole or to an aliquot part of the free portion of the inheritance by virtue of a will. Since in testamentary succession, the right of representation, by virtue of which the representative is raised to the place and the degree of the person represented in case of either predecease or incapacity of the latter, is a right which pertains only to the legitime of compulsory heirs, it necessarily follows that when a person who has been instituted as a voluntary heir dies before the testator, he can transmit no right whatsoever to his own heirs. The same is true in case a person has been designated as a devisee or a legatee with respect to a definite item of property. Since a devise or legacy is a charge upon the free portion of the inheritance, it necessarily follows that when the designated devisee or legatee dies before the testator, no right whatsoever is transmitted to the heirs of such devisee or legatee. (See Cuison vs. Villanueva, 90 Phil. 850.)

212. X died testate in 1986. In his will, he instituted as heirs his four (4) legitimate children, A, B, C, and D to inherit in equal shares. B and C, however, died before X. B is survived by two (2) legitimate children, E and F, while C is also survived by two (2) legitimate children, G. and H. D, on the other hand, survived, but repudiated his inheritance. He has two (2) legitimate children of his own, I and J. The net value of the estate is P120,000. How shall this estate be distributed? ANS: Had all the instituted heirs survived the testator and accepted their inheritance, the distribution would have been as follows: A

P15,000, as compulsory heir P15,000, as voluntary heir

B

15,000, as compulsory heir P15,000, as voluntary heir

C

P15,000, as compulsoryheir P15,000, as voluntary heir

D

........

P15,000, as compulsory heir P15,000, as voluntary heir 120,000

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DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

Arts. 970-977

B and C, however, died before the testator and D repudiated his inheritance. There are, therefore, three vacant portions in the inheritance. These vacant portions shall now be distributed as follows: (1) Share o f B — The legitime of P15,000 to which B would have been entitled shall be given to his children, E and F, by right of representation, while the free portion of P15,000 to which he would have been entitled as voluntary heir shall be given to his co-heir, A, by right of accretion. (See Arts. 856, 972,1015,1016, NCC.) (2) Share o f C — The legitime of P i5,000 to which C would have been entitled shall be given to his children, G and H, by right of representation, while the free portion of P15,000 to which he would have been entitled as voluntary heir shall be given to his co-heir, A, by right of accretion. (Ibid.) (3) Share o f D — Since D has repudiated his inheritance, the effect of such repudiation is as follows: The legitime of P15,000 to which he would have been entitled cannot be given to his children, I and J, because of the principle that an heir who repudiates his inheritance cannot be represented. (Art. 977, NCC.) Consequently, it shall pass to the legal heirs of X by right of intestate succession (Art. 1021, NCC.) These legal heirs are A, the children of B, and the children of C. The division shall be as follows: A shall be entitled to 1/3, or P5,000; E and F shall also be entitled to 1/3, or P5,000, which they shall divide equally; and G and H shall also be entitled to 1/3, or P5,000, which they shall also divide equally. As far as the free portion of P15,000 to which D would have been entitled as a voluntary heir is concerned, the entire portion shall be given to his co-heir, A, by right of accretion. (Arts. 1015,1016, NCC.) Therefore, the ultimate distribution shall be as follows: A

..............

E

..............

P15,000, as compulsory heir P I5,000, as voluntary heir P5,000, as legal heir to D’s legitime P I5,000, by right of accretion from B’s share PI5,000, by right of accretion from C’s share P15,000, by right of accretion from D’s share P7,500, by right of representation P2,500, as legal heir to D’s legitime

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F

P7,500, by right of representation P2,500, as legal heir to D’s legitime

G

P7,500, by right of representation P2,500, as legal heir to D’s legitime

H

P7,500, by right of representation P2,500, as legal heir to D’s legitime

I J P120,000

213. Suppose that X, in the above problem, died intestate, how shall the distribution be made? ANS: Had all of the children of X survived and accepted their inheritance, the distribution would have been as follows: A

........................P30,000

B

........................ P30,000

C

.................. ..... P30,000

D

..... .................. P30,000

B and C, however, died before X and D repudiated his inheritance, thus creating three vacant portions in the inheritance. These vacant portions shall now be distributed as follows: (1) Share o f B — The entire P30,000 to which B would have been entitled shall be given to his children, E and F, by right of representation. (2) Share o fC — The entire P30,000 to which C would have been entitled shall be given to his children, G and H, by right of representation. (3) Share o f D — Since D has repudiated his inheritance, his children, I and J, cannot represent him. (Art. 977, NCC.) Consequently, the entire P30,000 which he has repudiated shall now accrue to his co-heirs. (Art. 1018, NCC.) A is the only co-heir. It is obvious that E, F, G and H are not co-heirs; they are merely representatives of B and C.

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Arts. 970-977

Therefore, the ultimate distribution shall be as follows: A

......... .........

P30,000, as legal heir P30,000, by right of accretion

E

..................

P15,000, by right of representation

F

..................

P15,000, by right of representation

G

..................

P15,000, by right of representation

H

.... ..............

P15,000, by right of representation Pl20,000

214. What are the different limitations imposed by law upon the right of representation in the collateral line? ANS: The right of representation in the collateral line is subject to the following limitations: (1) The right can be exercised only by nephews and nieces of the decedent. (Arts. 972 and 975, NCC.) (2) The right can be exercised by nephews and nieces of the decedent only if they concur with at least one brother or sister of said decedent, (Art. 975, NCC.) Otherwise, if they are the only survivors, they shall inherit in their right and not by right of representation. (3) The right of representation in the collateral line is possible only in intestate succession; in other words, it cannot possibly take place in testamentary succession. In testamentary succession, only compulsory heirs may be represented. (Art. 856, NCC.) It is, of course, obvious that brothers and sisters are not compulsory heirs. If instituted as heirs, they are classified as mere voluntary heirs.

215. X died intestate, survived by the following: A and B, nephews through a predeceased sister, Y and M and N, grandnieces through a predeceased nephew, Z. M and N claim the right to inherit one-third of the estate of X by representation of their parent, Z. Is their claim legally tenable? Reasons. (1971) ANS: The claim of M and N to inherit 1/3 of the estate of X by representation of their parent, Z, is untenable. It must be observed that they are merely grandnieces of the decedent, X. Under the NCC,

623

Arts. 970-977

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

representation in the collateral line can only take place in favor of nephews and nieces (Art. 972, NCC.), never in favor of grandnephews and grandnieces. As a matter of fact, nephews and nieces can inherit from the decedent by right of representation only when they survive or concur with at least one uncle or aunt, who is a brother or sister of said decedent. (Art. 975, NCC.) Even this condition is not present in the instant case. It is clear from the facts that the only survivors are nephews (A and B) and grandnieces (M and N). Therefore, since the only possible way by which such survivors can inherit would be in their own right, the rule of proximity is applicable. Only A and B can inherit from X.

216. A and B are C’s brothers. D is the child of A, and E of B, while F is the child of D. C died without leaving a will, A, B and D are likewise dead. May F inherit from C? Explain. (1973) ANS: F cannot inherit from C. True, he is a 4th degree relative by blood of the decedent, but he is excluded by E, a nephew, and therefore, a third degree relative by blood of said decedent. Actually, the right of representation does not take place in the instant case. In the collateral line, representation takes place only in favor of the children of brothers and sisters, whether they be of the full or half blood (Art. 972, NCC.), and only if they survive with at least one uncle or aunt who is a brother or sister of the decedent. (Art. 975, NCC.) Both conditions are not present here. F is a grandnephew of the decedent C, not a nephew. He concurs with a nephew of the decedent, not with a brother or sister. Therefore, the only way by which he can inherit would be in his own right. Unfortunately for him, under the principle of proximity recognized in Art. 962 of the NCC, he is excluded by E.

217. A, before his death, executed a will instituting his legitimate children, B and C, and his brother D, as his heirs without designating their shares. In the will, he also bequeathed P10,000 to his friend, E. The residue or net remainder of his estate is P80,000. (1) If B, C, D and E are all living and could inherit from A at the time of the death of the latter, how shall the estate be divided? Reasons. 624

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

Arts. 970-977

(2) If all of them died before the testator, survived by their own children, can such children represent them? Reasons. ANS: (1) Since B and C are compulsory heirs, we must first satisfy their legitime. They are entitled to P20,000 each. (Art. 888, NCC.) Then the legacy of P I0,000 to E must be satisfied from the free portion. That leaves only P30,000 which is disposable. Applying the provision of Art, 846 of the NCC, the remaining free portion of P30,000 shall then be divided equally among B, C and D. All in all, B shall be entitled to P30,000; C-P30,000; D-P10,000; and E-P10,000. (2) Only the legitimate (but not illegitimate) children of B and C can inherit by right of representation, but not the children of D and E. The reason for this is that D is a voluntary heir and E is a legatee, and under the law, voluntary heirs (and this applies also to legatees and devises) cannot transmit any right to their own heirs in case of predecease. (Art. 856, NCC; Cuison vs. Villanueva, 90 Phil. 850.)

218. Can an illegitimate person be represented? ANS: Yes, an illegitimate person can be represented by his child or descendant, whether legitimate or illegitimate. (Arts. 902, 989, 998, 999, NCCJ

219. “A” died intestate survived by the following grand­ children: (a) “B,” legitimate child of a deceased legitimate son; (b) “C,” illegitimate child of a deceased legitimate daughter; (c)

“D,” legitimate child of a deceased illegitimate son;

and (d) “E” illegitimate child of a deceased illegitimate daughter. Can such grandchildren inherit from "A” by right of representation? ANS: “B,” “D,” and “E” can inherit from “A” by right of representation, but “C” cannot. “C” is excluded from the succession,

625

Arts. 970-977

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Representation

because under Art. 992 of the NCC, an illegitimate child cannot inherit ab intestato from the legitimate relatives of his natural parents. Considering the provision of Art. 992 of the Code, it is, therefore, clear that the following rules will necessarily follow: (1) If the person to be represented is a legitimate person, then it is indispensable that the representative must also be legitimate. (2) If the person to be represented is an illegitimate person, then it is immaterial whether the representative is legitimate or illegitimate.

220. Decedent X, born illegitimate, is survived by only an illegitimate brother Y, and by Z, an illegitimate child of another illegitimate brother, who died ahead of X. State whether or not X has any right in the intestate succession of X, giving the substance of the legal principle. ANS: There are two (2) views: According to one view, Z has no right in the intestate succession of X. (3 Reyes and Puno, Outline of Civil Law, 1958 Ed., pp. 145-146.) The reason for this is that the right of an illegitimate is extended by the NCC only to those in the direct descending line and not to those in the collateral line. (Arts. 902, 998, 999, NCC.) According to a second view, Z has a right in the intestate succession ofX. The reason for this is the law itself which recognizes the right of children of brothers and sisters to inherit by right of representation, if they survive with uncles and aunts. (Arts. 902, 977, 994, NCC.) It is, however, indispensable that the person to be represented must also be illegitimate; in other words, the decedent, the person to be represented, and the representative must all be related to each other by illegitimate filiation. (See 3 Tolentino NCC, 1956 Ed., pp. 403-404, 407.) This is so because of the barrier existing between members of the legitimate family and those of the illegitimate family by virtue of which one cannot inherit ab intestato from the other. (Art. 992, NCC.) While it is true that it is in the direct descending line where the right of illegitimates to inherit by right of representation is expressly recognized (Arts. 902, 998, 999, NCC.), nevertheless, there is no reason for not applying the same principle to representation in the collateral line.

626

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

It is submitted that the second view is more in accordance with the new philosophy of our law with regard to illegitimate children. It is, of course, admitted that under the old Code, when the law speaks of “children” without any qualification whatsoever, the jurisprudence of that period construed it to refer only to legitimate children. However, this construction was then necessary, because successional rights were granted to illegitimates only by way of exception. The rule is now different. All kinds of children, whether legitimate or illegitimate, are now granted successional rights, although in a graduated scale. Consequently, I submit that Z has a right in the intestate succession of X

221. What is the share which is given to a person who inherits by right of representation? ANS: In testamentary succession, the share which is given to the representative is the legitime of the compulsory heir who is represented, while in intestate succession, it is the entire share of the legal heir who is represented.

Section 2. ORDER OF INTESTATE SUCCESSION (Arts. 978-1014) 222. What is the order of intestate succession? ANS: We must distinguish between the order of intestate succession if the decedent is a legitimate person and the order if said decedent is an illegitimate person. If the decedent is a legitimate person, the order is: (1)

Legitimate children or descendants.

(2)

Legitimate parents or ascendants.

(3)

Illegitimate children or descendants.

(4) The surviving spouse subject to the concurrent right of brothers and sisters, nephews and nieces. (5)

Brothers and sisters, nephews and nieces.

(6)

Other collateral relatives within the fifth degree.

(7)

The State.

627

Arts. 978-1014

DIFFERENT MODES OP ACQUIRING OWNERSHIP Succession Order of Intestate Succession

If the decedent is an illegitimate person, the order is: (1)

Legitimate children or descendants.

(2)

Illegitimate children or descendants.

(3)

Parents by nature.

(4) The surviving spouse subject to the concurrent right of brothers and sisters, nephews and nieces. (5)

Brothers and sisters, nephews and nieces.

(6)

The State.

If the decedent is an adopted person, the above orders of intestate succession are still followed, but with a difference in connection with parents or ascendants. Under the FC, the adopter or adopters get a share in the estate of the adopted except only if the latter is survived by legitimate children and other descendants. Thus, if the adopted dies single and is survived only by his parents by nature, whether legitimate or illegitimate or legitimate ascendants, as well as by the adopter or adopters, the parents or ascendants get 1/2 of the estate of the adopted, and the other half goes to the adopter. (Art. 190[2], FC.)

223. Keanu was survived by two (2) legitimate children, two (2) illegitimate children, his parents, and two (2) brothers. He left an estate of PI million. Who are the compulsory heirs of Keanu? How much is the legitime of each? How much is the free portion of his estate, if any? (b) Suppose Keanu, in the preceding question (a), died intestate. Who are his intestate heirs? How much is the share of each in his estate? (2003) ANS: (a) The compulsory heirs are the two (2) legitimate chil­ dren and the two (2) illegitimate children. The parents are excluded by the legitime children, while the brothers are not compulsory heirs at all. Their respective legitimes are: (1) The legitime of the two (2) legitimate children is 1/2 of the estate (P500,000.00) to be divided between them equally, or P250,000.00 each.

628

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-10X4

(2) The legitime of each illegitimate child is 1/2 the legitime of each legitimate child or P125,000.00. Since the total legitimes of the compulsory heirs is P750,000, the balance of P250,000.00 is the free portion. (b) The intestate heirs are the two (2) legitimate children and the two (2) illegitimate children. In intestacy the estate of the decedent is divided among the legitimate and illegitimate children such that the share of each illegitimate child is 1/2 the share of each legitime child. Their shares are: For each legitimate child

—

P333,333.33

For each illegitimate child

—

P166,666.66

(Art. 983, NCC; Art. 176, FC.)

224. Do the above-mentioned orders of intestate succes­ sion apply the principle of exclusion or the principle of con­ currence? Explain. ANS: Actually, the above-mentioned orders of intestate succession apply as a rule the principle of exclusion, but they also recognize the principle of concurrence at the same time. Thus, legal heirs who are primary compulsory heirs, such as legitimate children or descendants, acknowledged illegitimate children or descendants and the surviving spouse can not be excluded from the succession. They shall always inherit regardless of whether they survive alone as a class or with other legal heirs. However, in the case of the others, they are excluded by those who precede them in the order of intestate succession, except brothers and sisters, nephews and nieces. Although they are excluded by children or descendants, whether legitimate or illegitimate, or in default thereof, by parents or ascendants, whether legitimate or illegitimate, such brothers and sisters, nephews and nieces are not excluded by the surviving spouse. This is, probably, the only reason why the latter occupies the fourth position in the order of intestate succession.

629

Vrts, 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

225. May the brothers and sisters of the decedent inherit Prom their brother if the decedent has illegitimate children? ANS: No, if the decedent left illegitimate children, the brothers and sisters are precluded from inheriting the estate of their brother. Under Art. 988, NCC, in the absence of legitimate descendents :>r ascendants, the illegitimate children shall succeed to the entire sstate of the deceased. If there are no illegitimate children or a surviving spouse, the collateral relatives shall succeed to the entire sstate of the deceased. (Art. 1003, NCC.) The rule is so because the children are the closest relatives and under the law, the nearer excludes the.farther in the law on succession. (Carolina Abad Gonzales vs. CA, October 30, 1999.)

226. Joey was married to Pipay. Petitioners are the nephew and niece of Pipay. When Pipay died, she was survived by her husband and the petitioners. Joey executed an Affidavit of Adjudication of a parcel of land left by Pipay and sold it to Alma. Petitioners filed an action to recover their share of such land contending that they are entitled to inherit from Pipay. Will the action prosper? Why? ANS: Yes, because what was inherited by Joey was only 1/2 of the parcel of land and the other 1/2 went to the petitioners, nephew and niece of Pipay. Joey therefore could alienate only 1/2 of the land. More particularly, the law outlines the manner by which the estate of the decedent shall be divided, to wit: “Art. 975. Where children of one or more brothers or sis­ ters of the deceased survive, they shall inherit from the latter by representation, if they survive with their uncles or aunts. But if they alone survive, they shall inherit in equal portions.” “Art. 995. In the absence of legitimate descendants and ascendants, and illegitimate children and their descendants, whether legitimate or illegitimate, the surviving spouse shall inherit the entire estate, without prejudice to the rights of brothers and sister, nephews and nieces should there be any, under Article 1001.”

630

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

Art. 1001. Should brothers and sisters of their children survive with the widow or widower, the latter shall be entitled to 1/2 of the inheritance and the brothers and sisters or their children to the other h a lf” (Tizon vs. CA, G.R. No. 121027, July 31,1997.)

227. TABLE OF INTESTATE SUCCESSION UNDER THE FAMILY CODE Survivors

Share

1. Any class alone

Whole estate

Rule of Proxim­ ity (Art. 962, NCC.)

2. (a) Leg. Children (b) Leg. Parents

Whole estate Excluded

Rule of proxim­ ity (Art. 962, NCC.)

3. (a) Leg. Children (b) Uleg. Parents

Concurrence or Exclusion Theory

Concurrence theory — Sat­ isfy legitime and then distribute the disposable portion, if any, pro rata (10:5)

Division

(Art. 895, 983, 996, 999, NCC.) 4. (a) Leg. Children (b) Surviving spouse

Surviving spouse entitled to same share as each legitimate child

5. (a) Leg. Children (b) Illeg. children (c) Surviving spouse

Concurrence or Exclusion theory Note: The legitime of each illegiti­ mate child shall consist of 1/2 of the legitime of a legitimate child (Art. 176, Family Code.)

631

Exclusion theory — Satisfy their legitime, and then give the disposable por­ tion. If any, to the preferred heir in the order of intestate suc­ cession. (Arts. 895, 961, 983, 996, 999, NCC.)

Vrts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

6. (a) Leg. Parents (b) Illegitimate Parents

1/2 1/2

If decedent is an illegitimate person, his natural parents are excluded by presence of il­ legitimate child. (Art 991.)

7. (a) Leg. Parents (b) Surviving spouse

1/2 1/2

Same share even if decedent is an illegiti­ mate person. (Art 997, NCC.) (Art. 176, FC.)

8. (a) Leg. Parents (b) Illegitimate children (c) Surviving spouse

1/4 1/4. 1/4

(Art. 998, NCC.)

9. (a) Illeg. children (b) Surviving spouse

1/2 1/2

(Art. 1001, FC.)

10. (a) Surviving spouse (b) Brothers and sisters, nephews and nieces

whole estate

(Arts. 1003-1010, NCC.) Principle

11. Collaterals

whole estate

of proximity. (Arts. 1011-1014, NCC.) Escheat

proceedings. 12. State

228. A, spurious child, died intestate survived by B, the brother of his deceased mother, and C, his mother’s legitimate granddaughter. May B and C inherit from A? Reasons. (1983) ANS: B and C cannot inherit from A. The reason is what is sometimes known as the principle of absolute separation between members of the legitimate family and members of the illegitimate family. According to this principle, an illegitimate child cannot inherit ab intestato from the legitimate children or relatives of his presumed or putative parent; neither can such legitimate children or

632

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

relatives of his presumed or putative parent inherit ab intestato from the illegitimate child. Obviously, B and C are legitimate relatives of A’s mother. There is, therefore, an impenetrable or impassable barrier existing between A, the decedent, on one hand, and B and C, on the other hand. One cannot inherit ab intestato from the other. (Note:

The above answer is based on Art. 992, NCC.)

229. What is meant by the law when it speaks of brothers and sisters, nephews and nieces, as legal or intestate heirs of an illegitimate child? ANS: It refers to illegitimate brothers and sisters as well as to the children, whether legitimate or illegitimate, of such brothers and sisters. The law prohibits absolutely a succession ab intestato between the illegitimate child and the legitimate children and relatives of the father or mother of said legitimate child. Between the legitimate family and the illegitimate family, there is presumed to be an intervening antagonism and incompatibility. The illegitimate child is disgracefully looked down upon by the legitimate family; the legitimate family is, in turn, hated by the illegitimate child; x x x the law does no more than recognize this truth, by avoiding further grounds of resentment. (Jurado, Comments and Jurisprudence on Succession, 8th ed., 1991, pp. 423-424, as cited in Manuel vs. Ferrer, G.R. No. 117246, August 21,1995.)

230. What are the successional rights of illegitimate children in intestate succession? ANS: The successional rights of illegitimate children in intes­ tate succession may be summarized as follows: (1) I f they survive alone as a class — Under Art. 176 of the FC, when the illegitimate children survive alone as a class, they are entitled to the entire estate and the share of the illegitimate children, whether classified as natural or not under the NCC, shall be the same. Hence, the entire estate is divided equally among the illegitimate children. (The old law providing that the share of an acknowledged illegitimate child who is not natural is always 4/5 of the share of the acknowledged natural child or natural child by legal fiction, was repealed by the FC.)

633

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

(2) If they survive with legitime descendants — Estate shall be divided in accordance with the proportion prescribed in the Family Code (Art. 176.) which is 10:5. (3) I f they survive with ascendants — If decedent is legitimate, the legitimate ascendants are entitled to 1/2 of estate, while the illegitimates are entitled to the other 1/2. (Art. 991, NCC.) If decedent is illegitimate, ascendants are excluded; consequently, the illegitimates are entitled to entire estate. (Art. 993, NCC.) (4) If they survive with spouse — The illegitimates are entitled to 1/2 of estate while the surviving spouse is entitled to the other 1/2. (Art. 998, NCC.) (5) If they survive with legitimate descendants and spouse — Under the FC, the illegitimate child (natural or not) shall be entitled to 1/2 of the legitime of a legitimate child. So, the successional rights of the illegitimate children with legitimate descendants and spouse shall be divided in the proportion of 10:10:5 (contrary to the proportion prescribed with old law [Art. 895, NCC] which is 10:5:4, with the surviving spouse getting the same share as that of a legitimate child [Arts. 999, 983, NCC]). (6) I f they survive with ascendants and spouse — If decedent is legitimate, the legitimate ascendants are entitled to 1/2 of estate, the illegitimates are entitled to 1/4, and the surviving spouse is entitled to 1/4. (Art. 1000, NCC.) If decedent is illegitimate, the parents are excluded; consequently, the illegitimates are entitled to 1/2 of estate, while the surviving spouse is entitled to the other 1/2. (Arts. 993, 994, NCC.) 231. X died intestate survived by one legitimate child, A, two acknowledged natural children, B and C, and two (2) acknowledged illegitimate children not natural, D and E. The estate is P72,000. How shall the inheritance be distributed? ANS: Under the FC, the legitime of each illegitimate child (whether natural or not) shall consist of 1/2 of the legitime of a legitimate child. (Art. 176.) Therefore, the legitime of the two acknowledged illegitimate children and two acknowledged illegitimate children who are not natural in the above problem shall be the same. The 5:4 proportion has'been eliminated under

634

1 .;

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

the Family Code and the 10:5 proportion is herein followed. To apply this proportion directly would result in the impairment of the legitime of A. Consequently, we must first satisfy the legitime of the survivors in the aforementioned problem. A shall, therefore be entitled to 1/2 of P72,000.00 or P36,000.00. Now, if she shall give 1/2 of P36,000.00 will not be sufficient to satisfy the legitime of the four (4) illegitimate children. So, the remaining free portion of P36,000.00 shall be divided among the four (4) illegitimate children equally. Consequently, the distribution shall be as follows: A shall be entitled to P36.000.00; B to P9,000.00; C, P9,000.00; D to P9,000.00; and E to P9,000.00. 232. X died intestate survived by two (2) legitimate children, A and B, and one acknowledged natural child, C. The estate is P80,000. How shall the distribution be made? ANS: Two different theories have been advanced in order to solve the above problem. The first is based upon the principle of exclusion, while the second is based upon the principle of concur­ rence. For the sake of convenience, we shall call the first the exclu­ sion theory and the second the concurrence theory. Under both theories, the legitime of the survivors must be satisfied first. Hence, since A and B are legitimate children of the decedent, they shall be entitled to 1/2 of P80,000.00. Consequently, each of them shall be given P20,000.00. On the other hand, since C is an acknowledged natural child, he shall be entitled to 1/2 of P20,000, or P I0,000.00. There is, therefore, a balance of P30,000.00. How shall this balance be divided? It is here where there is a conflict between the two theories. According to the exclusion theory, the balance of P30,000.00 shall be given to A and B, in conformity with the general order of succession. Consequently, under this theory, the share of each survivor shall be as follows: A

P35,000.00

B

P35,000.00

C

P10,000.00 P80,000.00 635

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

According to the concurrence theory, the balance of P30,000 shall be divided among the three (3) survivors in the proportion of 2:2:1 in conformity with the provision of Art. 983 of the NCC. A and B shall, therefore, be entitled to 2/5 each of P30,000.00, or P12,000.00 each, while C shall be entitled to 1/5 of P30,000.00, or P6,000.00. Consequently, under this theory, the share of each survivor shall be as follows: A

P32,000.00

B

P32,000.00

C

P16,000.00 P80,000.00

It is submitted that the solution according to the concurrence theory is the correct solution. The provision of Art. 983 is explicit. Where there is a concurrence of legitimate and illegitimate children in the succession, the article declares that the “proportions prescribed by Art. 895” shall be observed. Under the exclusion theory, such proportions are not observed; as a matter of fact, they are discarded altogether. Besides, we must not lose sight of the new philosophy underlying the application of the order of intestate succession. As a result of the changes or innovations in the new Code, it would be more accurate to say that the order of intestate succession is now based not only on the principle of exclusion but also on the principle of concurrence. Consequently, the old method of distribution whereby acknowledged natural children would be entitled only to their legitime has no longer any place under our law. 233. Can an adopting parent inherit from the adopted child whether testate or intestate? ANS: An adopting parent can inherit from the adopted by testamentary succession. Under the testate succession, there is no law which prohibits the latter from making a will and instituting therein the adopter as heir, legatee or devisee. Thus, under the FC, the adopting parent can inherit from the adopted or get a share in the estate of the adopted on legal or intestate succession except only if the latter is survived by legitimate children and other descendants. When the parents, legitimate or

636

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

illegitimate, or the legitimate ascendants of the adopted concur with the adopters, they shall divide the entire estate, 1/2 to be inherited by the parents or ascendants and the other half, by the adopters. (Art. 190[2], FC.) When the surviving spouse or the illegitimate children of the adopted concur with the adopters, they shall divide the entire estate in equal shares, 1/2 to be inherited by the spouse or the illegitimate children of the adopted and the other half, by the adopters. (Art. 190[3], FC.) When the adopters concur with the illegitimate children and the surviving spouse of the adopted, they shall divide the entire estate in equal shares, 1/2 to be inherited by the illegitimate children, 1/3 by the surviving spouse, and 1/3 by the adopters. (Art. 190[4], FC.) And when only the adopters survive, they shall inherit the entire estate. (Art. 190[5]} FC.) All the abovementioned provisions refer to legal or intestate succession. 234. Before his death, X executed a will bequeathing P10,000 to his friend, Y. There is no other disposition found in the will. He is survived by his legitimate father, A, and an acknowledged natural son, B. His estate is P40,000.00. How shall the distribution be made? ANS: It is evident that mixed succession shall take place in this case. There is, of course, no question that the legacy of P10,000.00 in favor of Y shall have to be satisfied. After all it is not inofficious. How then shall the balance of P30,000.00 be divided? Shall the provision of Art. 991 of the NCC be applied literally so that A shall be entitled to P15,000.00 and B shall also be entitled to P15,000.00? It is clear that if this solution is followed, there would be an impairment of the legitime of A. Under the law on legitime, he is entitled to 1/2 of P40,000.00, or P20,000.00 by operation of law. Such legitime cannot be impaired whether by the expressed or the presumed will of the decedent. Hence, if anybody should be prejudiced by the legacy given to Y, and it cannot be avoided since it is admitted that such legacy must be respected, it should be B. Anyway, his legitime is not impaired. Consequently, the distribution must be made as follows: A

P20,000.00

B

P10,000.00

C

P10,000.00 P40,000.00 637

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

235. What are the successional rights of the surviving spouse in intestate succession? ANS: The successional rights of the surviving spouse in intestate succession may be summarized as follows: (1) I f he or she survives alone — He or she is entitled to the entire estate. (Art. 995, NCC.) (2) I f he or she survives with legitimate descendants — He or she shall have the same share as that of each legitimate child. (Art. 996, NCC.) (3) If he or she survives with ascendants — If decedent is legitimate, the legitimate ascendants are entitled to 1/2 of estate, while he or she is entitled to the other 1/2. (Art. 997, NCC.) If decedent is illegitimate, same rule applies. (Art. 994, NCC.) (4) I f he or she survives with illegitimate children — The illegitimates are entitled to 1/2 of estate, while he or she is entitled to the other 1/2. (Art. 998, NCC.) (5) I f he or she survives with brothers and sisters, nephews and nieces — He or she is entitled to 1/2 of estate, while brothers and sisters, nephews and nieces are entitled to the other 1/2. (Art. 1001, NCC.) (6) I f he or she survives with legitimate descendants and illegitimate children — Under the FC, the legitime of illegitimate children (whether classified under the NCC as natural or not) is 1/2 of the legitime of the legitimate child. So, the successional rights of the spouse surviving, with legitimate descendants and illegitimate children shall be divided in the following proportions 10:10:5, thereby eliminating the proportions prescribed in Art. 895, NCC which is 10:5:4. (7) I f he or she survives with ascendants and illegitimate children — If decedent is legitimate, the legitimate ascendants are entitled to 1/2 of estate, the illegitimates are entitled to 1/4, and the surviving spouse is entitled to 1/4. (Art. 1000, NCC.) If decedent is illegitimate, the parents are excluded; consequently, the illegitimates are entitled to 1/2 of estate, while the surviving spouse is entitled to the other 1/2. (Arts. 993, 994, NCC.)

638

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

236. Spouses Guillermo and Pacita had three (3) sons, namely, A, B and C. Beset by quarrels, their marriage broke up. Guillermo left for and obtained a divorce in the United State, where he subsequently married Juana, by whom he had a son, D. Guillermo later died in the United States without even knowing that C had died earlier, leaving a wife, E, and a legitimate son, F. State the shares, if any, of the following in the estate of Guillermo; A, B, D, E, F, Pacita and Juana. (1984) ANS: A shall be entitled to the share of a legitimate child. B shall also be entitled to the share of a legitimate child. D, being a natural child by legal fiction, shall be entitled to 1/2 of the share of A or B. It must be observed that Guillermo’s marriage to Juana is void from the point of view of Philippine law since the decree of absolute divorce obtained by him against Pacita is not recognized as a valid decree. (See Arts. 15, 71, 80, No. [4], NCC.) E shall not participate in the inheritance because she is not a legal heir of Guillermo. F shall be entitled to the same share as A or B by right of representation, being the legitimate son of C, who predeceased his father Guillermo. Pacita shall be entitled to the same share as A or B, being the surviving spouse of Guillermo. (Art. 999, NCC.) Juana shall not participate in the inheritance because she is not a legal heir of Guillermo. Hence, the proportionate shares of A, B, F, Pacita and D in the inheritance will be: (2 for A, 2 for B, 2 for F, 2 for Pacita, and 1 for F) or (2:2:2:2:1). A’s share will be 2/9 of the estate; B’s share will be 2/9 of the estate; F’s share will be 2/9 of the estate; Pacita’s share will be 2/9 of the estate; and D’s share will be 1/9 of the estate.

639

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

237. (a) A died without a will. He is survived by his widow, B, and by one legitimate son, C. The estate is P60,000.00. How shall the distribution be made? (b) A died without a will. He is survived by his widow, B, one legitimate son, C, one acknowledged natural son, D, and one illegitimate (spurious) son, E. The estate is P72,000.00. How shall the distribution be made? ANS: (a) B shall be entitled to 1/2 of P60,000.00, while C shall be entitled to the other 1/2. Consequently, the share of B shall be P30,000.00, while the share of C shall also be P30,000.00. Art. 996 expressly provides that if a widow or widower and legitimate children or descendants are left, the surviving spouse has in the succession the same share as that of each of the legitimate children. Although, apparently, this provision refers only to a situation where the surviving spouse concurs with two (2) or more legitimate children or descendants, nevertheless, the provision should be read and so applied as follows: “If the widow or widower and a legitimate child are left, the surviving spouse has the same share as that of the legitimate child.” This is so because of a wellestablished principle of statutory construction to the effect that the plural includes the singular. Besides, the legislator's desire to promulgate just one general rule applicable to all situations regardless of whether there is only one legitimate child or two (2) or more legitimate children can be clearly inferred from the fact that the arrangement under the Spanish CC, whereby one rule (the general rule) was expressly provided for a case where the widow or widower concurs with legitimate children and another rule (the exception) was expressly provided for a case where such widow or widower concurs with only one legitimate child, has not been adopted in Art. 996 of the New NCC. (Santillon vs. Miranda, 12 SCRA 563.) (b) Although the NCC in Art. 999 expressly declares that when the widow or widower survives with legitimate children or their descendants and illegitimate children or their descendants, whether legitimate or illegitimate, such widow or widower shall be entitled to the same share as that of a legitimate child, nevertheless, the rule that the widow or widower shall be entitled to the same share as that of a legitimate child cannot be applied literally to the instant problem. The reason for this is evident. Nothing would be left for the illegitimate children. Under the principle of compulsory succession, 640

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

which pervades our law of succession whether testamentary or intestate, the legitime of compulsory heirs can never be impaired. Consequently, the only thing that we can do is to satisfy the legitime of the survivors. C shall be entitled to 1/2 of P72.000.00, or P36,000.00. B shall be entitled to 1/4 of P72,000.00, or P18,000.00; D and E shall be entitled to the remaining P I8,000.00 of which they shall divide equally since the free portion is not sufficient to satisfy the legitime of the two (2) illegitimate children, which should be P18,000.00 for each of them. Please note that under the FC, D and E as both classified as the illegitimate children of A and will get the same share, which is 1/2 of the legitime of C, the legitimate child of A, thereby eliminating the proportion of 5:4 prescribed under the old law. Consequently, the distribution shall be as follows: B, the sur­ viving spouse gets P18,000.00; C, the legitimate son gets P36,000.00; D and E gets P9,000.00 each. 238. X, an employee of the Supreme Court, died intestate in 1976, survived by his widow, W, a legitimate child, A and 2 illegitimate children, B and C. The record shows that he failed to state in his application for membership with the GSIS the beneficiary or beneficiaries of his retirement benefits. Said benefits amount to P80,000.00. How shall such benefits be divided? ANS: The rules of intestate succession shall govern. Hence, the retirement benefits amounting to P80,000.00 shall be divided as follows: W

.................

A

...................

1/2, or P40,000.00

B

..................

1/8, or P10,000.00

C

.......... .

1/8,'orPlO,000.00

1/4, or P20,000.00

(Re: Mario V. Chanliongco, 79 SCRA 364.) The raison d*etre for the above distribution is very well explained by Mr. Justice Aquino in his concurring opinion, thus: “I concur. The provisions on legitime are found under the rubric of testamentary succession. That does not mean that the legitime

641

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

is taken into account only in testamentary succession. The legitime must also be taken into consideration in legal succession. There may be instances, like the instant case, where in legal succession the estate is distributed according to the rules on legitime without applying the rules on intestate succession. The reason is that sometimes the estate is not even sufficient to satisfy the legitimes. The legitimes of the primary compulsory heirs, like a child or descendant, should first be satisfied. In this case the decedent’s legal heirs are his legitimate child, his widow and 2 illegitimate children. His estate is partitioned among those heirs by giving them their respective legitimes. The legitimate child gets 1/2 of the estate as his legitime which is regarded as his share as a legal heir. (Art. 888 , NCC.) The widow’s legitime is 1/4 of the estate. That represents also her share as a legal heir. (Art. 8 92,1st sentence, NCC.) The remaining 1/4 of the estate, which is the free portion, goes to the illegitimate children in equal shares, as their legitime, pursuant to the provision that “the legitime of the illegitimate children shall be taken from the portion of the estate at the free disposal of the testator, provided that in no case shall the total legitime of such illegitimate children exceed that free portion, and that the legitime of the surviving spouse must first be fully satisfied. (Last par., Art. 895, NCC.) The rule in Santillon vs. Miranda, L-19281, June 30, 1965, 14 SCRA 563, that when the surviving spouse concurs with only one legitimate child, the spouse is entitled to one-half of the estate and the child gets the other half, pursuant to Article 996 of the N C C, does not apply to this case because here illegitimate children concur with the surviving spouse and the legitimate child. In this case, to divide the estate between the surviving spouse and the legitimate child would deprive the illegitimate children of their legitime. So, the decedent’s estate is distributed in the proportion of 1/2 for the legitimate child, 1/4 for the widow and 1/8 each for the two illegitimate children. Also not of possible application to this case is the rule that the legitime of an acknowledged natural child is 1/2 of the legitime of the legitimate child and that the legitime of the spurious child is 2/5 of that of the legitime of the legitimate child or 4/5 of that of the acknowledged natural child.

642

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

That rule cannot be applied because the estate is not sufficient to cover the legitimes of all the compulsory heirs. That is one of the flaws of the law of succession. A situation, as in the instant case, may arise where the illegitimate children get less than their legitime.”

239. X is survived by: (1) W, his widow; (2) A and B, his legitimate children; (3) C, an acknowledged natural child; and (4) D and E, acknowledged illegitimate children who are not natural. The net value of his estate after liquidation is P104,000.00. (a)

How much is the legitime of the above survivors?

(b)

If X died intestate, how shall the estate be divided?

ANS: (a) Under the law on legitime, the legitime of A and B is 1/2 of the estate, or P52,000.00, or P26,000.00 each. (Art. 888, NCC.) The legitime of W is equal to that of each legitimate child, or P26,000.00. (Art. 892, par. 2, NCC.) Now, if we shall give 1/2 of P26,000.00, or P13,000.00. Which is the share under Art. 176 of the FC of each of the three illegitimate children (whether classified under the NCC as natural or not since they are now all classified as illegitimate children under the FC and will get the same share, which is 1/2 of the legitime of each legitimate child, thereby eliminating the proportion of 5:4), the file portion of P26,000.00 will not be sufficient to satisfy the legitime of the three (3) illegitimate children. So, the remaining free portion of P26,000.00 shall be divided among the 3 illegitimate children equally. Consequently, the distribution shall be as follows: A and B shall be entitled to P26,000.00 each; W to P26,000.00; C, D and E shall be entitled to P8,666.66 each. (b) Applying the provisions of Arts. 996 and 999 of the NCC, in relation to Art. 983 of the same Code, which declares that “if illegitimate children survive with legitimate children, the shares of the former shall be in the proportions prescribed in Article 895,” the shares of the survivors are the same as those mentioned above. In other words, the survivors will be entitled to their legitime only. (Note: As earlier stated, the proportions prescribed in Art. 895 of the N C C was eliminated by the FC.)

643

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

240. X died intestate, survived by the following; (1) his widow, Y; (2) his legitimate children, A and B; and (3) his acknowledged natural child, C. The net value of the estate is P 140,000.00. How shall the distribution be made? ANS: There are two (2) conflicting theories with regard to the correct solution to the above problem. The first is based upon the principle of exclusion, while the second is based upon the principle of concurrence. Under both theories, the legitime of the survivors must be satisfied first. Hence, since A and B are legitimate children, their legitime shall be P35,000.00 each. The widow, Y, shall, of course, be entitled to P35,000.00 also, while the acknowledged natural child, C, shall be entitled to 1/2 of P35,000.00, or P17,500.00. That leaves a balance of P17,500.00. It is with respect to this balance that there is a conflict of opinion. According to the first theory (the exclusion theory), the balance must be given to the legitimate children, A and B, since they are the first in the order of intestate succession. Consequently, the distribution shall be as follows: A ...................... P43,750.00 B

...................P43,750.00

Y

...............

C

.......... ,....... P17,500.00

P35,000.00 P140,000.00

According to the second theory (the concurrence theoiy), the balance must be divided among A, B, Y and C in the proportion of 2:2:2:1. A, B and Y shall, therefore, be entitled to 2/7 each of P I7,500.00, or P5,000.00 each, while C shall be entitled to 1/7 of P17,500.00, or P2,500.00. Consequently, the distribution shall be as follows: A

...................... P40,000.00

B

...................... P40,000.00

Y

..... P40,000.00

C

...................... P20,000.00 P140,000.00 644

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

It is submitted that the second solution is correct. Art. 983 of the NCC provides that “if illegitimate children survive with legitimate children, the shares of the former shall be in the proportions prescribed in Art. 895,” while Art. 999 of the same Code provides that “when the widow or widower survives with legitimate children or their descendants and illegitimate children or their descendants, whether legitimate or illegitimate, such widow or widower shall be entitled to the same share as that of a legitimate child.” It is obvious that the first solution would discard the proportions prescribed in Art. 895 altogether and, at the same time, disregard the rule prescribed in Art. 999 by giving to the surviving spouse a share which is less than that of a legitimate child. 241. Let us assume that in the above problem, B and C died before the decedent, X. B is survived by two (2) children, D and E. D is a legitimate child, while E is an acknowledged natural child. C, on the other hand, is also survived by two (2) children, F and G. F is a legitimate child, while G is an acknowledged natural child. How shall the inheritance be distributed? ANS: Before we can distribute the inheritance it is necessary to determine whether the child of B as well as those of C can inherit from the decedent by right of representation or not. Undoubtedly D, who is legitimate, can represent his father B (Arts. 981, 982, NCC.), but how about E — can be inherit by right of representation from the decedent, X, considering that he is illegitimate? The answer is obvious. He cannot. Under the NCC, there is an impassable barrier existing between members of the legitimate family and members of the illegitimate family. (Art. 992, NCC.) It is different in the case of F and G; their father, C, is illegitimate. Consequently, this barrier does not exist. Hence, they can inherit from their grandfather, X, by right of representation. As a matter of fact, this right is expressly recognized in Art. 999 of the NCC. It must, however, be observed that since F is a legitimate child and G is an acknowledged natural child, the share which would have passed to their father C, shall have to be divided between them in the proportion of 2:1. In other words, F shall be entitled to 2/3, while G shall be entitled to 1/3. In view of the foregoing, the final distribution of the inheritance shall be as follows: 645

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Under the exclusion theoiy: A

............. ....P43,750.00

D

........ .........P43,750.00

E

.............

by right of representation

None

Y

....P35,000.00

F

............. ....PI 1,666.66

G

............. ....P5,833.33

plus, by right of representation plus, by right of representation.

P140,000.00 Under the concurrence theory: A

............

P40,000.00

D

............

P40,000.00,

E

........ .

Y

by right of representation

None P40,000.00

F

............

P13,333.33

plus, by right of representation

G

............

P6,666.66

plus, by right of representation.

P140,000.00 242. PR died intestate. She was survived by her husband FR, and their two (2) children, MA (the daughter) and AR (the son). Another child CR, predeceased her, leaving behind a child MR, and his (CR’s) widow, IR. In the course of the intestate proceedings, the trial court issued an order declaring the following as the legal heirs of PR prescribing their respective share of the estate as follows: FR (Fortunato T. Rosales — Husband)

—

1/4

MA (Magna R. Acebes — daughter)

—

1/4

AR (Antonio Rosales — son)

—

1/4

—

1/4

MR (Macikequerox Rosales — grandson, the son of CR (Caterio Rosales) and IR (Irene Rosales — widow of CR)

IR insisted in getting a share of the estate in her capacity as the surviving spouse of CR, son of PR, claiming that she 646

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

is a compulsory heir of her mother-in-law together with her son MR. The intestate court denied her plead. She appealed to the Supreme Court. Whether the widow whose husband predeceased his mother can inherit from the latter, her mother-in-law? Reasons. ANS: The facts stated in the above problem are those in the case of Rosales vs. Fortunato Rosales (G.R. No. L-40789, February 27, 1987), where the SC held that there is no provision in the NCC which states that a widow (surviving spouse) is an intestate heir of her mother-in-law. The entire Code is devoid of any provision which entitled her to inherit from her mother-in-law, either by her own right or by the right of representation. The provisions of the Code which relate to the order of intestate succession (Arts. 978 to 1014.) enumerate with meticulous exactitude the intestate heirs of a decedent, with the State as the final heirs. The conspicuous absence of a provision which makes a daughter-in-law an intestate heir of the deceased all the more confirms Supreme Court observation. If the legislature intended to make the surviving spouse an intestate heir of the parent-in-law, it would have so provided in the Code. IR however contends that at the time of the death of her husband CR, he had an inchoate or contingent right to the properties of PR as compulsory heir. Be that as it may, said right of her husband was extinguished by his death that is why it is their son MR who succeeded from PR by right of representation. He did not succeed from his deceased father, CR. 243. Xdied, survived by the following heirs: (a) his widow, W; (b) his legitimate parents, F and M; (c) his acknowledged natural children, A and B; and (d) his acknowledged spurious children, C and D. The net value of his estate is P288,000.00. (1)

How much is the legitime of the above survivors?

(2) Suppose that X died intestate, how shall the estate be divided? ANS: (1) The legitime of F and M is 1/2 of the estate, or P144,000.00, or P72,000.00 each. (Art. 889, NCC.) The legitime of W is 1/8 of the estate to be taken from the free portion, or P36,000.00. (Art. 899, NCC.) The legitime of the four (4) illegitimate children is 1/4 to be taken also from the free portion, or P72,000.00. (Art

647

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

899, NCC.) Under the FC they shall inherit in the same successional rights, whether classified under the NCC as natural or not. The 5:4 proportion on natural and not natural children has been eliminated by the FC. Hence, A, B, C, and D shall be entitled to P18,000.00 each (P72,000.00 -r 4). There will still be a balance of 1/8 of the estate, or P36,000.00, for free disposal. (2) If X died intestate, according to Art. 1000 of the NCC, F and M shall be entitled to 1/2 of the estate, or P144,000.00 or P72,000.00 each; W, to 1/4 of the estate, or P72,000.00; and A, B, C and D, to 1/4 of the estate, or P72,000.00. The share of P72,000.00 of A, B, C and D shall then be divided among them equally. (Under the FC, the proportion of 5:4 prescribed in the old law has been eliminated.) A, B, C, and D shall be entitled to P18,000.00 each (P72,000.00 -f 4). In synthesis, the division of the estate is as follows: F

...................

P72,000.00

M

....................

P72,000.00

W

....................

P72,000.00

A

....................

P18,000.00

B

....................

P18,000.00

C

...................

P18,000.00

D

....................

P18,000.00

Estate

P288,000.00

244. H died intestate survived by his widow, W, and his legally adopted son, AS. In the proceedings for the settlement of his estate, M, the widowed mother of H, intervened and claims for a share of the estate of H. AS opposes the claim of M contending that since under the law he is given the same rights as a legitimate child, he excludes M from the estate of H. Should this opposition be sustained? Why? (1979) ANS: The opposition of AS should not be sustained. He is to a certain extent correct when he contends that he is entitled to the same successional rights as a legitimate child, but there is an exception to this rule. According to the Child and Youth Welfare Code, if the adopter is survived by legitimate parents or ascendants 648

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

Arts. 978-1014

and by an adopted child, the latter shall not have more successional rights than an acknowledged natural child. (Art. 39, No. 4, PD No. 603.) The reason behind this law is that it would be most unfair to accord more successional rights to the adopted, who is only artificially related to the decedent, than those who are naturally related to him by blood in the direct ascending line. True, the exception as provided for in the Welfare Code speaks only of the adopted child concurring with legitimate parents or ascendants. The surviving spouse is not included. However, this does not mean that it cannot also be applied to a situation where the adopted child concurs not only with legitimate parents or ascendants but also with the surviving spouse. The exception in such a case is still applicable. The reasons for this are as follows: (1) The view that the legitimate parents or ascendants should be excluded would defeat the intent of the framers of the law. . (2) Under the NCC (Art. 893.), the surviving spouse does not exclude the legitimate parents or ascendants of the decedent. Hence, the presence of M, the mother of H, should not affect the application of the exception. (3) Furthermore, the language of the law is clear. It does not require that the concurring heirs should be the adopted child and the legitimate parents or ascendants only. A contrary view cannot be presumed. Art. 1000 of the NCC, is, therefore, applicable. M shall be entitled to 1/2 of the estate of H; AS, to 1/4; and W, to 1/4. (Del Rosario vs. Conanan, 76 SCRA 136.) 245. "A ” died without a will survived by: (a) his widow, “W,*” (b) his legitimate brothers, “B” and “C;” and (c) his nephews, “E” and “F ” who are the children of a deceased sister, “D.” The net remainder of his estate is P24,000.00. How shall such estate be distributed? ANS: According to Art. 1001 of the NCC, “should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled to 1/2 of the inheritance and the brothers and sisters or their children to the other half.” Consequently, the estate shall be divided as follows:

649

Arts. 978-1014

DIFFERENT MODES OF ACQUIRING OWNERSHIP Succession Order of Intestate Succession

“W”

.P12,000.00, in her own right;

“B”

4.000.00, in his own right;

“C”

4.000.00, in his own right;

“E”

2.000.00, by right of representation; 2.000.00, by right of representation. P24,000.00

246. “A” died without a will survived by: (a) his widow iFW f (b) Inc., 69 Phil. 681; Pablo vs. Sapungan, 71 Phil. 145; Magdalena-Estate, Inc. vs. Rodriguez, 18 SCRA 967; Millar vs. CA, supra.) 177. Suppose that in second and new contract, there is a postponement of the date of payment or an extension of the period of payment, is there a novation? Reason. ANS: There is no novation because in such cases there is no clear case of incompatibility between the two (2) obligations; nei­

797

Arts. 1291-1304

OBLIGATIONS AND CONTRACTS Obligations Novation

ther is there a change in the obligatory relation between the parties which will alter the essence of the old obligation. (Ynchausti & Co. vs. Yulo, 34 Phil. 978; Pascual vs. Lacsamana, 100 Phil. 381; La Tondena, Inc. vs. Alto Surety & Insurance Co., 101 Phil. 879.) 178. Suppose that in a second and new contract, there is another method of payment agreed upon, or there is an additional security, is there a novation? Reason. ANS: There is no novation. It is clear that the two (2) contracts zan stand together, and consequently, there can be no incompatibility between them. (Zapanta vs. De Rotaeche, 21 Phil. 154; Bank of the P.J. vs. Herridge, 47 Phil. 57; Millar vs. CA, supra.) 179. Suppose that in a second and new contract, a surety bond is filed, or a third person assumes payment of the obligation and the creditor even accepts partial payments From such third person, is there a novation? ANS: There is no novation so long as there is no agreement :hat the first debtor shall be released from responsibility. This is so 5ven where a surety bond is filed, for the simple reason that such Dond is not a new and separate contract but is merely an accessory )f the original contract. In such a case, the third person who has assumed payment of the obligation merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first and second lebtors are considered obligated jointly. (Dungo vs. Lopena, 6 SCRA 1007; Magdalena Estate, Inc. vs. Rodriguez, supra.) 180. A bought from B a parcel of land and paid the purchase price except for an unpaid balance of P6,000. A, herefore, executed a promissory note for the balance of ?6,000 with interest at 10% to be paid within 60 days. On the same date, C surety company executed a bond in favor of B for the amount of P6,000 representing the unpaid balance >f the purchase price of the parcel of land, without any stipulation regarding payment of interest. On the due date, A 'ailed to pay. However, C surety company paid P6,000 to B. B hen sued A for the accumulated interest on the principal of *6,000. A claimed novation of the obligation when B merely

798

OBLIGATIONS AND CONTRACTS Obligations Novation

Arts. 1291-1304

guaranteed payment of P6,000. Is A correct? Explain your answer. (1978) ANS: A is not correct. There is no agreement whether express or implied that the principal debtor is released from responsibility. True, C surety company executed a bond in favor of B for the amount of P6,000, but that did not have the effect of releasing A from the obligation. The surety bond is not a new and separate contract. It is merely an accessory of the original contract entered into by and between A and C surety company on one hand and B on the other hand. It provided merely for a more definite and solid arrangement for payment. Therefore, A and B are still bound under their old contract. The former is still liable for accumulated interests on the principal of P6,000. (Dungo vs. Lopena, 6 SCRA 1007; Magdalena Estate vs. Rodriguez, 18 SCRA 967.) (.Note: The above problem may also be answered as follows: A is not correct. The defense of implied novation invoked by him requires clear and convincing proof of complete incompatibility between the two obligations. The test is whether the two obligations can stand together. If they cannot, incompatibility arises, and the second obligation novates the first. If they can stand together, no incompatibility results and novation does not take place. Applying this test to the instant case, it is clear that the original contract between A and B and the surety bond executed by C surety company can stand together. The bond is merely an accessory of the original contract. Therefore, there is no novation.)

181. A obtained a favorable judgment against B from the CFI of Manila for the sum of P2,000. Subsequently, a writ of execution was issued and a jeep belonging to the latter was seized by the sheriff. However, the two (A and B) arrived at an arrangement by virtue of which B executed a chattel mortgage on the jeep stipulating, inter alia, that B shall satisfy the judgment in two equal installments, payable at designated period. B failed to pay the first installment, and as a result, A obtained an alias writ of execution and levied upon certain personal properties of B. The latter filed an urgent; motion for suspension of the execution sale on the ground of payment of the judgment obligation. He maintains that the execution of the deed of chattel mortgage has

799

Arts. 1291-1304

OBLIGATIONS AND CONTRACTS Obligations Novation

extinguished the judgment debt because of implied novation. Is this correct? Reasons. ANS: The contention of B that the mortgage obligation has extinguished the judgment obligation because of implied novation is not correct. The defense of implied novation requires clear and convincing proof of complete incompatibility between the two (2) obligations. The law requires no specific form for an effective novation by im­ plication. The test is whether the two (2) obligations can stand to­ gether. If they cannot, incompatibility arises, and the second obliga­ tion novates the first. If they can stand together, no incompatibility results and novation does not take place. Applying this test, we see no substantial incompatibility between the mortgage obligation and the judgment obligation sufficient to justify a conclusion of implied novation. The stipulation for the payment of the obligation under the terms of the deed of CM serves only to provide an express and specific method for its extinguishment — payment in two (2) equal installments. The chattel mortgage simply gave the judgment debtor a method and more time to enable him to fully satisfy the judgment indebtedness. (Millar vs. Court of Appeals, supra.), 182. ABC Trading Co., a domestic corporation engaged in the sale of automobile spare parts, opened with “X” Bank a letter of credit up to the extent of P450,000.00 for a period of one year. To secure payment thereof, it executed a chattel mortgage over its stocks-in-trade valued at P500,000.00. On May 15, and June 15, 1981, Mr. s. Tacloban Electric and Ice Plant Co., 105 Phil. 168.) 16. What are the different kinds of innominate con­ tacts and how are they regulated? (1977) ANS: There are four (4) kinds of innominate contracts. They are: 1) Do ut des — I give that you give; (2) Do ut facias — I give that you lo; (3) Facio ut des — I do that you give; and (4) Facio ut facias — I lo that you do. These contracts shall be regulated by the stipulation >f the parties, by the general provisions or principles of obligations tnd contracts, by the rules governing the most analogous nominate :ontracts, and by the custom of the place. (Art. 1307, NCCJ 17.

(a) What is meant by the mutuality of contracts?

(b) A leased a certain building to B and C. In the contract of lease there is a stipulation that B and C can coninue occupying the building indefinitely so long as they ihould faithfully fulfill their obligation of paying the rentils. In an action for ejectment, can B and C successfully set ip the defense that under the contract, they can continue occupying the building so long as they faithfully fulfill their obligation of paying the rentals? Reasons. ANS: (a) The mutuality of contracts refers to the position of ssential equality which must be occupied by both of the contracting iarties in relation to the contract. This principle is confirmed by yrt 1308 of the NCC, which declares that the contract must bind 'Oth contracting parties; its validity or compliance cannot be left o the will of one of them. This binding effect of a contract on both iarties is based on the principle that the obligations arising from ontracts have the force of law between the contracting parties. It is epugnant to have one party bound by the contract while leaving the ther free therefrom. (Allied Banking Corporation vs. CA, G.R. No. 24290, January 16, 1998.)

822

OBLIGATIONS AND CONTRACTS Contracts Genera] Provisions

Arts. 1305-1317

(b) B and C cannot successfully set up the defense that under the contract of lease, they can continue occupying the building so long as they will faithfully fulfill their obligation of paying the rentals. It is clear that under this stipulation, the continuance and fulfillment of the contract would then depend solely and exclusively upon their uncontrolled choice between continuing paying the rentals or not, completely depriving the owner of all say on the matter. If this defense is allowed, so long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his purpose by the simple expedient of stopping payment of the rentals. This is, of course, prohibited by Art. 1308 of the NCC. (Encarnacion vs. Baldemar, 77 Phil. 470. To the same effect — see; General Enterprises, Inc. vs. Lianga Bay Logging Co., 11 SCRA 733; Garcia vs. Rita Legarda, Inc., 21 SCRA 555.) 18. X Co. hired. A to become manager of the company. In the contract of employment, there is a stipulation that after the termination of the contract, he shall be entitled to a bonus “as the Board of Directors may see fit to grant.” After five years, when the contract was finally terminated, the Board of Directors of the company granted to A bonus of only P100. Not satisfied with the amount, the latter brought an action against the company, contending that the stipulation found in the contract of employment violates the principle enunciated in Art. 1308 of the NCC that the validity of or compliance with a contract cannot be left to the will of one of the contracting parties. He is now asking the court to fix the amount of the bonus. If you were the judge, how would you decide the case? ANS: If I were the judge, I would decide the case against A. The stipulation in the contract by virtue of which the company shall grant a bonus to A and that the amount thereof shall depend upon the discretion of the Board of Directors of said company does not violate the prohibition contained in Art. 1308 of the NCC. A simple perusal of the article will show that what the law prohibits are: first, the delegation of the power to determine whether the contract shall be valid or not; and second, the delegation of the power to determine

823

Arts. 1305-1317

OBLIGATIONS AND CONTRACTS Contracts General Provisions

whether the contract shall be complied with or not. In the instant case, there is neither a delegation of the power to determine the validity of the contract nor a delegation of the power to determine the performance of the contract to the defendant company. As a matter of fact, the company admits the validity of the promise to grant the plaintiff a bonus. What it did was merely to comply with the promise. Undoubtedly, therefore, a promise of this character is legally binding, although in its actual results it may not infrequently prove to be illusory. (Liebenow vs. Phil. Vegetable Oil Co., 39 Phil. 60.) 19. Johnny borrowed P300,000.00 housing loan from the bank at 18% per annum interest. However, the promissory note contained a proviso that the bank “reserves the right to increase interest within the limits allowed by law.” By virtue of such proviso, over the objections of Johnny, the bank increased the interest rate periodically, until it reached 48% per annum. Johnny, filed an action questioning the right of the bank to increase the interest rate up to 48%. The bank raised the defense that the Central Bank of the Philippines had already suspended the Usury Law. Will the action prosper or not? Why? (2001) ANS: The action will prosper. While it is true that the interest ceilings set by the Usury Law are no longer in force, it has been held that PD No. 1684 and CB Circular No. 905 merely allow contracting parties to stipulate freely on any adjustment in the interest rate on a loan or forbearance of money but do not authorize a unilateral increase of the interest rate by one party without the other's consent. (PNB vs. CA, 238 SCRA 20 [1994].) To say otherwise will violate the principle of mutuality of contracts under Art. 1308, NCC. To be valid, therefore, any change of interest must be mutually agreed upon by the parties. (Dizon vs. Magsaysay, 57 SCRA 250 [1974].) In the present problem, the debtor not having given his consent to the increase in interest, the increase is void. 20. (a) What is meant by the relativity of contracts? What are the different exceptional cases where a contract may produce effect either directly or indirectly on third persons?

824

OBLIGATIONS AND CONTRACTS Contracts General Provisions

Arts. 1305-1317

(b) What is meant by a stipulation pour autrui? What requisites must concur in order that such a stipulation may be enforced? (1977) What is the form of the acceptance by the third person or beneficiary? ANS: (a) Relativity of contracts refers to the principle of the civil law that a contract can only bind the parties who had entered into it or their successors who have assumed their personality or their juridical position, and that, as a consequence, such contract can neither favor nor prejudice a third person (in conformity with the axiom res inter alios acta aliis neque nocet prodest). Thus, Art, 1311, of the NCC declares that contracts take effect only between the parties, their assigns and heirs. There are, however, four (4) exceptional cases where a contract may either favor or prejudice a third person. They are: (1) Where the contract contains a beneficial stipulation in favor of a third person, provided that such third person has communicated his acceptance to the obligor before it is revoked (Art. 1311, par. 2, NCC.); (2) Where a third person comes into the possession of the object of a contract creating a real right (Art. 1312, NCC.); (3) Where the contract is entered into in order to de­ fraud a third person (Art. 1313, NCC); and (4) Where the third person induces a contracting party to violate his contract. (Art. 1314, NCC.) (b) Using Art. 1311, paragraph 2, of the NCC as basis, a stipulation pour autrui may be defined as a stipulation in a contract, clearly and deliberately conferred by the contracting parties as a favor upon a third person, who must communicate his acceptance of the favor or benefit to the obligor before it could be revoked. In Florentino vs. Encarnacion (79 SCRA 192), it was defined as a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person may demand its fulfillment provided that he communicates his acceptance to the obligor before it is revoked. 825

Arts. 1305-1317

OBLIGATIONS AND CONTRACTS Contracts General Provisions

The requisites are: (1) that the stipulation in favor of the third person should be a jmrt, not the whole, of the contract; (2) that the favorable stipulation should not be conditioned or_compensated by jany kind of obligation whatever; ancf(3) neither of the contracting parties' Hears the^egal representation or authorization of the third person. (Florentino vs. Encarnacion.) There is, of course, a fourth requisite — acceptance of the benefit by the third person communicated to the obligor before it could be revoked. The acceptance by the third person or beneficiary does not have to be done in any particular form. It may be done expressly or impliedly. (Florentino vs. Encarnacion, supra; see also Cristobal vs. Gomez, 50 Phil. 810; 4 Tolentino, NCC, p. 410.) 21. A and B entered into a contract of compromise. In the contract, there is a stipulation wherein the parties ceded a house and lot to X. Upon the signing of the contract, X entered into the possession of the property. Ten years later, after the death of both A and B, their heirs revoked the beneficial stipulation. Subsequently, they brought an action against X for the recovery of the property. Will the action prosper? ANS: The action will not prosper. The stipulation in the instant case is a stipulation pour autrui. All of the requisites of a valid and enforceable stipulation pour autrui are present. It is a part, not the whole, of a contract; it is not conditioned or compensated by any kind of obligation whatever; and neither A nor B bears the legal representation or authorization of X. Additionally, there was an implied acceptance by X when he entered into the possessions of the property. That implied acceptance is recognized by the law is now well-settled. (Florentino vs. Encarnacion.) Therefore, the act of the heirs of A and B in revoking the stipulation is an absolute nullity. Since the stipulation was accepted by X, it is crystal clear that there was a perfected agreement, with A and B as stipulators or benefactors and X as beneficiary, although still constituting a part of the main contract. Consequently, the cardinal rules of contracts, such as the obligatory force of contracts and the mutuality of contracts based on the essential equality of the parties are directly applicable to the beneficial stipulation itself. It can no longer be revoked. (Florentino vs. Encarnacion.) 826

Phiil?

A T V ?tU

OBLIGATIONS AND CONTRACTS Contracts General Provisions

Arts. 1305-1317

22. The Fieldmen’s Insurance Co. issued in favor of the Manila Taxicab Co, a common carrier accident insurance policy, wherein it obligated itself to indemnify the Insured in the event of accident against all sums which the Insured will become legally liable to pay for the death or bodily injury to any passenger including the driver, conductor or inspector who is riding in the vehicle insured at the time of the accident. D, the driver of one of the taxicabs of the Insured, was killed in a vehicular accident. Because of the failure of the Company and the Insured to indemnify them, the parents of D, F and M, brought an action against the Insurance Company to collect the plaintiffs have no cause of action because they have no contractual relation with the Company. Will the action prosper? Reasons. ANS: Yes, the action will prosper. The policy in the instant case is typical of contracts pour autrui. Although in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the second paragraph of Art. 1311 of the NCC. This is but a restatement of a well-known principle concerning contracts pour autrui, the enforcement of which may be demanded by a third party for whose benefit it was made, although not a party to the contract, before the stipulation in his favor has been revoked by the obligor. It is clear, therefore, that plaintiffs, who are admittedly the sole heirs of the deceased, have a direct cause of action against the Company. (Coquia vs. Fieldmen’s Insurance Co., 26 SCRA 178.) 23. A, married to B, executed a fictitious deed of sale of a two-storey house and four (4) subdivision lots in favor of his mistress, M, who at that time was pregnant, with the understanding that the latter shall hold the properties in trust for their unborn illegitimate child. After securing a new transfer certificate of title in her name, M mortgaged the properties twice to a bank, and subsequently, she tried to sell them. A then brought an action against her praying for the issuance of a writ of preliminary injunction restraining her from further alienating or disposing of the properties and for judgment ordering her to convey the properties to their illegitimate child, X, who by that time was already five 827

IncursnoL Co

Arts. 1305-1317

OBLIGATIONS AND CONTRACTS Contracts General Provisions

(5) years old. A motion to dismiss was filed on the ground that the illegitimate child, who is the beneficiary of the alleged trust, is not included as a party-plaintiff, and that the action in question is unenforceable under the Statute of Frauds. Subsequently, A amended his complaint so as to include X as party-plaintiff. The lower court, however, dismissed the case. A raised the case by direct appeal to the Supreme Court on the following questions of law: (a)

Is there a valid cause of action in the instant case?

(b) Is the action unenforceable under the Statute of Frauds? ANS: (a) There is a valid cause of action in the instant case. Upon the facts alleged in the complaint, the contract between appellant and appellee was a contract pour autrui, although, cpucned in the form of an absolute deed of sale, and that the appellant’s action was, in effect, one for specific performance. That one of the parties to a contract is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. It appearing that the amended complaint submitted by ap­ pellant to the lower court impleaded the beneficiary under the con­ tract as a party co-plaintiff, it seems clear that the three (3) parties concerned therewith would, as a result, be before the court and the latter’s adjudication would be complete and binding upon them.

(b) On the other hand, the contention that the contract in question is not enforceable by action by reason of the provisions of the Statute of Frauds does not appear to be indubitable, it being clear upon the facts alleged in the amended complaint that the contract between the parties had already been partially performed by the execution of the deed of sale, the action brought below being only for the enforcement of another phase thereof, namely, the execution by appellee of a deed of conveyance in favor of the beneficiary thereunder. (Constantino vs. Espiritu, 39 SCRA 206J

828

OBLIGATIONS AND CONTRACTS Contracts Essential Requisites of Contracts

Arts. 1318-1346

24. How are contracts perfected? ANS: We must distinguish. If the contract is consensual, it is perfected by mere consent (Art, 1315, NCC.); if the contract, however, is real, it is perfected by the delivery of the object of the contract by one contracting party to the other. (Art. 1316, NCC.) ESSENTIAL REQUISITES OF CONTRACTS (Art. 1318) 25.

What are the essential requisites of a contract?

ANS: There is no contract unless the following requisites concur: (1)

Consent of the contracting parties.

(2) Object certain which is the subject matter of the contract. (3) NCC.)

Cause of the obligation which is established. (Art. 1318,

CONSENT (Arts. 1319-1346) 26. What is meant by consent and what are its requi­ sites? ANS: As applied to contracts, consent signifies the concurrence of the wills of the contracting parties with respect to the object and the cause which shall constitute the contract. Or using the language of the Code, it signifies the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art 1319, NCC.) Under the NCC, in order that there is consent, the following elements must concur: first, the consent must be manifested by the concurrence of the offer and the acceptance (Arts. 1319-1326, NCC.); second, the contracting parties must possess the necessary legal capacity fArte. 1327-1329.) and third, the consent must be intelligent, free, spontaneous, and real. (Arts. 1330-1346, NCC.)

829

Arts. 1319-1346

OBLIGATIONS AND CONTRACTS Contracts Consent

The first is expressly stated in the Code; the second and the third are implied. 27.

When are contracts perfected?

ANS: In general, contracts are perfected from the moment that there is a manifestation of the concurrence between the offer and the acceptance with respect to the object and the cause which shall constitute the contract. (Art. 1319, par. 1, NCC.) However, if the acceptance is made by letter or telegram, we must distinguish. According to Art. 1319, par. 2, of the NCC, the contract is perfected from the moment that the offeror has knowledge of such acceptance, while according to Art. 54 of the Code of Commerce, the contract is perfected from the moment an answer is made accepting the offer. Because of the repealing clause found in Art. 2270 of the NCC, it is submitted that Art. 54 of the Code of Commerce can now be applied only to purely commercial contracts, such as joint accounts, maritime contracts, etc. We can, therefore, say that the rule found in the second paragraph of Art. 1319 of the NCC is the general rule, while that found in Art. 54 of the Code of Commerce is the exception. 28. In an offer to sell, parties failed to agree on the size of the land to be sold. Is there a meeting of the minds of the parties that would perfect a contract? ANS: There is no consent that would perfect a contract as there is no agreement on the exact area to be sold. Contracts that are consensual in nature are perfected upon mere meeting of the minds. A contract is produced once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer. It must be plain, unequivocal. Otherwise, it unconditional, and without variance of any sort from the proposal, constitutes a counter-offer and is a rejection of the original offer. Hence, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer. (ABS-CBN vs. CA, 301 SCRA 572; Palattao vs. CA, G.R. No. 131726, May 7, 2002.)

830

OBLIGATIONS AND CONTRACTS . Contracts Consent

Arts. 1319-1346

29. Gigi offered to construct the house of Chito for a very reasonable price of PI Million, giving the latter 10 days within which to accept or reject the offer. On the fifth day, before Chito could make up his mind, Gigi withdrew the offer. What is the effect of the withdrawal of Gigi’s offer? ANS: The withdrawal of Gigi’s offer will cause the offer to cease in law. Hence, even if subsequently accepted, there could be no concurrence of the offer and the acceptance. In the absence of concurrence of offer and acceptance, there can be no consent. (Laudico vs. Rodriguez, G.R. No.16530, March 31, 1922). Without the consent, there is no perfected contract for the construction of the house of Chito. (Salonga vs. Farrales, G.R. No. L-47088, July 10, 1981.) Article 1318 of the Civil Code provides that there can be no contract unless the following requisites concur: (1) consent of the parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation. Gigi will not be liable to pay Chito any damages for withdrawing the offer before the lapse of the period granted. In this case, no consideration was given by Chito for the option given. Thus, there is no perfected contract of option for lack of cause of obligation. Gigi cannot be held to have breached the contract. Thus, he cannot be held liable for damages . (Suggested Answers to the 2005 Bar Examination Questions, Philippine Association o f Law Schools.) 30. A offered to sell his automobile to B for P50,000. After inspecting the automobile, B offered to buy it for P50,000. This offer was accepted by A. The next day, A offered to deliver the automobile, but B, being short of funds, secured a postponement of the delivery, promising to pay A the price “upon arrival in this port of the steamer Helena.” The steamer, however, never arrived because it was wrecked somewhere off the coast of Samar. (a)

Is there a perfected contract in this case? Why?

(b) Is the promise to pay made by B conditional or with a term? Why? (c) Can A compel B to pay the purchase price and to accept the automobile? Why? 831

Arts. 1319-1346

OBLIGATIONS AND CONTRACTS Contracts Consent

ANS: (a) Yes, there is a perfected contract because there is already a concurrence between the offer and the acceptance with respect to the object and the cause which shall constitute the contract. Such concurrence is manifested by the acceptance made by A of the offer made by B. (b) The promise to pay made by B is not conditional, but with a term. The promise is to pay the P50,000 upon arrival in this port of the steamer, Helena, not i f the steamer Helena shall arrive in this port. Hence, the promise is with regard to the date of arrival and not with regard to the fact of arrival. ..(c) Yes, A can compel B to pay the purchase price and to accept the automobile. He will, however, have to wait for the date when the steamer, Helena, would have arrived were it not for the shipwreck. After all, there is already a perfected contract. 31. What is meant by the manifestation, expedition, reception, and cognition theories as applied to perfection of contracts? Which of these theories is followed in the Philippines? ANS: There are actually four (4) different theories which have been advanced in order to pin-point the exact moment when a contract is perfected if the acceptance by the offeree is made by means of a letter or telegram. They are: (1) Manifestation theory (manifestation) — The contract is perfected from the moment the acceptance is declared or made. This is the theory which is followed by the Code of Commerce. (Art. 54, Code of Commerce.) (2) Expedition theory (expedition) — The contract is perfected from the moment the offeree transmits the notification of acceptance to the offeror, as when the letter is placed in the mailbox. This is the theory which is followed by the majority of American courts. (3) Reception theory (reception) — The contract is perfected from the moment that the notification of acceptance is in the hand of the offeror in such a manner that he can, under ordinary conditions, procure the knowledge of its contents, even if he is not able actually to acquire such knowledge by reason of absence, sickness or some

832

OBLIGATIONS AND CONTRACTS Contracts Consent

Arts. 1319-1346

other cause. This is the theory which is followed by the German Civil Code. (4) Cognition theory (cognition) — The contract is perfected from the moment the acceptance comes to the knowledge of the offeror. This is the theory which is followed by the Spanish Civil Code. In the Philippines, we have adopted the cognition theory. According to the second paragraph of Art. 1319 of the NCC, acceptance by letter or telegram does not bind the offeror except from the time it comes to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. 32. X applied for a life annuity of P6,000 at the local office of the Sun Life Assurance Co. in Manila. He paid the amount of P6,000 and was issued a provisional receipt. The application was forwarded to the head office of the Company in Canada. Notice of acceptance, however, was received at the residence of X one day after his death. Can his legal heirs still recover the P6,000? Reasons. ANS: Yes, the legal heirs of X can still recover the P6,000 already paid to the Company. The reason is that there is still no perfected contract of life annuity. Under the provision of the second paragraph of Art. 1319 of the NCC, it is clear that the contract is perfected only once the offeror has knowledge of the acceptance made by the offeree. In the instant case, the offeror was already dead when the notice of acceptance was received. (Enriquez vs. Sun Life Assurance Co., 41 Phil. 269.) Besides, under the provision of Art. 1323 of the Code, there can be no possible contract that can be generated here. An offer, says the law, becomes ineffective upon the death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed. The word “conveyed” in this provision denotes that it has already been communicated. 33. On March 5, 1956, A wrote a letter to B offering to him the lease of a building. On March 6, 1956, at 1:00 P.M., B sent a letter of acceptance which was received by A at 4:00 P.M. that day. But at 2:00 P.M., A had already sent B a letter

833

ArtB. 1319-1346

OBLIGATIONS AND CONTRACTS Contracts Consent

of withdrawal of the offer which was received by B at 5:00 P.M. Was the contract perfected? Reasons. ANS: The contract has not been perfected. The decisive moment to consider in this case is the time when the offeror, A, had knowledge of the acceptance made by the offeree, B. This is so because, according to the law, the contract is perfected only from the moment that the offeror has knowledge of the acceptance by the offeree. (Art. 1319, par. 2, NCC.) According to the facts stated in the problem, A received the letter of acceptance at 4:00 P.M. But two (2) hours before that, at 2:00 P.M., he had already sent a letter to B withdrawing the offer. Consequently, at 4:00 P.M., although there was acceptance, there was no longer any offer. Therefore, the contract was not perfected because it is evident that there was no concurrence between the offer and the acceptance. (Laudico vs. Arias, 43 Phil. 270.) 36. (a) A offered to lease a certain building to B. Within the period of the option given to him, B finally accepted the offer. A few hours after mailing the letter of acceptance, he changes his mind. May he revoke his acceptance by means of a telegram. (b) When the offeror has not fixed a period for the offeree to accept the offer is made, when should acceptance be made? ANS: (a) Manresa believes that he cannot. Tolentino, however, believes that he can. According to Manresa, the NCC grants the power to revoke only to the offeror. There is no similar grant to the offeree. The reason for this is the fact that the offeree is the first to know of the concurrence of wills of the parties. Consequently, as far as he is concerned, the obligation must commence earlier. According to Tolentino, since there is still no perfected contract, and, as a consequence, the parties are not yet bound, there is no juridical reason why the offeree cannot revoke his acceptance. It is submitted that the view of Tolentino is more logical. If we accept the view of Manresa, that would be tantamount to saying that a contract may be perfected at two different moments, which is juridically impossible.

834

OBLIGATIONS AND CONTRACTS Contracts Consent

Arts. 1319-1346

(b) If no time was given to the offeree to accept, he m accept it immediately. (Marlboro vs. Court o f Appeals, G.R. No. 125761, April 30, 2003.) 35. What is the effect of the death, civil interdiction, insanity, or insolvency of either offeror or offeree before acceptance is conveyed? ANS: The offer becomes ineffective. (Art. 1323, NCC.) 36. Suppose that an option has been granted by the offerer to the offeree within which to decide whether or not he will accept the offer, will it still be possible for such offeror to withdraw the offer during the pendency of the option? ANS: We must distinguish between the effect of an option which is without a consideration and one which is founded upon a consideration upon the right of the offeror to withdraw his offer or proposal. If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at any time before acceptance; if it is founded upon a consideration, the offeror can not withdraw his offer. (Art. 1324, NCC.) 37. S and R executed an instrument entitled “Ogtion to Purchase,” whereby the latteragreed to sell to the former a parcel of land for PI,500 within a period of two (2) years from the execution thereof. S made several tenders of payment, but R always refused the tenders. Finally, S brought an action against R for specific performance and damages. Defendant set up the defense that her contract with plaintiff is a mere unilateral offer to sell, and consequently, since it is unsupported by a consideration which is separate from the purchase price, said promise is not binding upon her pursuant to Art. 1479 of the NCC. Will the action prosper? Reasons. ANS: The factual setting of the above problem is identical to that of Sanchez vs. Rigos (45 SCRA 368). In that case, the Supreme Court, speaking through Chief Justice Concepcion, ruled that the action will prosper thus abandoning the view adhered to in Southwestern Sugar and Mollasses, Co. vs. Atlantic and Pacific Co. (97 Phil. 249).

835

Arts. 1319-1346

OBLIGATIONS AND CONTRACTS Contracts Consent

In unilateral offers to buy or to sell, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of his withdrawal, his promise partakes of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. As a matter of fact, in a concurring opinion, Justice Antonio even states: “If the option is given without a consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale. The concurrence of both acts, the offer and the acceptance, could in such event generate a contract. While the law permits the offeror to withdraw the offer at any time before acceptance, he cannot exercise this right in an arbitrary and capricious manner. This is based upon the principle that an offer implies an obligation on the part of the offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not, and therefore, cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions.” 38. “A” agreed to sell to “B” a parcel of land for P5,000.00. “B” was given up to May 6, 1975 within which is to raise the necessary funds. I* was further agreed that if “B” could not produce the money on or before said date, no liability would attach to him. Before May 6,1975, “A” backed out of the agreement. Is “A” obliged to sell the property to “B”? Explain. (1975) ANS: Assuming that the offer of “A” to sell the land to “B” is merely a unilateral offer to sell, and that there is still no bilateral, agreement in the sense that “B” had already agreed to buy the land, “A” is not obliged to sell the property to “B.” In such case, it is clear that the general rule stated in Art. 1324 and the particular rule stated in Art. 1479, par. 2, of the NCC are applicable. As a matter of fact, even if “B” has formally accepted the option given him by “A,” such acceptance would be of no moment since the option is not supported by any consideration distinct from the purchase price; “A” can always change his mind at any time. The option does not bind him for lack of a cause or consideration. It would have been different if “B” had accepted the offer to sell within the period of the option

836

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Arts. 1319-1346

before said offer was withdrawn by “A.” In such a case, a contract of sale would have been generated right then and there. As it turned out, “A” withdrew his offer in time. (See Sanches vs. Rigor, 45 SCRA 368.) (Note: In Sanchez vs. Rigor, supra, the Supreme Court finally resolved a question which arose out of the use of the word “accepted” in modifying the phrase “unilateral promise to buy or to sell” in Art. 1479, p&r. 2, of the NCC. “Accepted” refers to the option, not to the offer to buy or to sell; in other words, it refers to the acceptance by either prospective vendee or prospective vendor of the option of, let us say, ninety days within which he shall decide whether or not he shall buy or sell the thing. Thus, if a offers to sell a lot to B for P200,000, and gives the latter an option of 90 days within which to decide whether or not he shall buy the property, and the latter accepts the option, 2 possible situations may arise: (1) In accepting the option, B pays to A an “option money” of, let us say P5,000 which is distinct from the purchase price. In such case, there is already a perfected preparatory contract of option. A is bound by his offer. B shall now decide within the period of the option whether or not he shall buy the property. If he decides to buy, he shall then pay to A the price of P200,000 if he decides otherwise, no contract of sale will ever be perfected. (2) In accepting the option, B does not pay any “option money” to A. In such case, there is no perfected preparatory contract of option for lack of a consideration. The result is a mere offer to sell, acceptance of which will be sufficient to generate a perfected contract of sale. But suppose that, meanwhile, A has changed his mind? The lot is no longer for sale. B, on the other hand, has decided to buy the property. What will now happen? Under this situation, the one who is first to notify the other of his decision emerges the victor. If A is the first to notify B of his change of mind, no contract of sale will ever be perfected; if B is the first to notify A of his acceptance of the offer, a contract of sale has already been perfected.)

39. X, the owner of a house and lot in Quezon City, gave an option to A to purchase said property for P100,000.00 within 90 days from May 1, 1979. A gave X one peso (P1.00) as option money. Before the expiration of the 90-day period, A went to X to exercise his option and to pay the purchase price but X refused because somebody wanted to buy his property for P I50,000.00 and because there was no sufficient

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of withdrawal of the offer which was received by B at 5:00 P.M. Was the contract perfected? Reasons, ANS: The contract has not been perfected. The decisive moment to consider in this case is the time when the offeror, A, had knowledge of the acceptance made by the offeree, B, This is so because, according to the law, the contract is perfected only from the moment that the offeror has knowledge of the acceptance by the offeree. (Art 1319, par. 2, NCC.) According to the facts stated in the problem, A received the letter of acceptance at 4:00 P.M. But two (2) hours before that, at 2:00 P.M., he had already sent a letter to B withdrawing the offer. Consequently, at 4:00 P.M., although there was acceptance, there was no longer any offer. Therefore, the contract was not perfected because it is evident that there was no concurrence between the offer and the acceptance. (Laudico vs. Arias, 43 Phil. 270.) 36. (a) A offered to lease a certain building to B. Within the period of the option given to him, B finally accepted the offer. A few hours after mailing the letter of acceptance, he changes his mind. May he revoke his acceptance by means of a telegram. (b) When the offeror has not fixed a period for the offeree to accept the offer is made, when should acceptance be made? ANS: (a) Manresa believes that he cannot. Tolentino, however, believes that he can. According to Manresa, the NCC grants the power to revoke only to the offeror. There is no similar grant to the offeree. The reason for this is the fact that the offeree is the first to know of the concurrence of wills of the parties. Consequently, as far as he is concerned, the obligation must commence earlier. According to Tolentino, since there is still no perfected contract, and, as a consequence, the parties are not yet bound, there is no juridical reason why the offeree cannot revoke his acceptance. It is submitted that the view of Tolentino is more logical. If we accept the view of Manresa, that would be tantamount to saying that a contract may be perfected at two different moments, which is juridically impossible.

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(b) If no time was given to the offeree to accept, he mu accept it immediately. (Marlboro vs. Court of Appeals, G.R. No. 125761, April 30, 2003.) 35. What is the effect of the death, civil interdiction, insanity, or insolvency of either offeror or offeree before acceptance is conveyed? ANS: The offer becomes ineffective. (Art. 1323, NCC.) 36. Suppose that an option has been granted by the offerer to the offeree within which to decide whether or not he will accept the offer, will it still be possible for such offeror to withdraw the offer during the pendency of the option? ANS: We must distinguish between the effect of an option which is without a consideration and one which is founded upon a consideration upon the right of the offeror to withdraw his offer or proposal. If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at any time before acceptance; if it is founded upon a consideration, the offeror can not withdraw his offer. (Art. 1324, NCC.) 37. S and R executed an instrument entitled “Option to Purchase,” whereby the latterAgreed to sell to the former a parcel of land for P 1,500 within a period of two (2) years from the execution thereof. S made several tenders of payment, but R always refused the tenders. Finally, S brought an action against R for specific performance and damages. Defendant set up the defense that her contract with plaintiff is a mere unilateral offer to sell, and consequently, since it is unsupported by a consideration which is separate from the purchase price, said promise is not binding upon her pursuant to Art. 1479 of the NCC. Will the action prosper? Reasons. ANS: The factual setting of the above problem is identical to that of Sanchez vs. Rigos (45 SCRA 368). In that case, the Supreme Court, speaking through Chief Justice Concepcion, ruled that the action will prosper thus abandoning the view adhered to in Southwestern Sugar and Mollasses, Co. vs. Atlantic and Pacific Co. (97 Phil. 249).

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In unilateral offers to buy or to sell, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of his withdrawal, his promise partakes of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. As a matter of fact, in a concurring opinion, Justice Antonio even states: “If the option is given without a consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale. The concurrence of both acts, the offer and the acceptance, could in such event generate a contract. While the law permits the offeror to withdraw the offer at any time before acceptance, he cannot exercise this right in an arbitrary and capricious manner. This is based upon the principle that an offer implies an obligation on the part of the offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not, and therefore, cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions.” 38. “A” agreed to sell to “B” a parcel of land for P5,000.00. “B” was given up to May 6, 1975 within which is to raise the necessary funds. It was further agreed that if “B” could not produce the money on or before said date, no liability would attach to him. Before May 6,1975, “A” backed out of the agreement. Is “A” obliged to sell the property to “B”? Explain. (1975) ANS: Assuming that the offer of “A” to sell the land to “B” is merely a unilateral offer to sell, and that there is still no bilateral agreement in the sense that “B” had already agreed to buy the land, “A” is riot obliged to sell the property to “B.” In such case, it is clear that the general rule stated in Art. 1324 and the particular rule stated in Art. 1479, par. 2, of the NCC are applicable. As a matter of fact, even if “B” has formally accepted the option given him by “A,” such acceptance would be of no moment since the option is not supported by any consideration distinct from the purchase price. “A” can always change his mind at any time. The option does not bind him for lack of a cause or consideration. It would have been different if “B” had accepted the offer to sell within the period of the option

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before said offer was withdrawn by “A.” In such a case, a contract of sale would have been generated right then and there. As it turned out, “A” withdrew his offer in time. (See Sanchez vs. Rigor, 45 SCRA 368.) (Note: In Sanchez us. Rigor, supra, the Supreme Court finally resolved a question which arose out of the use of the word “accepted” in modifying the phrase “unilateral promise to buy or to sell” in Art. 1479, p&r. 2, of the NCC. “Accepted” refers to the option; not to the offer to buy or to sell; in other words, it refers to the acceptance by either prospective vendee or prospective vendor of the option of, let us say, ninety days within which he shall decide whether or not he shall buy or sell the thing. Thus, if a offers to sell a lot to B for P200,000, and gives the latter an option of 90 days within which to decide whether or not he shall buy the property, and the latter accepts the option, 2 possible situations may arise: (1) In accepting the option, B pays to A an “option money” of, let us say P5,Q00 which is distinct from the purchase price. In such case, there is already a perfected preparatory contract of option. A is bound by his offer. B shall now decide within the period of the option whether or not he shall buy the property. If he decides to buy, he shall then pay to A the price of P200,000 if he decides otherwise, no contract of sale will ever be perfected. (2) In accepting the option, B does not pay any “option money” to A. In such case, there is no perfected preparatory contract of option for lack of a consideration. The result is a mere offer to sell, acceptance of which will be sufficient to generate a perfected contract of sale. But suppose that, meanwhile, A has changed his mind? The lot is no longer for sale. B, on the other hand, has decided to buy the property. What will now happen? Under this situation, the one who is first to notify the other of his decision emerges the victor. If A is the first to notify B of his change of mind, no contract of sale will ever be perfected; if B is the first to notify A of his acceptance of the offer, a contract of sale has already been perfected.)

39. X, the owner of a house and lot in Quezon City, gave an option to A to purchase said property for P100,000.00 within 90 days from May 1, 1979. A gave X one peso (P1.00) as option money. Before the expiration of the 90-day period, A went to X to exercise his option and to pay the purchase price but X refused because somebody wanted to buy his property for P 150,000.00 and because there was no sufficient

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consideration for the option. A sued X to compel him to accept payment and execute a deed of sale in his favor. Decide the case. (1980) ANS: X should be compelled to accept the purchase price of P I00,000.00 and to execute a deed of sale of the subject property in favor of A. The reason is that there is already a perfected contract of sale. Undoubtedly, in the instant case, there is a unilateral offer of X to sell the subject property to A. For that purpose, the latter was given an option of 90 days from May 1,1979 within which to exercise the option. The consideration for the option is PI .00. Since there is a consideration for the option, X is now bound by his promise to sell the property to A so long as the latter will exercise the option within the agreed period of 90 days. A exercised the option. Therefore, there is already a perfected contract of sale. As a matter of fact, even if the option is without any consideration, the end result would still be the same. Since there was an acceptance by the offeree of the offer before the offeror could revoke or withdraw his offer, there is already a perfected contract of sale. (Sanchez vs. Rigos, G.R. No. L25494, June 14,1972.) The above conclusion is clearly supported by Art. 1324 the NCC, which declares that “when the offeror (X) has allowed the offeree (A) a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.” It is also supported by the second paragraph of Art. 1479 of the NCC. True, X shall suffer lesion or damage if he is compelled to execute the contract of sale in favor of A. If what he says about another buyer is the truth he will be losing something like P50,000.00. True also, the consideration for the option is grossly inadequate. However, the law is clear and categorical. According to Art. 1355 of the NCC, “except in cases specified by law, lesion or inadequacy o f cause shall not invalidate a contract, unless there has been fraud, mistake, or undue influence.” Under the facts stated in the instant case, there 4s no basis for invalidating the preparatory contract of option on the ground of fraud, mistake or undue influence. 40. A gasoline manufacturing company (TPMC) ob­ tained a loan from PNB and executed a real estate mortgage over its parcel of land in Paranaque City to secure its loan.

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When the loan matured, PNB sent collection letters to TPMC. In reply, TPMC proposed to pay its obligations by way of a dacion en pago conveying its TCT No. 122533. Instead of ac­ cepting the offer, PNB filed a petition for extrajudicial fore­ closure of the HEM. TPMC filed a complaint for annulment of extrajudicial foreclosure sale alleging that its debt has al­ ready been extinguished by its offer of dacion en pago. PNB contended that the proposal of TPMC to pay by way of da­ cion en pago did not extinguish its obligation as it was not accepted by PNB. Hence, the extrajudicial foreclosure sale was proper.Was PNB correct? ANS: Yes, TPMC has no clear right to an injunctive relief be­ cause its proposal to pay by way of dacion en pago did not extinguish its obligation. Undeniably, TPMC’s proposal to pay by way of dacion en pago was not accepted by PNB. Dacion en pago is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. The undertaking is really one of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain and cause or consideration must be present. It is only when the thing offered as an equivalent is accepted by the creditor that novation takes place, thereby, totally extinguishing the debt. Thus, the unaccepted proposal neither novates the parties’ mortgage contract nor suspends its execution as there was no meeting of the minds between the parties on whether the loan will be extinguished by way of dacion en pago (Technogas Philippines Mfg. Corp. vs. Philippine National Bank, G. R. No. 161004, April 14, 2008). 41. “K” and Co. published in the newspaper an “Invita­ tion To Bid” inviting proposals to supply labor and materials for a construction project described in the invitation. “L,” “M,” and “N” submitted bids. When the bids were opened, it appeared that “L” submitted the lowest bid. However, “K” and Co. awarded the contract to “N,” the highest bidder, on

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the ground that he was the most experienced and respon­ sible bidder. “L” brought an action against “K” and Co. to compel the award of the contract to him and to recover dam­ ages. Is “L’s” position meritorious? (1980) ANS; “L’s” position is not meritorious. According to the NCC, advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder unless the contrary appears. It is clear that the general rule applies in the instant case. In its ad­ vertisement “K” and Co. did not state that it will award the contract to the lowest bidder. Therefore, in awarding the contract to “N,” the defendant company acted in accordance with its rights. CNote: The above answer is based on Art. 1326 of the NCC.)

42. Who are incapacitated to give their consent to a contract? ANS: The following are incapacitated to give their consent to a contract: (1) unemancipated minors; (2) insane or demented persons; (3) deaf-mutes who do not know how to write; (4) married women of age in cases specified by law; (5) persons suffering from civil interdiction; and (6) incompetents under guardianship. (Art. 1327, NCC; Art. 34, R.P.C.; Rules 93-94, Rules o f Court.) 43. Is a person of advanced years or age, or by reason of physical infirmities, incapacitated to enter into a contract? ANS: A person is not incapacitated to enter into a contract merely because of advanced years or by reason of physical infirmi­ ties, unless such age and infirmities impair his mental faculties to the extent that he is unable to properly, intelligently and fairly un­ derstand the provisions of said contract (Yason Arciaga, G.R. No. 145017, January 28, 2005). 44. What are the exceptions to the rule that a contract entered into by an emancipated minor without the consent or his parents or guardian is voidable?

840

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I

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Arts. 1319-1346

- VOWA

ANS: The exceptions are: (1) When the contract is entered into by a minor who misrepresents his age, applying the doctrine of estoppel (Mercado and Mercado vs. Espiritu, 37 Phil. 125; Sia Suan vs. Alcantara, 47 Off. Gaz. 456; Hermosa vs. Zobel, 104 Phil. 768.); (2) Where the contract involves the sale and delivery of necessaries to the minor {A rt 1489, par. 2, NCC.);

^ j I

(3) Where it involves a natural obligation and such obligation is voluntarily fulfilled by the minor, provided that such minor is between 18 and 21 years of age (Arts. 1426,1427, NCC.);

:

(4) When it is a marriage settlement or a donation by reason of marriage, provided that the minor is between 20 and 21, if male, or between 18 and 21, if female (Arts. 120,128, NCC.); and (5) When it is a life, health or accident insurance taken on the life of the minor, provided that the minor is 18 years old or more and the beneficiary is the minor’s estate, or the minor’s father, mother, husband, wife, child, brother, or sister. (Act No. 2424, as amended.) 45. On October 20,1944, Rosario Braganza and her two (2) minor sons, Rodolfo and Guillermo, who were then 18 and 16 years old respectively, borrowed from Villa Abrille P70,000 in Japanese military notes, promising to pay the latter solidarily P10,000 “in legal currency of the Philippines, two (2) years after the cessation of present hostilities or as soon as International Exchange has been established in the Philippines,” plus 2% interest per annum. For failure to pay Villa Abrille sued them in March 1949. Defendants, however, interposed the minority of Rodolfo and Guillermo de Braganza at the time they signed the note as a defense. Consequently, the principal questions to be decided are: first, whether or not the minority of her consigners has any effect upon the liability of Mrs. Braganza; and second, whether or not such co-signers can be held liable. ANS: Mrs. Braganza is liable because the minority of her co­ signers does not release her from liability, since it is a personal defense of the minors. However, she can avail herself of the defense but such defense will benefit her only as regards the part of the debt for which the minor are responsible. (Art. 1222, NCC.) Therefore,

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she shall pay 1/3 of P10,000, or P3,333.33, plus 2% interest from October, 1944. It is true that Mercado vs. Espiritu (37 Phil. 215), it was held that “when minors pretended to be of legal age, when in fact they were not, they will not later on be permitted to excuse themselves from the fulfillment of the obligation contracted by them, or to have it annulled.” However, the Mercado case is different because the document signed therein by the minor specifically stated that they were of age; here, the promissory note contained no such statement. In other words, in the Mercado case, the minors were guilty of active misrepresentation; whereas, in this case, the minors are guilty of passive or constructive misrepresentation. From the minor’s failure to disclose their minority, it does not follow as a legal proposition that they will not be permitted thereafter to assert it. According to Corpus Juris Secundum (3, p. 206), “mere silence when making a contract as to his age does not constitute a fraud which can be made the basis of an action for deceit. In order to hold the infant liable, the fraud must be actual and not constructive.” Therefore, the minors in the case at bar cannot be legally bound by their signature in the promissory note. They cannot, however, be absolved entirely from monetary responsibility. Under the NCC, even if their written contract is voidable because of non-age, they shall make restitution to the extent that they may have profited by the money they received. (Art. 1399, NCC.) There is testimony that the funds were used for their support during the Japanese occupation. Such being the case, it is but fair to hold that they had profited to the extent of the value of such money, which value has been established in the Ballantyne Schedule. In October, 1944, P40 Japanese military notes were equivalent to PI.00 of current Philippine money. Hence, they shall pay jointly Pl,666.67, plus 6% interest beginning March 7, 1949, when the complaint was filed. (Braganza vs. Villa Abrille, 105 Phil. 456.) 46.

Who are prohibited from entering into a contract?

ANS: The following persons are prohibited from entering into certain contracts: (1) Insolvents before they are discharged by the Insolvency Court. Under the Insolvency Law (Act No. 1956.), they cannot encumber, alienate or otherwise dispose of their properties.

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(2) Non-Christians of Mindanao, Sulu, Mountain Province, and Nueva Vizcaya. Under the Revised Administrative Code (Secs. 145-146.), they cannot sell real property without the written approval of the provincial governor or his representative. This rule is still intact under R.A. No. 3872, although the sale is now subject to the approval of the Chairman of the Commission on National Integration. (3) Husband and wife. Under the NCC, as a general rule, they are prohibited from donating or selling property to each other during the marriage. (Arts. 133, 1490, NCC.) (4) Persons who are prohibited from giving each other any donation or advantage. Under the NCC, they are prohibited from entering into a contract of universal partnership. (Art. 1782, NCC.) (5) Persons holding a fiduciary relation with respect to certain properties. Thus, under Art. 1491 of the NCC, the following cannot acquire by purchase, even at a public or judicial auction, in person or through the mediation of another: (a) The guardian, the property of the person or persons who may be under his guardianship; (b) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given; (c) Executors and administrators, the property of the estate under administration; (d) Public officers and employees, the property of the State or of any subdivision thereof, or of any government owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatso­ ever, take part in the sale; (e) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise their re­

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spective functions; this prohibition includes the act of acquir­ ing by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litiga­ tion in which they may take part by virtue of their profession; (f)

Any others specially disqualified by law.

47. Distinguish between incapacity to enter into a contract and prohibition to enter into a contract. ANS: Incapacity to enter into a contract and prohibition to inter into a contract may be distinguished from each other in the following ways: (1) Incapacity restrains the exercise of the right to contract, whereas prohibition to contract restrains the very right itself; in >ther words, in the first, the incapacitated person may still enter into the contract, but with the consent of his parents or guardian, vhereas in the second, the disqualified person cannot; (2) Incapacity is based upon subjective circumstances of certain persons which compel the law to suspend for a definite or ndefmite period their right to contract, whereas prohibition to contract, which has been improperly called special incapacity by certain authors, is based upon public policy and morality; and (3) A contract entered into by an incapacitated person is nerely voidable in accordance with Art. 1390 of the NCC, whereas hat entered into by one against whom a prohibition is directed s void in accordance with Arts. 5 and 1409, No. 7, of the NCC. (3 Castan, 7th Ed., p. 255.) 48.

What are the vices of consent?

ANS: According to Castan, the vices of consent may be livided into two (2) distinct groups — vices of the will (vicious de a formation de la voluntad) and vices of declaration (vicious de la leclaracion). The first comprehends mistake, violence, intimidation, indue influence, and fraud; the second comprehends all forms of imulated contracts. (3 Castan, 7th Ed., p. 330; Art. 1330, NCC.)

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49. Define mistake of fact and mistake of law. Which of these mistakes can vitiate consent rendering the contract voidable? ANS: There is a mistake of fact when one or both of the contracting parties believe that a fact exists when in reality it does not, or that such fact does not exists when in reality it does. On the other hand, there is a mistake of law when one or both of the contracting parties arrive at an erroneous conclusion regarding the interpretation of a question of law or the legal effects of a certain act or transaction. As a general rule, it is only a mistake of fact which will vitiate consent thus rendering the contract voidable; a mistake of law, on the other hand, does not render the contract voidable because of the well-known principle that ignorance of the law does not excuse anyone from compliance therewith. (Ignorantia legis neminem excusat). (Luna vs. Linatoc, 74 Phil. 15; 3 Castan, 7th Ed., pp. 330-331.) 50. What mistakes of fact will render a contract voidable? ANS: The mistakes of fact which will render a contract voidable are the following: (1) Mistake as to the object of the contract (error in re) — This may refer to: (a) mistake as to the identity of the thing (error in corpore), or (b) mistake as to the substance of the thing (error in substancia), or (c) mistake as to the condition of the thing, provided, such condition has principally moved one or both of the parties to enter into the contract, or (d) mistake as to the quantity of the thing (error in quantitate), provided that the extent or dimension of the thing was one of the principal reasons of one or both of the parties for entering into the contract. (2) Mistake as to person (error in persona) — This refers to mistake with regard to the identity or with regard to the qualification of one of the parties. (Art. 1331, NCC; 3 Castan, 7th Ed., pp. 331332.) 51. Is there any exception to the rule that a mistake of law cannot vitiate consent rendering the contract voidable? Explain. 845

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ANS: Mistake of law as a rule will not vitiate consent. There s, however, an exception to this rule. According to Art. 1334 (a new >rovision), mutual error as to the legal effect of an agreement when he real purpose of the parties is frustrated, may vitiate consent, "hree requisites are, therefore, necessary in order that such misake will vitiate consent. In the first place, the mistake must be with espect to the legal effect of an agreement; in the second place, the nistake must be mutual; and in the third place, the real purpose of he parties must be frustrated. Explaining the reason for the insertion of Art. 1334 in the NCC, he Code Commissioners stated in their report: “Mistake of law does not generally vitiate consent. But when there is a mistake on a doubtful question of law, or on the construction or application of law, this is analogous to mistake of fact, and the maxim of ‘Ignorantia legis neminem excusaf should have no proper application. When even the highest courts are sometimes divided upon difficult legal questions and when one-half of the lawyers in all controversies on a legal question are wrong why should a layman be held accountable for his honest mistake on a doubtful legal issue?” (Report o f the Code Commission, p. 136.)

52. What is meant by violence and intimidation? ANS: There is violence when in order to wrest consent, serious r irresistible force is employed. There is intimidation when one of the contracting parties is impelled by a reasonable and well-grounded fear of ah imminent nd grave evil upon his person or property, or upon the person r property of his spouse, descendants or ascendants, to give his msent. (Art, 1335, pars. 1 and 2, NCC.) 53. What are the requisites of violence and intimidation rhich will render a contract voidable? ANS: In order that consent is vitiated through violence, it is ssential that the following requisites must concur: first, the force nployed to wrest consent must be serious or irresistible; and rcond, it must be the determining cause for the party upon whom is employed in entering into the contract. (3 Castan, 7th Ed., p. 36.)

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Intimidation, on the other hand, requires the concurrence of the following requisites: first, one of the contracting parties is compelled to give his consent by a reasonable and well-grounded fear of an evil; second, the evil must be imminent and grave; third, the evil must be unjust; and fourth, the evil must be the determining cause for the party upon whom it is employed in entering into the contract. (Ibid.) 54. Distinguish between violence and intimidation. ANS: Because of the similarity between violence and intimidation, especially with regard to their effects both upon the will of the person upon from they are exercised and upon the contract which is produced thereby, the two are sometimes known as duress. One, however, must be distinguished from the other. While violence is external, intimidation is internal; while the first prevents the expression of the will substituting it with a material act dictated by another, the second influences the operation of the will, inhibiting it in such a way that the expression thereof is apparently that of a person who has freely given his consent. (8 Manresa, 5th Ed., Bk. 2, p . 408.) In the terse language of Castan, violence is physical compulsion, while intimidation is moral compulsion. (3 Castan, 7th Ed., p. 336.) 55.

What is meant by undue influence?

ANS: There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress. (Art. 1337, NCC.) 56. What is meant by fraud? ANS: There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (Art. 1338, NCC.) 847

Arts. 1319-1346

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57. What are the requirements of fraud to vitiate con­ sent for purposes of annulling a contract? ANS: The requirements are: a)

It was employed by a contracting party upon the other;

b)

It was serious; and

c) It resulted in damages and injury to the party seeking annulment. (Constantino vs. CA, 264 SCRA 59.) 58. What are the different classes of fraud? ANS: In general, fraud may be classified as civil or criminal, depending upon whether it is governed by the NCC or by the Revised Penal Code. Civil fraud may be classified as either fraud in the perfection of a contract (Art. 1338, et seq., NCC.) or fraud in the performance of an obligation. (Art. 1170, NCC.) The first is the fraud which is employed by a party to the contract in securing the consent of the other party, while the second is the fraud which is employed by the obligor in the performance of an existing obligation. Fraud or dolo which is present or employed at the time of the birth or perfection of a contract, on the other hand, may be either causal (dolo causante) or incidental (dolo incidente). Causal fraud refers to those deceptions or misrepresentations of a serious character employed by one party without which the other party would not have entered into the contract, while incidental fraud refers to those incidental deceptions or misrepresentations employed by one party without which the other party would still have entered into the contract. 59. Distinguish between dolo causante and dolo inci­ dente. ANS: Dolo causante (Art. 1338.) and dolo incidente (Art. 1344.) may be distinguished from each other in the following ways: (1) The first refers to a fraud which is serious in character, whereas the second is not serious. (2) The first is the cause which induces the party upon whom it is employed in entering into the contract, whereas the second is not the cause.

848

OBLIGATIONS AND CONTRACTS Contracts Consent

Arts. 1319-1346

(3) The effect of the first is to render the contract voidable, whereas the effect of the second is to render the party who employed it liable for damages, 60. Does failure to disclose facts to the other party constitute fraud which will render a contract voidable? How about an exaggeration in trade? How about an expression of an opinion? ANS: Under our law, if there is a failure of one party to disclose facts to the other party, when there is a duty to reveal them, as when they are bound by confidential relations, such failure would constitute fraud which will render a contract voidable; however, if there is no duty to reveal them, such failure does not constitute fraud. (Art. 1339, NCC; Strong vs. Gutierrez Repide, 213 U.S. 419; 41 Phil 974.) In the case of the usual exaggerations in trade, so long as the other party had an opportunity to know the facts, under our law, they are not in themselves fraudulent. (Art. 1340, NCC; Songco vs. Sellner, 37 Phil 254; Azarraga vs. Gay, 52 Phil. 599.) Similarly, under our law, a mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former’s special knowledge. (Art. 1341, NCC; Songco vs. Sellner, supra.) 61. C, an old and ignorant woman, was helped by V in obtaining a loan of P3,000.00 from X Rural Bank secured by a mortgage on her house and lot. On the day she signed the promissory note and the mortgage covering the loan, she also signed several documents. One or these documents signed by her was a promissory note of V for a loan of P3,000.00 also secured by a mortgage on her house and lot. Several years later, she received advice from the sheriff that her property shall be sold at public auction to satisfy the two obligations. Immediately she filed suit for annulment of her participation as co-maker in the obligation contracted by V as well as of the mortgage in relation to said obligation of V on the ground of fraud and mistake. Upon filing of the

849

Arts. 1319-1346

OBLIGATIONS AND CONTRACTS Contracts Consent

complaint, she deposited P3,383.00 in court as payment of her personal obligation including interests. (a)

Can C be held liable for the obligation of V? Why?

(b) Was there a valid and effective consignation con­ sidering that there was no previous tender of payment made by C to the Bank? Why? ANS: (a) C cannot be held liable for the obligation of V. It is crystal clear that C’s participation in V’s obligation both as co-maker and as mortgagor is voidable riot on the ground of fraud because the Bank was not a participant in the fraud committed by V, but on the ground of mistake. There was substantial mistake on the part of both C and the Bank mutually committed by then as a consequence of the fraud employed by V. (See Rural Bank o f Caloocan City vs. CA, 104 SCRA 151.) (Note: In reality, the above answer of the Supreme Court is based upon the explicit provisions of Art. 1342 of the NCC.) (b) Despite the fact that there was no previous tender of payment made directly to the Bank, nevertheless, the consignation was valid and effective. The deposit was attached to the record of the case and the Bank had not made any claim thereto. Therefore, C was right in thinking that it was useless and futile for her to make a previous offer and tender of payment directly to the Bank. Under the foregoing circumstances, the consignation was valid, if not un­ der the strict provisions of the law, under the more liberal consider­ ations of equity. (Ibid.) 62. What is meant by simulation of contracts and what are its effects? Simulations of contract, which Castan calls vices of declaration (vicios de la declaracion), may be either absolute or relative. The simulation is absolute when there is colorable contract but it has no substance as the contracting parties do not intend to be bound by the contract at all, as when a debtor simulates the sale of his properties to a friend in order to prevent their possible attachment by creditors. The basic characteristic of this type of simulation of contract is the fact that the apparent contract is not really desired or intended to 850

OBLIGATIONS AND CONTRACTS Contracts Object

Arts. 1347-1349

produce legal effects or in any way alter the juridical situation of the parties. It is relative when the contracting parties state a false cause in the contract to conceal their true agreement, as when a person conceals a donation by simulating a sale of the property to the beneficiary for a fictitious consideration. The primary consideration in determining the true nature of a contract is the intention of the parties. Such intention is determined from the express terms of their agreement as well as from their contemporaneous and subsequent acts. (Tating vs. Marcella, G.R. No. 155208, March 27, 2007). While the other vices of consent (vicios de la formacion de la uoluntad) render the contract voidable, simulation of contracts af­ fects the contract in an entirely different manner. Thus, according to Art. 1346, an absolutely simulated contract is void and the par­ ties may recover from each other what they may have given under the contract, while a relatively simulated contract is binding and enforceable between the parties and their successors in interest to their real agreement, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good cus­ toms, public order or public policy (Valerio vs. Refresca, G.R. No. 163689, March 28, 2006). The legal presumption is in favor of the validity of contracts. The party who impugns the validity and regularity of a contract has the burden of proving his allegation. OBJECT (Arts. 1347-1349) 63.

What is meant by object of contracts?

ANS: The object o f a contract maybe defined as the thing, right or service which is the subject matter of the obligation which is created or established. 64. What requisites must concur in order that a thing, right, or service may be the object of contracts? ANS: As a general rule, all things, rights or services may be the object of contracts. It is, however, essential that the following requisites must concur:

851

Arts. 1347-1349

OBLIGATIONS AND CONTRACTS

Contracts Object

(1) The object should be within the commerce of men; in other words, it should be susceptible of appropriation and transmissible from one person to another. (2) The object should be real or possible; in other words, it should exist at the moment of the celebration of the contract, or, at least, it can exist subsequently or in the future. (3) The object should be licit; in other words, it should not be contrary to law, morals, good customs, public order or public policy. (4) The object should be determinate, or at least, possible of determination, as to its kind. (3 Castan, 7th Ed., pp. 342-343, 8 Manresa, 5th Ed., Bk. 2, pp. 431-432.) 65. What things, rights or services cannot be the object of contracts? ANS: The following cannot be the object of contracts: (1)

Things which are outside the commerce of men;

(2)

Intransmissible rights;

(3) by law; (4)

Future inheritance except in cases expressly authorized Impossible things or services;

(5) Services which are contrary to law, morals, good customs, public order or public policy; and (6) Objects which are not determinable as to their kind. (See Arts. 1347,1348, 1349, NCC.) If the parties enter into a contract with respect to the above objects, the contract is void or inexistent. 66. What are the exceptions to the rule that no person can enter into a contract with regard to future inheritance? ANS: They are: (1) Under Art. 130 of the FC, which allows the future spouses to give or donate to each other in their marriage settlement their future property to take effect upon the death of the donor and

852

OBLIGATIONS AND CONTRACTS Contracts Object

Arts. 1347-1349

to the extent laid down by the provisions of the NCC relating to testamentary succession; and (2) Under Art, 1080 of the Code, which allows a: person to make a partition of his estate among his heirs by an act inter vi­ vos, provided that the legitime of the compulsory heirs is not preju­ diced. 67. A married B in 1930. Out of this marriage, there were three (3) children, D, E and F. In 1940, B died. The following year after B’s death, A contracted a second marriage with C. There were no children out of this marriage. At the time of this second marriage, no liquidation of the properties of the first marriage was made. On December 26, 1956, only over a week before his death on January 9, 1957, A executed a will declaring all of his properties as conjugal and giving onehalf thereof to C as her share. On the same date, C signed a notarized document, stating that she had read the will of her husband and that she promises to convey by will 1/2 of the share given to her to the children of her husband by his previous marriage. C died in 1960 without complying with her promise. As a result, D, E and F brought an action against her estate asking for the enforcement of the promise contained in the document. Will the action prosper? ANS: According to the Supreme Court in Bias vs. Santos (111 Phil. 503), the action will prosper. Considering that the properties of the first marriage had not been liquidated and the further fact that such properties were actually included as conjugal properties of the second marriage, it is clear that the document sighed by C is the compromise defined by Art. 2028 of the NCC. It is, therefore, a contract with sufficient cause or consideration. There is of course the question as to whether or not the contract would fall within the pur­ view of Art 1347 of the NCC which prohibits contracts with respect to future inheritance. According to the Supreme Court in the case just cited however, the prohibition does not apply. In other words, according to the Court, the document signed by C is not void under Art. 134 of the NCC. What is prohibited is a contract which deals with any property or right not in existence or capable of determina­ tion at the time of the contract, that a person may in the future ac­ quire by succession. Here the subject-matter of the contract signed

853

Arts. 1350-1355

OBLIGATIONS AND CONTRACTS Contracts Cause

by C are well-defined properties, existing at the time of the agree­ ment. 68. Can the certainty of the object of the contract be negated by the failure of the parties to state the exact location of the property in the contract? ANS: In the case of Camacho vs. CA (G.R. No. 127520, Feb­ ruary 9, 2007), the SC held that Arts. 1349 and 1460 of the NCC provide the guidelines in determining whether or not the object of the contract is certain. In this case, the object of the contract is a 5,000 sq.m.portion of Lot 261, Balanga Cadastre. The failure of the parties to state the exact location in the contract is of no moment. This is a mere error occasioned by the parties’ failure to describe with particularity the subject property, which does not indicate the absence of the principal object as to render the contract void. Since in this case, Camacho bound herself to deliver a portion of Lot 261 to Atty. Banzon, the description of the property subject of the contract is sufficient to validate the same. CAUSE (Arts. 1350-1355) 69. What is meant by the cause of contracts? ANS: In general, cause is the why of the contract or the essential reason which moves the contracting parties to enter into the contract. (8 Manresa, 5th Ed., Bk. 2, p. 450.) In other words, it is the immediate, direct or most proximate reason which explains and justifies the creation of an obligation through the will of the contracting parties. (3 Castan, 7th Ed., p. 347, citing 2 Planiol, Sec. 277.) In particular, in onerous contracts, the cause is understood to be for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory contracts, it is the service or benefit which is remunerated; and in contracts of pure beneficence, it is the liberality of the benefactor. (Art. 1350, NCC.) 70.

Distinguish between cause and consideration.

ANS: Actually, in this jurisdiction, cause and consideration are used interchangeably. After all, causa is merely the civil law

854

OBLIGATIONS AND CONTRACTS Contracts Cause

Arts. 1350-1355

term, while consideration is the common law term. It is, however, undisputed that causa in civil law jurisdictions is broader in scope than consideration in Anglo-American jurisdictions. Many agreements which cannot be supported in Anglo-American law for want of consideration can be enforced under the broader doctrine of causa, (See 4 Tolentino, NCC, 1956 Ed., p. 486.) 71. Distinguish the cause from the object of contracts. ANS: The cause must not be confused with the object of the contract. Of course, there can be no question about the difference between the two in cases of remuneratory and gratuitous contracts: thus, in the first, the cause is the service or benefit which is remunerated, while the object is the thing which is given in remuneration, and in the second, the cause is the liberality of the benefactor* while the object is the thing that is donated. In onerous contracts, the cause for each contracting party is the prestation or promise of a thing or service by the other, while the object is the thing or service itself. Thus, in a contract of sale, the cause for the vendor is the acquisition of the purchase price, while the cause for the vendee is the acquisition of the thing sold. The objects, on the other hand, are the thing which is sold and the price which is paid. (3 Castan 346; 8 Manresa, Bk. 2, 450.) Dr. Tolentino, however, while concurring with this view with respect to the cause, maintains that the object is the thing that is sold because it is the starting point of agreement without which the negotiations would never have begun. (4 Tolentino 585.) Dr. Padilla, on the other hand, contends, that in bilateral contracts like sale, the thing sold is the object, while the price paid is the cause. (3 Padilla 553.) It is submitted that the view of Dr. Tolentino is the most logical. 72. Distinguish the cause of a contract from the motives of the contracting parties. ANS: The cause of a contract and the motives of the parties in entering into the contract may be distinguished from each other as follows: (1) The cause is the direct or proximate reason of a contract, whereas the motives are the indirect or remote reasons.

855

Arts. 1350-1355

OBLIGATIONS AND CONTRACTS Contracts Cause

(2) The cause is the objective or juridical reason of a contract, whereas the motives are the psychological or personal reasons. (3) The cause for a certain contract is always the same, whereas the motives will differ or vary depending upon who are the parties. (4) The cause can affect the validity of a contract, whereas the motives cannot. 73. Is there any exception to the rule that the particular motives of the parties in entering into a contract are different from the cause of the contract? If there is, what is it? Give examples. ANS: There is an exception to the rule and that is when the contract is conditioned upon the attainment of the motive of either contracting party. In other words, the motive may be regarded as causa when it predetermines the purpose of the contract. (Liguez vs. ?ourt of Appeals, 102 Phil. 577.) The best examples are the decided cases. Thus — (1) Where a married man of mature years donated a parcel >f land to a girl o f 16 subject to the condition that the latter shall cohabit with him, and such condition is accepted, it is clear that the lonation is conditioned upon the attainment of the motive of the lonor; in other words, it predetermines the purpose of the contract. Thus considered, the conveyance is clearly predicated upon an illegal '.ausa. Consequently, it is void. Therefore, under what is now Art. L412 of the NCC, there can be no recovery of what has already been lelivered. (Liguez vs. CA, supra.) (2) Where a mother sold two (2) fishponds to a daughter and ,he latter, in turn, resold the same fishponds to her and her stepather, as a consequence of which said fishponds were converted nto conjugal properties, it is clear that the motive or purpose is to :ircumvent the law against donations between spouses. (Art. 133, SfCCJ This motive or purpose is the illegal causa rendering the conract void. Consequently, the rule of in pari delicto non oritur actio, low enunciated in Art. 1412 of the NCC, is applicable. (Rodriguez >s. Rodriguez, 20 SCRA 908.)

856

OBLIGATIONS AND CONTRACTS Contracts Cause

Arts. 1350-1355

(3) Where a Filipino leased a parcel of land to an alien for 99 years with an option to buy the property within 50 years, provided that the latter shall become a Filipino citizen, it is clear that the motive or purpose of the arrangement, which has resulted in the virtual transfer of ownership to the lessee, is to circumvent the Constitutional prohibition of transfer of lands to aliens. This motive or purpose is the illegal causa rendering the contract void. However, it will be the provision of Art. 1416 and not of Art. 1412, of the NCC that will apply. Because of public policy the lessor will be allowed to recover the property. (Phil, Banking Corp. vs. Lui She, 21 SCRA 52.) 74. May a moral obligation constitute a sufficient cause to support an onerous contract? ANS: Where the moral obligation arises wholly from ethical considerations, unconnected with any civil obligation, and as such, is demandable only conscience, and not in law, it cannot constitute a cause to support an onerous contract (Fisher vs. Robb, 69 Phil. 101.), but where such moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time when the contract is entered into, it constitutes a sufficient cause or consideration to support the said contract. (Villaroel vs. Estrada, 71 Phil. 14.) 75. What requisites must concur in order that there will be a sufficient cause upon which a contract may be founded? ANS: In order that there will be a sufficient cause upon which a contract may be founded, it is essential that the following requisites must concur: (1)

The cause should be in existence;

(2)

The cause should be licit or lawful; and

(3)

The cause should be true.

If the contract has no cause, or even if it has, if the cause should be illicit or unlawful, the rule is that it shall not produce any effect whatsoever, or what amounts to the same thing, it is inexistent or void from the beginning. (Arts. 1352, 1409, Nos. 1, 2 and 3, NCC.)

857

Arts. 1350-1355

OBLIGATIONS AND CONTRACTS Contracts Cause

The same is true if the cause stated in the contract is false, unless it can be proved that the contract is, in reality, founded upon another cause which is true and lawful. (Art. 1353, NCC.) 76. W, wife of H and daughter of F, while employed in a pawnshop owned by P, embezzled P2,000 belonging to said pawnshop. In order to prevent her criminal prosecution for estafa, H and F signed a document obligating themselves jointly and severally to pay to P the amount embezzled including interest. Because of their failure to comply with their promise, the latter brought an action against them for collection. Will the action prosper? Reasons. (2000) ANS: The action will not prosper. The consideration for the agreement is clearly illicit, which fact is apparent on the face of the contract, and the case is accordingly governed by Art. 1352 of the NCC. There has been no period since contract law reached the state of consciousness, when the maxim ex turpi causa non oritur actio was not recognized. A contract based upon an unlawful object is and always has been void ab initio by the common law, by the civil law, moral law, and all laws whatsoever. It is immaterial whether the illegal character is revealed in the matter of the consideration, in the promise as expressed in the agreement or in the purpose which the agreement, though legal in expression, is intended to accomplish. If the illegality lurks in any element, or even subsists exclusively in the purpose of the parties, it is fatal to the validity of the contract. By the universal consensus of judicial opinion in all ages it has been considered contrary to public policy to allow parties to make an agreement designed to prevent or stifle prosecution for crime. (Velez vs. Ramas, 40 Phil. 787.) 77. A gave to B P2,000, to be used in the purchase of palay, with the obligation to return said amount within 10 days, if not spent for said purpose. B neither bought palay nor returned said amount. As a result, A accused him of estafa. When the case was about to be heard, X, a common friend, acting upon B’s request prevailed upon A to move for the dismissal of the case and be contented with a promissory note to be executed by B. The note was executed, and

858

OBLIGATIONS AND CONTRACTS Contracts Form of Contracts

Arts. 1356-1358

accordingly, the criminal case was dismissed. B, however, was unable to comply with his promise despite repeated demands. Subsequently, A brought an action against B for the recovery of the P2,000. B, however, contends that the promissory note is void because the consideration thereof is the dismissal of the estafa case which is certainly contrary to public policy. Is this correct? ANS: This is not correct. It is admitted that B had received P2,000 from A to be used in the purchase of palay. The cause or consideration, therefore, for the promise was this pre-existing debts of B, not the dismissal of the estafa case, which merely furnished the occasion for title execution of the promissory note. (Mactal vs. Melegrito, 111 Phil. 363 ) FORM OF CONTRACTS (Arts. 1356-1358) 78. As a general rule, what is the form of a contract in order that it will be of obligatory force? ANS: Whatever may be the form in which a contract may have been entered into, the general rule, according to Art. 1356 of the NCC, is that it shall be obligatory provided all of the essential requisites for its validity are present. We have, therefore, retained the “spiritual system” of the Spanish NCC by virtue of which the law looks more at the spirit rather than at the form of contracts. Hence, under our legal system, the form in which a contract is executed has no effect, as a general rule, upon its obligatory force, provided all of the essential requisites for its validity are present. 79. What are the exceptions to the above rule? ANS: It must be observed that when Art. 1356 speaks of con­ tracts as being obligatory regardless of the form in which they may have been entered into, it does not include those contracts for which the law prescribes a certain form either for validity or for enforce­ ability. It is, therefore, evident that there are two (2) exceptions to the general rule. These exceptions are: (1) When the law requires that the contract, must be in a certain form in order to be valid; and

859

Arts. 1356-1358

OBLIGATIONS AND CONTRACTS Contracts Form of Contracts

(2) When the law requires that the contract must be in a certain form in order to be enforceable, 80. What are the different kinds of formalities which are prescribed by law for certain contracts? ANS: The formalities required by law for the execution of certain contracts are: (1) those which are for convenience or for the purpose of binding third persons; (2) those which are necessary for the validity of the contract; and (3) those which are necessary for the enforcement of the contract. The first is governed by Arts. 1356 to 1358 of the NCC; the second by scattered provisions of the NCC and by special laws; and the third by the Statute of Frauds. 81. (a) What are the formalities which are merely for the “convenience of the parties? (b) Marlene Dauden, a movie star, filed a complaint against X Co. to recover P 14,700 representing the balance of her compensation as leading actress in two (2) motion pic­ tures produced by the company. Upon motion of defendant, the lower court dismissed the complaint because “the claim of plaintiff was not evidenced by any written document, ei­ ther public or private” in violation of Art. 1358 of the NCC. Is this order of dismissal in accordance with law? Reasons. ANS: (a) The following must appear in a public document: (1) Acts and contracts which have for their object the creation* transmission, modification or extinguishment of real rights over immovable property, sales of real property or of an interest therein are governed by Arts. 1403, No. 2, and 1405; (2) The cession, repudiation or renunciation of heredi­ tary rights or of those of the conjugal partnership of gains; (3) The power to administer property, or any other pow­ er which has for its object an act appearing or which should ap­ pear in a public document, or should prejudice a third person; (4) The cession of actions or rights proceeding from an act appearing in a public document.

860

OBLIGATIONS AND CONTRACTS Contracts Form of Contracts

Arts. 1356-1358

All other contracts where the amount involved exceeds P500.00 must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Arts. 1403, No. 2, and 1405. (Art 1358, NCC.) (b) The lower court’s orders of dismissal is not in accordance with law. In the matter of formalities, in general, contracts are valid and binding from their perfection regardless of form, whether they be oral or written. This is plain from Arts. 1315 and 1356 of the present NCC. Consequently, so long as the three (3) elements (consent, object and cause) exist, the contract is generally valid and obligatory. To this rule, the Code admits the following exceptions: (a) Contracts for which the law itself requires that they be in a particular form in order to make them valid and enforceable (the so-called solemn contracts); and (b) contracts that the law requires to be proved by some writing of its terms as in those covered by the Statute of Frauds. The contract sued upon by plaintiff in the case at bar does not fall under either exception. It is true that it is covered by the last clause of Art. 1358, but Art: 1357 clearly indicates that contracts covered by Art. 1358 arei binding and enforceable by action or suit despite the absence of writing. Hence, this case must be remanded to the lower court for further proceedings not at variance with this decision. (Daudeh-Hernaez vs. De los Angeles, 27 SCRA 1276.) 82. What are the formalities which are necessary for the validity of contracts? ANS: Contracts which must appear in writing are as follows: (1) Donations of personal property whose value exceeds P5,000.00. According to Art. 748 of the NCC, the donation and the acceptance shall be made in writing; otherwise, it shall be void. (2) Sale of a piece of land or any interest therein by an agent. According to Art. 1874 of the NCC, if the authority of the agent is not in writing, the sale is void. (3) According to Art. 2134 of the NCC, in contracts of an­ tichresis, the amount of the principal and of the interest shall be specified in writing; otherwise, the contract shall be void.

861

Arte. 1356-1358

OBLIGATIONS AND CONTRACTS Contracts Form of Contracts

(4) Agreements regarding payment of interest in contracts of loan. According to Art. 1956 of the NCC, no interest shall.be :due unless it has been expressly stipulated in writing. The validity of the contract of loan, however, is not affected. Contracts which must appear in a public document are as follows: (1) Donations o f immovable property. According to Art. 749 of the NCC, the donation must be made in a public document. The acceptance, on the other hand, may be made in the same deed of donation or in a separate public document. If the acceptance is made in a separate public document, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. Non-compliance with any of these formalities shall render the donation void. (2) Partnerships where immovable property or real rights are contributed to the common fund. According to Arts. 1771 and 1773 of the NCC, in a contract of partnership where immovable property or real rights are contributed to the common fund, it is necessary that the contract must appear in a public instrument and that there must be an inventory of the immovable property or real rights, signed by the partners, and attached to the public instrument; otherwise, the contract is void. Contracts which must be registered are as follows: (1) Chattel mortgages. According to Art. 2140 of the NCC, by a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage. (2) Sales or transfers of large cattle. According to the Cattle Registration Act, no sale or transfer of large cattle shall be valid unless it is duly registered and a certificate of transfer is secured. (Sec. 22, Act No. 1147; Art. 1581, NCC.)

83. Spouses Robert and Yollie wanted to sell their house. They found a prospective buyer, Nina. Yollie negotiated with Nina for the sale of the property. They agreed on a fair price of P2 Million. Nina sent Yollie a letter confirming her 862

OBLIGATIONS AND CONTRACTS Contracts Reformation of Instruments

Arts. 1359-1369

intention to buy the property. Later, another couple, Marius and Ellen, offered a similar house at a lower price of P1.5 Million. But Nina insisted on buying the house of Robert and Yollie for sentimental reasons. Nina prepared a deed of sale to be signed by the couple and a manager’s check for P2 Million. After receiving the P2 Million, Robert signed the deed of sale. However, Yollie was not able to sign it because she was saying she changed her mind. Yollie filed suit for nullification of the deed of sale and for moral and exemplary damages against Nina. Does Nina have any cause of action against Robert and Yollie? ANS: Considering that the contract has already been perfected and taken out of the operation of the statute of frauds, Nina can compel Robert and Yollie to observe the form required by law in order for the property to be registered in the name of Nina which can be filed together with the action for the recovery of house. (Art. 1357, NCC). In the alternative, she can recover the amount of P2 Million that she paid. Otherwise, it would result in solution indebiti or unjust enrichment. (Suggested Answers to, the 2006 Bar Examination Questions, PALS.)

REFORMATION OF INSTRUMENTS (Arts. 1359-1369) 84. What is the doctrine of reformation of instruments under the NCC? What requisites must concur in order that an instrument may be reformed? What is the difference between reformation of instruments and annulment of contracts? ANS: When the true intention of the parties to a perfected and valid contract are not expressed in the instrument purporting to embody their agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument so that such true intention may be expressed. (Art. 1359, NCC.) In order that there can be a reformation of the instrument, the following requisites must, therefore, concur: (1)

There must be a meeting of the minds of the parties;

863

Arts. 1359-1369

(2)

OBLIGATIONS AND CONTRACTS Contracts Reformation of Instruments

Their true intention is not expressed in the instrument:

and (3) Such failure to express their true intention is due to mistake, fraud, inequitable conduct or accident. (Huibonhoa vs. COA, 320 SCRA 625; Sarming vs. Dy, G.R. No. 133643, June 6, 2002.) If the first requisite is lacking, the proper remedy is not the reformation of the instrument but the annulment of the contract. Hence, the most fundamental distinction between an action for the reformation of an instrument and an action for the annulment of a contract consists of the fact that the first presupposes a perfectly valid contract in which there has already been a meeting of the minds of the contracting parties, while the second is based on a defective contract in which there has been no meeting of the minds because the consent of one of the contracting parties has been vitiated. 85. What is the basis and nature of the remedy of reformation of instrument? ANS: The remedy of reformation of an instrument is based on the principle of equity where, to express the true intention of the contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by court decree made legally effective. Consequently, the courts, as the agencies authorized by law to exercise the power to reform an instrument, must necessarily exercise that power sparingly and with great caution and zealous care. The remedy, being an extraordinary one, must be subject to limitations as may be provided by law. A suit for reformation of an instrument must be brought within the period prescribed by law, otherwise, it will be barred by the mere lapse of time. (Bentir vs. Leanda, G.R. No. 128991, April 12, 2000.) Reformation is that remedy in equity by means of which the instrument is amended to conform to the real intention of the parties. (NIA vs. Gamit, et al., 215 SCRA 436; Conde vs. Cuenva, 99 Phil. 1056; Sarming vs. Dy, supra.)

864

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86. (a) Give five (5) examples of instruments which may be reformed. (b) In the above examples, who are the parties who can bring the action for reformation of the instrument? ANS: (a) The best examples are the following: (1) When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement. (Art. 1361, NGC.) (2) If one party was mistaken and the other acted fr aud­ ulently or inequitably in such a way that the instrument does not show their true intention. (Art. 1362, NCC.) (3) When one party was mistaken and the other knew or believed that the instrument did not state their real agree­ ment, but concealed that fact from the former. (Art. 1363, NCCJ ; (4) When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties. (Art. 1364, A7CC.J (5) If two (2) parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely, or with a right of repurchase .(Art. 1365, NCC.) (b) In No. (X) the party who can bring the action is either party or his successors in interest; in Nos. (2), (3), (4) and (5), the party who can bring the action is the injured party or his heirs and assigns. (Art. 1368, NCC.) 87. What instruments cannot be reformed? ANS: The following instruments cannot be reformed: (1) Simple donations inter vivos wherein no condition is imposed; (2) (3) NCC.)

Wills; and Those where the real agreement is void. (Art. 1366,

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OBLIGATIONS AND CONTRACTS Contracts Reformation of Instruments

88. (a) What is a contract of adhesion? (b) Are contracts of adhesion void or prohibited? ANS: In the case of Development Bank o f the Philippines vs. Perez (G.R. No. 148541, November 11, 2004), the Court held that: (a) A contract of adhesion is so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto. (b) A contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion are not iiivalid perse; they are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. In the case of Sps. Francisco vs. BPI Family Savings Bank3 Inc. (G. R. Nos. 149840-41, March 31, 2006), where the petitioner spouses undertook to secure the P15M loan of Transbuilders Resources & Development Corporation to BPI-FSB “and other credit accommodations o f whatever nature obtained by the Borrower/ Mortgagor” under the Real Estate Mortgage they executed in favor of BPI-FSB, the SC held that while the stipulation proved to be onerous to the petitioners, neither the law nor the courts will extricate a party from an unwise or undesirable contract entered into with all the required formalities and with full awareness of its consequences. Petitioners voluntarily executed the REM on their property infavor of BPI-FSB to secure the loan. They cannot now be allowed to repudiate their obligation to the bank after Transbuilder’s default. While petitioner’s liability was written in fine print and in a contract written by BPI-FSB, it has been the consistent holding of the Court that contracts of adhesion footing are not invalid per se. On numerous occasions, the SC has upheld the binding effects of such contracts. 89. Comment on the acceptability/validity of stipulations of the credit card company that (i) it is not responsible if the card is not honoured by any merchant affiliate for any 8 6 6

OBLIGATIONS AND CONTRACTS Contracts Reformation of Instruments

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reason; (ii) its liability is limited to PI,000,00 or actual damage proven, whichever is lesser. ANS: In the case of Emmanuel Aznar vs. Citibank, N.A. (Philippines) (G. R. No. 164273, March 28,2007), the SC held that the terms and conditions of Citibank's Mastercard constitute a contract of adhesion. It is settled that the contracts between cardholders and the credit card companies are contracts of adhesion, so-called, because their terms are prepared by only one party while the other merely affixes his signature signifying his adhesion thereto. In this case, paragraph 7 of the terms and conditions states that Citibank is not responsible if the card is not honoured by any merchant affiliate for any reason. While it is true that Citibank may have no control of all the actions of its merchant affiliates, and should not be held liable therefor, it is incorrect, however, to give it blanket freedom from liability if its card is dishonoured by any merchant affiliate for any reason. Such phrase renders the statement vague and as the said terms and conditions constitute,-a contract of adhesion, any ambiguity in its provisions must be construed against the party who prepared the contract, in this case Citibank. Citibank also invokes paragraph 15 of its terms and conditions which limits its liability to PI,000.00 or actual damage proven, whichever is lesser. Again, such stipulation cannot be considered as valid for being unconscionable as it precludes payment of a larger amount even though damage may be clearly proven. The Supreme Court is not precluded from ruling out blind adherence to the terms of a contract if the attendant facts and circumstances show that they should be ignored for being obviously too one-sided. 90. (a) What is the cardinal rule applicable in a case where the terms of a contract are clear and leave no doubt upon the intention of the contracting parties? (b) If the words appear to be contrary to the evident intention of the ' parties, which shall prevail? (c) How are intentions of the parties judged? ANS: (a) It is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation shall control; The contract is

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the law between the parties and when the words of the contract are clear and can easily be understood, there is no room for construction. (Olivares and Robles vs. Sarmiento, G.R. No. 158384, June 12,2008J In the case of Philippine National Construction Corporation vs. The Hon. CA, G.R. No, 159417, January 25, 2007, the Court held that the contract between parties is the formal expression of the parties’ rights, duties and obligations. It is the best evidence of the intention of the parties. Thus, when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. It is further required that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. (Frias vs. San Diego-Sison, G.R. No. 155223, April 3, 2007.) (b) If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. (c) In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts are principally considered. This is without prejudice to the consideration of other factors as fixed or determined by the other rules of interpretation mentioned in the Civil Code and the Rules of Courts. As a general rule, documents are interpreted in the precise terms in which they are expressed, but the courts, in the exercise of their sound discretion, are called upon to admit direct and simultaneous circumstantial evidence necessary for their interpretation with the purpose of making the true intention of the parties prevail. DEFECTIVE CONTRACTS 91. tracts?

What are the different classes of defective con­

ANS: There are four (4) classes of defective contracts under the present NCC. They are: (1)

Rescissible contracts;

8 6 8

OBLIGATIONS AND CONTRACTS Contracts Defective Contracts

(2)

Voidable contracts;

(3)

Unenforceable contracts; and

(4)

Void and inexistent contracts.

Arts. 1359-1369

.

92. Where shall the action for reformation of instrument be instituted? ANS: The action for reformation of instrument shall be instituted in a special civil action for declaratory relief. 93. What are the essential features or characteristics of defective contracts? ANS: Rescissible contracts possess the following features or characteristics: (1) Their defect consists in injury or damage either to one of the contracting parties or to third persons. (2) Before rescission; they are valid and therefore legally > effective. (3) They are susceptible of convalidation only by prescription, and not by ratification. (4)

They can be attacked directly only, and not collaterally.

(5) They can be attacked either by a contracting party who suffers injury or by a third person who is defrauded. Voidable contracts possess the following features or character­ istics: (1) Their defect consists in the vitiation of consent or in the legal incapacity of one of the contracting parties. (2) court.

They are binding until they are annulled by a competent

(3) They are susceptible of convalidation either by ratification or prescription. (4)

They cannot be attacked or assailed by third persons.

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Unenforceable contracts possess the following features or characteristics: . (1) Their defect consists either in the fact that they were entered into in excess or without any authority, or they do not comply with the Statute of Frauds, or both contracting parties are legally incapacitated. (2)

They cannot be enforced by a proper action in court.

(3)

They are susceptible of convalidation by ratification.

(4)

They cannot be attacked or assailed by third persons.

Void and, inexistent contracts possess the following features or characteristics: (1) Their defect consists in the fact that they lack absolutely either in fact or in law one or some of the elements of a valid contract; (2) As a general rule, they produce no legal effects in accordance with the principle “quod nullum est nullum producil

effectum.H (3) They are not susceptible of convalidation either by ratification or by prescription: (4) The right to set up the defense of absolute nullity or inexistence cannot be renounced. (5) They can be attacked or assailed either by a contracting party or by a third person whose interest is directly affected. RESCISSIBLE CONTRACTS (Arts. 1380-1389) 94. Define rescissible contracts. ANS: A rescissible contract is a contract which is valid because it contains all of the essential requisites prescribed by law; but which is defective because of injury or damage to either of the contracting parties or to third persons, as a consequence of which it may be rescinded by means of a proper action for rescission.

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OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

95.

Arts. 1380-1389

Define rescission.

ANS: Rescission is a remedy granted by law to the contracting parties, and even to third persons, to secure the reparation of damages caused to them by a contract, even if the same should be valid, by means of the restoration of things to their condition prior to the celebration of the contract. (8 Manresa, 5th Ed., Bk. 2, p. 545,) 96. Distinguish rescission o f contracts from rescission o r resolution o f recip roca l obligations. ANS: Rescission of rescissible contracts must not be confused with the rescission or resolution of reciprocal obligations under Art. 1191 of the NCC. Although there are similarities both with respect to validity and effects, they are distinguish from each other in the following ways: (1) As to party who may institute action: In rescission the action may be instituted not only by a party to the contract blit even by third persons, whereas in resolution the action may be instituted only by a party to the contract. (2) As to causes: In rescission there are several causes or grounds such as lesion, fraud and others expressly specified by law, whereas in resolution the only ground is failure of one of the parties to comply with what is incumbent upon him.' (3) As to power of the courts: In rescission there is no power of the court to grant an extension of time for performance of the obligation , so long as there is a ground for rescission, whereas in resolution the law expressly declares that courts shall have the discretionary power to grant an extension for performance provided that there is a just cause. (4) As to contracts which may be rescinded or resolved: In rescission any contract, whether unilateral or reciprocal, may be rescinded, whereas in resolution only reciprocal contracts may be resolved. 97. What contracts are rescissible? ANS: The following contracts are rescissible: V (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; 871

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(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission fArf. 1381, NCC.); (6) Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected are also rescissible. (Art. 1382, NCC.) 98. May a contract of sale entered into in violation of a third party’s right of first refusal be rescinded in order that such third party can exercise said right? ANS: In Guzman, Bocaling and Co., Inc. vs. Bonnevie, the Court upheld the decision of a lower court ordering the rescission of a deed of sale which violated a right of first refusal granted to one of the parties therein. The Court held: wx x x Contract of Sale was not voidable but rescissible. Under Arts. 1380 to 1381(3) of the Civil Code, a contract oth­ erwise valid may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by the sale of the subject property to the petitioner without recognizing their right of first priority under the Contract of Lease. According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons, to secure repa­ rations for damages caused to them by a contract, even if this should be valid) by means of the restoration of things to their condition at the moment prior to the celebration of said contract. It is a relief al­ lowed for the protection of one. of the contracting parties and even third persons from all injury and damage the contract may cause, or to protect some incompatible and preferent right created by the

872

OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

Arts. 1380-1389

contract. Rescission implies a contract which, even if initially valid, produces a lesion or pecuniary damage to someone that justifies its invalidation for reasons of equity. In the recent case of Litonjua vs. L & R Corporation, the Court, also citing the case of Guzman, Bocaling & Co. vs. Bonnevie, held that the sale made therein in violation of a right of first refusal embodied in a mortgage contract, was rescissible. Thus, the prevailing doctrine, as enunciated in the cited cases, is that a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible. (Rosencor Development Corporation vs. Inquing, G.R. No. 140479, March 8, 2001.) 99. (a) State the nature of an action for rescission, (b) When should it be filed? ANS: (a) The action for rescission is subsidiary. It cannot be instituted except when the party suffering damage has no other v legal means to obtain reparation for the same. (Art. 1383, NCC.) Hence, it must be availed of as the last resort, availed only after all legal remedies have been exhausted and proven futile. (Khe Hong Cheng vs. CA, G.R. No. 144169, March 28, 2001.) (b) The action for rescission must be commenced within four (4) years. For persons under guardianship and for absentees, the period of four (4) years shall not begin until the termination of the former’s incapacity, or until the domicile of the latter is known, (Art. 1389, NCC.) It is the legal possibility of bringing the action which determines the starting point for the computation of the 4year prescriptive period as provided in the law. (Khe Hong Cheng vs. CA, G.R. No. 144169, March 28, 2001.) 100. What requisites must concur before a contract may be rescinded on the ground of lesion? ANS: Whether the contract is entered into by a guardian in behalf of his ward or by a legal representative in behalf of an absentee, before it can be rescinded on the ground of lesion, it is indispensable that the following requisites must concur: (1)

The contract must be entered into by the guardian in

873

Arts. 1380-1389

OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

behalf of his ward or by the legal representative in behalf of an absentee. (Art. 1381, Nos. 1 and 2, NCC.) (2) The ward or absentee suffered lesion of more than onefourth of the value of the property which is the object of the contract. (Ibid.) (3) The contract must be entered into without judicial approval. (Art. 1386, NCC.) (4) There must be no other legal means for obtaining reparation for the lesion. (Art. 1383, NCC.) (5) The person bringing the action must be able to return whatever he may be obliged to restore. (Art. 1385, par. 1, NCC.) (6) The object of the contract must not be legally in the possession of a third person who did not act in bad faith. (Art. 1385, par. 2, NCC.) 101. What requisites must concur before a contract entered into in fraud of creditors can be rescinded? ANS: Before a contract can be rescinded on the ground that it has been entered into in fraud of creditors, it is indispensable that the following requisites must concur: (1) There must be a credit existing prior to the celebration of the contract; (2) There must be a fraud, or at least the intent to commit fraud, to the prejudice of the:creditor seeking the rescission. (3) credit.

The creditor cannot in any other legal manner collect his

(4) The object of the contract must not be legally in the possession of a third person who did not act in bad faith. 102. Can a contract of sale entered into in violation of a third party's right of first refusal be rescinded, so that such third party can exercise said right? ANS: A contract of sale entered into a violation of a third party’s right of first refusal can be rescinded. In the case of Guzman, Bocaling and Co., Inc. vs. Bonnevie (206 SCRA 668), the Court held

874

OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

Arts. 1380-1389

that such contract of sale is not voidable but rescissible. Under Arts. 1380 to 1381(3) of the NCC, a valid contract may nonetheless be subsequently rescinded by reason of injury to third persons, like creditors. The parties could be validly accorded the status of creditors. The parties could be validly accorded the status of creditors for they had substantial interests that were prejudiced by the sale of the subject property to another without recognizing their right of first priority under the Contract of Lease. 103. Who are the persons who may institute an action for the rescission of a rescissible contract? ANS: The action for rescission may be instituted by the following: (1) The person who is prejudiced, such as the person suffering the lesion in rescissory actions based on lesion, the creditor who is defrauded in rescissory actions based on fraud, and other persons authorized to exercise the same in other rescissory actions; (2) their representatives; (3) their heirs; and (4) their creditors by virtue of the subrogatory action defined in Art. 1177 of the NCC. (3 Castan, 7th Ed, p. 423 ) 104. Under our NCC, an heir may institute an action for rescission of a rescissible contract in his capacity as a representative or successor-in-interest of a person who suffers from lesion or of the creditor who is defrauded. Suppose, however, that it can be established that the decedent, during his lifetime, entered into a contract with another in order to defraud him of his legitime, can he institute an action for the rescission of such contract after the death of the decedent? ANS: Yes, he can institute an action for the rescission of. the contract under No. 3 of Art. 1381.of the NCC. According to Manresa, the reason is that the right of a compulsory heir to his legitime is similar to the right of a creditor with respect to his credit. More accurately, using the exact language of the eminent commentator, “the rights of a forced heir to the legitime are undoubtedly similar to a credit of a creditor insofar as the right to the legitime may be defeated by fraudulent contracts, and are superior to the will of those bound to respect them.” (8 Manresa, 5th Ed., Bk, 2, pp. 555-556. This opinion o f Manresa was quoted with approval in Concepcion vs. Sta. Anna, 87 Phil. 787.) 1

875

Arts. 1380-1389

OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

105. In rescissory actions based on fraud, it is essential that the fraud or the intent to defraud must be proved. How can this be done? ANS: Such fraud or the intent to defraud may be either presumed in accordance with Art. 1387 of the NCC or duly proved in accordance with the ordinary rules of evidence. The law presumes that there is fraud of creditors in the following cases: (1) Alienations of property by gratuitous title if the debtor has not reserved sufficient property to pay all of his debts before such alienation?: (2) Alienations of property by onerous title if made by a debtor against whom some judgment has been rendered in any instance or soine writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission. It must be observed, however, that the above presumptions are disputable. (Art. 1387, NCC.) 106. A died intestate, survived by his wife, B, and several children, X, Y and Z, by a Chinese wife. B subsequently filed a claim against A’s estate for P250,000 which the court approved on the strength of a deed wherein the decedent acknowledged said indebtedness to his wife. Thereafter, the administrator of the estate proceeded against A & Co., a firm founded by the decedent, for an accounting of the income derived from the shares of stock owned by the decedent in the company. In answer, the company alleged that the decedent had already transferred all his shares to his children, X, Y and Z. It is admitted that the transfer was made gratuitously. B, on the other hand, testified that the P250,000 borrowed by the decedent from her had been invested in the company. Can the transfer be rescinded on the ground of fraud? ANS: Yes, the transfer can be rescinded on the ground of fraud. Its fraudulent character is clearly inferable from the facts that the transferees are the decedent’s own children, that no consideration was given for the transfer, that the corporation was the only

876

OBLIGATIONS AND CONTRACTS Contracts Rescissible Contracts

Arts. 1380-1389

business of the decedent, and that he has an outstanding obligation of P250,000 with his wife which he had invested in the corporation. (Rivera vs. Li Tam & Co., 4 SCRA 1072.) 107. What are the badges of fraud? ANS: If the fraud or intent to defraud cannot be established by means of the presumptions enunciated in Art. 1387 of the NCC, it may still be proved in accordance with the ordinary rules of evidence. This may be done by proving the existence of any one of the following circumstances which have been denominated by the courts badges of fraud: (1) The fact that the cause or consideration of the conveyance ; is inadequate. (2) A transfer made by a debtor after suit has been begun and while it is pending against him. (3)

A sale on credit by an insolvent debtor.

(4)

Evidence of large indebtedness or complete insolvency.

(5) The transfer of all or nearly an of his property by a debtor, especially when he is insolvent or greatly embarrassed financially. (6) The fact that the transfer is made between father and son, when there are present others of the above circumstances. (7) The failure of.the vendee to take exclusive possession of all the property. (Oria vs. McMicking, 21 Phil. 243J 108. What is the period of prescription for an action to claim rescission? ANS: As a general rule, the action to claim rescission Must be commenced within four (4) years. If the action is based on lesion (Art. 1381, Nos. 1 and 2, NCC ), the period must be counted from the time of the termination of the incapacity of the ward or from the time the domicile of the absentee is known. If it is based on fraud (Arts. 1381, Nos. 3 and 4,1382, NCC.), the period must be counted from the time of the discovery of the fraud. However, in certain contracts of sale which are specially declared by law to be rescissible, the period is 6 months or even 40 days, counted from the day of delivery. (Arts. 1543,1571,1577, NCC.)

877

Arts. 1390-1402

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

VOIDABLE CONTRACTS (Arts. 1390-1402) 109. Define voidable contracts. ANS: Voidable contracts are those in which all of the essential elements for validity are present, but the element of consent is vitiated1either by lack of legal capacity of one of the contracting parties, or by mistake, violence, intimidation,' undue influence or fraud. 110. Distinguish voidable contracts from rescissible contracts. ANS: Voidable and rescissible contracts may be distinguished from each other in the following ways: (1) In a voidable contract, the defect is intrinsic because it consists of a vice which vitiates consent, whereas in a rescissible contract the defect is external because it consists of damage or prejudice either to one of the contracting parties or to a third person. (Arts. 1381, 1390, NCC.) (2) In the former, the contract is voidable even if there is no damage or prejudice, whereas in the latter the contract is not rescissible if there is no damage or prejudice. (Ibid.) (3) In the former, the annulability of the contract is based on the law, whereas in the latter, the reseissibihty of the contract is based on equity. Hence, annulment is not only a remedy but a sanc­ tion, whereas rescission is a mere remedy. Public interest, therefore, predominates in the first, whereas private interest predominates in the second. (8 Manresa, 5th Ed., Bk. 2, pp. 554-555.) (4) The causes of annulment are different from the causes for rescission; (5) The former is susceptible of ratification, whereas the latter is not. (Arts. 1381,1390, NCC.) (6) Annulment may be invoked only by a contracting party, whereas rescission may be invoked either by a contracting party or by a third person who is prejudiced. (8 Manresa, 5th Ed., Bk. 2, p. 545.) 878

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

Arts. 1390*1402

111. What contracts are voidable? ANS: The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving; his consent to a contract; and (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. (Art. 1390, NCC.)

112. How may a voidable contract be convalidated? ANS: There are three (3) ways or modes of convalidating a voidable contract. They are: (1) by prescription of the action for annulment (Art. 1391, NCC.); (2) by ratification or confirmation (Art. 1392-1396, NCC.); and (3) by the loss of the thing which is the object of the contract through the fraud or fault of the person who is entitled to institute the action for the annulment of the contract. (Art. 1401, NCC.)

113. What is the period of prescription for an action for annulment of a voidable contract? ANS: The action for annulment of a voidable contract must be commenced within a period of four (4) years. If the action refers to contracts entered into by incapacitated persons, the period shall be counted from the time thie guardianship ceases; if it refers to those where consent is vitiated by violence, intimidation or undue influence, the period shall be counted from the time such violence, intimidation or undue influence ceases or disappears; and if it refers to those where consent is vitiated through mistake or fraud, the period shall be counted from the time of the discovery of such mistake or fraud. (Art. 1391. NCC.)

114. X was the owner of a 10,000-square meter property. X married Y and out of their union, A, B and C were born. After the death of Y, X married Z and they begot as children, D, £ and F. After the death of X, the children of the first and second marriages executed an extrajudicial partition of the aforestated property on May 1,1970 ■ —D, E and F were given a one thousand square meter portion of the property. At that 879

Arts. 1390-1402

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

time, D, E and F were minors — D was 17 years old, E was 14 and F was 12. They were made to believe by A, B and C that unless they sign the document they will not get any share. Z was not present then. In January 1974, D, E and F filed an action in court to nullify the suit alleging they discovered the fraud only in 1973. (a) Can the minority of D, E and F be a basis to nullify the partition? Explain your answer. (b) How about fraud? Explain your answer. (1990) ANS: (a) Yes minority can be a basis to nullify the partition because E and F were not properly represented by their parents i>r guardians at the time they contracted the extrajudicial partition. 'Arts. 1327,1391, NCC:) (b) In the case of fraud, when through insidious words Dr machinations of one party the other is induced to enter into the contract without which he would not have agreed to, the action would still prosper because under Art. 1391 of the NCC, in case of ?raud, the action for annulment may be brought within 4 years from :he discovery of the fraud. :

115. In 1960, an unregistered parcel of land was mort­ gaged by owner O to M, a family friend, as collateral for a loan. O acted through his attorney-in-fact, son S, who was iuly authorized by way of a special power of attorney, therein O declared that he was the absolute owner of the and, that the tax declarations/receipts were all issued in his iame, and that he has been in open, continuous and adverse possession in the concept of owner. As O was unable to pay back the loan plus interest for he past 5 years, M had to foreclose the mortgage. At the foreclosure sale, M was the highest bidder. Upon issuance the sheriffs final deed of sale and registration in January, L966, the mortgaged property was turned over to M’s possession and control. M has since then developed the said property. In 1967, O died, survived by sons S and P. In 1977, after the 10th death anniversary of his father O, ion P filed a suit to annul the mortgage deed and subsequent sale of the property, etc., on the ground of fraud. He asserted 880

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

Arts. 1390-1402

that the property in question was conjugal in nature actually belonging, at the time of the mortgage, to O and his wife, W, whose conjugal share went to their sons (S and P) and to O. (a) Is the suit filed by P barred by prescription? Explain your answer. (b) After the issuance of the sheriffs final deed of sale in 1966 in this case, assuming that M applied for registration under the Torrens System and was issued a Torrens Title to the said property in question, would that added fact have any significant effect on your conclusion? State your reasons. (1990) ANS: (a) Under Art. 173 of the NCC, the action is barred by prescription because the wife had only 10 years from the transaction and during the marriage to file a suit for the annulment of the mortgage deed. ALTERNATIVE ANS: (a) The mortgage contract executed by O is only a voidable contract since it involves a conjugal partnership property. The action to annul the same instituted in 1977, or 11 years after execution of the sheriffs final sale, has obviously prescribed because: 1.

;An action to annul a contract on the ground of fraud

fraud. Since this is in essence an action to recover ownership, it must be reckoned from the date of execution of the contract or from the registration of the alleged fraudulent document with the assessor’s office for the purpose of transferring the tax dec­ laration, this being unregistered land. (Bael vs. Intermediate Appellate Court, G.R. L-74423, January 30, 1989, 169 SCRA 617) 2. If the action is to be treated as an action to recover ownership of land, it would have prescribed just the same be­ cause more than 10 years have already elapsed since the date of the execution of the sale. (b) If M had secured a Torrens Title to the land, all the more S and P could not recover because if at all their remedies would be: 1. A Petition to Review the Decree of Registration. This can be availed of within one year from the entry thereof, but

881

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OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

only upon the basis of “actual fraud.” There is no showing that M committed actual fraud in securing his title to the land; or 2. An action in personam against M for the reconvey­ ance of the title in their favor. Again, this remedy is available within four years from the date of the discovery of the fraud but not later than 10 years from the date of registration of the title in the name of M.

116. Mrs. S borrowed P20,000.00 from PG. She and her 19-year-old son, Mario, signed the promissory note for the loan, which note did not say anything about the capacity of the signers. Mrs. S made partial payments little by little. After several years, she died leaving a balance of P10,000.00 on the note. PG demanded payment from Mario who refused to pay. When sued for the amount, Mario raised the defense that when he signed the note he was still a minor. Should the defense be sustained? Why? (1979) s ANS: No. 1: The defense should be sustained. Mario cannot be bound by his signature in the promissory note.. It must be observed that the promissory note does not say anything about the capacity of the signers. In other words, there is no active fraud or misrepresentation; there is merely silence or constructive fraud or misrepresentation. It would have been different if the note says that Mario is of age. The principle of estoppel would then apply. Mario would not be allowed to invoke the defense of minority. The promissory note would then have all the effects of a perfectly valid note. Hence, as far as Mario’s share in the obligation is concerned, the promissory note is voidable because of minority or non-age. He cannot, however, be absolved entirely from monetary responsibility. Under the NCC, even if his written contract is voidable because of minority he shall make restitution to the extent that he may have been benefited by the money received by him. (Art. 1399, NCC.) True, more than four (4) years have alreadjr elapsed from the time that Mario had attained the age of 21. Apparently, his right to interpose the defense has already prescribed. However, where minority is used as a defense and no positive relief is prayed for, the 4-year period (Art. 1391, NCC.) does not apply. Here, Mario is merely interposing his minority as an excuse from liability. (Braganza vs. Villa Abrille, 105 Phil. 456.)

882

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ANS: Alternative Answer: The defense should not be sustained. It must be noted that the action for annulment was instituted by PG against Mario when the latter was already 26 years old. Therefore, the right of Mario to invoke his minority as a defense has already prescribed. According to the NCC, actions for annulment of voidable contracts shall prescribe after four (4) years. In the case of contracts which are voidable by reason of minority or incapacity, the 4-year period shall be counted from the time the guardianship ceases. (Art. 1391, NCC.) The same rule should also be applied to the defense. In the instant case, since more than four (4) years had already elapsed from the time Mario had attained the age of 21, therefore, he can no longer interpose his minority as a defense. It would have been different if four (4) years had not yet elapsed from the time Mario had attained the age of 21. Since there was no active fraud or misrepresentation on his part at the time of execution of the promissory note, it is clear that the contract is voidable as far as he is .concerned. In such case, the defense of minority should then be sustained. (Braganza vs. Villa Abrile, 105 Phil. 466.) (Note: Spanish commentators sustain the view that the defense shall also prescribe after the lapse of 4 years since the basis of the 5 action and the basis of the defense are the same. (3 Castan, 7th Ed., 415-416, citing Manresa, De Buen and Ramos.) In Braganza, however, the Supreme Court declared that “there is reason to doubt the pertinency of the period fixed by Art. 1301 [now Art. 1389] of the NCC where minority is set up only as a defense to an action, without the minors asking for positive relief from the contract.” Nevertheless, we believe that this statement in the decision is not controlling because it is based on a mere assumption, since the Court found as a fact that when the defense of minority was interposed, the 4-year period of prescription had not yet expired. Hence, the question is still controversial. Personally, we believe that the first answer [supra] is more just and logical.)

117. What is meant by ratification of voidable contracts? What are its requisites? ANS: Ratification, or confirmation as it is known in the Spanish NCC, is defined as the act or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity. (8 Manresa, 5th Ed., Bk. 2, p. 665.)

883

Arts. 1390-1402

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

Ratification or confirmation requires the concurrence of the following requisites: (1) The contract should be tainted with a vice which is sus­ ceptible of being cured. (2) The confirmation should be effected by the person who is entitled to do so under the law. (3) It should be effected with knowledge of the reason which renders the contract voidable. (4) The reason which renders the contract voidable should have already disappeared.

118. What are the forms of ratification of voidable con­ tracts? What are the effects of ratification? ANS: The ratification of a voidable contract may be effected either expressly or tacitly. There is an express ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should expressly declare his renunciation of his right to annul the contract. On the other hand, there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. (Art. 1393, NCC.) There are two (2) distinct effects of ratification or confirmation. In the first place, it extinguishes the action to annul the contract; and in the second place, it cleanses the contract of its defects from the moment it was constituted. (Arts. 1392,1396, NCC.)

119. Who has the right to institute an action for the annulment of voidable contracts? ANS: Two (2) different requisites are necessary in order that a person may institute the action for the annulment of a voidable contract. In the first place, the plaintiff must have an interest in the contract in the sense that he is obliged thereby either principally or subsidiarily; in the second place, the victim and not the party responsible for the vice or defect must be the one who must assert the same. (Art. 1397, NCC..)

884

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

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120. If a person is not obliged principally or subsidiarily under a contract, would it be possible, for him to institute an action for the annulment of the contract? ANS: As a rule, a contract cannot be assailed by one who is not a party thereto. However, the Supreme Court in several cases has held that a person, who is not a party obliged principally or subsidiarily under a contract, may bring an action for annulment of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can show detriment which would positively result to him from the contract in which he has no intervention. (Singsong vs. Isabela Sawmill, 88 SCRA 623, 643, citing Teves vs. People’s Homesite & Housing Corporation, 23 SCRA 1114 and De Santos vs. City o f Manila, 45 SCRA 409.) Thus, where the remaining partners of a partnership, which is heavily indebted to several creditors, executed a chattel mortgage of practically all properties of the partnership in favor of a former partner to secure an obligation, undoubtedly, the contract of chattel mortgage has prejudiced the rights of the creditors of the partnership. Consequently, if such creditors can prove or show the detriment which would positively result to them, they can ask for the annulment of the contract of chattel mortgage. (Singson vs. Isabela Sawmill, supra.)

121. X, of age, entered into a contract with Y, a minor. X knew and the contract specifically stated the age of Y. May X successfully demand annulment of the contract? Reasons. (1971) ANS: X cannot successfully demand annulment of the contract. True, said contract is voidable because of the fact that at the time of the celebration of the contract, Y, the other contracting party, was a minor, and such minority was known to X. (Arts. 1327, No. 1, 1390, No. 1, NCC.) However, the law is categorical with regard to who may institute the action for annulment of the contract. In addition to the requirement that the action may be instituted only by the party who has an interest. In the contract in the sense that he is obliged thereby either principally or subsidiarily, Art. 1397 of the NCC further requires that in case of contracts voidable by reason of incapacity of one of the contracting parties, the party who

885

Arts. 1390-1402

OBLIGATIONS AND CONTRACTS Contracts Voidable Contracts

has capacity cannot ,allege the incapacity of the party with whom he contracted. Because of this additional requisite, it is clear that Y, and not X can institute the action for annulment.

122* Pedro sold a piece of land to his nephew Quintin, a minor. One month later, Pedro died. Pedro’s heirs then brought an action to annul the sale on the ground that Quintin was a minor and therefore without legal capacity to contract. If you are the judge, would you annul the sale? (1974) ANS: If I were the judge, I will not annul the sale. The NCC in Art. 1397 is explicit. Persons who are capable cannot allege the incapacity of those with whom they contracted. True, Pedro who sold the land to the minor Quintin is already dead, and it is his heirs who are now assailing the validity of the sale. However, under the principle of relativity of contracts recognized in Art. 1311 of the NCC, the contract takes effect not only between the contracting parties, but also between their assigns and heirs. (Note: Another way of answering the above problem would be to state the two requisites which must concur in order that a voidable contract may be annulled. These requisites are: ta] that the plaintiff must have an interest in the contract; and [b] that the victim or the incapacitated party must be the person who must assert the same. The second requisite is lacking in the instant case.)

123. contract?

What is the effect of the annulment of a voidable

ANS: If the contract has not yet been consummated, it is evi­ dent although the NCC does not expressly say so, that the contract­ ing parties shall be released from the obligations arising therefrom. (3 Castan, 7th Ed., pp. 416-417.) However, if the contract has al­ ready been consummated, the rules provided for in Arts. 1398 to 1402 of the NCC shall govern. Upon the annulment of the contract, if the prestation thereof consisted in obligations to give, the parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interests, except in cases provided by law. If, on the other hand, the prestation consisted in 886

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

Arts. 1403-1408

obligations to do or not to do, there will have to be an apportionment of damages based on the value of such prestation with corresponding interests. (Art 1398, NCC; 3 Castan, 7th Ed., pp. 416-417.) In other words, upon annulment the contracting parties should be restored to their original position by mutual restitution. (Caddwallader & Co. vs. Smith, Bell & Co., 7 Phil. 416; Dumasag vs. Modelo, 34 Phil. 252; Oliveros vs. Porciungeola, 69 Phil. 306; Talag vs. Tankengco, 92 Phil 1066.) The principle of mutual restitution as enunciated in Art, 1398 is, however, modified by the provisions of Art. 1399. When the defect of the contract consists in the incapacity of one of the contracting parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. It is evident that this rule is applicable only and exclusively to those cases where the nullity arises from the incapacity of one of the contracting parties. Consequently, if the nullity should arise from some other cause, the general rule enunciated in Art. 1398 would govern. (8 Manresa, 5th Ed., Bk. 2, p. 647.)

UNENFORCEABLE CONTRACTS (Arts. 1403-1408) 124. Define unenforceable contracts. ANS: Unenforceable contracts are those which cannot be enforced by a proper action m court, unless they are ratified j because either they are entered into without or in excess of authority or they do not comply with the Statute of Frauds or both of the contracting parties do not possess the required legal capacity.

125. Distinguish unenforceable contracts from other defective contracts. ANS: In general unenforceable contracts may be distinguished from the other defective contracts in the following ways: ■ (1) From rescissible contracts — first, unenforceable contracts cannot be enforced by a proper action in court, whereas rescissible contracts are valid and enforceable unless they are rescinded. Second, 887

Arts. 1403-1408

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

the former are susceptible of ratification, whereas the latter are not. And third, the former cannot be assailed by third persons, whereas the latter may be assailed by third persons who are prejudiced. (2) From voidable contracts — Unenforceable contracts cannot be enforced by a proper action in court, whereas voidable contracts are binding and enforceable unless they are annulled by a proper action in court. (3) From void contracts — There are some unenforceable contracts which are valid arid, therefore, may produce effects, although they cannot be enforced by a proper action in court; void or iriexisteht contracts, on the other hand, do not produce, as a general rule, any effect whatsoever. Hence, unenforceable contracts are susceptible of ratification, whereas void contracts are not.

126. What contracts are unenforceable? ANS: The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement thereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is .not to be per­ formed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, 888

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

Arts. 1403-1408

or the evidence, or some or them, of such things in action, or ' pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement for the leasing for a longer period than : one year, or for the sale of real property or an interest therein; ,

(f)

A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a: contract. (Art. 1403, NGC.)

127. G, husband of D, sold paraphernal property in her name without her (D’s) consent. Was such sale valid, void, voidable, rescissible. or unenforceable? Explain. (1976) ANS: The sale is unenforceable. According to the NCC under the law on defective contracts, a contract entered into in the name of another person by one who has been given no authority or legal representation; or who has acted beyond his power s, is unenforceable. (Art. 1403, No. 1, NCC.) This rule reiterates a general principle of the law on contracts which declares that a contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, is unenforceable, unless it is ratified expressly or impliedly, by the person on whose behalf it he been executed, before it is revoked by the other contracting party. (Art. 1317, NCC.) Since the property which was sold by C is paraphernal, and therefore, it belongs exclusively to C’s wife D, and since the sale was made without D’s consent, obviously, |jh% sale is unenforceable. (Note: D, therefore, has a valid cause of action against C and/ or the vendee for recovery of the property or of indemnification for damages depending upon the circumstances.)

128. “A” and “B” entered into a verbal contract whereby “A” agreed to sell to “B” his only parcel of land for P20,000 and B agreed to buy at the aforementioned price. “B” went to 889

Arts. 1403-1408

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

the bank, withdrew the necessary amount, and returned to “A” for the consummation of the contract. “A,” however, had changed his mind and refused to go through with the sale. Is the agreement valid? Will an action by “B” against “A” for specific performance prosper? Reason. (1982) ANS: It must be observed that there are two (2) questions in the case at bar. They are: (1) Is the agreement valid? The answer is yes. It is a time honored rule that even a verbal agreement to sell land is valid so long as there is already an agreement with respect to the object and the purchase price. (2) Will an action by “B” against "A” for specific performance prosper? The answer is no, unless it is ratified. The reason is obvious. The property is covered by the Statute of Frauds. It cannot, therefore, be enforced by a court action because it is not evidenced by any note or memorandum or writing properly subscribed by the party charged. {Note: The above answer is based on No. 2 of Art. 1403 of the NCC and on decided cases.)

129. purpose?

(a) What is the “Statute of Frauds”? (b) What is its

ANS: (a) The “Statute of Frauds” is descriptive of statutes which require certain classes of contracts to be in writing. The contract shall be unenforceable by action unless the same or some note or memorandum thereof be in writing and subscribed by the party charged or by his agent. Evidence of the contract, therefore, cannot be received without the writing or a secondary evidence of its content. (Art. 1403[2], NCC.) (b) The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing a signed by the party to be charged. (Rosencor Development Corp. vs. Inquing, supra.)

890

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

Arts. 1403-1408

130. Can the Statute of Frauds be applied to transac­ tions involving right of first refusal? ANS: The Statute of Frauds cannot apply to transactions not enumerated therein. The Statute of Frauds does not contemplate transactions involving a right of first refusal because the application of such statute presupposes the existence of a perfected contract. A right of first refusal is only a contractual grant over the property sought to be sold and is not a perfected contract of sale of real property, Thus, a right of first refusal may be proven by oral evidence and need not be written to be enforceable. (Rosencor Development Corp. vs. Inquing, supra.) 131. B purchased from A, a parcel of land, paying a part of the agreed price with the understanding that he will pay the balance upon the execution of the deed of conveyance. Subsequently, A sold the same land to C, who knew of the first sale. As a result B brought this action against both A and C to enforce the contract. Defendants contend that the contract is unenforceable under the Statute of Frauds as enunciated in No. 2 of Art. 1403 of the NCC. Decide the case, stating your reasons. * ANS: This is the case of C&rbQnell vs. Pomiq (103 Phil. 655). According to the Supreme Court: “It is well-settled in this jurisdiction that the Statute of Frauds is applicable only to executory contracts (Facturan vs. Sabanal, 81 Phil. 512.), not to contracts that are totally or par­ tially performed. (Almirol vs. Monserrat, 48 Phil. 67, 70; Robles vs. Lizarraga Hermanos, 50 Phil. 387; Diana vs. Macalibo, 75 Phil. 71.) The reason is simple. In executory contracts, there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting par­ ties. The statute has precisely been enacted to prevent fraud. (Moran, Comments on the Rules of Court, Vol. Ill, 1956 Ed., p. 178.) However, if a contract has been totally or partially per>formed, the exclusion of parol evidence would promote fraud or bad faith for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or li­

891

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abilities assumed or contracted by him thereby. So that when the party concerned has pleaded partial performance, such party is entitled to a reasonable chance to establish by parol evidence the truth of his allegation, as well as the contract it­ ......... self.” 132. “O” verbally leased his house and lot to “L” for two (2) years at a monthly rental of P250.00 a month. After the first year, “O” demanded a rental of P5O0.OO claiming that due to the energy crisis, with the sudden increase of the price of oil, which no one expected, there was also a general increase in prices. “O” proved an inflation rate of 100%. When “L” refused to vacate the house, “O” brought an action for ejectment. wO” denied that they had agreed to a lease for two (2) years. A. Can the lessee testify on a verbal contract of lease? Reasons. (1981) ANS: Yes, the lessee “L” may testify on the verbal contract of lease. Well-settled is the rule that the Statute of Frauds by virtue of which oral contracts (such as the contract in the instant case) are unenforceable by court action is applicable only to those contracts which have not been consummated either totally or partially. The reason for this rule is obvious. In effect, there is already a ratification of the contract by acceptance of benefits. Here, “L” has been paying to “O” a monthly rental of P250.00 for one year. The case is, therefore, withdrawn from the coverage of the Statute of Frauds. {Note: The above answer is based on Arts. 1403, No. 2, and 1405 of the NCC and on decided cases.)

B. Assuming that “O” admits the two (2)-year contract, is he justified in increasing the rental? Why? (1981) ANS: Yes, “O” is justified in increasing the monthly rental. Since it is admitted that the contract of lease is for a definite term or period of two (2) years, it is crystal clear that the case is withdrawn from the coverage of the new rental law. Now, during the hearing of the case, “O” was able to prove an inflation rate of 100%. Therefore, an increase is justified: (Batas Pambansa Big. 25.)

892

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134. What is the Statute of Frauds? What is the purpose of the Statute of Frauds? ANS: The term “statute of frauds” is descriptive of statutes which require certain classes of contracts to be in writing. This statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable Thus, they are included in the provisions of the NCC regarding unenforceable contracts, more particularly Art. 1403, paragraph 2. (Rosencor Development Corporation vs. Inquing, supra.) 135. Is a right of first refusal akin to “an agreement for the leasing of a longer period than one year, or for the sale of real property or of an interest therein” as contemplated by Article 1403, par. 2(e) of the NCC? ANS: Not all agreements “affecting land” must be put in writing to attain enforceability. Thus, the setting up of boundaries, the oral partition of real property, and an agreement creating a right of way are not covered by the provisions of the statute of frauds. The reason simply is that these agreements are not among those enumerated in Article 1403 of the NCC. A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Art. 1403, par. 2(e) of the NCC presupposes the existence of a perfected, albeit unwritten, contract of sale A right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involved, but of the right of first refusal over the property sought to be sold. It is thus evident that the statute of frauds does not contem­ plate cases involving a right of first refusal. As such, a right of first refusal need not be written to be enforceable and may be proven by oral evidence. (Rosencor Development Corporation vs. Inquing, su­ praJ 136. Can an oral sale of land be judicially enforced as between the contracting parties, if the land has not been

893

Arts. 1403-1408

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

ANS: Yes, the action will prosper. The right of way, although arising from a verbal agreement between M and the predecessor of W & Co., still subsists. Obviously, the Statute of Frauds cannot be applied because the agreement is not an agreement for the sale of real property or an interest therein. Therefore, the agreement is not only valid but aiso enforceable at the same time. (Western Mindanao Lumber Co. vs. Medalla, 79 SCRA 702.) Besides, it is a well-settled rule that the Statute of Frauds is applicable only to purely executory contracts and not to contracts which have already been executed either totally or partially. Here, the verbal agreement with respect to the right of way had already

894

c - A i ■ a w m - 5 x n - o m a i n f : .: r t g

137. W & Co., a logging company, received a letter from M, the new owner of a certain property, notifying it that the latter will close the road running through his property and through which W & Co.’s trucks pass in hauling logs to its sawmill. W & Co., therefore, begged M not to do so and upon the latter^ refusal, W & Co. filed an action for injunction alleging among others that it had acquired a right of way through M’s land before by virtue of a verbal agreement with the previous owner. Will the action prosper? (1979)

j A

^

a

a

ANS: Yes, an oral sale of land where the land has not been delivered but the buyer has paid 10% of the purchase price may be judicially enforced. Well-settled is the rule that the Statute of Frauds by virtue of which oral contracts are unenforceable by court action is applicable only to those contracts which are executory and not to those which have been consummated either totally or partially, (Almirol vs. Monserrat, 48 Phil. 67; Asturias Sugar Central vs. Montinola, 69 Phil. 725; Diana vs. Macalibo, 74 Phil. 70; Arroyo vs. Azur, 76 Phil. 493; Facturan us. Sabanal, 46 Off. Gaz. 310; Carbonell vs. Poncio, 103 Phil. 655.) The reason is obvious. In effect, there is already a ratification of the contract because of acceptance of benefits. As a matter of fact, this reason is now embodied in the NCC. According to Art. 1405 of said Code, contracts infringing the Statute of Frauds are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.

- .B i g

delivered but the buyer has paid 10% of the purchase price? (1974)

OBLIGATIONS AND CONTRACTS Contracts Unenforceable Contracts

Arts. 1403-1408

been totally executed. As a consequence, it is withdrawn from the purview of the Statute of Frauds. 138. Suppose that in an oral contract, which by its terms is not to be performed within one year from the execution thereof, one of the contracting parties has already complied within the year with the obligations imposed him by said contract, can the other party avoid the fulfillment of those incumbent upon him by invoking the Statute of Frauds (Art. 1403, No. 2, NCC)? ANS: No, he cannot. This is so, because the Statute of Frauds aims to prevent and not to protect fraud. It is well-settled that when the law declares that an agreement which by its terms is not to be performed within a year from the making thereof is unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent, it refers only to an agreement which by its terms is not to be performed on either side within a year from the execution thereof. Hence, one which has already been fully performed on one side within a year is taken out of the operation of the statute. (PNB vs. Phil. Vegetable " Oil Co., 49 Phil. 857; Shoemaker vs. La Tondena, 68 Phil. 24.) 139. In 1968, D borrowed P5,000 from C. This debt is evidencedby a promissory note wherein D promised to pay the obligation within two years. In 1970, when the note matured, A, a friend of D, assumed orally, without the knowledge of D, but with the consent of C, the payment of the debt within six (6) months. Because of A’s failure to pay within the period agreed upon, C finally decided to bring an action against him. Will such an action prosper, assuming that the oral contract can be proved by testimonial evidence? ANS: Yes, the action will prosper. It is well-settled that a special promise to answer for the debt, default or miscarriage of another in order to fall within the operation of the Statute of Frauds should be collateral not independent or original. (Reiss vs. Memije, 15 Phil. 350.) Example of this would be the undertaking of a guarantor or a surety. In the instant case, the promise of A is independent or original.

895

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

140. How may contracts infringing the Statute of Frauds be ratified? ANS: Contracts infringing the Statute of Frauds may be ratified either: (1) by the failure to object to the presentation of oral evidence to prove the same, or (2) by the acceptance of benefits under them. (Art. 1405, NCC.) 141. Distinguish from each other “confirmation,” “rati­ fication,” and ‘‘recognition.” ANS: Under the Spanish Civil Code, the terms “confirmation* and “ratification” were not interchangeable. Confirmation was a term used to designate the act by which avoidable contract was cured of its vice or defect, while ratification was used exclusively to designate the act by which a contract entered into by a person m behalf of another without or in excess of authority is cured of its defect. Ratification, therefore, was a specie of confirmation, Under the present Code, the term ratification is now used to designate the act of validating any kind of defective contract. Under the old law, it was also customary to distinguish confir­ mation and ratification from recognition. Recognition or acknowl­ edgment refers to an act whereby a defect of proof is cured, such as when an oral contract is put in writing, or when a private instru­ ment is converted into a public instrument. Thus, according to the Supreme Court, in the case of Luna vs. Linatoc (74 Phil. 15): “Con­ firmation tends to cure a vice of nullity and ratification is for the purpose of giving authority to a person who.previously acted in the name of another without authority. Recognition, on the other hand, is merely to cure a defect of proof. In recognition, there is no vice to be remedied, such as fraud, violence or mistake, so that the case is distinguished from confinnation. In recognition, the person acting on behalf of another is duly authorized to do so, so the situation is different from ratification.” VOID OR INEXISTENT CONTRACTS (Arts. 1409-1422) 142. Define void and inexistent contracts. ANS: In general, void and inexistent contracts may be defined as those which lack absolutely either in fact or in law one or some

896

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

or all of those elements which are essential for; its validity. In particular, void contracts are the contracts where all of the requisites prescribed by law for contracts are present, but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy, or they are prohibited by law, or they are declared by law to be void. Inexistent contracts, on the other hand, are those contract which lack absolutely one or some or all of those requisites which are essential for validity. 143. Distinguish between void and inexistent contracts. ANS: Void and inexistent contracts may be distinguished from each other in the following ways: (1) Void contracts refer to those where all of the requisites of a contract are present, but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy, or the contract itself is prohibited or declared by law to be void; inexistent contracts, on the other hand, refer to those where one or some or all of those requisites which are essential for validity are absolutely lacking (Liguez vs. Court o f Appeals, 102 Phil. 577.) (2) The principle of in pari delicto is applicable in the first, but not in the second. Consequently, the first may produce effects. (Arts. 1411, 1412, NCC.), but the second does not produce any effect whatsoever. 144. Distinguish void and inexistent contracts from the other defective contracts. ANS: A void or inexistent contract may be distinguished from a rescissible contract in the following ways: (1) A void or inexistent contract produces as a rule no effect even if it is not set aside by a direct action, whereas a rescissible contract is valid unless it is rescinded. (Arts. 1380, 1409, NCC.) (2) The defect of the former consists in absolute lack in fact or in law of one or some or all of the essential elements of a contract, whereas the defect of the latter consists in lesion or damage to one of the contracting parties or to third persons. (Ibid.) (3) In the former the nullity or inexistence of the contract is based on the law, whereas in the latter its rescissible character

897

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

is based on equity. Hence, an action for declaration of absolute nullity or inexistence is not only a remedy but a sanction, where as an action for rescission is a mere remedy. Public interest, therefore, predominates in the first, whereas private interest predominates in the second. (8 Manresa, 5th Ed., Bk. 2, pp. 544-545.) (4) The action for the declaration of the nullity or inexistence of a contract isdmprescriptible, whereas the action for the rescission of a contract is prescriptible. (Arts. 1389, 1410, NCC.) (5) The nullity or inexistence of a contract cannot as a rule be assailed by third persons, whereas the rescissible character of a contract may be assailed by third persons. (Arts. 1381, 1382, 1409, NCC). A void contract may be distinguished from a voidable contract in the following ways: (1) A void or inexistent contract produces as a rule no effect even if it is not set aside by a direct action, whereas a voidable contract is binding unless it is annulled. (Arts. 1390,1409, NCC.) (2) The causes for the inexistence or absolute nullity of the former are different from the causes for the annulability or relative nullity of the latter. (Ibid.) (3) The former is not susceptible of ratification, whereas the latter is susceptible of ratification. (Ibid.) (4) The action for the declaration of the nullity or inexistence of a contract is imprescriptible, whereas the action for the annulment of a contract is prescriptible. (Arts. 1391, 1140, NCC.) (5) The defense of inexistence or absolute nullity is available to third persons whose interests are directly affected, whereas the defense of annulability is not available to third persons. (Arts. 1397, 1421, NCC.) A void contract may be distinguished from an unenforceable contract in the following ways: (1) In a void or inexistent contract, there is in law or in reality no contract at all, whereas in an unenforceable contract there is actually a contract which cannot be enforced by a court action unless it is ratified. (Arts. 1403,1409, NCC.)

898

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

(2) The causes for the inexistence or absolute nullity of the . former are different from the causes for the unenforceability of the latter. (Ibid.) (3) The former is not susceptible of ratification, while the latter is susceptible of ratification; (Arts. 1404, 1405, 1407, 1409, NCC.) (4) ,, The former can be assailed by third persons whose interests are directly affected, whereas the latter cannot be assailed by third persons. (Arts. 1408,1421, NCC J 145. What contracts are void or inexistent? ANS: Tlie following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals ? good customs, public order or public policy; (2)

Those which are absolutely simulated or fictitious; ,

(3) Those whose cause or object did not exist at the time of the transaction; (4)

Those whose object is outside the commerce of men;

(5)

Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. (Art. 1409, NCC.) In addition, we can also include those which are the direct results of previous illegal contracts (Art. 1422, NCC.), those where there is no concurrence between offer and acceptance with regard to the object and the cause of the contract, and those which do not comply with the required form where such form is essential for validity. 146. (a) Cite an example of a contract which is contrary to morals, (b) Can the nullity of the stipulation on the usurious interest affect (i) the lender’s rights to recover the principal loan; (ii) the terms of the real estate mortgage?

899

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

ANS: (a) Stipulations authorizing iniquitous or unconsciona­ ble interests are contrary to morals, if not against the law. Under Art. 1409 of the NCC, these contracts are inexistent and void from the very beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived. (b) The nullity of the stipulation on the usurious interest does not, however, affect ,the lender’s right to recover the principal loan. Nor would it affect the terms of the real estate mortgage (REM). The right to foreclose the mortgage remains with the creditors and said right can be exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest. A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed. But in a situation where the total amount of indebtedness during the foreclosure proceedings is pegged in an amount which included interest which is excessive, iniquitous and exorbitant, the foreclosure proceedings cannot be given effect and will be considered invalid: If the foreclosure proceedings were considered valid, this would result in an inequitable situation wherein the borrowers will have their land foreclosed for failure to pay an over-inflated loan only a small part of which they were obligated to pay. (Heirs ofZoilo Espiriiu and Primitiva Espiritu vs. Sps. Landrito, G.R. No. 169617, April 3, 2007). 147. (a) What is the period of prescription for bringing an action for a judicial declaration of the absolute nullity or inexistence of a void or inexistent contract? (b) On the basis of a document entitled “Deed of Absolute Sale,” a certain lot and building then leased by its owner PC to JG with monthly rental of P 1,000.00, was sold to and thus registered, in the latter’s name. Six (6) years after the issuance of the title to JG, MC, the sole heir of PC who had just died, brought an action for recovery of the property alleging in his complaint, among others, that PC then very old and with weak eyesight was tricked by JG into signing the Deed of Absolute Sale upon the fraudulent misrepresentation that said document was only a renewal of the lease contract over the property; that the price stated in the document is only P50,000.00. JG moved to dismiss the

900

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

action on the ground of prescription. Should the motion be granted? (1979) ANS: (a) There is no period of prescription. In other words, the action is imprescriptible. (Art. 1410, NCC.) (b) The motion should not be granted. In reality, the action for recovery of the subject property brought by MC against JG is an action to declare the fictitious deed of sale as void or inexistent because: first, there is absolutely no consent of the alleged vendor to the sale; and second, there is no cause or consideration for the sale as far as the alleged vendor is concerned. Fraud was merely alleged in the complaint to show or explain why the alleged vendor signed the absolute deed of sale. Consequently, since the action instituted by MC against JG is an action for the judicial declaration of the inexistence of the alleged deed of sale, it is imprescriptible. (Art. 1410, NCC; Maria Castillo vs. Josefa Galvan, 85 SCRA 526; Ocejo, Perez and Co. vs. Flores, 40 Phil. 921; Mapalo vs. Mapalo, 17 SCRA 114.) 148. What is the principle of in pari delicto? ANS: When the defect of a void contract consists in the illegality of the cause or object of the contract, and both of the parties are at fault ox in pari delicto, the law refuses them every remedy and leaves them where they are. This rule which is embodied in Arts. 1411 and 1412 of the NCC is what is commonly known as the principle of in pari, delicto. It is a rule which is expressed in the maxims: “Ex dolo malo non oritur actio” and “In pari delicto potior est conditio defendentis.” The law will not aid either party to an illegal agreement; it leaves them where they are. 149. What are the exceptions to the principle of pari delicto? ANS: The exceptions to the principle of pari delicto are the following: (1) Payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before the purpose has been accomplished, or before any damage has been caused to a third person. In such case, the courts

901

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

may allow such party to recover what he has paid or delivered, if the public interest will thus be subserved. (Art. 1414, NCC.) (2) Payment of money or delivery of property by an incapac­ itated person. In such case, the courts may allow such person to recover what he has paid or delivered, if the interest of justice so demands. (Art. 1415, NCC.) (3) Agreement or contract which is not illegal per se but is merely prohibited by law, and the prohibition is designed for the protection of the plaintiff. In such case, such plaintiff, if public policy is thereby enhanced, may recover what he has paid or delivered. (Art. 1416, NCC.) (4) Payment of any amount in excess of the maximum price of any article or commodity fixed by law, In such case, the buyer may recover the excess. (Art. 1417, NCC.) (5) Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law. In such case, the laborer may demand for overtime pay. (Art. 1418, NCC.) (6) Contract whereby a laborer accepts, a wage lower than the minimum wage fixed by law. In such case, the laborer may demand for the deficiency. (Art. 1419, NCC.) 150. On January 24,1934, M executed a deed of sale con­ veyance ownership to two (2) fishponds located in Malabon to X, a daughter by a prior marriage. On January 27, 1934, X executed a deed of sale conveying ownership of the same properties to her stepfather F and her mother M. In 1953, F died intestate, survived by his widow M and three children A, B, and C, by a prior marriage. After the death of F, M and her stepchildren partitioned the properties. Subsequently, the relationship between M and her stepchildren turned for the worse. Finally, in 1962, M brought an action against her stepchildren for conveyance of the shares given to them in the aforementioned properties on the ground that the con­ veyances made in 1934 are null and void. Defendants set up the defenses, among others, of pari delicto and laches. De­ cide the case. ANS: What would invalidate the conveyances under scrutiny is the fact that they were resorted to in order to circumvent the

902

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

prohibition against donations between spouses contained m Art 1334 (now Art. 133) of the NCC. The illegal purpose tainted the two contracts. The illegal or illicit purpose then becomes illegal causa within the terms of the NCC. Consequently, the contracts are null and void. Unfortunately for plaintiff, in contracts invalidated by illegal causa, Arts. 1305 and 1306 (now Arts. 1411 and 1412) of the NCC apply rigorously the rule "in pari delicto non oritur actio, denying all recovery to the guilty party inter se. And of course, it cannot be denied that she had knowledge of the nullity of the contracts since 1934 because she was a party thereto. And yet, her present action was filed only in 1962 and after the breaking up of friendly relations between her and her stepchildren. Her inaction to enforce her right for 28 years cannot be justified by the lame excuse that she assumed that the transfer was valid. Knowledge of the effect of that transaction would have been obtained by the exercise of due diligence. Ignorance which is the effect of inexcusable negligence, it has been said, is no excuse for laches. (Rodriguez vs. Rodriguez, 20 SCRA 908J 151. A, married to B, donated in 1940 a parcel of land belonging to the conjugal partnership to C, a minor of 16, subject to the condition that C shall become his mistress. The donation was duly accepted by C and by her parents. After the perfection of the donation, C became the mistress of A. When A died in 1945, his widow, B, and his legitimate children, X and Y, took possession of the land. Subsequently, C commenced an action for recovery of the property. Defen­ dants advanced the defense that the contract of donation is inexistent because of the illegality of the cause; consequent­ ly, it has not produced any effect whatsoever. Plaintiff, how­ ever, contended that what is illegal is the motive of the do­ nor and not the cause, since the contract in this case is one of pure beneficence. (1) What is the character of the contract — is it valid, void or inexistent? Reasons. (2) .Assuming that the contract is either void or inexistent, what are its effects if any? Reasons. ANS: The factual backdrop of the above problem is identical

903

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

to that of Liguez vs. CA (102 Phil. 577). The answers given by the SC to the questions propounded above may be summarized as follows: (1) The contract in the instant case is void. The facts clearly demonstrate that the contract is onerous in character since the donor was not moved exclusively by the desire to benefit the donee, but also to gratify his sexual impulse. While it is true that the causa of a contract must not be confused with the motives of the parties (Art. 1351, NCC.), there is an exception. The motive may be regarded as causa when it predetermines the purpose of the contract. In otherwords, we must except from the rule those contracts that are conditioned upon the attainment of the motives of either party. In the present case, it is scarcely disputable that the donor would not have conveyed the property in question had the donee refused to accept the condition that she will cohabit with him. Hence, the cohabitation was an implied condition of the donation, and being unlawful, necessarily tainted the donation. (2) Since the contract is void by reason of the illegality of the cause, the provisions of Art. 1412 of the NCC are, therefore, applicable. However, the rule of pari delicto is not applicable. C was only 16 years old at the time of the donation. It is well-known that minors occupy a privileged position under our law. As a matter of fact, the law’s tender care for them is now emphasized in Art. 1415 of the Code. At any rate, even if they were in pari delicto, the same rules would still apply. Under Arts. 1411 and 1412, nullity of contracts due to illegal cause or object, when executed (and not merely executory) will produce the effect of barring any action by a guilty party to recover, where has already given under the contract. These articles make it plain that as far as the guilty party is concerned, his act of conveying property pursuant to an illicit contract operates to divest him of the ownership of the property, and to bar him from recovering it from his transferee, just as if the transfer were through a bargain legal from its inception. Although repugnant, the law deems it more repugnant that a party should invoke his own guilt as a reason for relief from a situation which he has deliberately entered. This serves to explain why the tainted conveyance to the extent that it has been carried out becomes conclusive as between the guilty parties, even if without effect against strangers without notice; and why a guilty party may not ask the courts for a restoration to the status quo ante. The same reasons can also be applied to the case of the successors

904

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

or heirs of the guilty party. They cannot attract the validity of the donation in their quality as successors or heirs of the guilty party since it is undeniable that they cannot be placed in a better position than their predecessor. Consequently, since the property donated is conjugal and since the donation was made when the Spanish NCC was still in force, Art. 1419 of said Code is applicable. The second paragraph of this article considers the donation as merely fraudulent, subject to collation upon liquidation of the conjugal partnership properties and deduction of its value from the donor’s share in the conjugal profits. Therefore, C is entitled to so much of the donated property as may be found upon proper liquidation not to prejudice the share of the widow or the legitimes of the compulsory heirs. 152. A partnership borrowed P20,000.00 from "A ” at clearly usurious interest. Can the creditor recover anything from the debtor? Explain. (1975) ANS: Yes, the creditor can recover from the debtor the following: the principal, legal interest on the principal from the date of demand (Art. 2209, NCC.), legal interest on the legal interest from the time of judicial demand (Art. 2212, NCC.), and attorney's fees, if proper, under Art, 2208 of the NCC. , That the creditor can recover the principal from the debtor is now well-settled. (Angel Jose vs. Chelda Enterprises, 23 SCRA 119; Briones vs. Cammayo, 41 SCRA 404.) In a usurious contract of loan, there are always two (2) stipulations. They are: first, the principal stipulation whereby the debtor undertakes to pay the principal; and second, the accessory stipulation whereby the debtor undertakes to pay a usurious interest. These two (2) stipulations are divisible. According to Art. 1420 of the NCC, in case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced. It is clear that what is illegal is the prestation to pay the stipulated interest. Hence, being separable, the latter only should be deemed void. (Note: It must be noted that in Angel Jose vs. Chelda, it was held that attorney’s fees cannot be awarded. The principal reason is that, at the time when the decision was promulgated, there was yet no definite ruling on the point of law involved. Now, it is already

905

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

well-settled that plaintiff creditor may recover the principal plus legal interest under Arts. 2209 and 2212 of the NCC. Hence, attorney's fees may now be awarded.)

153. On January 15, 1958, D borrowed P10,000 from C. As evidence of the indebtedness, D executed a promissory note promising to pay the entire obligation on January 15, 1959 at 24% interest per annum. As security for the payment of the obligation, he also executed a real estate mortgage on a house and lot registered in his name in favor of C. This mortgage was duly registered. When the note matured, D paid the entire obligation plus interest amounting to P2,400. Considering that the contract is usurious, if D institutes an action against C for the recovery of the usurious interest which he has paid, how much can he recover? Reason. ANS: D can recover the entire interest of P2,400 which he has paid plus 6% interest thereon from the date of payment. This is in accordance with Sec. 6 of the Usury Law and Art. 1413 of the NCC, It must be observed that under Sec. 6 of the Usury Law, the debtor may recover the whole interest paid. Under the NCC, iri Art. 1413, “interest paid in excess of the interest allowed by the usury laws may be recovered by the debtor, with interest thereon from the date of payment.” When the Code speaks of “interest paid in excess of the interest allowed by usury laws,” it means the whole usurious interest..The two (2) provisions, therefore, are almost identical. The only change effected by Art. 1413, NCC, is not to provide for the recovery of the interest paid intexcess of that allowed by law, which the Usury Law already provided for, but to add that the same can be recovered “with interest thereon from the date of payment.” (Angel Jose Warehousing Co. vs. Chelda Enterprises, 23 SCRA 119.) (Note: Prior to January 1, 1983 and under the Treasury Laws, no person shall receive a rate of interest, including commissions, premiums, fines and penalties, higher than 12% per annum or the maximum rate prescribed by the Monetary Board for a loan secured by a mortgage upon real estate the title to which is duly registered. Therefore, the 18% interest rate plus the additional interest and penalty charges of 18% and 8%, respectively, are highly usurious. [Development Bank o f the Philippines vs. Perez, G.R. No. 148541, November 11, 2004.] Under Central Bank (CB) Circular No. 905, which became effective on January 1, 1983, whereby the Monetary

906

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

Board is authorized to fix interest rates, the ceiling rates under the Usury law [Act No. 2655, as amended by P.D. No. 116] have been abolished. It should be noted that Central Bank CB Circular No. 905 did not repeal nor in any way amend the Usury Law but simply suspended the latter’s effectivity. The legislation of usury is wholly the creature of legislation. A Central Bank Circular cannot repeal a law. Only a law can repeal another law. Thus, retroactive application of a Central Bank Circular cannot, and should not, be presumed. [Development Bank o f the Philippines vs. Perez, G.R. No. 148541, November 11, 2004.J

In declaring void the stipulations authorizing excessive interest and charges, the SC declared that although the Usury Law was suspended by CB Circular No. 905 and consequently the parties are given wide latitude to agree on any interest rate, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. [Heirs ofZoilo Espiritu vs. Sps. Landrito, supra, G.R. No. 169617, April 3, 2007])

154. X Co. brought an action against ABC Co. for the recovery of an unpaid loan of P 10,000 with legal interest from the filing of the complaint, plus attorney’s fees. Defendant interposed the defense that since the loan is usurious and therefore void, consequently the principle of pari delicto as enunciated in Art. 1411 of the NCC is applicable. To strengthen its defense, defendant invoked the provisions of Arts. 1413 and 1961 of the NCC as well as the case of Sebastian vs. Bautista (58 Off.\ Gaz. 3146.) wherein the Court of Appeals held that in usurious contracts, although the NCC in Art. 1413 provides for an exception to the rule of pari delicto in the case of the debtor, it does not provide for an exception in the case of the creditor. Decide. ANS: The factual setting of the above problem is identical to that of Angel Jose Warehousing Co. vs. Chelda Enterprises Co. (supra.) In that case, the Supreme Court held that the creditor would be able to recover the entire principal plus legal interest of 6% per annum from the filing of the complaint, but not attorney’s fees. A contract of loan with usurious interest consists of principal and accessory stipulations, the principal one is to pay the debt; the

907

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

*

accessory is to pay interest thereon. These two (2) stipulations are divisible in character. According to Art. 1420 of the NCC, “in case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced.” In a simple contract of loan with usurious interest, the prestation of the debtor to pay the principal debt is not illegal; what is illegal is the prestation to pay the stipulated interest. Heince, being separable, the latter only should be deemed void. The foregoing interpretation is more in accordance with the philosophy of our usury legislation for the following reasons: (1) It discourages usurious contracts; (2) It is in consonance with the principle that no person shall enrich himself unjustly at the expense of another; (3) Penal sanctions are available against a usurious debtor as a further deterrence to usury. X Co. is therefore entitled to the recovery of the principal of the loan plus legal interest of 6% per annum from the filing of the complaint pursuant to Art. 2209 of the NCC. Attorney’s fees, however cannot be awarded since there is no showing that the case falls under any of the exceptions provided for in Art. 2208 of the NCC. Besides, defendant had reason to resist the claim since there was yet no definite ruling on the point of law involved in the light of the NCC. (The foregoing decision was subsequently reiterated in Briones vs. Cammayo, 41 SCRA 404.) 155. In usurious loans, the entire obligation does not become void because of an agreement for usurious interest; the unpaid principal debt still stands and remains valid, but the stipulation as to the usurious interest is void. Consequently, the debt is to be considered without stipulation as to the interest. In the absence of an express stipulation as to the rate of interest, what interest rate shall be imposed? ANS: The legal rate at 12% per annum shall be imposed. (DBP vs. Perez, G.R. No. 148541, November 11, 2004.) 156. On March 1, 1936, a homestead patent was issued to A. On March 1, 1937, he sold the homestead to X. In 1955, A died survived by his children, R and C. Subsequently, B and C brought an action against X for the recovery of the

908

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

Arts. 1408-1422

homestead on the ground that the sale is void pursuant to Sec. 118 of the Public Land Law. X, however, contends that there can be no recovery under the rule of pari delicto. Decide the case. ANS: The rule oipari delicto is not applicable here. While it is true that both vendor and vendee are guilty of violating the law, nevertheless, public policy dictates that the homesteader or his heirs should be allowed to reacquire the land even if it has beeii sold, since the avowed purpose of the law is to give said land to a family for home and cultivation. This exception to the rule of pari delicto is sanctioned by Art. 1416 of the NCC. The action for recovery, of course, will not prescribe since the contract is void. However, while the principle of pari delicto is not applicable to the homestead, it is applicable to the products and the improvements. In other words, because of the principle, the homesteader or his heirs cannot recover from the vendee the value of the products realized by said vendee from the land; neither can the vendee or his heirs recover from the vendor the value of the improvements made by them on the land. {Angeles vs. Court o f Appeals, 102 Phil. 1006. To the same effect — Ras vs. Sua, 25 SCRA 153, where the Supreme Court citing the Angeles case, applied the same doctrine to land acquired from the National Abaca and Other Fibers Corporation [NAFCO] pursuant to Rep. Act No. 477 and subsequently leased to another by the registered applicant in violation of the law.) 157. JS, blind, crippled and 90 years of age, entered into a contract with her friend, WH, a Chinese, by virtue of which she leased to the latter a portion of her property in Rizal Avenue, Manila, for 50 years at a monthly rental of P3,120. This contract was amended four times in a period of about a year so as to cover the entire property, giving the lessee an option to buy said property for P 120,000 payable within 50 years, and extending the term of the lease to 99 years, at a monthly rental of P3,480, but imposing the condition that the lessee must become a Filipino citizen. About six (6) months after the execution of the last contract, the lessor brought an action against the lessee for the annulment of the lease contracts. (1) In these contracts, is there a violation of the Constitutional ban against alien landholding? (2) If there is

909

Arts. 1409-1422

OBLIGATIONS AND CONTRACTS Contracts Void or Inexistent Contracts

a violation, is the principle of pare delicto applicable so as to prevent the lessor or her heirs from recovering the leased property from the lessee? ANS: (1) Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on the condition that he is granted Philippine citizenship. But if an alien is given not only a lease of, but also, an option to buy a piece of land by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages, not only of the right to enjoy the land (jus possidendi, jus utendi,jus fruendi, and jus abutendi) but also the right to dispose it (jus disponendi) -r rights the sum total of which make up ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this is exactly what the parties in this case did. If this can be done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko vs. Register o f Deeds, is indeed in grave peril.

.

'

]

(2) However, it does not follow that because the parties are in pari delicto, they will be left where they are without relief. i For one thing, the original parties are already dead; for another thing and this is important, Art. 1416 of the NCC provides, as an exception to the rule on pari delicto, that “when the agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.” It is well-settled that the provision of the Constitution in Art. XIII, Sec. 5, is an expression of public policy to conserve lands for Filipinos. This policy would certainly be defeated and its continued violation sanctioned, if the general rule of pari delicto is applied. Hence, the contracts in question are annulled. (Phil. Banking Corp. vs. Lui She, 21SCRA52.)

910

Title III NATURAL OBLIGATIONS (Arts. 1423-1430) 1.

Define natural obligations. (1977)

ANS: Natural obligations are those based on equity and natural law; which are not enforceable by means of a court action, but which, after voluntary fulfillment by the obligor, authorize the retention by the obligee of what has been delivered or rendered by reason thereof In other words, they refer to those obligations without a sanction, susceptible of voluntary performance, but not through compulsion by legal means. (4 Tolentino, NCC, 1956 Ed., p. 588, citing Colin & Capitant.) 2.

Distinguish between civil and natural obligations.

ANS: While it is true that natural obligations are regulated by the NCC, there are still two essential distinctions between natural and civil obligations. They are: first, natural obligations are based on equity and natural law, whereas.civil obligations are based on positive law; and second, natural obligations are not enforceable by court action, whereas civil obligations are enforceable by court action. 3. tions.

Distinguish between natural and moral obliga­

ANS: Although the terms “natural obligations” and “moral obli­ gations” are used interchargeably in this jurisdiction, strictly speak­ ing, there are two (2) essential differences between the two (2). They are: first, in natural obligations there is a juridical tie between the parties which is not enforceable by court action, whereas in moral obligations there is no juridical tie whatsoever; *and second, volun-? tary fulfillment of natural obligations produces legal effects which the court recognize and protect, whereas voluntary fulfillment of

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moral obligations does not produce any legal effect which the courts recognize or protect. 4.

Give an example of natural obligations. (1977)

ANS: The best example would be the one that is regulated by Art. 1424 of the NCC. According to this article, when a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. (Note: Any one of the examples given by the NCC in Arts. 1424 to 1430 will constitute a sufficient answer.) 5. A borrowed PI,000 from B which amount B failed to collect. After the debt had prescribed, A voluntarily paid B who accepted the payment. After a few months, being in need of money, A demanded the return of the PI,000 on the ground that there was a wrong payment, the debt having already prescribed. B refused to return the amount paid. May A succeed in collecting if he sues B in court? Reason out your answer. (1970) ANS: A will not succeed in collecting the PI,000 if he sues B in court. The case is expressly covered by Art. 1424 of the NCC which declares that when a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. Because of extinctive prescription, the obligation of A to pay his debt of PI ,000 to B became a natural obligation. While it is true that a natural obligation cannot be enforced by court action, nevertheless, after voluntary fulfillment by the obligor, under the law, the obligee is authorized to retain what has been paid by reason thereof. 1423, NCC.)

912

Title IV ESTOPPEL (Arts. 1431-1439) 1.

Define estoppel.

ANS: Estoppel is a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. (Art. 1431s NCC.) 2.

Give and define the different kinds of estoppel.

ANS: The NCC, in Art. 1433, gives only two (2) kinds of estoppel — estoppel in pais (by conduct) and estoppel by deed. This classification is based on the common law classification of estoppels into equitable estoppel and technical estoppel. However, this classification is too broad. Hence, in a recent case, the Supreme Court classified estoppels into: (1) estoppel in pais; (2) estoppel by deed or by record; and (3) estoppel by laches. (Tijam vs. Sibonghanoy, 23 SCRA 29.) They may be defined as follows: (1) Estoppel in pais or by conduct is that which arises when one by his acts, representations or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, as a consequence of which he would be prejudiced if the former is permitted to deny the existence of such facts. (31 C.J.S. 237.) (2) Estoppel by deed is a type of technical estoppel by virtue of which a party to a deed and his privies are precluded from asserting as against the other party and his privies any right or title in derogation of the deed, or from denying any material fact asserted therein. (31 C.J.S. 155.) On the other hand, estoppel by record is a type of technical estoppel by virtue of which a party and his privies

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are included own denying the truth of matters set forth in a record, whether judicial or legislative. (19 Am. Jur. 605.) (3) Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a. reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. (Tijam vs. Sibonghanoy, supra; Heirs o f Lacamen vs. Heirs ofLaruan, 65 SCRA 605.) It is, therefore, a type of equitable estoppel which arises when a party knowing his rights as against another, takes no step or delays in enforcing them until the condition of the latter, who has no knowledge or notice that the former would assert such rights, has become so changed that he cannot, without injury or prejudice, be restored to his former state. 3. What is the basis of the doctrine of laches? What are its elements? ANS: The doctrine of laches or of “stale demands” is based on public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. (Tijam vs. Sibonghanoy, supra.) The four (4) essential elements of laches are: (1) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which the complaint seeks a remedy; (2) delay in asserting the complainant’s rights, the complainant having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred (Miguel vs. Catalino, 26 SCRA 234, and cases cited therein; Maneclang vs. Buan, 208 SCRA 179; Santos vs. Santos, G.R. No. 133895, October 2, 2001.) 4. In 1928, a non-Christian, sold a parcel of land to C, father of the defendant, without executive approval as

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required by Sec. 145 of the Administrative Code. Despite the invalidity of the sale, B allowed C to enter, possess and enjoy the land in question without protest, from 1928 to 1943 when B died. The plaintiffs who are the heirs of B, also remained, inactive, taking no step to reinvidicate the property from 1944 to 1962, when the present suit was commenced in court. Will the suit prosper? Reason. ANS: The suit will not prosper. Even granting plaintiffs proposition that no prescription lies against their father’s recorded title, their passivity and inaction for more than 34 years justifies the defendant in setting up the defense of laches. All of the four (4) elements of laches are present. As a result, the action of plaintiffs must be considered barred. (Miguel vs. Catalino, supra; see also Heirs ofLacamen vs, Heirs ofLaruan, 65 SCRA 605.) 5.

Distinguish between laches and prescription.

ANS: Laches and prescription may be distinguished from each other as follows: (1) Laches is concerned with the effect of delay, whereas prescription is concerned with the fact of delay. (2) Laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties, whereas prescription is a question or matter of time. (3)

Laches is not statutory, whereas prescription is statu­

(4)

Laches applies in equity, whereas prescription applies at

tory. law. (5) Laches is not based on fixed time, whereas prescription is based on fixed time. (Miguel vs. Catalino, supra; Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., 18 SCRA 1040.) 6. One-half of a parcel of land belonging to A and B was sold by X to Y for the amount of PI,500. The sale was executed verbally. One year later, A and B sold the entire land to X. Is the sale executed verbally by X to Y valid and binding? Reason.

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ANS: The sale, although not contained in a public instrument or formal writing, is nevertheless valid and binding for the timehonored rule is that even a verbal contract of sale of real estate produces legal effects between the parties. In the premises, Art. 1434 of the NCC, which declares that when a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee, is applicable. (Bucton us. Gabar, 55 SCRA 499.) 7. What is meant by estoppel by silence? What is meant by estoppel by acceptance of benefits? Give an example of each. ANS: Estoppel by silence or inaction refers to a type of estoppel in pais which arises when a party, who has a right and opportunity to speak or act as well as a duty to do so under the circumstances, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other relies and acts on such belief, as a consequence of which he would be prejudiced if the former is permitted to deny the existence of such facts. On the other hand, estoppel by acceptance of benefits refers to a type of estoppel in pais which arises when a party, by accepting benefits derived from a certain act or transaction, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other relies and acts on such belief, as a consequence of which he would be prejudiced if the former is permitted to deny the existence of such facts. A good example of estoppel by silence is the situation contem­ plated in Art. 1437 which provides: “When in a contract between third persons concerning immovable property, one of them is misled by a person with respect to the ownership or real right over the real estate, the latter is precluded from asserting his legal title or interest therein, provided all these requisites are present: (1) There must be fraudulent representation or wrong­ ful concealment of facts known to the party estopped; (2) The party precluded must intend that the other should act upon the facts as misrepresented;

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(3) The party misled must have been unaware of the true facts; and (4) The party defrauded must have acted in accordance with the misrepresentation. A good example of estoppel by acceptance of benefits is the situation contemplated in Art. 1438 which provides: “One who has allowed another to assume apparent owner­ ship of personal property for the purpose of making any trans­ fer of it, cannot, if he received the sum for which a pledge has been constituted, set up his own title to defeat the pledge of the property, made by the other to a pledgee who received the same in good faith and for value.” 8. What is meant by estoppel by judgment? How is it distinguished from res judicata? ANS: Actually, estoppel by judgment is merely a type of estoppel by record. It may be defined as the preclusion of a party to a case from denying the facts adjudicated by a court of competent jurisdiction. This type of estoppel must not be confused with resjudicata. Estoppel by judgment bars the parties from raising any question that might have been put in issue and decided in a previous litigation, whereas res judicata makes a judgment conclusive between the same parties as to the matter directly adjudged. (Phil. Nat. Bank vs. Barreto, 52 Phil. 818; Namarco vs. Macadaeg, 52 Off. Gaz. 182.)

917

Title V TRUSTS (Arts. 1440-1457) 1.

Define trust.

ANS: Trust may be defined as the legal relationship between one person having an equitable ownership over a certain property and another having the legal title thereto.

2.

Who are the parties to a trust?

ANS: A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards the property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary. (Art. 1440, NCC.) 3.

Give and define the different kinds of trusts.

ANS: Trusts are either express or implied. Express trusts are those created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law. (Art. 1441. NCC.) Implied trusts may be resulting or constructive. In Ramos vs. Ramos (61 SCRA 284), the Supreme Court adopted the following definitions: “Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters o f intent, or which are superinduced on the transaction by opera­ tion of law as matters o f equity, independently of the particular intention of the parties. (89 C.J.S. 724J They are ordinarily subdivided into resulting and constructive trusts. A resulting trust in its more restricted sense, is a trust raised by implication of law and presumed always to have been

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contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance. Examples are those found in Arts. 1447 to 1455 of the NCC. A constructive trust in its more restricted sense, as con­ tradistinguished from a resulting trust, is a trust not created by words, either expressly or impliedly evincing a direct inten­ tion to create a trust, but by the construction of equity in order to satisfy the demands of justice. ‘If a person obtains legal title to property by fraud or concealment, courts of equity will im­ press upon the title a so-called constructive trust in favor of the defrauded party.’ A constructive is not, therefore, a trust in the technical sense.” ("See Anf. 2456, NCCJ 4. Explain the concept of trust de son tort (construc­ tive trust) and give an example. (2007) ANS: A constructive trust is a form of implied trust created by equity to meet the demands of justice. It arises contrary to intention against one who, by fraud, duress, or abuse of confidence, undue influence or mistake or breach of fiduciary duty or wrongful disposition of another’s property, obtains or holds the legal right to property which he is not entitled to under the law (Huang v. Court o f Appeals, G.R. No. 108525, September 13, 1994). An example of constructive trust is when a property is acquired through mistake or fraud, the person obtaining it, is by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. (Art. 1456, NCC.) (Suggested Answers to the 2007 Bar Examination Questions, PALS) 5. Distinguish between express trust and implied trust. (1993) ANS: Express trust and implied trust may be distinguished from each other in the following ways: (1) Our NCC defines an express trust as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into being by operation of law. (2) Express trusts are those created by the direct and positive acts of the parties, by some writing or deed or will or by words

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evidencing an intention to create a trust. On the other hand, implied trusts are those which, without being expressed, are deductible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. (3) Thus, if the intent to establish a trust is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent, then the trust is implied. (Cuaycong vs. Cuaycong, 21 SCRA 1192.) (4) No express trusts concerning an immovable or any interest therein may be proved by parol evidence (Art. 1443, NCC.), while the existence of an implied trust may be proved by parol evidence. (5) Laches and prescription do not constitute a bar to enforce an express trust, at least while the trustee does not openly repudiate the trust, and make known such repudiation to the beneficiary, while laches and prescription may constitute a bar to enforce an implied trust, and no repudiation is required unless there is a concealment of the facts giving rise to the trust. (Fabian vs. Fabian, 21 SCRA 213.) 6. Sometime in 1965, respondent Dolores Sandoval bought two (2) lots, i.e.. Lots 20 and 21, in Dasmarinas Village. But because it is the policy of the subdivision owner to prohibit the acquisition of two lots by a single individual, she registered Lot 20 in the name of petitioner Ricardo Huang. Dolores asked Huang to execute in her favor a deed of absolute sale in order to protect her rights as owner of Lot 20 to which Huang conformed. Subsequently, Huang began challenging Dolores’ ownership of the property. Upon a complaint filed by Dolores, the trial court decreed that there is an implied trust created between the parties to which the CA agreed. (a) Has an implied trust been created between the parties? (b) Has the action to compel the trustee to convey the property to the “cestui que trust” prescribed? ANS: (1) Ricardo Huang became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The pertinent law

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is Art. 1448 of the NCC, which provides that there is an implied trust when property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having beneficial interest of the property. A resulting trust arises because of the presumption that he who pays for a thing intends a benefit interest therein for himself. (2) The action to compel the trustee to convey the property registered in his name for the benefit of the "cestui que trust” does not prescribe. If at all, it is only when the trustee repudiates the trust that the period of prescription commences to run. The prescriptive period is 10 years from the repudiation of the trust. This is so because the resulting trust and the corresponding obligation to convey the property and the title thereto to the owner are offsprings of the law. Art. 1144 of the NCC provides: “The following actions must be brought within 10 years from the time the right of action accrues: (a) Upon a written contract; (b) Upon an obligation created by law; (c) Upon a judgment.” Thus, the reckoning point is repudiation of the trust by the trustee, which in the present case gives rise to a cause of action by Dolores against Huang. (Huang vs. CA, supra.) Hence, the action filed by Dolores has not prescribed as Huang has not performed any unequivocal act of repudiation amounting to an ouster of Dolores. 7. “X” being unable to pay the purchase price of a house and lot for his residence has requested *% ” and “Y” agreed to lend him the money under one condition, that the Certificate of Title be transferred to him, in Y’s own name for his protection and as security of the loan. Later on, “Y” mortgaged the property to the bank without the knowledge of “X.” When the mortgage became due, “Y” did not redeem the mortgage and the property was advertised for sale. “X” retained you as his lawyer. What advice would you give your client and what legal ground provided by the Code would you assert to defend his rights? Give reasons. ANS: It is clear that in the instant problem, the provision of Art. 1450 of the NCC is applicable. This article provides: “If the price of the sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to 921

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secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him.” It must be observed, however, that the mortgage of the property by Y to the bank is perfectly valid inasmuch as the bank was not aware of any flaw or defect in the title or mode of acquisition of Y since the right of X has not been annotated in the Certificate of Title; in other words, the bank had acted in good faith. Consequently, the only way by which I would be able to help X would be to advise him to redeem the mortgaged property from the bank. After this is done, X can then institute an action to compel Y to reconvey the property to him pursuant to the provision of Art. 1450 of the NCC. In this action for reconveyance, the amount paid by X to the bank in redeeming the property can then be applied to the payment of his debt to Y. If there is an excess, he can recover the amount from Y. 8.

May laches constitute a bar to enforce a trust?

ANS: We must distinguish. Under our law, express trusts are created by the intention of the parties, while implied trusts are exclusively created by operation of law. The express trust disables the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and make such repudiation known to the beneficiary. But in implied trust, the rule is that laches constitutes a bar to actions to enforce the trust, and no repudiation is required, unless there is a concealment of the facts giving rise to the trust. (Fabian vs. Fabian, supra; Sotto vs. Teves, 86 SCRA 154.) Of course, this presupposes that all of the elements of laches are present. 9. May an action for reconveyance of real property based upon an implied trust be barred by the statute of limitations (prescription extinctiva)? ANS: Yes, an action for reconveyance of real property based upon an implied trust may be barred by the statute of limitations. On May 29, 1964, in Gerona vs. De Guzman (11 SCRA 163), in an excellently phrased decision penned by the then Justice Concepcion, the SC unequivocally reaffirmed the rule, overruling previous 922

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decisions, that “an action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud, may be barred by the statute of lim itations.This rule was subsequently reiterated in a long line of notable decisions. 10. What is the period of prescription of an action for reconveyance of real property based on an implied trust? ANS: It depends. (1) If the action for reconveyance involves the annulment of a voidable contract which became the basis for the fraudulent registration of the subject property, then the period of prescription is four (4) years from the discovery o f the fraud. This finds codal support in Art. 1391, par. 4, of the NCC, which declares that the action for annulment of contracts which are voidable by reason of mistake or fraud shall be brought within four (4) years from the time of the discovery of the mistake or fraud. It also finds support in the cases of Gerona vs. De Guzman (11 SCRA 153); Fabian vs. Fabian (22 SCRA 231); Carantes vs. CA (76 SCRA 514); Alarcon vs. Bidin (120 SCRA 390), and other cases. (2) If the action does not involve the annulment of a contract, but there was fraud in the registration of the subject property, then the period of prescription is ten years from the discovery of the fraud. This finds codal support in No. (2) of Art. 1144 of the NCC, which declares that an action based upon an obligation created by law must be brought within 10 years from the time the right of action accrues. It also finds support in the cases of Bueno vs. Reyes (27 SCRA 1179); Varsity Hills, Inc. vs. Navarro (43 SCRA 503); Escay vs. Court of Appeals (61 SCRA 369); Jaramil vs. CA (78 SCRA 420); Vda. de Nacalaban vs. CA (80 SCRA 428); Duque vs. Domingo (80 SCRA 654), and other cases. (3) If the action involves the declaration of the nullity or inexistence of a void or inexistent contract which became the basis for the fraudulent registration of the subject property, then the action is imprescriptible. This finds codal support in Art. 1410 of the NCC, which declares that the action or defense for the declaration of the inexistence of a contract does not prescribe. It also finds support in the case of Tongoy vs. CA (123 SCRA 99).

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(4) If the action for reconveyance is in reality an action to quiet title and the legitimate owner of the subject property which was fraudulently registered in the name of another had always been in possession thereof so that the constructive notice rule cannot be applied, then the action is imprescriptible, This finds support in the case of Caragay-Lagno vs. CA(133 SCRA 718). 11. “HH,” “II” and “JJ” inherited from their parents a large parcel of land. “HH” and “II” went abroad to reside in Canada. In their absence, “JJ” applied for the registration of the whole land in his name only. In due time, “JJ” obtained a Torrens Title for the land. When “HH” and “II” returned from Canada after seven (7) years, they found out what “JJ” did and sued him for their respective shares. “JJ” contented that the decree of title can no longer be reviewed or changed because of the lapse of more than one year from its issuance. In whose favor would you decide? (1980) ANS: I will decide in favor of “HH” and “II.” In reality, the action commenced by plaintiffs against defendant is an action for reconveyance of their respective shares in the subject property based on the constructive trust recognized and sanctioned by the NCC which declares that if the property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Since the obligation is created by law, the action commenced by the beneficiaries against him shall prescribe and the period of prescription is 10 years which shall be counted from the time of the discovery of the fraud. When did the plaintiff discover the fraud committed by defendant? Under the constructive notice rule, they are deemed to have discovered the fraud as of the date the trustee set up in himself a title adverse to the title of the beneficiaries. Normally, this would be the date the trustee “JJ” obtained his Torrens title. Since the instant action was commenced seven (7) after he issuance of said Title, it is obvious that it was commenced in time. (Note: See Art. 1456, NCC; Art. 1144, NCC; and decided cases.)

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12. The land in question originally belonged to X. He died intestate in 1928, survived by his children, A, B, C and D. In 1937, D and a first cousin, E, through a series of fraudulent acts, were able to register the land. A torrens title was issued in their names. In 1945, the two (2) subdivided the property and two (2) new transfer certificates of title were issued in their names. In 1960, A, B and C brought an action against them for reconveyance on the ground of the existence of an implied or constructive trust under Art. 1456 of the NCC. D and E set up the defense of laches and extinctive prescription. Will the action prosper? Reasons. ANS: The action will not prosper. Actually, the factual setting of the above problem is identical to that in Fabian vs. Fabian (22 SCRA 213). In that case the SC ruled: “As far as the defense of laches in concerned, plaintiffs are in error in believing that like express trusts, constructive trusts may not be barred by lapse of time. The express trust disables the trustee from acquiring for his own benefit the prop­ erty committed to his management or custody, at least while he does not openly repudiate the trust, and make such repudia­ tion known to the beneficiary. But in a constructive trust, the rule is that laches constitutes a bar to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust.” As far as the defense of extinctive prescription is concerned, it is well-settled in this jurisdiction that an action for reconveyance of real property based upon a constructive or implied trust resulting from fraud may be barred by prescription after 10 years. The period must be counted from the date the trustee set up a title adverse to that of the beneficiary. Naturally, this would take place at the time a new certificate of title issued in the name of the trustee. Upon the undisputed facts in the case at bar, not only had laches set in, but the right of plaintiffs to enforce the constructive trust had already prescribed. 13. The land in question originally belonged to A. He died intestate, survived by his three (3) children, B, C and D, C and D subsequently died. In 1936, by agreement among

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the heirs, X, C’s husband, was entrusted with the job of filing the answer in the cadastral proceedings and obtaining title over the property for and in behalf of the heirs. Instead, in 1939, X obtained on original certificate of title issued in his name as well as in the names of his brothers, Y and Z. In 1962, the heirs of A, who had always been in possession of the property, discovered the fraud committed by X and his brothers, Y and Z. As a consequence, they brought an action for reconveyance against the three (3). The latter set up the defense of prescription of action and reiterated this in a motion to dismiss. The trial court a quo held that the action is predicated on the existence of an implied trust and that such action prescribes in 10 years. Consequently, the case was dismissed. Is the dismissal in accordance with law? Reasons. ANS: The dismissal of the case is not in accordance with law. It must be noted that the factual setting of the above problem is identical to that in Bueno vs. Reyes (27 SCRA 1179). In that case, the SC ruled: “Upon the general proposition that an action for recon­ veyance such as the present is subject to prescription in 10 years the court a quo is correct. The question here, however, is: from what time should the prescriptive period be counted? It should be remembered that the constructive trust arose by reason of the bad faith of X, compounded by the bad faith of his brothers. Consequently, the cause of action must be deemed to have accrued only upon the discovery by the heirs of A that X, in violation of their agreement with him, had obtained reg­ istration of the disputed property in his own name and in the names of his brothers. It would not do to say that the cadastral proceeding was constructive notice to them by virtue of its na­ ture as a proceeding in rem for as far as they were concerned, the cadastral answer they had authorized X to file was not ad­ verse to them; and neither he nor his brothers may invoke the constructive notice rule on the basis of their own breach of the authority thus given. On top of all these, it was the appellants (heirs of A) who were and are in possession of the property as owners, continuously up to 1962, when for the first time X and his brothers appeared upon the scene and tried to get such pos-

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session, thereby revealing to them the fact of the fraudulent registration.” It would be more in keeping with justice, therefore, to afford plaintiffs and defendants the opportunity to lay their respective claims and defenses before the court in a full-blown litigation. Wherefore, the order appealed from is set aside and the case is remanded for further proceedings. 14. In 1935, X was able to register a parcel of land belonging to A in his (X) own name without the knowledge of the latter. A died in 1945 without knowing that the land was already titled in the name of X. He was survived by two (2) legitimate children, B and C. In 1955, X also died, survived also by two (2) legitimate children, D and E. In 1985, D and E demanded extrajudicially from B and C that they vacate the premises of the property on the ground that their father, X, is the registered owner of the property. B and C refused and immediately instituted the present action for reconveyance of the subject property based on fraud. D and E, however, have interposed the defenses of prescription and laches. If you were the judge, how will you decide the controversy? Reasons. ANS: If I were the judge, I shall decide the controversy in favor of the plaintiffs, B and C. The reason is obvious. They have acquired the subject property by succession from their father, A, But then, how about the defenses of extinctive prescription and laches? Are not these defenses meritorious? The above defenses are not meritorious. As far as the defense of prescription is concerned, it must be observed that the plaintiffs and their predecessor-in-interest have always been in possession of the subject property. The constructive notice rule, therefore, cannot be invoked as against them. Conse­ quently, D and C are deemed to have discovered the fraud only in 1985 when D and E made a demand upon them to vacate the prem­ ises. Besides, and this even more decftMve, the present action is in reality an action to quiet title. It is, Wcpurse, well-settled that an action to quiet title is imprescriptible.

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Anent the defense of laches, suffice it to state that if anybody is guilty of laches, it should be the defendants. They had a period of more than 40 years within which to assert their rights as registered owners. They slept on their rights. They should not, therefore, be allowed to invoke the doctrine of stale demands. (See Caragay-Layno vs. Court o f Appeals, 133 SCRA 718.) 15. Can a trustee acquired absolute ownership over the property held in trust by acquisitive prescription? ANS: Whether the trust is express or implied, as a general rule, the trustee cannot acquire absolute ownership over the trust by acquisitive prescription. However, if (1) he repudiates the right of the beneficiary, and (2) such act of repudiation is brought to the knowledge of such beneficiary, and (3) the evidence thereon is clear and conclusive, he may be able to acquire absolute ownership over the trust but only (4) after the lapse of the period fixed by law. It must be observed, however, that the latest decisions of the SC regarding the right of the trustee to acquire absolute ownership over the property held in trust seems to imply that these requisites must be strictly complied with only in express trusts, (see Sotto vs. Teves, 86 SCRA 154.) In implied trusts there is a clear implication that the ordinary rules regarding acquisitive prescription are applicable. Thus, in Fabian us. Fabian (supra), it was held that from the very moment the defendants set up a title over the property in their possession adverse to the title of the beneficiary, the period for acquisition of the right of ownership over said property by prescription commenced to run.

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Title VI SPECIAL CONTRACTS SALES (Arts. 1458-1637) 1. What is a contract of sale and what are its essential requisites and characteristics? ANS: By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. (Art, 1458, NCC.) The essential requisites of a contract of sale are: (1) Consent of the contracting parties by virtue of which the vendor obligates himself to transfer the ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefor a price certain in money or its equivalent. (2) Object certain which is the subject matter of the contract. The object must be licit and at the same time determinate or, at least, capable of being made determinate without the necessity of a new or further agreement between the parties. (3) Cause of the obligation which is established. The cause as far as the vendor is concerned is the acquisition of the price certain in money or its equivalent, while the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract. The characteristics of a contract of sale are: (1) consensual; (2) bilateral and reciprocal; (3) principal; (4) onerous; (5) commutative; and (6) nominate. 2. Distinguish between a contract of sale and a con­ tract to sell. ^ j.

^

ANS: The two (2) may be distinguished from each other in the following ways:

Arts. 1458-1637

OBLIGATIONS AND CONTRACTS Special Contracts Sales

(1) In the first, title passes to the vendee upon delivery of the thing sold, whereas in the second, by agreement, ownership is reserved in the vendor and is not to pass until full payment of the price. (2) In the first, nonpayment is a negative resolutory condi­ tion, whereas in the second, full payment is a positive suspensive condition. (3) In the first, the vendor has lost and cannot recover owner­ ship until and unless the contract is resolved or rescinded, whereas in the second, 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 the same. (Santos vs. Santos, CA, 47 Off. Gaz. 6372.)

3.

Fidel gave Corazon a receipt which states: “Receipt

Received from Corazon as down payment For my 1995 Nissan Sentra with plate No. XYZ-123..................................

P50,000.00

Balance payable: 12/30/01...................

P50,000.00

September 15, 2001. (Sgd.) Fidel Does this receipt evidence a contract to sell? Why? (2001) ANS: It is a contract of sale because the seller did not reserve ownership until he was fully paid.

4. Is a deed of sale where the stated consideration had not in fact been paid valid? ANS: A deed of sale where the stated consideration had not in fact been paid, is null and void. It produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. (Yu Bun Guan vs, Ong, G.R. No. 144735, October 18, 2001.)

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The sale is void for total lack of consideration. Under the law, payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (Art. 1240, NCC.) 5. “A ” agrees to sell a sewing machine to “B” for P400 in cash, and places the machine aboard the truck of “B,” while the latter goes home to fetch money. Before “B” returns, “C” appears and claims ownership of the sewing machine, exhibiting a document signed by “B” selling the machine to “C.” “A” rejects “C’s” claim alleging that he is still the owner. Decide with reasons. (1972)

ANS: It is submitted that the claim of “A” that he is still the owner of the sewing machine is correct. While it is true that there is already a perfected contract of sale between “A” and KB” and that, apparently, there is already an actual delivery when the former placed the sewing machine aboard the truck of the latter, nevertheless, such delivery did not vest the ownership thereof in the vendee. In other words, we have here a simple case of reservation by the vendor of his right of ownership over the thing sold. That this can be done either expressly or impliedly is well-settled. In the case at bar, the agreement between “A” and.“B” is that the sale must be in cash. Hence, it can easily be inferred that at that precise moment while “A” was waiting for “B” to return with the P400 purchase price, which the latter was supposed to fetch from his house, his intention, in spite of actual delivery, was to reserve the ownership in himself and to vest such ownership in the vendee only upon the actual payment of the purchase price. (Masiclat vs. Centeno, 99 Phil. 1043.) Besides, we have here a clear case of a contract to sell. Wellsettled is the rule that in a contract to sell, as distinguished from a contract of sale, ownership is reserved in the vendor and is not to pass to the vendee until full payment of the purchase price.

6. (a) Is a Declaration of Heirship and Waiver of Rights a recognized mode of acquiring ownership over a parcel of land? (b) Can a Declaration of Heirship and Waiver of Rights be considered a Deed of Sale in favor of another? 931

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Distinguish between a Declaration of Heirship and Waiver of Rights. ANS: Declaration of Heirship and Waiver of Rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the dece­ dent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. On the other hand, in a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party obligates himself to pay a price certain in money or its equivalent. In effect, a stranger cannot exclusively claim ownership over a parcel of land on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring ownership. According to the High Court, “an asserted right or claim to ownership or a real right over a thing arising from a judicial act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling cer­ tain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question.” (Acap vs. Court o f Appeals, G.R. No. 118114, December 7, 1995j

7.

Distinguish between emptio res speratae and emptio

spei.

ANS: The sale of a thing having a potential existence (emptio res speratae) and the sale of a hope (emptio spei), both of which are recognized in Art. 1461 of the NCC, may be distinguished from each other in the following ways: • (1) The first refers to the sale of a thing having a potential existence, whereas the second refers to the sale of a mere hope or expectancy. (2) In the first, the uncertainty is with regard the quantity and quality but not with regard the existence of the thing; in the second, the uncertainty with regard the existence of the thing.

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(3) In the first, the contract deals with a future thing in the second, the contract deals with a present thing — the hope or expectancy. (4) In the first, 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 the second, the sale produces effects even though the thing itself does not come into existence, since the subject matter is the hope itself.

8. X Co. granted to A the exclusive right to sell in the Visayas a certain number of beds which the Company was manufacturing at the invoice price of the beds in Manila, with a discount of 20 percent, the price to be paid at the end of 60 days. What contract is perfected — a contract of sale or a contract of agency? Reasons. ANS: The contract that is perfected here is a contract of sale. The essential features of a contract of sale are present in this case. There is the obligation on the part of X Co. to supply the beds and the obligation on the part of A to pay the purchase price. These features exclude the legal conception of a contract of agency to sell where the agent receives the thing in order to sell it without paying the price, but with the obligation to deliver to the principal the price which he may obtain from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. In the contract between X Co. and A, the latter, on receiving the beds, was necessarily obliged to pay the price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. (Quiroga vs. Parsons Hardware, 38 Phil. 501; Art. 1466, NCC.)

9. In a case where the consignor or firm delivers goods to a distributor for resale to customers, retaining the ownership of such goods, and the price and terms are still subject to the control of the firm, but with the understanding that the distributor is not the agent or legal representative of the firm for any purpose whatsoever, what kind of contract was perfected — a contract of sale or a contract of agency to sell? Explain. ANS: The contract is still a contract of agency to sell. Accord­ ing to Section 194(t) of the National Internal Revenue Code, a com­

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mercial broker includes all persons, other than importers, manufac­ turers, producers, or bona fide employees, who, for compensation or profit, sell or bring but sales or purchases of merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels or other means of transportation, or for the shippers, or consignors or carried by ves­ sels or other means of transportation. The term includes “commis­ sion merchants.” The controlling decision as to the test to be followed as to who fall within the above definition is that of Commissioner o f Internal Revenue vs. Constantino (31 SCRA 779). In the language of Justice J.B.L. Reyes, who penned the opinion: “Since the company retained ownership of the goods, even as it delivered possession into the dealer for resale to customers, the price terms of which were subject to the company’s control, the relationship between the com­ pany and the dealer is one of agency.” An excerpt from Salisbury vs. Brook (94 SE 117) in support of such view (which we might as well consider as the proper test to apply in cases similarly situated) follows: “The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him able as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, that transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property but as the property of the principal, who remains the owner and has the right to control sales, fix the price and terms, demand and receive the proceeds less the agent’s commission upon sales made.” (Ker & Co. vs. Lingad, 38 SCRA 524.)

10. X Shoe Store, Inc. entered into separate contracts with two (2) movie stars, A and B. With A, the agreement was that the shoe store shall deliver at a specified date for a price of PI,000 a pair of shoes of a specified brand which the store had been manufacturing for the general public but which at the time of the contract had already been sold out. With B, the agreement was that the shoe store shall deliver at a specified date for a price of P2,000 a pair of shoes to be made 934

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Arts. 1458-1637

specially for him, in accordance with a design submitted by him. What is the nature of these two (2) contracts? ANS: The contract with A is a contract of sale, whereas the contract with B a contract for a piece of work. (Art. 1467, NCC.) The test which must be applied in order to determine whether the delivery of an article by one person to another at a certain price is a contract of sale or a contract for a piece of work is simple. If the article is one which the obligor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, the contract is a contract of sale; however, if the article is to be manufactured (1) specially for the customer and (2) upon his special order, and not for the general market, the contract is a contract for a piece of work. (Ibid.)

11. A transferred to B a parcel of land for the price of P100,000. It was stipulated in the contract that B will pay P40,000 in cash and that for the difference, he will convey a Dodge automobile, valued at approximately P60,000. What kind of contract is this? Explain your answer. ANS: The contract is a barter. According to Art. 1468 of the NCC, “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. If 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.” It is evident from this provision that the test that must be applied if the manifest intention of the parties cannot be determined is as follows: If the cash added to the thing traded in is more than the value of such thing, the contract is sale; if less, the contract is barter. In the instant case, the cash of P40,000 added to the automobile is less than its value. Therefore, the contract is a barter.

12. “A” sells his 1976 Colt Lancer Sedan to “B,” a compadre, and leaves it to “B” to determine the price. If “B” refuses to fix a price and simply takes the car, is he still obliged to pay the price? Explain. (1976) ANS: Yes, “B” is still obliged to pay the price. This is clear from Art 1474 of the NCC.

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True, Art, 1473 of the NCC declares that “the fixing of the price can never be left to the discretion of one of the contracting parties,” Therefore, the act of “A” in leaving to “B” the power to determine the price of the car is illegal. But this will not affect the validity of the sale. “A” delivered the car to “B,” and the latter appropriated it. This will bring into play the provisions of Art. 1474 of the NCC. According to the article, if the thing or any part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent upon the circumstances of each particular case.

13. When is a contract of sale perfected? When is there a transmission of ownership of the thing sold? ANS: Since a contract of sale is consensual, it is perfected at the moment when there is meeting of minds upon the thing which is the object of the contract and upon the price. (Art. 1475, NCC.) In the case of a sale by auction, the contract is perfected when the auctioneer announces its perfection by the fall of the hammer or in any other customary manner. (Art. 1476, NCC.) The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (Art, 1477, NCC.) The parties, however, may stipulate that the ownership shall not pass to the vendee until the latter shall have fully paid the purchase price. (Art. 1478, NCC.)

14. During the months of May and June 1963, 16 trading entities (Sellers) unloaded locally grown Virginia tobacco at the redrying plant of the CCE at Agoo, La Union in accordance with the PVTA regulations and procedures. While waiting inspection and grading, the shipments were totally destroyed by a fire. The following facts are also beyond dispute: The CCE is an agent of the PVTA; the PVTA directs, supervises and controls the CCE in receiving tobacco shipments and all activities pertaining thereto; and once the shipments are received from the Sellers, they are under its control and cannot be withdrawn without its authority. Question: Is the PVTA liable to the Sellers for the loss of the tobacco shipments? Why? ANS: The PVTA is liable for the loss of the tobacco shipments. At the time of the loss, of the shipments, there was already a

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Arts, 1458-1637

perfected contract of sale. This is clear from Art. 1475 of the NCC which declares that the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Not only that. There was already a delivery of the shipments. (Philippine Virginia Tobacco Adm. vs. De los Angeles, 87 SCRA 197J {Note: Read the dissent of Justice Aquino. It is interesting, and we believe that he is correct. Delivery or tradition must be accepted. If the shipments were still to be inspected and graded, how can there be acceptance? Unloading is not the equivalent of delivery. Hence, the PVTA was not yet the owner of the tobacco shipments at the time of the fire. Therefore, under the principle of res perit domino, the PVTA is not liable.)

15. Spouses Biong and Linda wanted to sell their house. They found a prospective buyer, Ray. Linda negoti­ ated with Ray for the sale of the property. They agreed on a fair price of P2 Million. Ray sent Linda a letter confirming his intention to buy the property. Later, another couple, Bernie and Elena, offered a similar house at a lower price of PI.5 Million. But Ray insisted on buying the house of Biong and Linda for sentimental reasons. Ray prepared a deed of sale to be signed by the couple and a manageris check for P2Million. After receiving the P2 Million, Biong signed the deed of sale. However, Linda was not able to sign because she was abroad. On her return, she refused to sign the document say­ ing she changed her mind. Linda filed suit for nullification of the deed of sale and for moral and exemplary damages against Ray. (1) Will the suit prosper? Explain. ANS: No, the suit will not prosper. The contract of sale was perfected when Linda and Ray agreed on the object of the sale and the price [Art, 1475, NCC], The consent of Linda has already been given, as shown by her agreement to the price of the sale. There is therefore consent on her part as the consent need not be given in any specific form. Hence, her consent may be given by implication, especially since she was aware of, and participated in the sale of the property. (Pelayo vs. CA, G.R. No. 141323, June 8,2005.) Her action

937

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OBLIGATIONS AND CONTRACTS Special Contracts Sales

for moral and exemplary damages will also not prosper because the case does not fall under any of those mentioned in Art. 2219 and 2232 of the Civil Code. Alternative Answer: The suit will prosper. Sale of community property requires written consent of both spouses. The failure or refusal of Linda to affix her signature on the deed of sale, coupled with her express declaration of opposing the sale negates any valid consent on her part. The consent of Biong by himself is insufficient to effect a valid sale of community property (Art. 96, FC; Abalos vs. Macatangay, G.R. No. 155043, September 30, 2004). (Suggested Answers to the 2006 Bar Examination Questions, PALS)

(2) Does Ray have any cause of action against Biong and Linda? Can he also recover damages from the spouses? Explain. (2006) Considering that the contract has already been perfected and taken out of the operation of the statute of frauds, Ray can compel Linda and Biong to observe the form required by law in order for the property to be registered in the name of Ray which can be filed together with the action for the recovery of house [Art. 1357 NCC]. In the alternative, he can recover the amount of P2 million that he paid. Otherwise, it would result in solutio indebiti or unjust enrichment. Ray can recover moral damages on the ground that the action filed by Linda is clearly an unfounded civil suit which falls under malicious prosecution. (Ponce vs. Legaspi, G.R. No. 79184, May 6, 1992.) (Suggested Answers to the 2006 Bar Examination Questions, PALS)

16. A sold his piano to B, who immediately paid the price. Because the piano was at the repair shop at the time the contract was perfected, no delivery was made. Before delivery could be made, C, a creditor of A, who has filed a suit against him, attached the piano. Question: What right has B over the piano? May B oppose the attachment levied by C? Reasons. ANS: Upon the perfection of the contract, (and certainly, there is a perfected contract in the instant case), B acquired a personal

938

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right (jus ad rem) over the piano, in the sense that he can compel A to deliver it to him in accordance with the contract. (Arts. 1475, 1537, NCC.) However, such right has become useless because of the attachment of the piano by C, a creditor of A. B cannot oppose the attachment because there was still no delivery of the piano to him. In other words, A is still the owner thereof, not B. This is clear from the provision of Art. 1477 of the NCC. Consequently, the only possible remedy of B now would be to proceed against A for indemnification for damages.

17. “X” entered the restaurant of “Y” and asked the waiter to bring him a dozen fresh oysters in their shell. After eating he noticed an almost perfect pearl in one of the shells. He was about to take it when the restaurant owner claimed the pearl. To whom does the pearl belong? Why? (1972) ANS: The pearl belongs to “X.” When “X” ordered a dozen oysters in their shells at “Y’s” restaurant and ate the oysters, actually the contract that was perfected and consummated was a simple contract of sale, with the corresponding accessory contracts of services that a restaurant is supposed to provide. Consequently. “X” was already the owner of the oysters and their shells including their accessions and accessories. Hence, when he discovered the pearl in one of the shells, what is applicable is the old familiar rule that the owner of the principal is also the owner of the accessory. At any rate, whether we look at the pearl as an accession or as hidden treasure, “X” is the owner. If it constitutes accession, which I submit it is, as explained above, “X” is the owner. If it constitutes hidden treasure within the meaning of Art. 439 of the NCC, what is applicable is the rule enunciated in the first paragraph of Art. 438 reiterated by the rule enunciated in Art. 713 of the NCC with respect to occupation as a mode of acquiring ownership and not the rule enunciated in the second paragraph of Art. 438. “X” is the owner because at the time of the discovery he was already the owner of the shell where the pearl was found.

18. (1) Are promises to buy and/or to sell demandable?

(2) A offered to sell his house and lot to B who wa interested in buying the same for P200,000. In his letter to B, 939

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A stated that he was giving B a period of one month within which to raise the amount and that as soon as B is ready, they will sign the deed of sale. One week before the expiration of the one-month period, A went to B and told him that he is no longer willing to sell the property unless the price is increased to P250,000. May B compel A to accept the P200,000 first offered, and execute the deed of sale? Reasons. ANS: (1) 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 promissor if the promise is supported by a consideration distinct from the price. (Art. 1479, NCC; see Sanchez vs. Rigos, [1972] under Art. 1324, NCC, supra.) (2) B cannot compel A to accept the P200,000 first offered and execute the deed of sale. In the instant case, it is undeniable that the offer of A is merely a unilateral promise to sell his house and lot to B for P200,000 without any consideration distinct from the purchase price. Hence, the general rule stated in Art. 1324 and the particular rule stated in the second paragraph of Art. 1479 of the NCC are applicable. The promise of A is not binding upon him. As a matter of fact, even if B had formally accepted the option of one month given to him by A, such acceptance would be of no moment since there is no consideration thereof distinct from the purchase price. A can always change his mind at any time. The option does not bind him for lack of a cause or consideration. It would have been different if B had accepted terms and conditions of the offer to sell and paid a consideration distinct from the price within the period of the option before said offer was withdrawn by A. In such a case, a contract of sale would have been generated right then and there. As it turned out, A withdrew his offer in time. (See Sanchez vs. Rigos, 45 SCRA 368.)

19. What is an option contract? ANS: An option contract is an agreement granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. (Equatorial Realty Dev. Corp. vs. Mayfair Theaters,

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Inc., 264 SCRA 483.) An option contract conforms with the second paragraph of Art. 1479 of the NCC which states that: “An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.” (Ang Yu Asuncion vs. CA, 238 SCRA 602).

20. There is a stipulation in a contract of a lease that if the lessor should desire to sell the leased premises, the lessee shall have a 30-day exclusive option to purchase the same. However, if it is sold to another, the lessor is bound and obliged to stipulate in the deed of sale that the purchaser shall recognize the lease and be bound by all the terms and conditions thereof. What right was granted to the lessee, a right of first refusal or an option contract? ANS: The lessee was granted a right of first refusal and not an option clause or an option contract. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. The right of first refusal is an integral part of the contract of lease. The consideration is built into the reciprocal obligations of the parties. (Sps. Litonjua vs. L & R, Corp., Ynares Santiago, March 27, 2000 .)

21. Petitioner Serra is the owner of a 374-square meter parcel of land. He entered into a “Contract of Lease With Option To Buy” with the private respondent RCBC for 25 years, beginning 1975 to 2000. Under the contract, RCBC was given an option to buy the land within 10 years from the execution of the contract at P210.00 per square meter with the condition that if it fails to exercise the option, the building and/or the improvements thereon shall become the property of the lessor after the expiration of the 25-year lease without right of reimbursement. In 1984, RCBC decided to elxercise the option to buy and informed the lessor of its intention. Petitioner replied that he is no longer selling 941

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the property. Hence, private respondent filed an action for specific performance against petitioner. As a defense, petitioner contended that the contract was prepared by RCBC, that it took advantage of him when it set lopsided terms and that the option to buy was not supported by any consideration distinct from the price and hence, not binding upon him. The trial court ordered the petitioner to execute the proper deed of sale conveying the property to RCBC. The same was affirmed by the respondent CA. Was the option to buy supported by a consideration distinct from the price? Decide the case. ANS: Yea. Art. 1324 of the NCC provides that when an offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when such option is founded upon consideration as something paid or promised. On the other hand, Art. 1479 of the NCC provides that an accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may then reciprocally demand performance. Jurisprudence says that an option contract is a privilege existing only upon the buyer. For a separate consideration paid, he is given the right to decide to buy a certain property or not, at anytime within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. On the other hand, what may be regarded as a consideration separate from the price is discussed in the case of Vda. de Quirino vs. Palarca. The said case also involved a lease contract with option to buy where the consideration for the lessor’s obligation to sell the leased premises to the lessee, should he choose to exercise his option to buy the same, is the obligation of the lessee to sell to the lessor

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the improvements constructed by the former, if he fails to exercise his option to buy said premises. In the present case, the consideration is even more onerous on the part of the lessee since it entails transferring the improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated. As to whether the price “not greater than TWO HUNDRED PESOS” is certain or definite, it was held that a price is considered certain if it is so with reference to another thing certain or when the determination thereof is left to the judgment of a specified person or persons. (Art. 1469, NCC.) And generally, gross inadequacy of price does not affect a contract of sale. (Art. 1470, NCC.) said:

On whether the contract is one of adhesion, the Supreme Court f “A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulation in the contract, while the other party merely affixes his signature or his ‘adhesion’ thereto. These types of contracts are as binding as ordinary contracts. In reality, the party who adheres to the contract is free to reject it entirely. This Court will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided.” (PanAm vs. Rapadas, G.R. No. 60673, May 19, 1992; BP1 Credit vs. CA, 204 SCRA 601.)

The situation in the present case is not inequitable. Petitioner is a highly educated man. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. (Serra vs. CA, January 4,1994, 47 SCAD 55.)

22. A and B entered into a contract whereby the former agreed to sell his automobile to the latter for P25,000. Upon the perfection of the contract, B advanced the entire purchase price of P25,000 to A. It was, however, stipulated that the automobile shall be delivered to B at the end of March, 1972. Unfortunately, before the arrival of that date, it was completely destroyed without any fault of A- Can B now 943

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recover the amount which he had already advanced to A? Reasons. ANS: Actually, the problem can be boiled down to the following question — who shall bear the risk of loss after the contract of sale has been perfected, but before the thing sold has been delivered — the vendor or the vendee? There are three apparently conflicting provisions of the NCC which we must consider in order to answer this question. They are Arts, 1480,1504 and 1538. If we apply the provisions of Art. 1504 only, it is clear that the loss is imputable to the vendor; consequently, A must return to B the P25,000 which the latter had advanced to him. If we apply the provisions of Art. 1538 only, then we must observe the rules provided for in Art. 1189, and according to this article, the obligation is extinguished since the object thereof was lost without any fault of the vendor. If we apply the provisions of Art. 1480 only, there is an implication that the loss is imputable to the vendee, an implication which is directly in conflict with that which is expressly declared in Art. 1504, although the article declares categorically in the first paragraph that the provision of Art. 1262, among others, shall govern and according to this article, the obligation is extinguished since the object thereof was lost without any fault of the vendor. What then is meant by the law when it says that if the object of an obligation is lost or destroyed without any fault of the debtor (vendor), the obligation is extinguished? There are three views which have been advanced. They are: (1) The extinguishment of the obligation due to the loss of the thing affects both vendor and vendee since their obligations are reciprocal. If the obligation of the vendor to deliver is extinguished, the correlative obligation of the vendee to pay, which depends upon it, is also extinguished. Besides, a contract of sale is onerous in character; the cause, as far as the vendee is concerned, is the acquisition of the thing which is the object thereof. Hence, if he cannot have the thing it would be juridically illogical and unjust to make him pay its price. Furthermore, it is well known that if the object of a contract is lost before delivery, it is the vendor who is still the owner who bears the loss, and not the vendee. (5 Tolentino, NCC, p. 23.)

.

(2) When the thing sold is lost without any fault of the vendor, he is released from his obligation to deliver the thing; while

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the vendee’s obligation to pay the price subsists. If the vendee had paid the price in advance, the vendor may retain the same. The legal effect, therefore, is that the vendee assumes the risk of loss by fortuitous event from the time of the perfection of the contract up to the time of delivery. (3 Padilla, NCC, pp. 840-841.) (3) Art. 1504 is applicable to specific goods, while Art. 1480 is applicable only to fungible goods. Which of these three views is correct? Undoubtedly, the first two are backed up by sufficient authorities both Filipino and Spanish in origin, while the third is backed up by some authorities American in origin. It is, however, submitted that the first is more just and equitable. Besides, it is in conformity with the principle of res perit domino. The owner of the thing must bear the risk of loss. Consequently, A must return the P25,000 to B.

23. A sold an automobile to B for P20,000 to be paid as follows: P10,000 upon delivery of the car to B, and the balance at the rate of P2,000 every three (3) months thereafter. The automobile, however, was burned in the possession of B, without his fault, before the payment of the balance. Is B obliged to pay the balance? Reason. ANS: Yes, B is still obliged to pay the balance. The ownership of the automobile was transmitted to him upon delivery since there was no stipulation to the contrary. (Arts. 1477, 1478, NCC.) Consequently, applying the principle of res perit domino, the loss is imputable to him. (Art. 1504, NCC.)

24. “S” an American resident of Manila, about to leave on a vacation, sold his car to “B” for U.S. $2,000.00, the payment to be made 10 days after delivery to “X,” a third party depositary agreed upon, who shall deliver the car to “B” upon receipt by “X” of the purchase price. It was stipulated that ownership is retained by “S” until delivery of the car to “X.” Five days after delivery of the car to “X,” it was destroyed in a fire which gutted the house of “X” without the fault of either “X” or “B.” A. Is buyer “B” still legally obligated to pay the pur­ chase price? (1981) 945

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ANS: It must be observed that “S” had already delivered the car to “X ” the third party depositary or bailee. It was agreed that ownership is retained by “S” until delivery to “X.” Therefore, in effect, there was already a transfer of the right of ownership over the car to “B.” Consequently, “B” shall assume the fortuitous loss of the car. As a matter of fact, even if it was agreed that “S” shall retain the ownership of the car until the purchase price has been paid by “B,” the end result will still be the same. Since evidently, the purpose is to secure performance by the buyer of his obligation to pay the purchase price, by express mandate of the law, the fortuitous loss of the car shall be assumed by “B.” (Note: The above answer is based on Art, 1504 of the NCC.)

25. On January 5, A sold and delivered his truck to­ gether with the corresponding certificate of public conve­ nience to B for the sum of P6,000 payable within 60 days, 2 weeks after the sale and while the certificate of public con­ venience was still in the name of A, it was revoked by the Public Service Commission (now the Land Transportation Franchising and Regulatory Board) through no fault of A. Upon the-expiration of the 60-day period A demanded pay­ ment of the price from B. B refused to pay, alleging that the contract of sale was void for the reason that the certificate of public convenience which was the main consideration of the sale no longer existed. Is the contention of B tenable? Reasons. ANS: The contention of B is untenable. The contract of sale in the instant case is perfectly valid. It contains all of the essential requisites of a valid contract of sale. Thus, there is consent, there is an object certain, and there is a cause or consideration. True, the certificate of public convenience was probably the main consideration of the sale as far as B is concerned, but said consideration was still existing at the time of the perfection of the contract on January 6. It was revoked by the Public Service Commission (now the Land Transportation Franchising and Regulatory Board) only two (2) weeks after the sale had already been perfected. Besides, there was already delivery made by the vendor to the vendee resulting in the transfer of the right of ownership of the object of the sale to B. Consequently, applying the principle of res perit domino (the owner

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bears the loss), the loss or revocation of the certificate of public convenience should be borne by B.

26. What is meant by earnest money? How does this differ from earnest money under the Spanish Civil Code? ANS: According to Art. 1482 of the NCC, "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.” From this provision, it is clear that earnest money may simply be defined as a part of the purchase price advanced by the vendee to the vendor as a token of the perfection of the contract. This concept is, of course, radically different from the earnest money as contemplated in the Spanish NCC. In Art. 1464 of the latter Code, it was treated as a pledge given by the vendee to the vendor for the purpose of binding the two (2) parties to the contract of purchase and sale. Thus, if the vendee desires the rescission of the contract, he must forfeit the earnest money; if the vendor desires the rescission of the contract, he must return double the amount to the vendee; and if both are willing to go ahead with the contract, it becomes a part of the purchase price.

27. In a contract of sale of personal property the price of which is payable in installments: (a) What are the different remedies which are available to the vendor in case of breach? (b) Are these remedies cumulative? ANS: (a) In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vend­ ee 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

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balance of the price. Any agreement to the contrary shall be void. (Art. 1484, NCC.) (b) Well-accepted is the rule that the remedies of an unpaid seller under Art. 1484 of the NCC are alternative, not cumulative. Such rule is founded on the principle that no one shall enrich himself at the expense of another. Hence, when the unpaid seller has already enforced the contract by way of collecting the amount due, he can no longer rescind or cancel the same. He cannot also foreclosure the mortgage over the thing. For the exercise of one in full forecloses the right to exercise other remedies. (Nonato vs. CA, G.R. No. 67181, November 22,1985.) The preceding articles shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (Art. 1485, NCC.) In the cases referred to in the two (2) preceding articles, 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, NCC.)

28. A bought from X Co. a truck, payable in monthly installments. As security for the payment of the balance of the purchase price, he constituted a chattel mortgage on the truck in favor of the company. Because of his failure to pay three consecutive monthly installments, the company filed a complaint against him to recover the unpaid balance. A writ of attachment was subsequently issued against his properties. Thereafter, the truck was sold at public auction in which the company was the only bidder for PI,000. Since there was still a deficiency of more than P1,000, the court condemned A to pay to the company the deficiency plus interest. Is this in accordance with law? ANS: The order of the court is in accordance with law. According to Art. 1484 of the NCC, the company could either exact fulfillment of the obligation should the vendee fail to pay or cancel the sale should the vendee’s failure to pay cover two (2) or more installments or foreclose the CM should the vendee’s failure to pay cover two (2) or more installments, in which case, he shall have no

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further action against the vendee to recover any unpaid balance. These remedies are alternative, not cumulative. Manifestly, the company had chosen the first remedy. Consequently, it may enforce execution. (Southern Motors vs. Moscoso, 2 SCRA 168. To the same effect — see Tanjanlangit vs. Southern Motors, 54 Off. Gaz. 2502; Industrial Financing Corp. vs. Ramirez, 77 SCRA 152; Nonato vs. IA C y 140 SCRA 255.) 29, C purchased by installment from X Co. a Diesel truck for P45,000. To secure the payment of the purchase price, he executed a chattel mortgage over the vehicle in fa­ vor of the company. As additional security, R, a friend of C, executed a real estate mortgage on a parcel of land owned by her. Subsequently, X Co., by means of a discounting transac­ tion, assigned all of its rights in the two (2) mortgages to FIF Co. with due notice of such assignment to C and R. Because of C’s failure to pay any of the installments, FIF Co. extrajudicially foreclosed the chattel mortgage. At the foreclosure sale, FIF Co., as highest bidder, bought the truck for P15,000. C and R then brought this action to cancel the real estate mortgage. (a) May FIF Co. now foreclose the real mortgage in order to recover the deficiency? (1976) (b) Suppose that in the above problem, X Co. had made an assignment of its right to FIF Co. “with a right of re­ course” against the vendor-assignor, would there be a viola­ tion of the Recto Law (Art. 1484, NCC.) if the assignee will proceed against the assignor for the deficiency? (c) Suppose that the mortgagor refuses to deliver the chattel subject of the mortgage upon failure to pay two or more installments or suppose that he conceals the chattel, and the vendor-mortgagee instituted a suit for replevin and subsequently foreclosed the mortgage extrajudicially, would there be a violation of the Recto Law if such vendor demands reimbursement of expenses and attorney’s fees? ■ANS: (a) Art. 1484 of the NCC is applicable here. This provision is clear and simple. Should the vendee default in the payment of two or more of the agreed installments, the vendor may exact fulfillment

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of the obligation or cancel the sale or foreclose the chattel mortgage. These remedies have been recognized as alternative not cumulative; that the exercise of one would bar the exercise of the others. It is well-established that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance or the purchase price. Here, the defendant has elected to foreclose the chattel mortgage. The rule stated in No. 3 of Art. 1484 is, therefore, applicable. The fact that he is seeking to collect the deficiency by going against the real estate mortgage is of no moment. R is a guarantor. If she is compelled to pay the deficiency, she will in turn be entitled to recover what she has paid from the debtor-vendee. (Art. 2066, NCC.) Ultimately, it will be the vendee who will be made to pay despite the earlier foreclosure of the chattel mortgage. Thus, the protection given by Art. 1484 would be indirectly subverted, and public policy overturned. (Cruz vs. Filipinas Investment & Finance Corp., 23 SCRA 791; Pascua vs. Universal Motors Corp., 61 SCRA 121.) (b) There would be no violation of the law in such case. What the law seeks to protect are only the buyers by installment and not the sellers. Congress could not have intended to impair the right of the seller to make commercial use of his credit against the buyer, provided said buyer is not burdened beyond what the law allows. (Filipinas Investment & Finance Corp. vs. Vitug, 28 SCRA 658.) (c) There would be no violation of the Recto Law. According to the Supreme Court in Filipinas Investment & Finance Corporation vs. Ridad (30 SCRA 564), when the mortgagor plainly refuses to deliver the chattel or if he conceals such chattel to place it beyond the reach of the mortgagee, the latter is entitled to recover necessary expenses incurred by him in the prosecution of the action for replevin so that he can regain possession of the chattel. Recoverable expenses would include expenses properly incurred in effecting seizure of the chattel and reasonable attorney’s fees in prosecuting the action for replevin. While the basic philosophy of the Recto Law is that the underprivileged mortgagors must be afforded full protection against the rapacity of the mortgagees, said law should not be construed as to deprive the mortgagee protection against perverse mortgagors. 30. Under a lease of personal property, with option to buy, it was agreed that failure of the lessee to pay three months rent would entitle the lessor to take back the property

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and the option to buy would be lost. The lessee failed to pay for three months. The lessor took back the property and then instituted an action to recover the rents corresponding to the three months. Can he recover? Reason. ANS: No, he cannot recover. By express provision of Art. 1485 of the NCC, the preceding article (Art. 1484.) shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. Consequently, applying Art. 1484, upon taking possession of the thing leased, the lessor shall have no further action against the lessee to recover any unpaid rent. Any agreement to the contrary shall be void. (U.S. Commercial Co. us. Halili, 93 Phil 371.) 31. “O,” owner of a copying machine, leased it to “L” at a rental of P4,000.00 a month for a period of one year with option on the part of “L” to buy the copying machine at the end of one year for P80,000.00, to be paid by applying the rentals, so that “L” needs only to pay P32,000.00. "L ” failed to pay rentals for the 4th, 5th and 6th months so that “O” terminated the lease and repossessed the copying machine, then sued “L” for the unpaid rental of three months, or P12,000.00. Is “OV* suit legally tenable? Explain. (1981) ANS: “O’s” suit is legally untenable. By express provision of Art. 1485 of the NCC, the preceding article (Art. 1484.) shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. Consequently, applying Art. 1484, upon taking possession of the copying machine, “O” has no further action against “L” to recover the unpaid rents. (Note: The above answer is based on the Recto Law [Arts. 1484, No. 3 and 1485, NCC] and on U.S. Commercial Co. us. Halili, 93 Phil. ..371.)

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32. What is the Realty Installment Buyer Protection Act (also known as the “Maceda Law”) and what are its provisions? ANS: Realty Installment Buyer Protection Act is a law (Rep. Act No. 6552) enacted by the Congress of the Philippines and approved by the President of the Philippines on Sept. 14, 1972 to provide protection to buyers of real estate on installment payments. Its provisions are: Sec. 1. This Act shall be known as the “Realty Installment Buyer Protection Act.” Sec. 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirtyeight hundred forty-four as amended by Republic Act Numbered Sixty three hundred eight-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaidinstallments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.

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Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Sec. 5, Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Sec. 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price at any time without interest and to have such full payment of the purchase price annotated in the certificate of the title covering the property. Sec. 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. Sec. 8. If any provisions of this Act is held invalid or unconstitutional, no other provisions shall be affected thereby. Sec, 9. This Act shall take effect upon its approval. 33. Rosy purchased a condominium unit in Makati City from the Houseland Corporation for a price of P10 Mil­ lion, payable P3 Million down and the balance with inter­ est thereon at 14% per annum payable in 60 equal monthly installments of P201,000.00. They executed a Deed of Condi­ tional Sale in which it is stipulated that should the vendee fail to pay three (3) successive installments, the sale shall be deemed automatically rescinded without the necessary judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way of rent for the use and occupancy of the unit and as liquidated damages. For 50 months, Rosy paid the monthly installments religiously, but on the 51st and 52nd months, she failed to pay. On the 53rd month, she tried to pay the installments due but the vendor refused to receive the payments tendered by her. The follow­ ing month, the vendor sent her a notice that it was rescind­ ing the Deed of Conditional Sale pursuant to the stipulation

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for automatic rescission, and demanded that she vacate the premises. She replied that the contract cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of the NCC. a)

Is Art. 1592, NCC applicable?

b)

Can the vendor rescind the contract? (2000)

ANS: a) Art. 1592 of the NCC does not apply to a conditional sale. In Valarao v. CA, 304 SCRA 155, the SC held that Art. 1592 applies only to a contract of sale and not to a Deed of Conditional Sale where the seller has reserved title to the property until full payment of the purchase price. The law applicable is the Maceda Law. b) No, the vendor cannot rescind the contract under the circumstances. Under the Maceda Law, which is the law applicable, the seller on installment may not rescind the contract till after the lapse of the mandatory grace period of 30 days for every one year of installment payments, and only after 30 days from notice of cancellation or demand for rescission by a notarial act. In this case, the refusal of the seller to accept payment from the buyer on the 53rd month was not justified because the buyer was entitled to 60 days grace period and the payment was tendered within that period. Moreover, the notice of rescission served by the seller on the buyer was not effective because the notice was not by a notarial act. Besides, the seller may still pay within 30 days from such notarial notice before rescission may be effected. All these requirements for a valid rescission were not complied with by the seller. Hence, the rescission is invalid. 34. What are the rights of both the seller and the buyer under K A 6552, the Realty Installment Buyer Protection Act? ANS: R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the seller to convey title from acquiring binding force. The .law also provides for the rights of the buyer in case of cancellation, i.e., the seller shall refund to the buyer the cash surrender value of the

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payments on the property equivalent to 50% of the total payments made and after five (5) years of installments, an additional 5% every year but not to exceed 90% of the total payments. The actual cancellation of the contract shall take place 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. In case there is no payment of the cash surrender value, there is no actual cancellation of the contract. Hence, the buyer may still reinstate the contract by updating his account during the grace period and before actual cancellation. (Leano vs. Court of Appeals, G.R. No. 129318, November 15, 2001.) 35. In a case where the buyer failed to pay the price of a real property in accordance with a contract to sell, what law governs in case of cancellation of the contract? ANS: The Realty Installment Buyer Protection Act (R.A. No. 6552) applies. Said law recognizes in conditional sales of the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendors to convey title from acquiring binding force. (Rillo vs. CA, 34 Phil. 570; Luzon Brokerage Co., Inc. vs. Maritima Bldg., Co., Inc., 86 SCRA 305.) The Law provides in its Sec. 3(b) for the rights of the buyer in case of cancellation of the contract. But if the buyer was not given the cash surrender value of the payments that she made, there was still no actual cancellation of the contract. Consequently, the buyer may still reinstate the contract by updating the account during the grace period and before actual cancellation. (R.A. No. 6552, Sec. 5; Leano vs. CA, G.R. No. 129018, November 15, 2001.) In the case of Jestra Development and Management Corpora­ tion vs. Pacifico (G.R. No. 167452, January 30, 2007), the SC held that R.A. No. 6552 was enacted to protect buyers of real estate on installment against onerous and oppressive conditions. While the seller has, under the Act, the option to cancel the contract due to non-payment of installments, he must afford the buyer a grace pe­ riod to pay them and, if at least two years installments have already been paid, to refund the cash surrender value of the payments. A buyer who fails to pay at least two (2) years of installments is not entitled to refund of the cash surrender value of his payments. What

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applies instead is Sec. 4 of the same law, viz; In case where less than two (2) years of installments were paid, the seller shall give the buy­ er a grace period of not less than 60 days from the date the install­ ments became due. If the buyer fails to pay the installment due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. 36. What is the two-step process covering the cancella­ tion of a contract under Sec. 4 of R.A. 6552? ANS: In the above cited case, the SC described the cancellation of the contract under Sec. 4 as a two (2)-step process. First, the seller should extend the buyer a grace period of at least 60 days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective 30 days from the buyer’s receipt thereof. 37. Can husband and wife sell property to each other during the marriage? ANS: The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Art. 191. (Art 1490, NCC.) 38. Who cannot acquire property by purchase, even at public or judicial auction, either in person or through the mediation of another? What is the reason behind these prohibitions? ANS: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another. (1) The guardian, the property of the person or person who may be under his guardianship;

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(2) Agents, the property whose administration or sale may have been intrusted to them; unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) NCC.)

Any others specially disqualified by law. (Art. 1491,

These prohibitions are based upon public policy and morality. The law believes that human nature, being what it is, would not be strong enough to resist temptations which might arise as a result of the antagonism between the interest of the vendor and that of the vendee. (Araneta vs. Tuazon, 49 Off\ Gaz. 45.) 39. At a mortgage foreclosure sale carried out as a result of a judicial proceeding, A, attorney for the mortgage creditor, bought the mortgaged real estate. (1) If A had bought the property for himself, is the sale void or voidable? (2) If A had bought the property for his client, did he violate the absolute terms of Art. 1491 of the NCC? ANS: (1) The sale is void. This is so, because it is a contract prohibited by law. (Art. 1491, No. 5, NCC.)

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(2) If A bought the property for his client, there would be no violation of the prohibition stated in Art. 1491 because then there would be no breach of trust or confidence in such a case. He would be merely acting as agent of his client; and under the law, such client is not prohibited from buying the property. 40. Suppose that a client executed a deed of assignment of the property which was the object of litigation in favor of his lawyer who handled his case in said litigation, may such deed of assignment be ratified? ANS: The nullity of such prohibited contract is definite and permanent and cannot be cured by ratification. In this aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three (3) cases of guardians, agents and administrators (Art. 1491, NCC.), as to whose transactions, it has been opined that they may be “ratified” by means of and in “the form of a new contract, in which case its validity shall be determined only by the circumstances at the time of execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of such new contract. Thus, the object which was illegal at the time of the first contract may have already become lawful at the time of the ratification of the second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification of the second contract would then be valid from its execution; however, it does not retroact to the date of the first contract. (Rubias vs. Batiller, 51 SCRA 120.) 41. A offered to sell a set of furniture to B for P500. B immediately accepted the offer. However, unknown to both parties, the residence of A was gutted by a fire of accidental origin, two (2) hours before A made the offer to B. All of the effects of A including the furniture were destroyed by the fire. A now demands payment of the P500 on the ground that the sale was perfected. Can B be compelled to pay? Reasons. ANS: B cannot be compelled to pay. The contract in this particular case is inexistent. According to Art. 1493 of the NCC: “If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect.

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“But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon.” 42. D sold a second-hand car to E for P150,000.00. The agreement between D and E was that half of the purchase price, or P75,000.00, shall be paid upon delivery of the car to E and the balance of P75,000.00 shall be paid in five (5) equal monthly installments of P I5,000.00 each. The car was delivered to E, and E paid the amount of P75,000.00 to D. Less than one month thereafter, the car was stolen from E’s garage with no fault on E’s part and was never recovered. Is E legally bound to pay the said unpaid balance of P75,000.00? Explain your answer. (1990) ANS: Yes, E is legally bound to pay the balance of P75,000.00. The ownership of the car sold was acquired by E from the moment it was delivered to him. Having acquired ownership, E bears the risk of the loss of the thing under the doctrine of res perit domino. (Arts. 1496,1497, NCC.) 43. Suppose that the vendee is prevented from taking actual possession of two (2) parcels of land which she bought by a third person who claims to be the owner thereof. In an action for rescission of the contract of sale brought by such vendee against the vendor, can the latter prevent the rescission by claiming that the execution of the public instrument or deed of sale is equivalent to delivery or tradition pursuant to Arts. 1497 and 1498 of the NCC? ANS: In the earlier case of Sarmiento vs. Lesaca (108 Phil. 900), he cannot. Although it is postulated in Art. 1498 of the NCC that the execution of the public instrument is equivalent to delivery, this legal fiction only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. If, notwithstanding the execution of the instrument, the vendee cannot have the enjoyment and material tenancy of the thing and make use of it himself, because such tenancy and enjoyment are opposed by another, then delivery has not been effected.

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In the later case of Ong Ching vs. CA (239 SCRA 741), however, and under Art. 1498, NCC, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if, from the deed, the contrary does not appear or cannot be inferred. Possession is also transferred, along with ownership thereof, to the vendees by virtue of the deed of conveyance. Further, in Dulay Enterprises, Inc. vs. CA (225 SCRA 678) and Garcia vs. CA (312 SCRA 180), the Court held that since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required. Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by symbolic delivery can still be effected through the execution of the deed of conveyance. (Art. 1498, NCC.) The key word is control, not possession, of the subject property. The rule is true especially where the deed of conveyance does not stipulate or infer that the vendees could not exercise control over said property, delivery can be effected through the mere execution of said deed. (Power Commercial and Industrial Corporation vs. CA, 274 SCRA 597.) 44. What provisions in our NCC apply in cases of rescission? ANS: Art. 1389, NCC applies to rescissible contracts, as enumerated and defined in Arts. 1380 and 1381. The rescission in Art. 1381 is not akin to the term “rescission” in Art. 1191 and Art. 1592. (Ong vs. CA, 310 SCRA 1.) In Art. 1381, the action is a subsidiary one limited to cases of rescission for lesion or those enumerated in said article. In Arts. 1191 and 1592, the rescission is a principal action which seeks the resolution or cancellation of the contract. The prescriptive period applicable to rescission under Arts. 1191 and 1592, is found in Art. 1144, which provides that the action upon a written contract should be brought within 10 years from the time the right of action accrues. (Iringan vs. CA, G.R. No. 129107, September 26, 2001.) 45. When goods are delivered to the buyer “on sale or return” or “on approval” or “on trial” or “on satisfaction,” when does the ownership thereof vest in the buyer?

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ANS: When goods are delivered to the buyer Kon sale or return” to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer on delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or if no time has been fixed, within a reasonable time. When goods are delivered to the buyer “on approval” or “on trial” or “on satisfaction,” or other similar terms, the ownership therein passes to the buyer: (1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. (Art 1502, NCC.) 46. What title is acquired by the vendee or buyer if the object which he bought was sold by somebody who is not the owner thereof and who was not authorized to sell it? ANS: The vendee, in such a case acquires no better title to the object than the vendor had. This rule, however, is subject to the following exceptions. (1) Where the true owner is estopped or precluded by his conduct from denying the vendor’s authority to sell; (2) Where the sale is made by the registered or apparent owner in accordance with recording or registration laws; (3) Where the sale is made pursuant to a statutory power of sale or under the order of a court of competent jurisdiction; and (4) Where the purchase is made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws. (Art 1505, NCC.) As far as the third exception is concerned, it must be observed that if the object which was sold at the public sale is movable

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property, the true owner who had lost it or who has been unduly deprived of it can still recover the same from the vendee. However, if the latter had acquired it in good faith, such owner cannot obtain its return without reimbursing the price paid therefore. (Art. 559 of the NCC is applicable.) 47. Define negotiable document of title. ANS: A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document is a negotiable document of title. (Art 1507, NCC.) 48. How may a negotiable document of title be negoti­ ated by delivery? ANS: A negotiable document of title may be negotiated by delivery: (1) Where by the terms of the document the carrier, warehouseman or other billee issuing the same undertakes to deliver the goods to the bearer; or (2) Where by the terms of the document the carrier, warehousemen or other bailee issuing the same undertakes to deliver the goods to the order of specified person, and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer. Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the indorsement of such indorsee. (Art. 15081NCC.) 49. How may a negotiable document of title be negotiated by indorsement? ANS: A negotiable document of title may be negotiated by the indorsement of the person to whose order the goods are by the terms of the document deliverable. Such indorsement may be in blank to bearer or to a specified person. If indorsed to a specified person, it

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may be again negotiated by the indorsement of such person in blank to bearer or to another specified pee^on^Subsequent negotiations may be made in like manner. (Art. 1509, ^C C .) 50.

Who may negotiates negotiable document of title?

ANS: A negotiable document of title may be negotiated. (1)

Bythe owner thereof; or

(2-K"By any person to whom the possession or custody of the ^do€um ent has been entrusted by the owner, if, by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document in such form that it may be negotiated by delivery. (Art 1512, NCC.) 51. What are the rights which are acquired by a person to whom a negotiable document of title has been duly negotiated? ANS: A person to whom a negotiable document of title has been duly negotiated acquires thereby: (1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; and (2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. (Art. 1513, NCC.) 52. What are the implied warranties of the person who negotiates a document of title by indorsement or delivery? ANS: A person who for value negotiates or transfers a document of title by indorsement or delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants:

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,

? OBLIGATIONS AND CONTRACTS Special Contracts Sales

(1)

That the document is genuine;

(2)

That he has a legal right to negotiate or transfer it;

(3) That he has knowledge of no fact which would impair the validity or worth of the document; and (4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. (Art, 1516, NCC.) 53. What are the obligations of the seller and the buyer in contracts of (1) “c.i.f' and (2) “f.o.b” sale? ANS: (1) In “c.i.f” sales of goods, the buyer pays a fixed price, while the seller pays the insurance and freight up to the place of destination. In other words, the seller is responsible for the delivery of the goods, pays for all expenses, such as insurance and freight, pays for all charges, such as export taxes and other charges or fees, and be responsible for the goods up to the point of destination. The buyer, on the other hand, who paid a fixed price, shall accept delivery of the goods at the point of destination, pays all charges, such as taxes or duties at such point, and be responsible for the goods once the seller’s responsibility ceases. (2) In “f.o.b.” sales of goods, the goods are shipped by the seller to a certain point without any expense to the buyer, but after delivery at such point all subsequent expenses incident to the transportation and delivery shall be paid by the buyer. Thus, if the sale is “f.o.b.” at the place of shipment the buyer must pay the freight, if “f.o.b.” at the place of destination, the seller must pay the freight. 54. seller?

When is the seller of goods deemed to be an unpaid

ANS: The seller of goods is deemed to be an unpaid seller: (1)

When the whole of the price has not been paid or tendered;

and (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on

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which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise. The term “seller” includes any person who is in the position of the seller, such as an agent of such seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself, paid, or is directly responsible for the price. (Art. 1525, NCC.) 55.

What are the remedies of the unpaid seller?

ANS: Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has the following remedies: (1) A lien on the goods or right to retain them for the price while he is in possession of them; (2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them; (3)

A right of resale;

(4)

A right to rescind the sale.

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-existent with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (Art. 1526, NCC.) 56. (a) When is the right to retain the goods available to the unpaid seller?

(b) When does the unpaid seller lose his lien on o right of retention over the goods? ANS: (a) The unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases: (1) Where the goods have been sold without any stipula­ tion as to credit; (2) Where the goods have been sold on credit, but the term of credit has expired; and 965

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Where the buyer becomes insolvent.

The seller may exercise his right of lien or retention notwithstanding that he is in possession of the goods as agent or bailee for the buyer, (Art. 1527, NCC.) (b) The unpaid seller loses his right of lien or retention in the following cases: (1) When he delivers the goods to a carrier or other bail­ ee for the purpose of transmission to the buyer without reserv­ ing the ownership in the goods or the right to the possession thereof; (2) When the buyer or his agent lawfully obtains pos­ session of the goods; and (3)

By waiver thereof.

The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained judgment for the price of the goods. (Art. 1529, NCC.) 57. (a) What is meant by the right of stoppage in transitu? (1961) (b) When is this right available to the unpaid seller? (1961) (c)

How is the right exercised?

ANS: (a) The right of stoppage in transitu refers to the right of the unpaid seller to resume possession of the goods at anytime while they are in transit by virtue of which he will then be entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. (Art. 1530, NCC.) (b) This right is available to the unpaid seller when he has already parted with the possession of the goods and the buyer is or becomes insolvent. (Art. 1530, NCC.) (c) The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the

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latter case, the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer. When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the seller. The expenses of such delivery must be borne by the seller. If, however, a negotiable document of title representing the goods has been issued by the carrier or other bailee, he shall not be obliged to deliver or justified in delivering the goods to the seller unless such document is first surrendered for cancellation. (Art. 1532, NCC.) 58. (a) When is the right of resale available to the unpaid seller? (b) What is the effect of such resale? (c) How is the resale effected? (d) Is it essential that notice of such resale should be given to the original buyer? ANS: (a) The right of resale is available to the unpaid seller of goods in the following cases: (1)

Where the goods are of perishable nature;

(2) Where the seller has expressly reserved the right of resale in case the buyer should make default; and (3) Where the buyer has been in default in the payment of the price for an unreasonable time. It is, however, essential before the resale can be made that the unpaid seller should have a right of lien or should have stopped the goods in transitu. (Art. 1533, NCC.)

(b) Where a resale is properly made, the buyer acqu a good title against the original buyers. The unpaid seller, on the other hand, shall not be liable to the original buyer upon the contract of sale or for any profit made by reason of the resale. As a matter of fact, under the law, he may recover from the latter damages for any loss occasioned by the breach of the contract of sale. (Art. 1533, NCC; Katigbak vs. Court of Appeals, 4 SCRA 243.)

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(c) The resale may be made either by public or private sale. However, the unpaid seller, who is bound to exercise reasonable care and judgment in making the resale, cannot directly or indirectly buy the goods. (Art 1533, NCC.) (d) It is not essential to the validity of a resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. (Art. 1533, NCC.) 59. (a) When is the right of rescission available to the unpaid seller? (b) What is the effect of such rescission? (c) Is it essential that notice of such rescission should be given to the buyer? ANS: (a) The right of rescission is available to the unpaid seller in the following cases: (1) Where he expressly reserved the right to do so in case the buyer should make default; and (2) Where the buyer has been in default in the payment of the price for an unreasonable time. It is, however, essential before the rescission can be made that the unpaid seller should have a right of lien or should have stopped the goods in transitu. (Art. 1534, NCC.) (b) Once the unpaid seller has rescinded the transfer of title and resumed ownership in the goods, he shall not thereafter be liable to the buyer upon the contract of sale. As a matter of fact, under the law, he may recover from the buyer damages for any loss occasioned by the breach of the contract. (Art. 1534, NCC.) (c) Although the law requires that the intention to rescind must be manifested by some overt act, it is not essential that such overt act should be communicated to the buyer. However, the

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giving or failure to the notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer has been in default for an unreasonable time before the right of rescission was asserted. (Art. 1534, NCC.) 60. Suppose that the buyer sold the goods to another before the unpaid seller could exercise his right of lien or his right of stoppage in transitu, what is the effect of such sale upon the latter’s right? ANS: The unpaid seller’s right of lien or stoppage in transitu is not affected, unless he had assented thereto. However, if a negotiable document of title had been issued for the goods, and subsequently, such document was negotiated to a purchaser in good faith and for value either before or after notification to the carrier or bailee who issued the document of the seller’s claim to a lien or right of stoppage in transitu, the right of the purchaser would then be superior to that of the unpaid seller. (Arts. 1535,1518, NCC.) 61. A sold two (2) parcels of land to B. (a) Suppose that in the contract there is a statement of the area of both immovables at the rate of a certain price for a unit of measure or number, what are the remedies of B if the actual area is less than that stated in the contract? (b) Suppose that there is also a statement of the quality, what are the remedies of B if the quality of a part of one of the immovables is not the quality specified in the contract? (c) Suppose that the sale is made for a lump sum or single price and not at the rate of a certain sum for a unit of measure or number, what are the remedies of B if the actual area does not correspond with that stated in the contract? (d) Assuming that B is entitled to the above remedies, within what period must he bring the action? ANS: (a) B may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.

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Nevertheless, if he can prove that he would not have bought the immovables had he known of their smaller area, he may still rescind the sale if he so desires. (Art. 1539, NCC.) (b) B may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the inferior value of the immovable whose quality does not correspond with the quality specified in the contract exceeds one-tenth of the price agreed upon. Nevertheless, if he can prove that he would not have bought the immovables had he known of the inferior quality of one of them, he may still rescind the sale if he so desires. (Ibid.) (c) As a rule, there is no remedy of B. However, there is an exception which the law recognizes. According to the NCC, “if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.” This exception applies regardless of whether only the immovable is sold for a lump sum or two or more immovables are sold for a single price. (Art. 1542, NCC.) (d) B must bring the action within six (6) months, counted from the day of delivery. (Art. 1543, NCC.) 62. Where the same thing is sold to different purchasers, to whom shall the ownership be transferred? ANS: As to movables — The ownership shall be transferred to the person who may have first taken possession thereof in good faith. As to immovables — The ownership shall be transferred: (1) To the person acquiring it who in good faith first recorded it in the Registry of Property. (2) In default thereof, to the person who in good faith was first in the possession.

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(3) In default thereof, to the person who presents the oldest title, provided there is good faith. (Art. 1544, NCC.) 63. (a) In 1955, the spouses A and B sold to C a parcel of unregistered land for the sum of P350. The deed of sale was not registered, but it is admitted that C took possession of the property in good faith and has been in possession ever since. Later, a decision was rendered against A and B in favor of D in a civil case commenced in 1957. The land sold to C was levied upon and subsequently sold to D in the sheriffs sale. The deed of sheriffs sale was duly registered in good faith. Who has the superior right over the property in dispute — C or D? Reasons. ANS: C has superior right over the disputed property. The rule in Art. 1544 of the NCC applies to lands covered by Torrens title where the prior sale is neither recorded nor known to the execution purchaser prior to the levy. But where the land in question is not registered under Act No. 496, the rule is different. While under Art. 1544 of the NCC registration in good faith prevails over possession in the event of a double sale by the vendor of the same piece of land to different vendees, said article is not applicable even if the later vendee was ignorant of the prior sale made by his judgment debtor in favor of another vendee. The reason is that the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter’s interest in the property sold as of the time the property was levied upon, as provided in Sec. 35 of Rule 39 of the Revised Rules of Court. (Carumba vs. Court of Appeals, 31 SCRA 558.) (b) Can double sales under Art. 1544 of the NCC be invoked where two (2) different contracts of sale are made by two (2) different persons, one of them not being the owner of the property sold? ANS: No. Art. 1544 of the NCC contemplates a case of double or multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and the same immovable property to two (2) or more buyers. It is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. It cannot be invoked where

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the two (2) different contracts of sale are made by different persons, one of them not being the owner of the property sold. And even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right. (Consolidated Rural Bank [Cagayan Valley], Inc. vs. Court of Appeals, G.R. No. 132161, January 17, 2005.) 64. “A” sold a piece of unregistered land to “B” who immediately took possession and improved the same while registration proceedings under the Torrens System was still pending. The deed of sale was not registered. A month later, the original certificate of title was issued in the name of “A,” “free from all liens and encumbrances.” Subsequently, the same land was sold at public auction to satisfy a debt of “A” to “C,” the judgment creditor. The notice of levy, the certificate of sale and the sheriffs certificate of final sale were registered. “C,” sold his rights to the property to “D” who then sued “B” in order that he be declared the owner of the property. Who has the better right to the land, “B” or “D”? Give reasons. (1972) ANS: “B” has a better right than “D” to the land in question. We are, of course, aware of the doctrine, repeatedly asserted by our appellate courts, that in case of conveyance of registered real estate the registration of the deed of sale is the operative act that gives validity to the transfer. But it must be observed that the instant case is exceptional in character. If both sales covered unregistered land, undoubtedly, “B” would have a better right because it is now well-settled that the law on double sales enunciated in Art. 1544 of the NCC is applicable only to lands covered by a Torrens Title. If both sales had been made when the land was already registered under our Torrens title system, undoubtedly, “D" would have a better right applying literally the provision of Art. 1544 regarding priority or preference of registration in good faith. The instant case, however, does not fall under either situation. Therefore, the Rules of Court shall govern. The purchaser of land sold in an execution sale shall be substituted to, and acquire, all the rights, title, interest, and claim of the judgment debtor to the property as of the time of the

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levy. (Rule 39, Revised Rules o f Court.) Since at the time of the levy “A” no longer owned the land, “D” acquired nothing. Parenthetically, the unregistered sale and subsequent transfer of the title and ownership to “B” could not have been rendered of no effect by the subsequent issuance of the Torrens title to the land. Besides, to deprive “B” now of the land and the improvements made thereon by sheer force of technicality would be both unjust and inequitable. (Dagupan Trading Co. vs. Macam, 14 SCRA 179; Carumba vs. Court of Appeals, 31 SCRA 558.) 65. (a) On Jan. 10,2000, Raul sold a parcel of registered land to Eddie. On Jan. 25,2004, he sold the same land to Ping. Who has a better right if: (i) the first sale is registered ahead of the second sale, with knowledge of the latter. Why? (ii) the second sale is registered ahead of the first sale, with knowledge of the latter? Why? (2001) ANS: (a) (i) The first buyer has the better right if his sale was first to be registered, even though the first buyer knew of the second sale. The fact that he knew of the second sale at the time of his registration does not make him as acting in bad faith because the sale to him was ahead in time, hence, has a priority in right. What creates bad faith in the case of double sale of land is knowledge of a previous sale. (ii) The first buyer is still to be preferred, where the sec­ ond sale is registered ahead of the first sale but with knowledge of the latter. This is because the second buyer, who at the time he registered his sale knew that the property had already been sold to someone else, acted in bad faith. (Art. 1544, NCC.) (b) What are the rules of preference in double sales? ANS: Following Art. 1544 of the double sale of an immovable, the rules of preference are: (a) the first registrant in good faith; (b) should there be no entry, the first in possession in good faith; and (c) in the absence thereof, the buyer who presents the oldest title in good faith. Prior

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registration of the subject property does not by itself confer ownership or a better right over the property. Article 1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer’s rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. (Consolidated Rural Bank [Cagayan Valley], Inc. vs. Court o f Appeals, G.R. No. 132161, January 17, 2005.) 66. (a) Explain briefly the right of priority of a first vendee of immovable property under Art. 1544 of the NCC. How may this right of priority be preserved as against a second vendee? (b) Explain briefly how a second vendee may be able to displace the first vendee. ANS: (a) The first vendee’s right of priority is based upon the principle of prius tempore, potior jure (first in time, stronger in right). Its only essential requisite is priority in time; in other words, the only one who can invoke it is the first vendee. Obviously, he is a purchaser in good faith because at the time when he bought the immovable, there was still no sale to a second vendee. In order that such right of priority may be preserved as against a second vendee, the law requires that the first vendee must register the deed of sale in his favor in the Registry of Property ahead of any registration in good faith by the second vendee or any subsequent vendee. In other words, in order that there will be priority in right, there must be both priority in time with respect to the sale and priority in time with respect to the registration. If these priorities are present, the first vendee can no longer be displaced by any subsequent vendee. It must be observed that so long as there is still no registration in good faith by a subsequent vendee, a registration made by the first vendee of his deed of sale regardless of whether he was unaware or aware of the existence of a second sale is always in good faith. This is so because knowledge gained by him of the second sale cannot defeat his right except as provided by the NCC and that is where the second vendee first registers in good faith the second sale ahead of the first. The principle of “automatic registration” cannot, therefore,

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be applied to the first vendee. Knowledge gained by him of the existence of a second sale cannot be considered as the equivalent of registration in good faith by the second vendee. (See separate opinion of Justice Teehankee in Carbonell vs. CA, 69 SCRA 99, 120-123,) (b) Under Art. 1544 of the NCC, the only way by which the first vendee may be displaced by the second vendee is when said second vendee first registers the second sale in good faith ahead of the first. There can be no other way. And from the very nature of his position as second vendee, the law requires that as far as he is concerned, there must always be good faith throughout. He must not only be a purchaser in good faith; he must also be a registrant in good faith. This is the price exacted by Art. 1544 of the NCC in order that there will be a displacement of the first vendee by the second vendee. The latter must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law. (Ibid.) 67. On January 27, 1955, A sold a 195-square meter lot located in San Juan, Rizal to B for P2,000. This is evidenced by an informal memorandum agreement of sale written in the Batanes dialect. Three (3) days later, he sold the same lot to C for P4,000. This is evidenced by a formal deed of sale. Upon buying the property, C, who was aware of the first sale, immediately took possession of the lot. Informed of the second sale, on February 8, 1955, B registered an adverse claim to the property. On February 12,1955, C registered the deed of sale in her favor. Subsequently, B brought an action against both A and C, praying that she be declared the lawful owner of the lot. Will the action prosper? ANS: Yes, the action will prosper. B, the first vendee, is the lawful owner of the lot. Art. 1544 of the NCC, which is decisive in this case, declares that if the same immovable property should have been sold to different vendees, “the ownership shall pertain to the person who in good faith first recorded it in the Registry o f Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.”

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Undoubtedly, B’s prior purchase of the questioned property was in good faith. She could not have been aware of any sale to C as there was no such sale to C then. Her good faith subsisted and continued to exist when she recorded her adverse claim four days prior to the registration of C’s deed of sale. True, what was recorded was an adverse claim, but such recording in good faith has all of the effects of a registration in good faith of a deed of sale since B did not have a formal registrable deed of sale. In other words, it was the next best thing she could do in order to protect her legal rights. This is so because there is already a perfected and binding memorandum agreement of sale which can be the basis of an action to compel the vendor to execute a formal registrable deed of sale which would relate back to the date of the original memorandum agreement. True, also, B was already aware of the second sale made to C at the time when she recorded her adverse claim, but that is of no moment. The governing principle here is prius tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except only as provided by the NCC and that is where the second buyer first registers in good faith the second sale ahead of the first. C, on the other hand, is a purchaser in bad faith. She was already aware of a first sale made to B when she bought the lot frOm A. Therefore, her act of recording her formal deed of sale in the Registry of Property was in bad faith. Hence, she cannot displace B. (See Carbonell vs. CA, 69 SCRA 99; read separate op. o f Justice Teehankee, 69 SCRA 120-123.) 68. Through a private document, Waldo sold to Yamzon a piece of land registered under the Torrens System. After Waldo’s death, his heirs (who did not know of the sale) sold the land to Zeppo who registered the deed of sale and obtained a transfer certificate of title in his name. Yamzon subsequently filed an action against Zeppo seeking recovery of the land on the basis of Waldo’s prior conveyance. Who has the better right to the land? ANS: I distinguish. If Zeppo, the second vendee, was not aware of the prior sale, he has a better right to the land than Yamzon, the first vendee.

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This is explicitly supported by the law on double sales of immovable property as enunciated in Art. 1544 of the NCC. According to the law, the ownership of the land shall belong to the person who in good faith first recorded the sale in the Registry of Property. The fact that the second sale was effected by the heirs of Waldo is of no moment. Under the principle of relativity of contracts, the first sale effected by Waldo is also binding upon said heirs. (Art, 1311, NCC.) Hence, the instant case is clearly a case of double sale. However, if Zeppo was aware of the prior sale, Yamzon, the first vendee, has a better right. As far as the latter is concerned, the recording of the sale in the Registry of Property is void or inexistent because it was made in bad faith. This is true even if Zeppo was the first to take possession of the land. The law is explicit. There must be good faith even in the possession of land. Consequently, even if we assume that Zeppo was the first to take possession of the land, so long as he was aware of the prior sale, Yamzon has still the better right. The reason is that he can present the older title. (Art. 1544, NCC.) (Note: True, under our land registration laws, the act of registration is the operative act which binds the land, but it must be observed that this rule, as applied to double sale, is always predicated on good faith of the registrant as prescribed by Art. 1544 of the NCC, Besides, knowledge by or notice to the second vendee of the prior sale would be equivalent to registration of such prior sale.)

69. (a) A sold a piece of pasture land to B. On the same day A sold it again to C. Both sales were made in private documents, bearing the same date. Neither of the purchasers succeeded in taking physical possession of the land because it was already in the possession of another person under a contract of lease for one year, executed by A a month before, also in a private document. Please state your opinion as to: (1) who is the rightful owner of the land, in the supposition that both purchasers acted in good faith; and (2) whether the owner is at liberty to oust the lessee before the expiration of the lease. Why? (1922) ANS: (1) According to Art. 1544 of the NCC: “If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have

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first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.” Since the titles of B and C are not recorded in the Registry of Property, and since neither had succeeded in taking possession of the property, therefore, B is the rightful owner because he can present the older title. (2) According to Art. 1676 of the NCC, “the purchaser of a piece of land which is under a lease that is not recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence of the lease/’ Applying this provision, it is clear that B may oust the lessee even before the expiration of the lease, since the lease is not recorded in the Registry of Property and the purchaser was not aware of the existence of the lease. (b) Is a registration of a writ of attachment more supe­ rior than an unregistered sale? ANS: The levy on attachment, duly registered takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that where the property involved was duly covered by the Torrens System, said system works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land. This preference is not diminished since an attachment is a proceeding in rem, which means that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The lien continues until the debt is paid, or the sale is had under execution issued on the judgment, or until the judgment is satisfied or the attachment discharged or vacated in some manner provided by law. (Valdevieso vs. jDamalerio, G.R. No. 133303, February 15s 2005, supra.)

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70, What are the implied warranties in a contract of sale? ANS: In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal peaceful possession of the thing; and (2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. These warranties, however, do not mean that a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, can be held liable for the sale of a thing in which a third person has a legal or equitable interest. (Art. 1547, NCC.) In a sale of goods, there is an implied warranty as to the quality or fitness of the goods as follows: (1) Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller’s skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose; and (2) Where the goods are bought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (Art. 1562, NCC.)

71. What is meant by warranty in case of eviction? What are its essential requisites? ANS: Warranty in case of eviction is an implied warranty in contracts of sale, by virtue of which if the vendee is deprived of the whole or a part of the thing purchased by a final judgment based on a right prior to the sale or an act imputable to the vendor, such

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vendor shall answer for the eviction even though nothing has been said in the contract on the subject. (Art. 1548, NCC.) In order that such warranty may be enforced, it is essential that the following requisites must concur: (1) Deprivation of the vendee of the whole or part of the thing purchased. (2)

The deprivation must be by virtue of a final judgment.

(3) The deprivation must be based on a right prior to the sale or an act imputable to the vendor. (4) The vendor must be summoned in the suit for eviction at the instance of the vendee. (Arts. 1548, 1558, NCC.)

72. A sold a barge to B for P30,000 without express warranty of title. Subsequently, C sued B in an action of reinvindication and obtained final judgment for the ownership and possession of the barge. Can B now compel A to refund to him the P30,000? Reasons. ANS: Our answer must be qualified. In order that B can compel A to refund to him the P30,000, it is essential that he must prove that all of the requisites for warranty against eviction exist. These requisites are: first, deprivation of the vendee of the whole or a part of the thing purchased; second, the deprivation must be by final judgment; third, the deprivation must be based on a right prior to the sale or an act imputable to the vendor; and fourth, the vendor must be summoned in the suit for eviction at the instance of the vendee. If all of these requisites are present, B can compel A to refund to him the P30,000. However, if B did not notify A of the action commenced by C, A cannot be held liable.

73. Under the law, warranty against eviction may be waived. What are the two (2) kinds of waiver of warranty against eviction and what are their effects? ANS: The waiver may be “consciente” or “intencionada” In the first, there is merely a voluntary renunciation made by the vendee of the right to warranty in case of eviction. The effect of such renunciation is that the liability of the vendor in case of eviction

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shall extend only to the payment of the value of the thing sold at the time of eviction. In the second, there is a voluntary renunciation by the vendee of the right to warranty against eviction, with knowledge of the risk of eviction and assuming the consequences thereof. The effect of such renunciation in case of eviction is to relieve the vendor of any liability whatsoever. (Art. 1554, NCC.)

74. In 1934, A sold a parcel of land to B, with right to repurchase within a period of five years. After the expiration of said period, and without redeeming the property, A sold it again to C, who, in turn, sold it to D, with right of repurchase within a period of one year. Upon the expiration of the oneyear period, D consolidated his title over the property. This was in 1946. A year later, in 1947, C sold the same property to E, which sale contained a warranty of title. A few months later, D also sold the same property again to E, which sale also contained a warranty of title and against eviction. This sale was registered in 1948. However, before this sale was made, B had already brought an action against E for the recovery of the property. In this litigation, the land was awarded to B. The judgment having become final, a writ of execution was issued and as a result the properties of E were attached and sold at public auction. In 1956, E brought an action against D. (1) Can D be held liable for warranty against eviction? (2) Can the contract of sale entered into between D and E be rescinded? ANS: (1) The vendor’s liability for warranty against eviction is waivable and maybe renounced by the vendee. (Art. 1548, NCC.) In the case at bar, while there is a stipulation in the contract regarding warranty against eviction, it was only pro forma and, therefore, the vendor cannot be bound thereby, in view of the fact that the same land had been previously bought by the vendee E from C and that his only purpose in buying the same again from D was to enable him to register his prior deed of sale. Furthermore, the property was already the subject of a litigation between him and B who claimed its title and possession by virtue of an earlier sale from the original owner, and it was by final judgment in this litigation that E was finally

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evicted from said land. Not having appealed from this decision the implication is that he not only renounced the warranty, but he knew the danger of eviction and assumed its consequences. Under what is now Art. 1554 of the NCC, when the vendee has waived his right of warranty against eviction and eviction shall occur, the vendor shall only pay the price which the thing sold had at the time of the eviction, unless the vendee has made the waiver with knowledge of the danger of eviction and assumed its consequences. It is clear that in the instant case, E knew of the danger of eviction at the time he purchased the land from D and assumed its consequences. Therefore, D is not even obliged to restore to him the price of the land; in other words, he is completely exempt from any liability whatsoever. (Andaya vs. Manansala, 107 Phil. 1151.) (2) Neither may D be condemned to return the price on the theory of rescission of the contract of sale. In the first place, the remedy of rescission contemplates that the one demanding it is able to return whatever he has received under the contract. When this cannot be done rescission cannot be carried out. (Art 1385> NCC.) It is for this reason that the law on sales does not make rescission a remedy in case the vendee is totally evicted from the thing sold, as in this case, for he can no longer restore the thing to the vendor. It is only when the vendee loses “a part of the thing sold of such importance, in relation to the whole that he would not have purchased it without said part” that he may ask for rescission, but he has “the obligation to return the thing without other encumbrances than those which it had when he acquired it.” (Art. 15561 NCC.) In the second place, E assumed the risk of eviction, which stops him from asking for rescission even were it possible for him to restore what he had received under the contract. (Andaya vs. Manansala, supra.)

74. If there is no agreement with regard to warranty in case of eviction, what is the extent of the liability of the vendor? ANS: When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor: (1) The return of the value which the thing sold had at the time of the eviction be it greater or less than the price of the sale;

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(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; (3) The cost of the suit which caused the eviction and, in a proper case, those of the suit brought against the vendor for the warranty; (4) them;

The expenses of the contract, if the vendee has paid

(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. (Art. 1555, NCC.) Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances than those which it had when he acquired it. He may exercise this right of action, instead of enforcing the vendor’s liability for eviction. The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. (Art. 1556, NCC.)

75. Define “accion redhibitoria” and “accion quanti m inoris.”

ANS: "Accion redhibitoria" is an action instituted by the vendee against the vendor to avoid a sale on account of some vice or defect in the thing sold which renders it unfit for the use intended or which will diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it. "Accion quanti minoris” on the other hand, is an action to procure the return of a part of the purchase price paid by the vendee to the vendor by reason of such defect. (Arts. 1561, 1562, 1564, 1565, 1567, NCC.)

76. If there is a breach by the vendor of the implied warranty against hidden defects of or encumbrances upon the thing sold, what are the remedies of the vendee? What is the period of prescription for such remedies? 983

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ANS: The vendee may elect between withdrawing from the con­ tract (accion redhibitoria) and demanding a proportionate reduction of the price (accion quanti minoris), with damages in either case. (Art. 1567, NCC.) Generally, the period of prescription is 6 months. (Art. 1571, NCC.) However, in redhibitory actions based on the faults or defects of animals, the period is 40 days. (Art. 1577, NCC.) Whether six (6) months or 40 days, the period must be counted from the date of delivery to the vendee.

77. When is the vendee liable for interest on the price? ANS: The vendee is liable for interest on the price in the following cases: (1)

Should it have been so stipulated;

(2) Should the thing sold and delivered produce fruits or income; and (3) Should he be in default, from the time of judicial or extra­ judicial demand for the payment of the price. (Art. 1589, NCC.)

78. When may the vendee suspend the payment of the price? ANS: The vendee may suspend the payment of the price in the following cases: (1) Should he be disturbed in the possession or ownership of the thing sold; or (2) Should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure of mortgage. The right, however, does not exist in the following cases: (1)

Should there be a stipulation to that effect; or

(2)

Should the vendor give security for the return of the price;

or (3) Should the vendor have caused the disturbance or danger to cease; or (4) Should the disturbance consist only of a mere act of trespass. (Art. 1590, NCC.)-

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79* C bought from A cinematographic equipment for PI5,000. He made a down payment of P10,000, promising to pay the balance in four (4) installments. After payment of the first installment, B informed C that since he is a co-owner of the equipment sold, payments to A must be suspended. When A sought to collect from C, the latter refused to pay on account of B’s claim. Subsequently, B brought an action against both A and C for his share in the price of the equipment. A and B, however, arrived at a compromise agreement by virtue of which the former recognized the latter as co-owner of the equipment. After this agreement, A brought an action against C for the unpaid balance. Is C liable for the payment of legal interest considering that he was justified in suspending payment? ANS: The right of a vendee to suspend payment of the price of the thing sold in the face of any danger that he might be disturbed in its possession or ownership is conferred by Art. 1590 of the NCC, such suspension to continue until the vendor has caused the danger or disturbance to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. There is, therefore, no question that C had the right to suspend payment from the time he was informed by B of the latter’s claim of ownership thereof. Nevertheless, said right ended as soon as the vendor had caused the disturbance or danger to cease. In this case, the disturbance ceased when A reached a compromise agreement with B. It is clear, therefore, that C was in default from the date of the filing of the complaint by A, and under Art. 2209 of the NCC, he must pay legal interest from said date. (Bareng vs. Court of Appeals, 107 Phil. 641.)

80. In 1949, Myers Building Co. entered into a contract entitled “Deed of Conditional Sale” with the Maritime Building Co., where it sold to the latter a big tract of land located in Manila with all of the improvements thereon for PI,000,000, P50,000 of which shall be paid upon the execution of the contract and the balance to be paid in monthly installments of PI0,000, which was later reduced to P5,000. In the deed, there is a stipulation that in case of failure of the 985

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vendee to pay any installment due and payable, the vendor at his option can annul the contract and all payments already made shall be forfeited and said vendor shall then have a right to take possession of the property. In addition, there is also a stipulation that the vendor shall retain the ownership and that such ownership shall be vested in the vendee only upon compliance with all of the terms of the contract. In 1961, when the balance of the purchase price was only P319,300, the vendee, because of financial difficulties, defaulted in the payment of three consecutive monthly installments. As a consequence, the vendor transmitted a letter to the vendee rescinding the contract and declaring all payments already made as forfeited. Is Art. 1592 of the NCC applicable in the instant case? Reasons. ANS: No, Art. 1592 of the NCC is not applicable in the instant case. The contract in the case at bar is not the ordinary sale envisaged by Art. 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract. In suing to recover possession of the building from Maritime, Myers is not after the resolution or setting aside of the contract and of the restoration of the parties to the status quo ante, as contemplated in Art. 1592, but precisely enforcing the provisions of the agreement that it is no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with the specified condition precedent, which is to pay the installments as they fell due. The distinction between contracts of sale and contracts to sell with reserved title has been recognized by the Supreme Court in repeated decisions upholding the powers of promissors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for. (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., 43 SCRA 93.)

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81. A sold to B a house and lot for P500,000 payable 30 days after the execution of the deed of sale. It was expressly agreed in the deed that the sale would ipso facto be of no effect upon the buyer’s failure to pay as agreed. B failed to pay on maturity, and A sued to declare the contract of no force and effect. If B tendered payment before the action was filed, but subsequent to the stipulated date of payment, would the action prosper? ANS: The action would not prosper in such a case. According to the law, “in the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, so long as no demand for the rescission of the contract has been made upon him either judicially or by notarial act. After the demand, the court may not grant him a new term.” (Art 1592, NCC.) Here, at the time B tendered payment of the purchase price, there was still no demand made upon him by A for the payment of said purchase price either judicially or by notarial act,

82. A sold his house and lot to B and gave B until May 1979 to pay the balance of the purchase price. After B failed to pay the installments due, A made no judicial demand for rescission of the contract nor did he execute any notarial act demanding the same as required under Art. 1592 of the NCC. B still made payments even after the May 1979 deadline, which A accepted. Could A exercise his right to rescind the sale? ANS: With respect to rescission of a sale of real property, Art. 1592 of the NCC governs. Thus, in the instant case, upon the expiration of the period to pay, A made no move to rescind but continued accepting late payments, an act which cannot but be construed as a waiver of the right to rescind. When A, instead of availing of his right to rescind, accepted and received delayed payments of installments beyond the period stipulated, and B was in arrears. A in effect waived and is now estopped from exercising his right to rescind. (Justice Romero, Heirs o f Pedro Escanlar vs. CA, G.R. No. 119777; Holgado vs. CA, G.R. No. 120690, October 23, 1997.)

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83. How is a contract of sale extinguished? ANS: Sales are extinguished by the same causes as all other obligations, and also by conventional or legal redemption. (Art. 1600, NCC.)

84. Define conventional redemption. / ANS: Conventional redemption is that which takes place when the vendor reserves the right to repurchase the thing sold with the obligation to reimburse to the vendee the price of the sale, the expenses of the contract, other legitimate payments made by reason of the sale, as well as necessary and useful expenses made on the thing sold. (Arts. 1601,1616, NCC.)

85. When is conventional redemption presumed to be an equitable mortgage? ANS: The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) 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; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) 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 other obligation; and (7) When there is a doubt as to whether the contract is a contract of sale with right of repurchase or an equitable mortgage. In any of the foregoing cases, any money, fruits, or other ben­ efits to be received by the vendee as rent or otherwise shall be con­

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sidered as interest which shall be subject to the usury laws. (Arts. 1602,1603, NCC.)

86. “S” Executed a Deed of Sale of a parcel of land in favor of “T,” reserving for himselfs the right to repurchase the same within five years from the date of the contract. The contract provided that during the repurchase period “S” will retain possession of the land as lessee and pay the land taxes thereon. The consideration for the sale was P10,000.00 but the land was worth double the price. “S” failed to repurchase the land within the agreed period and “T” applied to the Court for the consolidation of his title. “S” opposed the application and claimed that he had the right to repurchase the land. Whose stand should be upheld? (1980,1991,1993) ANS: The stand of “S” should be upheld. In reality, the contract in the instant case is an equitable mortgage. The land is merely the collateral or security for the payment of a loan of P10,000.00. This is obvious from the deed of sale itself. In the first place, it says that “S” will retain possession of the land as lessee; in the second place, it says that “S” the vendor a retro, shall pay the taxes thereon; and in the third place, the purchase price is unusually inadequate. These are badges of an equitable mortgage. According to the NCC, the presence of any of these will be sufficient to raise the presumption that the contract is an equitable mortgage. Therefore, “S” can still insist on his right to pay to “T” his indebtedness of P10,000.00 plus interest. (Art. 1602, NCC.)

87. What is the period for the redemption of property sold with right of repurchase? ANS: In the absence of any express agreement, the period of redemption shall be four (4) years from the date of the contract. Should there be an agreement, the period cannot exceed 10 years. However, the vendor may still exercise the right to repurchase within 30 days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. (Art. 1606, NCC.)

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88. A sold a parcel of land to B for P5,000 with right of repurchase. It was expressly stipulated in the contract of sale that A shall have the right to redeem the property “at any time when he has money.” What is the period of redemption in such a case? Reason. (1955) ANS: According to several decisions rendered by the Supreme Court, the phrase “at any time” found in the deed of sale, although indefinite, expresses an agreement as to the period within which the right of redemption of the thing sold was reserved by the vendor to himself. Consequently, the case is governed by the second paragraph of Art. 1606 of the NCC, and not by the first paragraph. The period of redemption is, therefore, 10 years counted from the date of the execution of the contract. (Bandong vs. Austria, 31 Phil. 479; Alojado vs. Lim, 51 Phil. 339; Soriano vs. Abalos, 47 Off. Gaz. 168; Corcega vs. Brosas, CA, Off. Gaz. 3411.)

89. Suppose that in the above problem, it was expressly stipulated that the right of repurchase could not be exercised within three (3) years from the date of the sale, what would be the period of redemption? ANS: In Reyes vs. Rosales (25 Phil. 495), the Supreme Court held that in such a case, the vendor should be allowed four (4) years from the expiration of the time within which the right to redeem could not be exercised. But, in the event that the 4-year period would extend the life of the contract beyond 10 years, such as when it is agreed that the right of repurchase could not be exercised within 7, or 8 or 9 years from the date of the sale, the vendor should be allowed to redeem the property during the balance of the 10-year period.

90. Suppose that in the above problem, it was expressly stipulated that the vendor a retro can redeem the property as soon as he has established a certain business, what would be the period of redemption? ANS: Actually, in this case, there is no agreement with respect to a period. Consequently, the case is governed by the first paragraph of Art. 1606 of the NCC, and not by the second paragraph. Hence, the vendor a retro should be allowed 4 years within which to redeem the property. (Medel vs. Francisco, 51 Phil. 367.) '^ 5J

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91. B sold a parcel of land to defendant V for P4,000. In the deed of sale, it was expressly stipulated that “at any time after the expiration of ten years to be computed from October 1, 1951, the vendor, his heirs or successors-ininterest has the option and priority to purchase the land for the same consideration of P4,000.” On July 18,1963, the heirs of B commenced an action against V to compel the latter to reconvey the land to them pursuant to the contractual provisions of the aforequoted deed of sale. Defendant stands squarely on the proposition that the stipulation in the contract giving the vendor, his heirs or successors-in-interest the “option” to purchase the land is void and contrary to law, particularly Art. 1606 of the NCC. Decide the case. ANS: The factual backdrop of the above problem, is exactly the same as that of Baluyot us, Venegas (22 SCRA 412). According to the Supreme Court, the stipulation that “at any time after the expiration of the period of 10 years to be computed from October 1,1951, the vendor, his heirs or successors-in-interest has the option and priority to purchase the land for the same consideration of P4,000 is not legally feasible because it is prohibited by Art. 1606 of the NCC, which limits the period for repurchase, in case there is an agreement, to the maximum of 10 years from the date of the contract. The contract here was executed in July, 1951. The option or right to repurchase was sought to be exercised 12 years thereafter, or in 1963. Indeed by express agreement it could not have been exercised except after the expiration of 10 years. The effect of an agreement of this tenor is that the right to repurchase did not even arise, since by the time it was supposed to begin, it was already interdicted by law. While the contracting parties are free to establish any condition they may deem advisable, the same must not be contrary to law, morals, good customs, public order or public policy. (Art. 1306, NCC.)

92. Suppose that immediately prior to the expiration of the period of redemption agreed upon the vendor a retro brought an action to obtain a judicial declaration that the agreement entered into is a simple mortgage and not a sale with pacto de retro , and judgment declaring the contract to 991

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be a true sale with pacto de retro was rendered several years later, can such vendor a retro still redeem the property? ANS: Yes, he can. Under Art. 1606, par, 3, of the NCC, he is allowed to redeem the property within 30 days from the time the judgment has become final. If there was an appear the 30-day period starts to run from the time the decision of the appellate court has become final. (Ceynas vs. Ulanday, 105 Phil. 1007; Perez vs. Zulueta, 106 Phil. 264; Gerardino vs. Gloria, 80 SCRA 646.)

93. (a) Art. 1607 of the NCC provides: “In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the pro­ visions of Article 1616 shall not be recorded in the Registry of Property without judicial order, after the vendor had been duly heard.” Under this provision, how shall the consolidation of ownership in the vendee a retro be effected? Explain. (b) Against whom shall the action for consolidation be brought? (c) If the widow of the deceased (surviving spouse) sold under pacto de retro a conjugal lot, what did she dispose of? What is the effect of this upon the action for consolidation? ANS: (a) In Teodoro vs. Arcenas (110 Phil. 222) and again in Ongcoco vs. Honorable Judge (15 SCRA 30), the Supreme Court ruled that under Art. 1607 of the NCC, such consolidation shall be effected through an ordinary civil action, not by a mere motion, and that the vendor a retro should be made a party defendant, who should be served with summons in accordance with Rule 14 of the Revised Rules of Court; and that the failure on the part of the court to cause the service of summons, as prescribed in Rule 14, is sufficient cause for attacking the validity of the judgment and subsequent orders on jurisdictional grounds. The Supreme Court in the Arcenas case stressed that the reason behind the requirement of a judicial order for consolidation as directed by Art. 1607 of the NCC is because “experience has demonstrated too often that many sales with right of repurchase have been devised to circumvent or ignore our usury laws and for this reason, the law looks upon them with disfavor.” (Report o f the Code Commission, pp. 63-64.) When, therefore, Art. 1607 speaks of a judicial order after the vendor shall

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have been duly heard, it contemplates none other than a regular court proceeding under the governing Rules of Court, wherein the parties are given full opportunity to lay bare before the court the real covenant. Furthermore, the obvious intent of our NCC, in requiring a judicial confirmation of the consolidation in the vendee a retro of the ownership over the property sold, is not only to have all doubts over the true nature of the transaction speedily ascertained and decided, but also to prevent the interposition of buyers in good faith while such determination is being made. Under the former method of consolidation by a mere extra-judicial affidavit of the buyer a retro, the latter could easily cut off any claim of the seller by disposing of the property, after such consolidation, to strangers in good faith and without notice. The changes of the seller a retro to recover his property would thus be nullified, even if the transaction were really proved to be a mortgage and not a sale. (Yturralde vs. Court o f Appeals, 43 SCRA 413.) (b) The action for consolidation should be brought against all the indispensable parties, without whom no final determination can be had of the action; and such indispensable parties who are joined as party defendants must be properly summoned pursuant to Rule 14 of the Revised Rules of Court. If anyone of the party defendants, who are all indispensable parties, is not properly summoned, the court acquires no jurisdiction over the entire case and its decision and orders therein are null and void. (Ibid.) (c) Where the surviving spouse sold under pacto de retro a. conjugal lot, what she validly dispose of under the said sale was only her conjugal share in the lot plus her successional right as heir in the conjugal share of her deceased husband. Consequently, the vendee a retro cannot legally petition for the consolidation of his ownership over the entire lot. (Ibid.)

94. Suppose that in the action for consolidation of ownership over the land brought by the vendee a retro against the vendor a retro, the court held that the contract of sale with right of repurchase is in reality an equitable mortgage, will an action brought by the heirs of the vendee a retro , who had died in the meantime, against the vendor a retro demanding payment of the obligation prosper? Reasons. ANS: Yes, the action will prosper. The principle of res judicata is not applicable. The decision of the court did not constitute an

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adjudication of the right to collect the indebtedness or to foreclose the mortgage. Therefore, if after a certain period designated by the court in its discretion the debtor (vendor a retro) is unable to pay his indebtedness, the creditors (heirs of the vendee a retro) can foreclose the mortgage in a proper proceeding and sell the property to satisfy the obligation. (Heirs of Arches vs. Vda. De Diaz, 50 SCRA 440.)

95. In a document dated June 10, 1960 and expressly denominated; “Deed of Sale with Right to Repurchase,” AB sold his land to CD. Substantially, the document provided among others: “I, AB, being in great need of money, hereby sell my 10-hectare coconut land to CD for P2,000.00. It is agreed that I have the right to repurchase this land in 10 years. If I fail to buy back the property, I shall deliver possession thereof to CD.” Upon failure of AB to repurchase the property, CD, in 1971, consolidated his title and files an action to recover possession. AB files an answer offering to return the P2,000.00 plus interest at the legal rate. Will the action of CD prosper? Why? ANS: (Note: The above problem, which was asked in the Bar Examinations of 1979, is apparently a modification of the problem resolved by the Supreme Court in Labasan vs. Lacueta, 86 SCRA 16. Unfortunately, the Bar Examiner changed the date of the promissory note. In Lacasan, the date is April 20, 1927; in the bar problem, the date is June 10, 1960. The change is fatal — to many of the bar candidates. There is a second change which is even more fatal. In Lacasan, there was no consolidation of title by the vendee a retro; in the bar problem, there was a consolidation of title effected in 1971. Now, “under Art. 1509 of the Old or Spanish NCC, if the vendor failed to redeem within the period agreed upon, the vendee’s title became irrevocable by the mere registration of an affidavit of consolidation. Thus, under the old law, a judicial order was not necessary as is required now under Article 1607 of the New NCC.” [quoted from Labasan.] So, how shall we answer the bar problem? The following answer is submitted for what it is worth.) If the “consolidation of title” effected by CD in 1971 was merely extrajudicial in character in the sense that CD executed an affidavit consolidating his title over the subject property, then his action for recovery of possession will not prosper. The contract in the instant case is not a true contract of sale with right of repurchase.

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The purchase price is unusually inadequate; the vendor is still in possession of the property; and at the time when the Deed of Sale was executed, the vendor was in great need of money. There is now a presumption that the real covenant or agreement is an equitable mortgage (See Labasan vs. Lacuesta, 86 SCRA 16; Gardner vs. Court o f Appeals, 80 SCRA 399; Gloria Diaz vs. Court o f Appeals, 84 SCRA 483.) The land, therefore, is merely the security for the loan. At any rate, the question of whether the agreement is a true contract of sale with right of repurchase or merely an equitable mortgage has become moot and academic. AB has offered to return the P2,000 plus interest at the legal rate. So, even if judgment is rendered in favor of the theory that the contract is a true contract of sale with right of repurchase, he can still exercise his right of repurchase within thirty days from the time that the judgment has become final. (Art. 1606, NCC.) If the “consolidation of title” effected by CD in 1971 was the result of a judicial order as contemplated in Art. 1607 of the NCC, then that means that CD’s counsel has been remiss in his duty as a lawyer. The present action for recovery of possession is not the proper remedy. After the consolidation of title had become final, CD should have filed a motion for the issuance of a writ of execution so that, as owner of the subject property, he shall be installed in the possession thereof.

96. A, B and C are owners of an undivided parcel of land. They sold it to D jointly and in the same contract, with a right to repurchase. A tried to repurchase the entire parcel of land, hut D refused to accede to A’s demand. Is D’s refusal justified? Reasons. ANS: Yes, D’s refusal to accede to A’s demand is justified. According to Art. 1612 of the NCC: “If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share.”

97. What are the obligations of the vendor a retro when he exercises his right of repurchase? ANS: The obligations of the vendor a retro are the following: (1)

To return to the vendee the price of the sale;

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(2) To pay the expenses of the contract and other legitimate payments made by reason of the sale; and (3) To pay all necessary and useful expenses made on the thing sold. (Art. 1616, NCC.)

98. Define legal redemption (retracto legal). ANS: Legal redemption is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. (Art. 1619, NCC.)

99. What are the different instances of legal redemption recognized in our law? ANS: Under the New Civil Code: (1) Redemption by the other co-owners, or by any or some of them, should a co-owner sell his undivided share to a third person. If two or more co-owners desire to exercise the right, they may only do so in proportion to the share they may respectively have in the thing owned in common. (Art. 1620, NCC.) (2) Redemption by the other co heirs, or by any or some of them, should a co-heir sell his hereditary right to a stranger. (Art. 1088, NCC.) (3) Redemption by an owner of adjoining land should the owner of a piece of rural land, the area of which does not exceed one hectare, alienate it to a third person. If two (2) or more adjoining owners desire to exercise the right at the same time, the owner of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption. (Art 1621, NCC.) (4) Redemption by an owner of adjoining land should the owner of a piece of urban land, which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time and which said owner had bought merely for speculation, resell it to a third person. If the resale has not yet

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been perfected, an owner of adjoining land shall have a right of pre­ emption; in other words, his right to buy the property is preferred to that of third persons. If two (2) or more adjoining owners desire to exercise the right of pre-emption or redemption, as the case maybe, the owner whose intended use of the land appears best justified shall be preferred. (Art. 1622, NCC.) (5) Redemption by a debtor should the credit or other incorporeal right in litigation be sold by the creditor to a third person. (Art. 1634, NCC.) Under other laws: (1) Redemption by the applicant, his widow, and legal heirs within five (5) years should a piece of land under a homestead or free patent be alienated to a third person. (Sec. 119, Com. Act No. 141.) (2) Redemption by a judgment debtor within one year should real property belonging to him be sold on execution. (Sec. 30, Rule 39, New Rules o f Court.) (3) Redemption by owner should property belonging to him be sold for delinquent realty taxes. (Sec. 376, Rev. Adm. Code.) (4) Redemption by mortgagor within one year should his mortgaged property be foreclosed and subsequently sold. (Sec. 3, Rule 68, New Rules o f Court.)

100. Angie and Gracie were co-owners of a parcel of land. Last January 31, 2001, when she paid her real estate tax, Angie discovered that Gracie had sold her share to Emily on November 10, 2000. The following day, Angie offered to redeem her share from Emily, but the latter replied that Angie’s right to redeem has already prescribed. Is Emily correct or not? Why? (2001) ANS: Emily, the buyer, is not correct. Angie can still enforce her right of legal redemption as a co-owner. Art. 1623 of the NCC gives a co-owner 30 days from written notice of the sale by the vendor to exercise his right of legal redemption. In the present problem, the 30-day period for the exercise by Angie of her right of redemption had hot even begun to run because no notice in writing of the sale appears to have been given to her by Gracie.

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101. Distinguish between redemption and pre-emption. ANS: Redemption and pre-emption maybe distinguished from each other in the following ways: (1) In redemption, the sale to a third person has already been perfected, whereas in pre-emption, the sale to a third person has not yet been perfected. (2) The right of redemption has a much broader scope than the right of pre-emption. As a matter of fact, the latter may be exercised only where there is a prospective resale of a small piece of urban land originally bought by the prospective vendor merely for speculation. (3) The right of redemption is directed against the third person who bought the property, whereas the right of pre-emption is directed against the prospective vendor who is about to resell the property. (4) The effect of redemption is to extinguish a contract that has already been perfected or even consummated, whereas the effect of pre-emption is to prevent the birth or perfection of a contract,

102. Within what period must the right of pre-emption or redemption regulated by Arts. 1620 to 1622 of the NCC be exercised? ANS: The right must be exercised within 30 days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. (Art. 1623, NCC.)

103. A died with a will in 1956. In his will, he left his estate to his children and 1/3 of the free portion to a friend, X. On December 9, 1960, B, one of the co-owners of a house and lot located in Sta. Cruz, Manila, of which A was also a co-owner, sold her undivided 1/6 share in said property to Y Co. Formal notices were given by both vendor and vendee to all the co-owners, including all of the heirs of A as well as the judicial administrator of the estate of A. X offered to redeem the share sold and tendered payment thereof. The tender was refused. X then consigned the amount in court and filed the corresponding action for legal redemption. Is 998

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she entitled to exercise the right of redemption? If she is, from what time shall the period of redemption be counted — from the time when formal notice was made to X or to the judicial administrator? ANS: X is entitled to exercise the right of legal redemption. The rights to the succession are transmitted to the heirs from the moment of the death of the decedent. (Art 777, NCC.) As a consequence, the heirs of A acquired an undivided share in the house and lot from the moment of his death in 1966, and from that instant, they became co-owners, together with the original surviving co-owners of the decedent. Wherefore, any one of them is entitled to exercise the legal right of redemption as soon as another co-owner had sold her undivided share to a stranger. ("Arts, 1620,1623, NCC.) The situation is in no wise altered by the existence of a judicial administrator of the estate. The right of administration does not include the right of legal redemption because this right came into existence only when the sale was perfected. Consequently, in computing the thirty days for making the redemption, the period is counted, not from the time the administrator was formally notified of the sale in writing by the co-owner vendor, but from the time the co-owner who desires to exercise the right of redemption was so notified. (Butte vs. Manuel Uy and Sons, Inc., 4 SCRA 526, 864.)

104. In 1965, the spouses X and Y sold to A the northern half of a lot located in Pasay City. The next year, they sold the southern half to B. Upon learning that X and Y had sold the remaining portion of the property to B, A immediately brought an action against X, Y and B praying that he be declared as entitled to purchase, by way of legal redemption, the 1/2 portion of the lot that was sold to B. He contends that when he bought the northern half of said property, he became a co-owner; consequently, he is entitled to redeem the southern half which was sold to B in accordance with the provision of Art. 1620 of the NCC. Will the action prosper? Reasons. (1971) ■ ANS: The action will not prosper. The theory of the plaintiff is untenable. Tested against the concept of co-ownership, as autjioritively expressed by the commentators, A is not a co-owner of t^.laiid, taken as a unit or subject of co-ownership, since he and

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the spouses do not “have a spiritual part of a thing which is not physically divided” (3 Sanchez Roman 162.), nor is each of them an “owner of the whole, and over the whole he exercises the right of dominion, but he is at the same time the owner of a portion which is truly abstract.” (3 Manresa 405.) The portions of the plaintiff and of the defendant spouses are concretely determined and identifiable, for to the former belongs the northern half and to the latter belongs the remaining southern half, of the land. That their respective portions are not technically described, or that said portions are still embraced in one and the same certificate of title does not make said portions less determinable or identifiable, or distinguishable, one from the other, nor that dominion over each portion less exclusive, in their respective owners. Hence, no right of redemption among co­ owners exists. (De la Cruz vs. Cruz, 32 SCRA 307; see also Felices vs. Colegado, 35 SCRA 173.)

105. Suppose that in the above case, plaintiff A learned of the proposed sale of the southern half of the property to B before it could be perfected, would it have been possible for him to prevent said sale by exercising the right of pre­ emption granted to adjoining owners by Art. 1622 of the NCC? Reasons. ANS: In order that the right of pre-emption granted to adjoining owners by Art. 1622 of the NCC can be availed of, it is necessary that the following requisites should be present: (1) the property must be a piece of urban land; (2) it must be so small that it cannot be used for any practical purpose within a reasonable time; (3) it must be so situated that it cannot be used for any practical purpose within a reasonable time; and (4) it must have been previously bought merely for speculation. Although the right of pre-emption was invoked in both of the cases cited (De la Cruz vs. Cruz, supra, and Felices vs. Colegado, supra), the Supreme Court held that the right cannot be availed of because the requisites of pre-emptions were not proved. Besides, the sale to a third person had already been perfected.

106. A, B and C are co-owners of a small urban land, they having inherited the same from their wealthy uncle. D owns the adjoining land. C donated his portion to E, and B sold 1000

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his portion to F. Has D the right of redemption with respect to the portion of B? In case both A and D want to redeem the portion of C, who is preferred first, the co-owner or the owner of the adjoining land? (1962) ANS: D has no right to redeem the portion of B which the latter sold to F. Under Art. 1622 of the NCC, in order that the owner of the adjoining land can redeem, it is essential among others, that the vendor of the urban land should have previously bought the land for speculation and has resold it. Here B did not buy the land from the original owner for speculation. He inherited it from a wealthy uncle. As far as the portion donated by C to E is concerned, although the NCC in Art. 1623 declares that the redemption by co-owners excludes that of adjacent owners, the question of preferential rights of redemption by A and D is moot and academic. The reason is evident. Neither one has a right of legal redemption. Donation, being an act of pure liberality, cannot be classified either as purchase, or as dation in payment, or as any other transaction whereby ownership is transmitted by onerous title. Consequently, there is no right of redemption of co-owners or adjacent owners. (Art. 1619, NCC.)

107. X is the owner of a parcel of rural land less than one hectare in area which is bounded by three (3) other parcels of agriculture property owned, respectively, by A, B, and C. X sells his property to Y and A, B, and C apply to redeem. On what basis will one of them be preferred? ANS: Assuming that Y owns one or more rural lands, the owner of the adjoining land of smaller area shall be preferred; and should the adjoining lands have the same area, the one who first requested the redemption shall be preferred. (Art. 1621, par. 3, NCC.)

1001

Title VII BARTER OR EXCHANGE (Arts. 1638-1641) 1.

Define barter. What laws govern this contract?

ANS: Barter or exchange may be defined as a contract by virtue of which one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing. (Art. 1638, NCC.) As to matters not specifically provided for in Arts. 1638 to 1940 of the NCC, this contract shall be governed by the provisions relating to sales. (Art. 1641, NCCJ

2. What are the remedies of a party in a contract of barter if he loses the thing which he had received in barter by eviction? ANS: According to Art. 1640 of the NCC, he may recover that which he gave in exchange with a right to damages, or he may only demand an indemnity for damages. However, he can only make use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without prejudice to the rights acquired in good faith in the meantime by a third person.

1002

Title VII! LEASE GENERAL PROVISIONS (Arts. 1642-1645)

1.

Define lease.

ANS: Lease may be defined as a consensual, bilateral, onerous, and commutative contract by virtue of which one person binds himself to grant temporarily the use of a thing or to render some service to another who undertakes to pay some rent, compensation or price. (4 Sanchez Roman 736.) 2, What is meant by lease of things and lease of services? Distinguish one from the other.

ANS: In the lease of things, one of the parties, binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid. (Art. 1643, NCC) In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. (Art. 1644, NCC.) The two (2) may be distinguished from each other in the following ways: (1) As to object: In the first, the object of the contract is a thing, whereas in the second, the object of the contract is some work or service. (2) As to obligation o f lessor: In the first, the principal obligation of the lessor is to deliver the thing leased to the lessee,

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whereas in the second, the principal obligation of the lessor is to perform some work or service for the lessee. (3) As to remedies in case o f breach: In the first, the remedies available incase of breach are actions for specific performance or for damages, whereas in the second, the only remedy available is, as a general rule, an action for damages. 3. In the contract entered into between A, owner of a jeep, and B, his driver, it was agreed that the daily compensation of the latter shall be the excess of the total amount of fare collected over and above the amount of P7.50 which he shall pay to A. It was also agreed that the gasoline consumed by the jeep shall be for his account. What is the relationship which is created as a result of the contract — employer and employee or lessor and lessee? Why? ANS: The relationship which is created as a result of the contract between A and B is that of employer and employee. This is so, because B does not have an interest in the business since he did not invest anything in the acquisition of the jeep; neither does he have any participation in the management thereof. Consequently, the relationship of lessor and lessee cannot be sustained. (National Labor Union vs. Dinglasan, 52 Off. Gaz. 1933.) LEASE OF RURAL AND URBAN LANDS (Arts. 1646-1688) 4. May the lessee of real properly assign the lease to a third person without the lessor’s consent? In the same case, instead of assigning his right to the leasehold, may he sublease the premises without the consent of the lessor? Explain your answers. (1970, 1990) ANS: The lessee of real property may not assign the lease to a third person without the lessor’s consent, unless there is a stipulation in the contract of lease to the contrary. This is clear from Art. 1649 of the NCC which declares that the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary.

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On the other hand, the lessee may sublease the premises to a third person without the consent of the lessor, unless there is an express prohibition in the contract of lease. This is clear from the provision of Art. 1650 of the NCC. But, of course, such act of subleasing the property shall be without prejudice to his responsibility for the performance of the contract toward the lessor. 5. If the lessee subleases the property to a third person, may such third person or sublessee be held liable by the lessor for rent due from the lessee? ANS: Yes, such third person or sublessee may be held liable by the lessor, but only subsidiarily. Attention, however, must be called to Art. 1652 of the NCC which states: “The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor. Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor’s claim is concerned, unless said payments were effected in virtue of the custom of the place.” 6. A leased his house to B with a condition that the leased premises shall be used only for residential purposes. B subleased the house to C who used it as a warehouse for fabrics. Upon learning this, A demanded that C stop using the house as a warehouse, but C ignored the demand. A then filed an action for ejectment against C, who raised the defense that there is no privity of contract between him and A, and that he has not been remiss in the payment of rent. Will the action prosper? (2000) ANS: Yes, the action will prosper. Under Art. 1651 of the NCC, the sublessee is bound to the lessor for all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. 7. A leased a cold storage plant to B at a daily rental. B stored its foodstuffs in said storage plant while the refrigeration facilities in one of its vessels was out of order. After seven days B found out that the foodstuffs stored in

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said storage plant were contaminated by rats and not fit for consumption. They were, therefore, thrown out into the sea. B sued A for recovery of the loss of the foodstuffs disposed of. Is A liable? Reasons. (1978) ANS: Yes, A is liable for the loss of the foodstuffs disposed of. According to the NCC, the provisions of the NCC on warranty, contained in the law on sales, shall be applicable to lease. (Art. 1653.) Now, according to the law on sales with respect to warranty against hidden defects, the vendor (lessor) is responsible to the vendee (lessee) for any hidden defects in the thing sold (leased), even though he was not aware thereof. Under this provision, A is liable to B for the loss of the foodstuffs. (United States Lines vs. San Miguel Brewery, 10 SCRA 808.) 8. What are the obligations of the lessor and the lessee? Suppose that one of the parties is unable to comply with such obligations, what are the remedies which are available to the other party? ANS: The lessor is obliged: (1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) To make on the same during the lease an the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; (3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract. (Art. 1654, NCC.) The lessee is obliged: (1) To pay the price of the lease according to the terms stipulated; (2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the custom of the place; (3) NCC.)-

To pay the expenses for the deed of lease. (Art, 1657, -h

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If the lessor or the lessee should not comply with the obligations set forth in Arts. 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages or only the latter, allowing the contract to remain in force. (Art. 1659, NCC.) 9, Ramon had a warehouse which he leased to Simplicio at P6,000 a year for a term of 10 years. On the fourth year of the lease, the warehouse was completely destroyed by fire. Forthwith, Ramon erected a new warehouse which was exactly the same as the old one. Considering that the stipulated 10-year lease has not yet expired, can Simplicio legally claim possession of the new warehouse on the theory of substitution? (1974) ANS: Assuming that there was no fault on the part of the lessor, and therefore, the fire is really a fortuitous event, it is submitted that Simplicio cannot legally claim possession of the new warehouse on the theory of substitution. In the light of the facts stated in the problem, such theory cannot be sustained because there is no evidence of either an express or an implied renewal of the contract of lease. Consequently, what is applicable is the rule enunciated in the NCC that if the thing leased is totally destroyed by a fortuitous event, the lease is extinguished. (Art. 1655, NCC; see also Art. 1174, NCC.) 10. After leasing his restaurant to B, A leased the adjoining room to C knowing fully well that C was going to put up another restaurant, which he did. Is A liable to B for the damage he may have suffered as a result of the opening of C’s restaurant? Why? (1983) ANS: It is submitted that A is not liable to B for the damage he may have suffered as a result of the opening of C’s restaurant. Under the NCC, the lessor of a business or industrial establishment may continue engaging in the same business or industry to which the lessee devotes the thing leased, unless there is a stipulation to the contrary. Now, if A may still open or put up a restaurant in the room which adjoins the restaurant which had already been leased to B despite the fact that the latter might be prejudiced, there is no

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reason why he cannot lease such adjoining room to a third person knowing fully well that such third person will open a restaurant in said room. (Note: The above answer is based on Art. 1656 of the NCC. There are others who believe that A, in the above problem, should be held liable to B for the demand for which the latter may suffer as a result of the opening of the restaurant of C, using as basis Arts. 19 and 21 of the NCC. We believe that this answer should also be considered correct.)

11, A truck leased by a lessee company, suffered trans­ mission trouble and was stalled in a place where there was a guard to take care of the truck during day time, but there was none during the night. The truck was allegedly burned by the employees who were dismissed by the company. The lessee was held liable for damages. Thus, it appealed to the Supreme Court invoking fortuitous event. Decide the case. ANS: Fortuitous event cannot be invoked in the case herein because the lessee failed to employ the reasonable care and foresight in taking care of the truck. Art. 1667, NCC holds the lessee responsible for the deterioration or loss of the thing leased, unless the lessee proves that it took place without lessee’s fault. The fault of the lessee can be traced to the failure to post a guard to take care of the truck. In order for fortuitous event to exempt one from liability, it is necessary that one has committed no negligence or misconduct that may have occasioned the loss. (Tan Chiong Sian'vs. Inchausti Co., 22 Phil. 152; Juan Nakpil and Sons vs. CA, 144 SCRA 596; Metal Forming Corporation vs. Office o f the President, 247 SCRA 731.) An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequence of such a loss. One’s negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event, would not exempt one from liability. When the effect is found to be partly the result of a person’s participation whether by active intervention, neglect or failure to act — the whole concurrence is humanized and removed from the rules applicable to acts of god. (Juan Nakpil and Sons vs. CA, supra.) The lessee failed to employ reasonable foresight, diligence and care that would: have

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exempted it from liability resulting from the burning of the truck. Negligence is that conduct that naturally or reasonably creates undue risk or harm to others. It may be a failure to observe that degree of care, precaution or vigilance that the circumstances justly demand (Valenzuela vs. CA, 253 SCRA 303J; or to do any other act that would be done by a prudent and reasonable person, who is guided by considerations that ordinarily regulate the conduct of human affairs. (Minder Resources Development vs. Morillo, G.R. No. 138123, March 2,2002.) 12. What is meant by tacit renewal of a contract of lease (tacita reconduccion)? (1999) What are its requisites? ANS: By tacit renewal of a contract of lease (tacita reconduccion), we refer to the new contract of lease which is impliedly created or established if at the end of the old contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, provided that a notice to the contrary had not been previously given by either party. The period of the implied new lease in such case shall be the legal period established in either Art. 1682 or Art. 1687 of the NCC, but the other terms of the original contract shall be revived. (Art. 1670, NCC.) In order that there will be an implied new lease, it is clear from the above that the following requisites must concur: (1)

That the contract of lease should have ended;

(2) That the lessee should have continued enjoying the thing leased for 15 days; (3) That such continued enjoyment should be with the acquiescence of the lessor; (4) That a notice to the contrary by either party should not have been previously given; and (5) That there should have been no express contract entered into by lessor and lessee after the old contract had ended. The fifth requisite is, of course, necessary, because otherwise, instead of an implied renewal of a contract of lease as contemplated by the law, there would be an express renewal or modification of the original contract. (Paterno vs. CA, G.R. No. 115763, March 29,1997; Carlos us. CA, 268 SCRA, February 10,1997.)

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13. What are the grounds for which the lessor may judicially eject the lessee? ANS: The lessor may judicially eject the lessee for any of the following causes: (1) When the period agreed upon, or that which is fixed for the duration of leases under Arts. 1682 and 1687, has expired; (2)

Lack of payment of the price stipulated;

(3) Violation of any of the conditions agreed upon in the contract; (4) When the lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof; or if he does not observe the requirement in No. 2 of Art. 1657, as regards the use thereof. The ejectment of tenants of agricultural lands is governed by special laws. (Art. 1673, NCC.) 14. A five (5)-year contract of lease provided for an option to renew. After its expiration, a suit for ejectment was filed. The MTC dismissed the case considering that the lessee can unilaterally renew for another five (5)-year period. The RTC and subsequently the CA affirmed the decision. Is the extension of the lease proper? ANS: The lease contract cannot be extended anymore considering that it has already expired. The power of the court to fix a longer period for a lease is discretionary. Such power is to be. exercised only in accordance with the particular circumstances of a case. A longer term is to be granted where equities demanding extension come into play; to be denied where none appear — always with due deference to the parties5 freedom to contract. (La Jolla, Inc. vs. CA, G.R. No. 115851, June 20, 2001.) Thus, courts are not bound to extend the lease. (Heirs of Manuel Suico vs. CA, 266 SCRA 444; LL and Co. Development and Agro-Industrial Corp. vs. Huang Chao Chun, G.R. No. 142378, March 7, 2002.) But since the period of the lease has expired, there was no longer any lease that could be extended by the court. Hence, when it did, in effect, the Court, made a new contract for the parties, a power it did not have. (Henson vs. IAC, 148 SCRA 11.) 1010

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15. A lease contract provides that the period shall subsist for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals. It was contended that it falls under Art. 1687, NCC since the contract is for indefinite period making it a month-to-month contract since the rental payments are mode monthly. The CA held that when there is a fixed period for the lease, whether the period be definite or indefinite or when the period of the lease is expressly left to the will of the lessee, Art. 1687, NCC, will not apply, (a) Is the ruling of the CA correct? (b) Is the contract valid? ANS: (a) The CA ruling is correct. The lease contract between the parties is with a period subject to a resolutory condition. The wording of the agreement is unequivocal: “The lease period x x x shall continue for an indefinite period provided that the lessee is up-to-date in the payment of his monthly rentals.” The condition imposed for the contract to remain effective is that the lessee is upto-date in his monthly payments. Since the lessees paid their rent religiously, the agreement between the lessor and the lessees are still subsisting, with the original terms and conditions agreed upon. (Jespajo Realty Corp. v$. CA, G.R. No. 113626, September 27, 2002; Eliezagui vs, Manila Lawn Tennis Club, 2 Phil. 309.) (b) The contract is valid because of the principle of mutuality of contracts. An express agreement which gives lessee the sole option to renew the lease is valid and binding upon the parties. This option, which is provided in the same lease agreement, is fundamentally part of the consideration in the contract. The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality. The lessor is free to give or not to give the option to the lessee. And while the lessee has a right to elect whether to continue with the lease or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new lease agreement. Their rights and obligations become mutually fixed, and the lessee is entitled to retain possession of the property for the duration of the new lease, and the lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even if he should subsequently decide to abandon the premises. Mutuality obtains in such a contract and equality exists between the lessor and the lessee since they remain with the same faculties in respect to fulfillment. (Allied Banking 1011

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Corp. vs. CA, 284 SCRA 351; Jespajo Realty Corp. vs. CA, G.R. No. 113626, September 27, 2002.) 16. O leased one of his apartments to L “on a month to month basis.” The parties further agreed that — “Upon 30-days notice, either party may terminate this agreement, each fulfilling their respective obligations herein agreed.” May O terminate the contract of lease upon 30 days notice to L? Explain. ANS: Yes, O may terminate the contract of lease upon 30 days notice to L. The parties used the phrase “on a month to month basis” in their agreement with reference to the length of time during which the lessee would have the use and occupancy of the leased premises. And month here should be construed in like manner as in the interpretation of laws pursuant to the provisions of Art. 13 of the NCC, there being no reason to deviate therefrom, as a period consisting of 30 days. The contractual relations between the parties ceased after the expiration of the first 30 days reckoned from the date of the perfection of the contract of lease but continued for the next 30-day period and expired after the last day thereof, repeating the same cycle for the succeeding 30-day periods, until either party exercises his express prerogative under the agreement to terminate the same. (Rantael vs. CA, 97 SCRA 453.) 17. On January 1, 1980, Romy leased the fishpond of Cesar for a period of three (3) years at a monthly rental of P1,000.00, with an option to purchase the same during the period of the lease for the price of P500,000.00. After the expiration of the three (3)-year period, Cesar allowed Romy to remain in the leased premises at the same rental rate. On June 15, 1983, Romy tendered the amount of P500,000.00 to Cesar and demanded that the latter execute a deed of absolute sale of the fishpond in his favor. Cesar refused, on the ground that Romy no longer had an option to buy the fishpond. Romy filed an action for specific performance. Will the action prosper or not? Why? (2001) ANS: The action will not prosper. The implied renewal of the lease on a month-to-month basis did not have the effect of extending the life of the option to purchase which expired at the end of the 1012

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original lease period. The lessor is correct in refusing to sell on the ground that the option had expired. 18. Under R A No. 9341 (An Act Establishing Reforms in the Regulation of Rent of Certain Residential Units, pro­ viding the Mechanisms therefor and for Other Purposes ap­ proved last December 21,2005) What are the different limita­ tions imposed upon the lessor in order to protect the lessee? ANS: We can very well say that there are three (3) limitations. These limitations are: (1) The rent of any residential unit covered by this Act shall not be increased by more than 10% annually as long as the unit is occupied by the same lessee. When the residential unit becomes vacant, the lessor may set the initial rent for the next lessee. (Please note that all residential units in the National Capital Region and other higly urbanized cities, the total monthly rent for each of which does not exceed PI0,000.00 and all residential units in all other areas, the total monthly rent for each of which does not exceed P5,000.00 as of effectivity of R.A. No. 9341 shall be owners, without prejudice to existing contracts.); (2) No lessor may demand more than one month advance rent. Neither can he demand more than two (2) months deposit which shall be kept in a bank under the lessor’s account name during the entire duration of the lease agreement. Any and all interest that shall accrue therein shall be returned to the lessee at the expiration of the lease contract. (3) No lessor or his successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises have been sold or mortgaged to a third person regardless of whether the lease or mortgage is registered or not. (Secs. 3, 5 and 8, R.A. No. 9341.) 19.

Under the R~A. No. 9341:

(a) Sec. 7 provides for the grounds for judicial ejectment. What are these grounds? . (b) What are the requisites to warrant ejectment of a tenant on the ground of need for personal use of the owner or the immediate member of his family?

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(c) What are the requisites to warrant ejectment of a tenant on the ground of need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of condemnation by appropriate authorities to make the premises safe and habitable? ANS: (a) Judicial ejectment shall be allowed on the following grounds: (1) Assignment of lease or subleasing of residential units in whole or part, including the acceptance of boarders or bedspacers, without the written consent of the owned/lessor. (2) Arrears in payment of rent for a total of three (3) months: Provided, That in the case of refusal by the lessor to accept payment of the rental agreed upon, the lessee may ei­ ther deposit by way of consignation, the amount in court, or with the city or municipal treasurer, as the case may be, or in a bank in the name of and with, notice to the lessor, within one (1) month after the refusal of the lessor to accept payment. The lessee shall thereafter deposit the rental within 10 days of every current month. Failure to deposit the rental for three (3) months shall constitute a ground for ejectment. The lessor, upon authority of the court in case of consig­ nation or upon joint affidavit by him and the lessee to be sub­ mitted to the city or municipal treasure and to the bank where deposit was made, shall be allowed to withdraw the deposits. (3) Legitimate need of the owner/lessor to repossess his of her property for his or her own use or for the use of any im­ mediate member of his or her family as a residential unit. (4) Need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of condemnation by appropriate authorities concerned in order to make the said premises safe and habitable. (5)

Expiration of the period of the lease contract.

(b) To warrant ejectment on the ground of need for personal use of the owner as the immediate member of his family, the requisites are: (1) the lease for a definite period has expired; (2) the lessor has given the lessee formal notice three (3) months in advance

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of the lessor’s intention to repossess the property; and (3) the owner/ lessor is prohibited from leasing the residential unit or allowing its use by a third party for a period of at least one year from the time of repossession; (c) To warrant ejectment on the ground of need of the lessor to make necessary repairs of the leased premises which is the subject of an order of condemnation, the requisites are: (1) after repair, the lessee ejected shall have the first preference to lease the same promises; (2) the new'rent shall be reasonably commensurate with the expenses incurred for the repair of the said residential unit; and (3) if the residential unit is condemned or completely demolished, the lease of the new building will no longer be subject to the aforementioned first-preference rule in this subsection. 20. Under R A No. 9341: (a) What is the allowable maximum increase of monthly rentals? (b)

Is assignment of lease or subleasing allowed?

(c) Can the lessee be ejected upon the ground that the leased premises have been sold or mortgaged to a third person. ANS: (a) R.A. No. 93161 provides that the monthly rentals of all residential units in the National Capital Region arid other highly urbanized cities not exceeding P10,000.00 and the monthly rentals of all residential units in all other areas not exceeding P5,000.00 shall not be increased annually by the lessor, without prejudice to existing contracts, by more than 10%. (b) Assignment of lease or subleasing of the whole or any portion of the residential unit, including the acceptance of boarders or bedspacers, without the written consent of the owner/lessor is prohibited. (Sec. 6, R.A. No. 9341.) Further, assignment of lease without the consent of the lessor is void. (Tamio vs. Ticson, G.R. No. 154895, November 18, 2004.) : (c) No lessor or his successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises have been sold* or mortgaged to a third person regardless of whether the lease or mortgage is registered or not. (Sec. 8, R.A. No. 9341.)

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21. L leased a big lot belonging to O for 15 years. The lease expired on August 31, 1974. Because of L’s refusal to vacate the premises, O filed an ejectment suit against him in the City Court. After trial, the court rendered judgment ordering L to vacate the premises, remove the improvements thereon, pay P12,000 monthly with interests until he complies with the order, plus damages. L appealed to the Court of First Instance. Instead of filing a supersedeas bond based on the decision, L asked the City Court ex parte to approve his bond in the sum of P22,000 and to fix the monthly rental pending appeal at the old rate of P 1,200. This was approved. Upon receiving notice of the appeal, O filed two motions — one, a motion for preliminary mandatory injunction to restore her to the possession of the lot invoking Art. 1674 of the NCC, and second, a motion for immediate execution of the City Court’s judgment on the ground that the supersedeas bond is inadequate and that L failed to deposit the'P12,000 monthly rental as required by the decision. The court denied both motions. Will certiorari lie on the ground of abuse of discretion? ANS: Yes, certiorari will lie. The applicable rule is found in Section 8 of Rule 70 of the Rules of Court as an exception to the general rule regarding execution of judgment of an inferior court which is found in Sec. 18, Rule 5. The inferior court’s decision is immediately executory. Defendant, however, may stay execution by (a) perfecting an appeal and filing a supersedeas bond and (b) paying the rentals as fixed by the City Court in its judgment. The supersedeas bond answers only for back rentals fixed in the judgment and not for those that may accrue during the pendency of the appeal. It is evident that the bond of P22,000 is grossly inadequate considering the fact that the monthly rental fixed by the City Court is P12,000. It is also evident that L’s deposit of PI,200 monthly pending appeal is not the deposit contemplated by Sec. 8, Rule 70. Hence, we have a case where a supersedeas bond was posted and monthly deposits were made, but not in accordance with the City Court’s judgment. As far as the motion for the issuance of a writ of preliminary mandatory injunction is concerned, Art. 1674 of the NCC gives to the plaintiff in an unlawful detainer case the remedy which Art. 539

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gives to the plaintiff in a forcible entry case, but only when there is an appeal and such appeal is frivolous and dilatory. Here, it is evident that L’s appeal is frivolous and dilatory. The possession of the premises should, therefore, be restored to O. Upon being restored to the possession of the premises, shall O be required to reimburse to L the value of the building and other improvements which the latter had made during his occupancy? The answer is in the negative. Art. 1678 of the NCC is applicable, not Arts. 448, 546, 547 and 549. The latter provisions refer to a person who occupied the land in the belief that he was the owner thereof. They do not apply to a lessee because the lessee knows at the outset that he is not the owner of the land. (De Laureano vs. Adil, 72 SCRA 148.) 22. What are the different instances where the pur­ chaser of the thing leased cannot terminate the lease? ANS: The different instances where the purchaser cannot terminate an existing lease are: (1)

Where the lease is recorded in the Registry of Property;

(2) Where there is a stipulation in the contract of sale that the purchaser shall respect the lease; (3)

Where the purchaser knows of the existence of the lease;

(4)

Where the sale is fictitious; and

(5) Where the sale is made with right of repurchase. (Arts. 1676, 1677, NCC.) 23. L was already the lessee of the building and lot when B bought the property from the owner. The records show that the lease was not recorded in the Registry of Property and that B was aware of the existence of the lease at the time when he bought the property. Upon buying the property, B made several demands upon L to vacate the premises but the latter refused. Since the lease is without any definite term or period, B, therefore, brought an action against L for unlawful detainer. The city court dismissed the complaint but extended the lease by seven and a half years. The CFI

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modified the decision of the city court by extending the lease by only one year. The CA modified the decision of the CFI by extending the lease by five (5) years. Upon elevating the case to the Supreme Court for review by certiorari, B raised up the following questions of law: (a) Since the lease is not recorded in the Registry of Property, may B now eject L from the premises? and (b) Does not the decision of the Court of Appeals have the effect of making the Court the one who shall execute the contract between the parties thus violating the spirit of Art. 1687 of the NCC? Decide. ANS: (a) B cannot eject L from the premises. While it is true that the lease is not recorded in the Registry of Property, nevertheless, he was aware of the existence of the lease at the time when he bought the subject property. That would be equivalent to automatic registration. As a matter of fact, this is expressly stated in Art. 1676 of the NCC. According to this article, the purchaser cannot terminate the lease if he knows of the existence of the lease, (See F.S. Divina Gracia Agro Commercial vs. CA, April 21,1981.) (b) B’s contention that in effect it is the CA which is making or executing the contract between the parties thus violating the spirit of Art. 1687 of the NCC is devoid of merit. It is beyond dispute that Art. 1687 is the governing law. It is backed up or supported by Art. 1197 of the NCC. Considering both articles, it is at once clear and evident that the court is accorded the power to fix a longer term for the lease, which power is potestative and discretionary in nature. (Ibid.) 24. What are the rights of the lessor and lessee with regard to improvements which are made by the latter upon thing leased? ANS: If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee 1/2 of the value of the improvements at that time. Should the lessor refuse to reimburse said amount the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.

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With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. (Art. 1678, NCC.) 25. O, the owner of a residential house and lot in Manila, leased the property to L for 10 years. There was no stipulation between the parties as to improvements. The property had a driveway for cars, but it had no garage. L built a garage. (1) What is the legal nature of the garage as an improvement? (2) lease?

Can O retain the garage after the expiration of the

(3) Can O require L to remove the garage after the expiration of the lease? ANS: (1) The garage is a useful improvement. It must be observed that it is suitable to the use for which the lease is intended, considering the fact that there is a driveway for cars. Besides, it has enhanced the utility of the property. (See Robles vs. Lizarraga, Hnos., 42 Phil. 584.) (2) Yes, d can retain the garage after the expiration of the lease, provided that he shall pay 1/2 of its value at that time. This is clearly recognized by Art. 1678 of the NCC. (3) It is submitted that 0 cannot require or compel L to remove the garage after the expiration of the lease; he may, however, allow him to do so. Under Art. 1678 of the NCC, the lessor has the option of appropriating the useful improvement by paying 1/2 of its value at the time of the termination of the lease or of allowing the lessee to remove the improvement even if the principal thing suffers damage thereby. This option is available to the lessor, but not to the lessee. (Lapena vs. Morfes 53 Off. Gaz. 3207.) Hence, if the lessor, for instance, does not want to pay the required reimbursement and the lessee, on the other hand, does not want to remove the improvement, it is clear from the language of the law that there is no right of the former to require or compel the latter to remove such improvement.

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26. L, lessee of a lot belonging to O, now contends in the action for ejectment instituted by the latter against him that he be considered a builder in good faith, and therefore, entitled to reimbursement of the expenses incurred by him in the construction of the house standing thereon, or, if O refuses, that he be allowed to buy the land. Is this posture or position of L legally tenable? Why? ANS: The posture or position of L is legally untenable. The rule is well-settled that lessees are not possessors in good faith because they know that their occupancy of the leased premises continues only during the life of the contract of lease, and cannot as a matter of right recover the value of their improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are governed by Art. 1678 of the NCC which allows reimbursements of lessees up to 1/2 of the value of the improvements if the lessor so elects. (Vda. de Bocaling vs. Laguda, 54 SCRA 243; Laureano vs. Adil, 72 SCRA 148.) Neither does L have the right to buy the land. “The tenant cannot improve the landlord out of his property.” Art. 1678 does not give to him such right. (Southwestern University vs. Salvador, 90 SCRA 318.) 27. If the duration of the lease has not been fixed, what is the period of the lease? ANS: Rural land — The lease of a piece of rural land, when its duration has not been fixed, is understood to have been made for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although two (2) or more years may have to elapse for the purpose. (Art. 1682, NCC.) Urban property — If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly, and from day to day, if the rent is to be paid daily. However, even through a monthly rent is paid, and no period for the lease has been set, the court may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent

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is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six (6) months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month. (Art. 1687, NCC.) 28. The period of the lease contract agreed upon was three (3) years. The contract expired in December 1992. Les­ see continued to occupy the premises but failed to pay. Is the lease impliedly renewed? ANS: The lease was impliedly renewed on a month-to-month basis. Under Art. 1670, NCC, if at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Arts. 1682 and 1687. The other terms of the original contract shall be revived. Art. 1687, NCC further states that if the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if it is weekly; and from day to day, if the rent is to be paid daily. Lessee’s obligation to pay rentals did not cease with the termination of the original agreement. When she failed to remit the required rentals, the lessor was justified in instituting ejectment proceedings against her because of non-payment of rentals. (Santos vs. CA, G.R. No. 135481, October 23, 2001.) 29. A lessee has been occupying the leased premises for 25 years. Can the lessor terminate the contract? ANS: If the lessee has been occupying the premises for 25 years and the rental has been paid monthly, there is a justification for the fixing of a longer period. The unilateral act of the lessor in terminating the lease should not be recognized as writing an end to the agreement where the period of the lease was not set. The rental was paid monthly and the lessee has been occupying the premises for more than one year. (Art. 1687, NCC.) Where no period for the lease has been set and a monthly rent is paid, the law itself

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OBLIGATIONS AND CONTRACTS Lease Lease of Rural and Urban Lands

fixes the period as monthly; yet, the circumstances that the lessee has occupied the premises for over a year warrants the fixing of a longer period by the courts. (Chua vs. CA, G.R. No. 140886, Apr. 19, 2001 .)

30. Why can a lessee not controvert the title of his lessor? ANS: Under Rule 131, Sec. 2(b) of the Rules of Court, a lessee is precluded from denying the title of his lessor at the time of the commencement between them of the relation of landlord and tenant. The Court held in the case of Geminiano vs. CA (259 SCRA 344) that the lessees who had undisturbed possession for the entire term under the lease are estopped to deny their landlord’s title or to assert a better title not only in themselves, but also in some third person while they remain in possession of the leased premises and until they surrender possession to the landlord. In the case of Golden Horizon Realty Corporation vs. Sy Checan, G.R. No. 145416, September 21, 2001, it was held that estoppel applies even though the lessor had no title at the time the relation of lessor and lessee was created and may be asserted not only by the original lessor, but also by those who succeed to his title. 31. By virtue of a verbal contract, L rented a lot belonging to O about 20 years ago. There was no agreement with regard to the duration of the lease, although O assured L that the lease shall subsist as long as L continues paying the agreed rental. Because of this assurance, L constructed a house and made other improvements on the property. In 1955, when he defaulted in the payment of several months* rentals, O filed a complaint for ejectment against him. This complaint was dismissed. Thereafter, O notified L that the lease shall be terminated on April 30, 1966. In answer, L brought an action against O for damages. The trial court did not award damages but it ordered O to execute a contract of lease in favor of L for a period of two years. Is this decision correct? ANS: Yes, the decision is correct. Under Art. 1678 in correlation with Art. 1197 of the NCC, it is clear that the power of the courts to fix a longer term for the lease is potestative or discretionary; in other

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Arts. 1700-1721

words, the courts may fix a longer term where equities come into play demanding an extension, but always with due deference to the parties' freedom to contract. (Divino vs. Fabie de Marcos, 4 SCRA 186.) 32. What is PD 1517, otherwise known as the Urban Land Reform Act? What are the requirements to qualify and avail of rights under the said decree? ANS: P.D. No. 1517, otherwise known as the Urban Land Reform Act pertains to areas proclaimed as Urban Land Reform Zones. To be able to qualify and avail oneself of the rights and privileges granted by the said decree, one must be: (1) a legitimate tenant of the land for 10 years or more; (2) must have built his home on the land by contract; and (3) has resided continuously for the last 10 years. Those who do not fall within the said category cannot be considered “legitimate tenants,” and, therefore, not entitled to the right of first refusal to purchase the property should the owner of the land decide to sell the same at a reasonable price within a reasonable time. (Alcantara v. Reta, Jr., G.R. No. 136996, December 14,2001.) WORK AND LABOR HOUSEHOLD SERVICE (Arts. 1689-1699) (Note: For purposes of the Bar Examinations, this part of the NCC is taken up in labor law.)

CONTRACT OF LABOR (Arts. 1700-1721) 33. Can the employer be held liable for the death or personal injury of its employees in the course of employ­ ment? ANS: The employer shall be held liable for the death or personal injury of its employees in the course of employment as sanctioned by Art. 1711 of the NCC. The liability of the employer for death or personal injury of his employees arose from the contract of employment entered into between the employer and his employee

1023

Arts. 1713-1731

OBLIGATIONS AND CONTRACTS Lease Contract for a Piece of Work

which is likewise imbued with public interest. Accordingly, when the employee died or was injured in the occasion of employment, the obligation of the employer for indemnity, automatically attaches. The indemnity may partake of the form of actual, moral, nominal, temperate, liquidated or exemplary damages, as the case may be depending on the factual milieu of the case and considering the criterion for the award of these damages as outlined by our jurisprudence. In the case of Candano Shipping Lines, Inc. vs. Sugata-on (G.R. No. 163212, March 13, 2007), only the award of actual damages, specifically the award for unearned income is warranted by the circumstances since it has been duly proven that the cause of death of Melquiades is a fortuitous event for which the employer cannot be faulted. CONTRACT FOR A PIECE OF WORK (Arts. 1713-1731)

;

33. Define contract for a piece of work. ANS: A contract for a piece of work may be defined as a contract whereby the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or furnish the material. (Art. 1713, NCC.) 34. A entered into a contract with B, whereby it was agreed that for P20,000, the former, furnishing all labor and materials, shall build a house on a lot belonging to the latter. It was stipulated in the contract that delivery of the house shall be made on March 30, 1976. Due to the absence of B, delivery could not be made on that date. On April 1,1976, the house was destroyed by a fire of accidental origin. Now, who shall bear the loss? Why? ANS: B shall bear the loss. This is so, because there was mora accipiendi on his part. According to Art. 1717 of the NCC, if the contractor bound himself to furnish the material, he shall suffer the loss if the work should be destroyed before its delivery, save when there has been delay in receiving it.

1024

OBLIGATIONS AND CONTRACTS Lease Contract for a Piece of Work

Arts. 1713-1731

35. When can the engineer, architect or contractor be held liable for the collapse of a building? ANS: The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction he shall be solidarily liable with the contractor. Acceptance of the building, after completion, does not imply waiver of any of the causes of action by reason of any defect mentioned in the preceding paragraph. The action must be brought within 10 years following the collapse of the building. (Art. 1723, NCC.) 36. “O,” lot owner, contracted with “B,” builder, to build a multi-story office building designed by “A,” architect. “A” was paid a fee to supervise the construction and execution of his design. When completed, “O” accepted the work and occupied the building, but within one year, it collapsed in an earthquake that destroyed only the building and not the surrounding buildings. Construction was faulty. The building cost P3,000,000.00, but reconstruction cost would reach P10,000,000.00. A. What are the rights of “O” against “A” and “B”? Explain briefly. (1981) ANS: “O” can hold “A” and “B” solidarily liable for damages. This is clear from the NCC, which declares that the contractor is liable for damages if within 15 years from the completion of the edifice or structure, the same should collapse on account of defects in the construction. If the engineer or architect who drew up the plans and specifications of the building supervises the construction, he shall be solidarily liable with the contractor. Acceptance of the building, after

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completion, does not imply waiver of the cause of action. However, the action must be brought within 10 years following the collapse of the building. (Note: The above answer is based on Art. 1723 of the NCC.)

B. Could “O” demand reconstruction of the building. On what ground? Amplify. (1981) ANS: “0 ” can demand reconstruction of the building. The obligation of both “A” and “B” is an obligation to do. Consequently, Art. 1167 of the NCC is applicable. According to this article, if a person obliged to do something does it in contravention of the tenor of the obligation, the same shall be executed at his cost. It is obvious that the builder “B” and the architect “A” performed their jobs in contravention of the tenor of the obligation. As a matter of fact, had the building not collapsed, under the same article, it may even be decreed that what has been poorly done be undone. Consequently, “0 ” can now demand for the reconstruction of the building by “A” and “B” or by another at their cost. (Note: The above answer is based on Art. 1167 of the NCC and on Manresa, Vol. 8, pp. 116-117.)

37. What is meant by mechanic’s lien? ANS: Mechanic’s lien refers to the right of retention recognized in Art. 1731 of the NCC by virtue of which he who has executed work upon a movable has a right to retain it by way of pledge until he is paid. COMMON CARRIERS (Arts. 1732-1766) 38. Define common carriers. ANS: Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public. (Art. 1732, NCC.)

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Arts. 1732-1766

39. What is the degree of care which must be observed by common carriers over the goods and for the safety of the passengers transported by them? ANS: From the nature of their business and for reasons of public policy, they must observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. (Art. 1733, NCC.) In the case of passengers, the law further provides that they are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons with a due regard for an the circumstances. (Art 1755, NCC.) As a matter of fact, in case of death or injuries to passengers f they are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed by law. (Art. 1756, NCC.) In the case of goods, the common carriers must use all reasonable means to ascertain the nature and characteristic of the goods tendered for shipment and exercise due care in the handling and storage, including such methods as their nature requires. (Compania Maritima vs. CA, 164 SCRA 635.) The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee of to the person who has a right to receive them. (Art 1736, NCC.) 40. What is the presumption of fault or negligence against common carriers? ANS: Owing to the high degree of diligence required of common carriers, as a general rule, common carriers are presumed to have been at fault or negligent if the goods they transported, deteriorated or got lost or destroyed, unless they prove that they exercised extraordinary diligence in transporting the goods. To avoid responsibility for any loss or damages, therefore, common carriers have the burden of proving that they observed such diligence. (Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Company, Inc., G.R. No. 143133, June 5, 2002.) 41. In order that a common carrier may be exempted from liability for the loss, destruction, or deterioration of the

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goods by reason of a natural disaster, such as a flood, storm, or earthquake, what requisites are necessary? What would be the effect of delay on the part of the carrier in such case? What would be the effect of contributory negligence on the part of the shipper in such case? ANS: In order that a common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods by reason of a natural disaster, the following requisites are necessary: (1) The natural disaster must have been the proximate and only cause of the loss, destruction, or deterioration; and (2) The carrier must have exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the natural disaster. (Art 1739, NCC.) If at the time of the loss, the carrier had already negligently incurred in delay in transporting the goods, the natural disaster shall not exempt it from liability. (Art. 1740, NCC.) If there was contributory negligence of the shipper, the carrier would still be liable provided that the proximate cause of the loss is the latter’s negligence. However, the damages to be paid to the shipper shall be equitably reduced. (Art. 1741, NCC.) If the common carrier fails to exercise due diligence or that ordinary care which the circumstances of the particular case demand, to preserve and protect the goods carried by it on the occasion of a natural disaster, it will be deemed to have been negligent, and the loss will not be considered as having been due to a natural disaster under Art. 1734, NCC. (Philippine American General Insurance Co. vs. MGG Marine Services, Inc., G.R. No. 135645, Mar. 8, 2002.) 42. In order that an agreement between the carrier and the shipper limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, what requisites are necessary? ANS: In order that such an agreement shall be valid, the following requisites are necessary: (1)

It must be in writing, signed by the shipper or owner;

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(2) It must be supported by a valuable consideration other than the service rendered by the carrier; and (3) It must be reasonable, just and not contrary to public policy. (Art. 1744, NCC.) 43. What agreements or stipulations between a common carrier and a shipper are considered by law unreasonable, unjust and contrary to public policy? ANS: Any of the following or similar stipulations shall be considered unreasonable, unjust, and contrary to public policy: (1) shipper;

That the goods are transported at the risk of the owner or

(2) That the carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the carrier need not observe any diligence in the custody of the goods; (4) That the carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movable transported; (5) That the carrier shall not be responsible for the acts or omissions of its employees; (6) That the carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and (7) That the carrier is not responsible for the loss, destruction, or deterioration of the goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. (Art. 1745, NCC J 44. On October 15, 1983, goods were loaded on a vessel owned by a common carrier for transportation from Manila to Cebu under a bill of lading which provided that the car­ rier would not be responsible for loss arising from theft or robbery. The goods were stolen while the vessel was docked in Manila. Sued for damages, the common carrier invoked the cited stipulation to avoid liability for the loss of the cargo.

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Additionally, the carrier, which is a corporation, argued that it could not be held liable because it had done all it could to prevent the loss by exercising the utmost diligence in the selection and supervision of its employee. How valid are these defenses? (1983) ANS: Both defenses are not valid. The stipulation in the bill of lading which states that the carrier will not be responsible for loss arising from theft or robbery is certainly not valid. According to the NCC, such a stipulation is unreasonable, unjust and contrary to public policy. The defense of utmost diligence in the selection and supervision of employees is not also valid. Under the NCC, the only possible defenses would be proof of extraordinary diligence in vigilance over the goods and not proof of due or even utmost diligence in the selection and supervision of employees. (Note: The above answer is based on Arts. 1745, No. 6, 1733, 1734, and 1735, NCC.)

45. Is an agreement limiting the common carrier’s liability for delay in case of a strike valid? (1978) ANS: Yes, an agreement limiting the common carrier’s liability in case of a strike is valid. This is expressly recognized by the NCC under the law on common carriers. (Art. 1748.) Besides, and this is the reason behind the law, not only natural disasters or acts of God but even acts of men or force majeure which are unforeseeable or unavoidable, such as wars, strikes and riots, are classified as fortuitous events. Under the doctrine of fortuitous event (Art. 1174, NCC.), such an agreement would be perfectly valid. 46. Is an agreement or stipulation limiting the common carrier’s liability in case of loss, destruction, or deterioration of the goods or cargo to an agreed valuation binding? ANS: It must be observed that in actual commercial usage, three kinds of stipulations limiting a common carrier’s liability in case of loss, destruction, or deterioration of the goods or cargo have often been made in a bill of lading. They are: (1) Those exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. It is evident

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Arts. 1732*1766

that these stipulations are void because they are contrary to public policy, (Art. 1745, No. 2, NCC.) (2) Those limiting the carrier’s liability to an agreed valuation without any qualification whatsoever. As a rule, these stipulations are also void because they are contrary to public policy, (Heacockvs. Macondray & Co., 42 Phil. 205; Ysmael & Co. vs. Barreto, 51 Phil. 90.) However, if they can be shown to be reasonable and just under the circumstances, and have been fairly and freely agreed upon, then they are perfectly valid and binding. (Art. 1750, NCC.) (3) Those limiting the carrier’s liability to an agreed valuation; such as the value of the goods or cargo appearing in the bill of lading, unless the shipper declares a greater value. These stipulations are perfectly valid and binding. (Art. 1749, NCC.) 47. Is a stipulation limiting the common carrier's liability to the value of the goods declared by the shipper in the bill of lading valid? (1978) ANS: If the stipulation limits the carrier’s liability to an agreed valuation such as the value of the goods appearing in the bill of lading, unless the shipper declares a greater value, it is valid. This is expressly recognized and sanctioned by the law on common carriers. (Art. 1749,NCC.) If the stipulation limits the carrier’s liability to an agreed valuation without any qualification whatsoever such as the value of the goods stated in the bill of lading, as a rule, jt is contrary to public policy, and therefore, void. However, if it can be shown to be reasonable and just under the circumstances, and had been fairly and freely agreed upon, then it is perfectly valid, (Art. 1750, NCC.) 48. Atty. LT and contractor RT bought passage tickets at the branch office of the Sweet Lines Shipping Co. at Cagayan de Oro City bound for Bohol. Since the vessel where they were booked was not proceeding towards Bohol, they were relocated to another vessel of the company. Because said vessel was filled to capacity, they were compelled to hide at the cargo section. Subsequently, they brought an action against the company for recovery of damages in the CPI of Cagayan de Oro City. Defendant company moved

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to dismiss the action on the ground that at the back of the passage tickets which they bought, the following condition is printed: “it is agreed that all actions x x x shall be filed in the competent courts in the City of Cebu.” The trial court, however, denied the motion. Should the denial be sustained? Reasons. ANS: The denial should be sustained. It must be observed that the conditions written in fine print at the back of the passage tickets under question are examples of what are commonly known as “contracts of adhesion” the validity and/or enforceability of which will have to be determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. Generally, stipulations in contracts come about after deliberate drafting by the parties thereto. There are, however, certain contracts where almost all of the provisions are drafted by one party only, usually a corporation. Such contracts are called contracts of adhesion because the only participation of the other party is the inscription of his signature or his “adhesion” thereto. Insurance contracts, bill of lading, contracts of sale of lots on the installment plan fall under this category. The issue in the instant case, therefore, is: Is the condition printed at the back of the passage tickets, which limits the venue of actions arising from the contract of carriage to the CFI of Cebu City, valid and enforceable? The condition is void and unenforceable for the following reasons: (1) It is unjust and unfair. It is hardly just and proper to expect passengers to examine their tickets received from crowded or conjested counters for conditions that maybe printed thereon, much less charge them with having consented to the conditions, especially if there are several of them in fine print, as in this case. Besides, the conditions were prepared solely by the shipping company; private respondents had no say in their preparation. It would be unjust and unfair to presume their consent or adherence thereto from the mere fact that they purchased the tickets. Finally, judicial notice may be taken of the fact that the bulk of passengers of these vessels come from low-income groups and are less literate, and who have little or no choice but to avail of petitioner’s vessels.

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(2) The condition under question subverts the public policy on transfer of venue since the same will prejudice rights and in­ terests of innumerable passengers in different parts of the country who, under said condition, will have to file suits against petitioner only in the City of Cebu. Said condition should, therefore, be declared void and unen­ forceable as contrary to public policy, to make the courts accessible to all who may have need of their services. (Sweet Lines, Inc. vs. Teves, 83 SCRA 361.) 49. A & B purchased airline tickets in the Philippines from C Airline Co. All flights had been confirmed by C Airline Co. The tickets were to be used in the USA. But when A & B used the same, they were not allowed to board the plane. They were asked to go back to the check-in counter and were told that there was overbooking. They were left behind. In their complaint, they alleged that they were treated with harsh language. They prayed for moral damages. The RTC dismissed the case. The CA reversed and awarded moral and exemplary damages, but applied the laws of USA. Is US law applicable in this action for damages? ANS: Philippine law should apply. Although the contract of carriage was to be performed in the USA, the tickets were purchased through C Airline Co.’s agent in Manila. And although tickets were “rewritten” in Washington D.C., such fact did not change tha nature of the original contract of carriage entered into by the parties in Manila. According to the doctrine of lex loci contractus, the law of the place where the contract is made or entered into governs with respect to its nature and validity, obligation and interpretation. This is the rule even though the place where the contract was made is different from the place where it is to be performed, and particularly so, if the place of the making and the place of performance are the same. Hence, the court should apply the law of the place where the airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such State by C Airline Co. (United Airlines, Inc. vs. CA, G.R. No. 124110, April 20, 2001; Zalamea vs. CA, 278 SCRA 23.)

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50. OY was a passenger of PAL from Cebu to Butuan. Upon his arrival at Butuan, his luggage could not be located. It was only the next day that it was located, but several items were missing, such as exhibits, transcripts and two gift items. (a) Is PAL liable for compensatory damages, moral damages and exemplary damages for breach of contract? (b) Considering the fact that at the back of OY*s transportation ticket, it is stated that PAL’s liability in case of loss or delay in delivery of baggages of passengers is limited to P100.00, is OY entitled to other damages, such as the value of the missing items and attorney’s fee? ANS: (a) PAL is liable only for actual or compensatory damages for breach of contract, but not for moral and exemplary damages. It must be observed that PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or in ill will. It is undeniable that it was the duty of PAL to look for OYs luggage. It exerted due diligence in complying with such duty. Consequently, in the absence of a wrongful act or omission, or of fraud or bad faith, OY is not entitled to moral damages under either Art. 2219 or Art. 2220 of the NCC; neither is he entitled to exemplary damages under Art. 2232 of the NCC. Normally, therefore, PAL can be held liable only for the value of the items which were lost. (b) However, considering the fact that at the back of OYs transportation ticket, it is stated that PAL’s liability in such case is limited to P100.00, OY is entitled to an award of P100.00. (Art. 1750, NCC.) While it may be true that OY had not signed the plane ticket, he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the contract of carriage and valid and binding upon the passenger regardless of the latter’s lack of knowledge or assent to the regulation. It is what is known as a contract of “adhesion,” in regards of which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives his consent. Therefore, OY is entitled to an award of only P100.00. (Ong Yiu vs. CA, 91 SCRA 223).

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51. Can the responsibility of a common carrier for the safety of passengers be dispensed with or lessened by stipulation? ANS: Under our law, the responsibility of a common carrier for the safety of passengers cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on ticket, or otherwise. (Art. 1757, NCC.) However, when a passenger is carried gratuitously, a stipulation limiting the carrier’s liability is valid, but not for willful acts or gross negligence. (Art. 1758, NCCJ 52. A bystander hurled a stone at a bus, hitting a passenger above his left eye. The eye was partially impaired despite treatment. The passenger sued the bus company for damages. He charged that the bus company was negligent because the injury could have been prevented by the company if something like mashwork grills had covered the windows of its bus. The judge awarded the damages. The Court of Appeals, however, reversed and set aside the judgment. Should the carrier be held liable? ANS: Affirming the CA, the SC in the case of Pilapil vs. CA, December 22, 1989, held that the carrier is not charged with the duty of providing or maintaining vehicles as to absolutely prevent any and all injuries to passengers. Petitioner contends that it is to the greater interest of the State if a carrier were made liable for such stone-throwing incidents rather than the bus-riding public losing confidence in the transportation system. Such a policy, however, is better left to the consideration of Congress. 53. A contracted malaria. Since there was no available bus, he requested a friend, B, to take him in his pick-up to the provincial capital where there is a hospital. The latter agreed, and together with some friends, they rode off. B invited A to sit in the front seat, but the latter declined, preferring to recline at the back of the pick-up. On the way, A accidentally fell from the pick-up. He died subsequently as a result of the accident. Later, his heirs commenced an action against B to recover damages. Decide the case, stating your reasons. ANS: B cannot be held liable. It is, of course, true that the law imposes upon common carriers the obligation to observe extraordi­

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nary diligence for the safety of their passengers fArfc. 1733, 1755, NCC.) and that in case of death or injuries to such passengers, they are presumed to have been at fault or to have acted negligently. (Arts. 1756, et seq., NCC.) Nevertheless, there is nothing in the in­ stant case that would indicate that defendant had not taken the precaution that an ordinary prudent man would have taken under similar circumstances. As a matter of fact, he invited the deceased to sit with him in the front seat but the latter declined. Furthermore, even assuming that B had exercised ordinary diligence only and not extraordinary diligence as required by law for common carriers, the case would still fall within the purview of the doctrine regarding the degree of diligence which common carriers as well as other owners of vehicles should observe for the safety of accommodation passengers or invited guests. Under this doctrine, which is sustained by the weight of authority, the rule is established that the owner or operator of a vehicle owes the duty to an invited guest to exercise ordinary or reasonable diligence only. Since one riding in a vehicle is no less a guest because he asked for the privilege of doing so, the same obligation of care or diligence is imposed upon the driver as in the case of one expressly invited to ride. (Lara vs, Valencia, 104 Phil. 65; 5 Am. Jur., pp. 626-226.) 54. superior?

(a) What is meant by the principle of respondeat

(b) If a passenger dies or is injured through the negligence or willful act of an employee of a common carri­ er, in determining the responsibility of the carrier, shall we apply the principle of respondent superior or the principle that the negligence or willful act of the employee is disputably presumed to be the negligence or willful act of the car­ rier? (c) May the carrier be held liable if the death of or injury to a passenger is caused by the negligence or willful act of another passenger or of a stranger? ANS: (a) The principle of respondeat superior refers to that rule by virtue of which, if the damage or injury is caused by the negligence or willful act of an employee, the employer is liable only when the act of the employee is within the scope of his authority

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and duty. (Maranan vs. Perez, 20 SCRA 412.) As far as our law on common carriers is concerned, this view, which is the minority view in Anglo-American law, is not followed in this jurisdiction. (Ibid.) As the Supreme Court has stated it so emphatically “We do not — and have never — followed the respondeat superior rule.” (Ramos vs. Pepsi-Cola Bottling Co., 19 SCRA 289.) (b) Neither rule can be applied. The NCC provision on Common Carriers are new and were taken from Anglo-American Law. There, the majority view, as opposed to the doctrine of respondeat superior, holds that a carrier has an implied duty to transport a passenger safely. We follow this doctrine in this jurisdiction. (Maranan vs. Perez, supra.) Thus, Art. 1759 of the NCC, declares that “Common Carriers are liable x x x although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.” (c) Yes, the carrier may be held liable, provided that the carrier’s employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. (Art. 1763, NCC.) 55. A was a passenger in a taxicab owned and operated by P when he was stabbed and killed by the driver, V. While the criminal case against V was pending, M, mother and only heir of A, brought an action against P for recovery of damages caused by the death of P. Will the action prosper? Reasons. ANS: Yes, the action in the instant case will prosper. Actually, the factual setting of the above problem is identical to that of Maranan vs. Perez (20 SCRA 412). In that case, the Supreme Court ruled: The NCC provisions on the subject of Common Carriers are new and were taken from Anglo-American Law. There, the basis of the carrier’s liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier’s implied duty to transport the passenger safely.

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Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment duty. Under the second view, upheld by the majority and also by the latter cases, it is enough that the assault happens within the course of the employee’s duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier’s orders. The carrier’s liability here is absolute in the sense that it practically secures the passengers from assaults by its own employees. As can be gleaned from Art. 1759, the NCC of the Philippines evidently follows the rule based on the second view. At least three very cogent reasons underlie this rule. They are: (1) The special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the law, inter alia, from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier’s own servants charged with the passenger’s safety; (2) said liability of the carrier for the servant’s violation of duty to passengers, is the result of the former’s confiding in the servant’s hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier’s employees against passengers, since it, and not the passenger, has power to select and remove them. Accordingly, itis the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behaviour, moral fibers, and social attitude. Therefore, defendant carrier is liable under Art. 1759 of the NCC. Since plaintiffs action is predicated on breach of contract, the cab driver is not a party thereto. His civil liability is covered in the criminal case. 56. A taxicab passenger was deliberately killed by the driver. Is the operator of the taxicab civilly liable? Explain. (1975)

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ANS: Yes, the operator of the taxicab is civilly liable. This is clear from Art. 1759 of the NCC which declares that common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. As a matter of fact, the same article declares that the liability of the common carrier does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. We adhere, therefore, to the principle that there is always an implied duty on the part of a common carrier to carry a passenger safety to his place of destination. Thus, in Maranan vs. Perez (20 SCRA 412), a case with a factual setting identical to that of the above problem, the SC ruled that defendant operator is civilly liable under Art. 1759 of the NCC. Since plaintiffs action is predicated on breach of contract, the cab driver is not a party thereto. His civil liability is covered in the criminal case. 57. (1) In a case where it is proved that the person registered in the Public Service Commission as operator of a vehicle of public convenience had already sold such vehicle to another at the time when the accident took place resulting in the injury or death of a passenger, although the approval of the sale of the Commission was secured only after the accident had taken place, can such operator be held liable for damages? (2) Assuming that he can be held liable, can the transferee be held solidarily liable with him? If not, what is the nature, if any, of the liability of such transferee? ANS: (1) The registered owner is liable for damages. Otherwise, if he is allowed to prove who the supposed transferee, or owner is, it would be easy for him by collusion with others to escape said responsibility for transferring the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. (Erezo vs. Jepte, 102 Phil. 105; Tamayo vs. Aquino, 105 Phil. 49; Vargas vs. Langcay, 6 SCRA 174; Perez vs. Gutierrez , 53 SCRA 149.) (2) Since the action in the case at bar is based on culpa contractual and not culpa aquiliana, it is clear that the transferor and the transferee cannot be held solidarily liable as in the case

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of joint tortfeasors. The responsibility of the registered owner of the vehicle must be direct for the reasons given above. But as the transferee, who operated the vehicle when the accident occurred, is the one who is directly responsible for the accident, he should in turn be made responsible, solidarily with his driver, to the registered owner for what the latter had been adjudged to pay. In operating the vehicle without the transfer thereof having been approved by the public service commission, the transferee acted merely as agent of the registered owner and should be responsible to him for damages that he may cause the latter by his negligence. (Tamayo vs. Aquino, supra; Vargas vs. Langcay, supra; Perez vs. Gutierrez, supra.) 58. The records show that the truck in which X was riding, which was operated by A, was already parked when it was struck by another truck using a plate number issued to the Southern Motors Co. As a result of the collision, X suffered physical injuries. It is, however, established that previous to the accident, said truck had been sold by the Southern Motors Co. to B. This sale was reported to the Motor Vehicle’s Office prior to the accident but B failed to register it in his name. Considering that A cannot be held liable, can the Southern Motors Co. be held liable for the accident? ANS: Although it has been the constant doctrine that the registered owner of a certificate of public convenience is liable for injuries suffered by passengers even though the same has already been transferred to other persons this doctrine, however, is not applicable to the case at bar. The company was not the registered owner although the plate of the truck belonged to it. Under the Motor Vehicle Law, the vendee is required to register the vehicle purchased by him and is prohibited from displaying the dealer’s plate number. In spite of this prohibition, B continued using the number and did not have it registered in his name. Consequently, his failure to register the truck and secure a plate for himself is imputable to him alone. (Francisco vs. De la Serna, L-12245, August 31,1959.)

1040

Title IX PARTNERSHIP (Arts. 1767-1867) 1. What is a contract of partnership and what are its requisites? ANS: By the contract of partnership, two (2) 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 (2) or more persons may also form a partnership for the exercise of a profession. (Art. 1767, NCC.) The essential requisites of a contract of partnership are: (1)

There must be a valid contract.

(2) There must be a contribution of money, property, or industry to a common fund. (3)

The partnership must be organized for gain or profit.

(4) The partnership should have a lawful object or purpose, and must be established for the common benefit or interest of the partners. 2. Distinguish between a partnership and a private corporation. ANS: There are five (5) essential differences between a part­ nership and a private corporation. They are: (1) With regard to creation — A partnership is created by voluntary agreement of the partners, whereas a corporation is always created by some express legislative authority either in the form of a special law or of a general law. (2) With regard to liability o f members — Partners are usually liable to partnership creditors not only to the extent of their capital

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contribution to the firm but even with their own private property, whereas the stockholders of a corporation, after they have paid for their shares, are not subject to any further liability, unless otherwise provided by law. (3) With regard to effect o f transfer of interest — Because of the rule of “delectus personarum,” the third person to whom a partner has transferred his interest in the partnership does not become a partner without the consent of all the other partners, whereas the third person to whom a stockholder has transferred his shares becomes automatically a stockholder even without the consent of the other stockholders. (4) With regard to effect of death or bankruptcy of members — The death or bankruptcy of a partner usually causes the dissolution of the firm, whereas the death or bankruptcy of a stockholder does not result in such dissolution. (5) With regard to effect of acts of members — As a general rule, the partners are the agents of the partnership; hence, acts of the partners done for the account of the partnership are binding not only on the partnership but also on the members. On the other hand, whatever acts the stockholders might execute for the account of the corporation, either individually or collectively, are not binding on the corporation. (1 Fletcher, Cyc. Corp., Sec. 20.) 3. What is meant by the “Common Law” and “Mer­ cantile views of the nature of a partnership? Which of these views prevails in this jurisdiction? ANS: The “Common Law” view of a partnership is that it is not a juridical or legal person, while the “Mercantile” view is that it is a juridical or legal person. (Crane on Partnership, 8-16.) The latter view prevails in this jurisdiction. (Art. 1768, NCC.) 4. What are the tests or indicia to determine the existence of a partnership? ANS: There are always two (2) tests which must be applied in order to determine whether or not a partnership exists. The first test is to determine whether or not there is an agreement to contribute money, property, or industry to a common fund, and the

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second test is to determine whether or not there is an intent of the contracting parties to divide the profits among themselves. Once it can be shown that there was an agreement to contribute money, property, or industry to a common fund and that there was an intent to divide the profits among themselves, then a partnership contract exists. (Art. 1769, NCC; Evangelista vs. Coll. o f Int. Revenue, 54 Off. Gaz. 996; Negado vs. Makabenta, 54 Off Gaz. 4082; Yulo vs. Yang Chiaco Seng, L-12541, August 28, 1959.) 5. Assuming that there is mutual contribution of money, property, or industry to a common fund, is the receipt by a person of a share of the profits of a business conclusive evidence that he is a partner in the business? ANS: No, it is not conclusive evidence that he is a partner in the business. According to the NCC, it is merely prima facie evidence that he is a partner. This inference, however, cannot be drawn if such profits are payments for the following: (a) Debt payable by installments or otherwise; (b) wages of an employee or rent to a landlord; (c) annuity to a widow or to a legal representative of a deceased partner; (d) interest on a loan; or (e) sale of the goodwill of a business or other property by installments or otherwise. (Art. 1769, NCC.) 6. What are the different kinds of partnership? Define each of them. ANS: There are two (2) classifications recognized in the NCC — according to object and according to liability of the partners. As to object, partnership may be universal or particular. A universal partnership may refer to all the present property or to all the profits. (Art. 1777, NCC.) A partnership of all present property is that in which the parties contribute all 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, NCC.) 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, NCC.) A particular partnership, on the other hand, is that which has for its object determinate things, their use of fruits, or a specific

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undertaking, or the exercise of a profession or vocation. (Art, 1783, NCC,) As to liability of the partners, partnerships may be general or limited. A general partnership is one where one of the partners are general partners, while a limited partnership is one where there is at least one general and one limited partner. 7.

What are the different kinds of partners?

ANS: Partners may be classified as follows: (1)

As to liability:

(a) General partners, or those who can be held liable for partnership obligations even to the extent of their private property. (b) Limited partners, or those who cannot be held liable for partnership obligations. (2)

As to contribution:

(a) Capitalist partners, or those who contribute money or property to the common fund. (b) Industrial partners, or those who contribute only their skill or industry to the common fund. (3)

As to management:

(a) Managing partners, or those who manage or admin­ ister partnership affairs. (b) Silent partners, or those who have no voice in the management of partnership affairs. (4)

As to third persons: (a)

Ostensible partners, or those publicly known as

such. (b) Secret partners, or those whose connection with the partnership is not known. They are also known as dormant partners. (c) Partners by estoppel, or those who represent them­ selves, or consent to another or others representing them to

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anyone as partners either in an existing partnership or in one that is fictitious or apparent. They are also known as de facto partners. 8. (a) Can a husband and wife enter into a contract of partnership? (b) A organized a limited partnership with himself as general partner and his two friends, B and C, as limited partners. One year later, A and B got married, and thereafter the two bought the interest of C for a nominal amount. The Commissioner of Internal Revenue now maintains that the marriage of A and B and their subsequent acquisition of the interest of C in the partnership dissolved the limited partnership, and if there was no dissolution, the fiction of juridical personality of the partnership shouldbe disregarded for income tax purposes because the spouses have exclusive ownership and control of the business. Consequently, the income tax returns of A and his wife B should have included his and his wife’s individual incomes and that of the limited partnership. Is this correct? Reasons. ANS: (a) If the partnership is a universal partnership, a hus­ band and a wife cannot enter into such contract. This is so because under the NCC (Art. 1782.), persons prohibited from making dona­ tions to each other are prohibited from entering into universal part­ nerships. However, if the partnership is a particular partnership or a limited partnership, they can. (b) The Commissioner of Internal Revenue rests his thesis upon the opinion of Senator Tolentino in Commentaries and Jurisprudence on Commercial Laws ofthe Philippines, Vol. 1,4th Ed., page 58, that: “A husband and a wife may not enter into a contract of general co-partnership, because under the NCC, which applies in the absence of express provision in the Code of Commerce, persons prohibited from making donations to each other are prohibited from entering into universal partnerships. (2 Echavarri, 196.) It follows that the marriage of partners necessarily brings about the dissolution of a pre-existing partnership.” (1 Guy de Montella 58.) What the Commissioner has evidently failed to observe is the fact that the partnership in the case at bar is a limited and, at the same

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time, particular partnership, and not a universal partnership, such as the one that has for its object all the present property of the partners as contributed by them to the common fund, or else all that the partners may acquire by their industry or work during the existence of the partnership. Nor could the subsequent marriage of the partners operate to dissolve the partnership, such marriage not being one of the causes provided for that purpose either by the NCC or by the Code of Commerce. It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct and separate from that of its partners, the .by passing of the existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding clear statutory mandates and basic principles of our law. The limited partnership’s separate individuality makes it impossible to equate its income with that of the component members. True, Section 24 of the Internal Revenue Code merges registered general co-partnership with the personality of the individual partners for income tax purposes. But this rule is exceptional, and cannot be extended by mere implication to limited partnerships. (Commissioner of Internal Revenue vs. Suter, 27 SCRA 152.) 9. What are the formalities required by law for the organization or constitution of a partnership? ANS: If the partnership is general, it may be constituted in any form, except where immovable property or real rights are contributed to the common fund, in which case a public instrument, to which is attached an inventory of said property, signed by any of the partners, shall be necessary for validity. (Arts. 1771, 1773, NCC.) Furthermore, if it has a capital of P3,000 or more, it must appear in a public instrument, which shall be recorded in the Office of the Securities and Exchange Commission. However, this is not necessary for validity. (Art. 1772, NCC.) If the partnership is limited, it is required that the contracting parties, in addition to the formalities prescribed for the organization of a general partnership, shall execute a certificate of limited partnership which must be recorded in the Office of the Securities

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and Exchange Commission. (Art. 1843, NCC.) These formalities must be complied with; otherwise, the partnership is not limited but general. 10. How shall the profits and losses of a partnership be distributed? ANS: We must distinguish between a case where there is an agreement and one where there is no agreement. Thus — If there is an agreement — The profits and losses shall be distributed in conformity with such agreement. If the agreement is only with respect to the profits, the share of the partners in the losses shall be in the same proportion as their share in the profits. (Art, 1797, CC.) If there is no agreement — The profits and losses shall be distributed as follows: (1)

Profits:

(a) Capitalist partners — The share of a capitalist part­ ner shall be in proportion to what he may have contributed to the common fund. (b) Industrial partners — The share of an industrial partner shall be that which is just and equitable under the cir­ cumstances. (2)

Losses:

(a) Capitalist partners — The share of a capitalist part­ ner shall be in proportion to what he may have contributed to the common fund. (b) Industrial partners — An industrial partner shall not be liable for the losses. (Ibid.) 11. Under our law, may the partners enter into an agreement whereby one or more of them shall not share in the profits and losses? ANS: No, they may not. According to Art. 1799 of the NCC, such an agreement would be void.

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12. Can an industrial partner engage in a business other than that of the partnership? ANS: An industrial partner cannot engage in business for him­ self, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have ob­ tained in violation of this provision, with a right to damages in ei­ ther case. (Art 1789, NCC.) 13. Can a capitalist partner engage in a business other than that of the partnership? ANS: The capitalist partners cannot engage for their own account in any operation which is of the kind of business in which the partnership is engaged, unless there is a stipulation to the contrary. Any capitalist partner violating this prohibition shall bring to the common funds any profits accruing to him from his transactions, and shall personally bear all the losses. (Art. 1808, NCC.) 14. Jinggoy and Philip formed a partnership to operate a car repair shop in Quezon City. Jinggoy provided the capital while Philip contributed his labor and industry. On one side of their shop, Jinggoy opened and operated a coffee shop, while on the side, Philip put up a car accessories store. May they engage in such separate businesses? Why? (2001) ANS: Jinggoy, the capitalist partner, may engage in the restaurant business because it is not the same kind of business the partnership is engaged in. On the other hand, Philip may not engage in any other business unless their partnership expressly permits him to do so because as an industrial partner he has to devote his full time to the business of the partnership. (Art. 1789, NCC.) 15. X and Y are partners in a certain business, X being the managing partner. Z owes X P5,000.00 and the partner­ ship P 10,000.00, and both credits are demandable. Z pays X P3,000.00 and the latter issues a receipt in his name. Should X collect the entire amount? Would the result be the same if the receipt is in the name of the partnership? Explain (1973)

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ANS: X should not collect the entire amount of P3,000.00. He should collect only P I,000.00 for himself and apply the balance of P2,000.00 to the partnership credit. True, a receipt of payment was issued in his name. Under Art. 1792 of the NGC, however, wheth­ er the receipt is issued by X or by the debtor Z, the sum collected shall be applied to the two (2) credits in proportion to their amounts, which in this case is one is to 2, or 1/3 for X and 2/3 for the partner­ ship. This rule is applicable even if the debtor Z actually applied the payment to X’s credit. The debtor’s right to make on application of payment is available to him only if the managing partner’s credit is more onerous to him than the partnership credit. (Art. 1792, last paragraph.) In the instant case, it is clear that X’s credit is not more onerous to Z than the partnership credit. However, if the receipt is in the name of the partnership, the result would be different. By explicit mandate of the first paragraph of Art. 1792 of the NCC, the entire amount paid by Z to X shall be applied to the partnership credit. 16. Who shall manage the partnership? ANS: The management of the partnership may be vested by agreement in one, or some, or all of the partners, or even in a third person, either in the articles of partnership or after the partnership had already been constituted. (Arts. 1800, 1801, 1802, NCC.) If there is no agreement, it is vested in all of the partners. (Art. 1803, NCC.) 17. (a) A, B, C, and D organized a general partnership, with A and B as industrial partners and C, who contributed P30,000 to the common fund, and D, who contributed PI0,000 to the common fund, as capitalist partners. A and B were both appointed managing partners without any specification of their respective duties. When the firm commenced business operations, the two appointed X as accountant of the company. One year later, A decided to dismiss X, but this was opposed by B. How can the conflict between the two (2) be resolved?

(b) Suppose that in the above problem, nobody was appointed managing partner of the firm, how shall the conflict between A and B be resolved?

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OBLIGATIONS AND CONTRACTS Partnership

ANS: (a) According to Art. 1801 of the NCC, the conflict shall be resolved by the decision of the majority of the managing partners, and in case of a tie, it shall be decided by the partners owning the controlling interest. It is clear that, in the instant case, there is a tie; consequently, the matter must now be decided by C who owns the controlling interest. If he casts his vote in favor of A, X is out of a job; if he casts his vote in favor of B, X still has a job. (b) According to Art. 1803 of the NCC, when the manner of management has not been agreed upon, all the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of Art. 1801. According to Art. 1801, the decision of the majority shall prevail, and in case of a tie, the matter shall be decided by the partners owning the controlling interest. Consequently, the conflict between A and B shall be resolved by putting the question to a vote of all of the partners. In case of a tie, C, who owns the controlling interest in the partnership, shall decide. 18. (a) What is meant by the principle of “delectus personae” in partnership relations? (b) Suppose that a partner assigns his whole inter­ est in the partnership to a third person, shall such an assign­ ment result in the latter becoming a substitute partner? (c) May a partner form a sub-partnership with a third person with respect to his interest in the partnership? ANS: (a) The principle of delectus personae in partnership relations refers to the rule which is inherent in every partnership that no one can become a member of the partnership association without the consent of all of the partners. Consequently, even if a partner will associate another person in his share in the partnership, the associate shall not be admitted into the partnership without the consent of all the partners, even if the partner having an associate, should be a manager. (Art. 1804>NCC.) (b) If a partner conveys or assigns his whole interest in the partnership to a third person, such conveyance or assignment does not result in the latter becoming a substitute partner. This is clear from the provisions of Art. 1813 of the NCC.

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(c) Yes, a partner may form a sub-partnership wit third person with respect to his interest in the partnership even without the consent of the other partners. According to Manresa, this does not fall within the purview of the rule enunciated in Art. 1804. There is no modification or alteration of the original contract of partnership. The third person sub-partner remains a stranger to the partnership. (11 Manresa 399.) 19. When may a partner demand for a formal accounting of partnership affairs? ANS: Any partner may demand for a formal accounting of partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners; (2)

If the right exists under the terms of any agreement;

(3) If a partner has derived profits from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property; or (4) Whenever other circumstances render it just and reasonable. (Arts. 1809, 1807, NCC.) 20. A and B, as partners, operated a theatre in Tacloban City. Needing funds, the partnership mortgaged to C a lot covered by a transfer certificate of title in the name of the partnership. Because of the failure of the partnership to pay the loan, C foreclosed the mortgage and as a result, the mortgaged property was sold at public auction to the mortgagee himself. A few days before the expiration of the one-year period of redemption, A redeemed the property with his own private funds. A corresponding certificate of redemption was then issued to him. Soon thereafter, he filed a petition asking that the original title of the partnership be cancelled and that another one be issued in his name alone. This was opposed by B. Has A become the absolute owner of the property on the theory that, in redeeming them from C, he is now subrogated to all of the rights of the latter? ANS: Under general principles of law, a partner is an agent of the partnership. This is sanctioned by Art. 1818 of the NCC.

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Furthermore, every partner becomes a trustee for his co-partner with regard to any benefit or profit derived from his act as partner in accordance with Art. 1807 of the NCC. Consequently, when A redeemed the property in question, he became a trustee and held the same in trust for his co-partner B, subject to his right to demand from the latter his contribution to the price of the redemption plus legal interest. Another aspect of the case which rules out the application of the theory of subrogation, is that C never became the absolute owner of the property in question. Naturally, there was no title which he could convey to A as redemptioner. Hence, the redemption can be viewed merely as having removed the lien of mortgage and restoring the property to their original status as partnership property free from any encumbrance. (Catalan vs. Gatchalian, 105 Phil. 1270.) 21. (a) What are the property rights of a partner? Are these rights assignable? (b) What is meant by a partner’s interest in the partnership? (c) What is the effect of a conveyance made by a partner of his whole interest in the partnership to a third person? (d) What is meant by a “charging order” upon a partner’s interest in the partnership? ANS: (a) The property rights of partner are: (1) His rights in specific partnership property, (2) his interest in the partnership; and (3) his right to participate in the management. (Art. 1810, NCC.) Only the 2nd is assignable (Art. 1813, NCC.), but not the others. (Art 1811, NCC.) (b) A partner's interest in the partnership is his share of the profits and surplus. (Art. 1812, NCC.) (c) The effects of the conveyance by a partner of his whole interest in the partnership are as follows: (1)

It does not dissolve the partnership;

(2) It does not entitle the assignee to interfere in the management of the business, or to require an accounting of partnership transaction, or to inspect the partnership books;

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however, in case of fraud in the management of the partner­ ship, he may avail himself of the usual remedies; (3) It entitles the assignee to receive in accordance with his contract the profits to which the assignor would otherwise be entitled; and (4) Upon dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may then demand for an accounting. (Art. 1813, NCC.) (d) A “charging order” upon a partner’s interest in partnership refers to the remedy available to a judgment creditor of a debtor, partner to charge the interest of the latter in the partnership by means of a court order for the purpose of satisfying the amount of the judgment. A receiver of the debtor partner’s share of the profits may even be appointed. This charging order, however, is always subject to the preferred rights or partnership creditors. (Art. 1814, NCC.) 22. What are the requisites prescribed by law in order that a partnership may be held liable to a third person for the act of one of the partners? ANS: 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 1st, the contract must be entered into in the name and for the account of the partnership and under its signature; and 2nd, 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 by a partner in the ordinary course of the business of the partnership with the authority of his co-partners. (Art. 1822, NCC.) 23. Can the partners be held liable for a partnership obligation? If so, what is the nature of their liability? ANS: Yes, In the case of a partnership obligation arising from contracts, all general partners, including industrial ones, shall be

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liable pro rata with all their property and after all the partnership assets have been exhausted; in other words, the liability of the partners is joint and subsidiary. (Art. 1816, NCC.) In the case of a partnership obligation arising from a criminal offense or a quasi­ delict, all partners are liable solidarily with the partnership. (Art. 1824, NCC.) In the case of a partnership obligation under the Workmen’s Compensation Act, all partners are also liable solidarily with the partnership. (Liwanag vs. Workmen’s Compensation Commission, 105 Phil. 741.) 24. A, B and C formed a general partnership with the following contributions to the common fund: A, P2,000; B, P4,000; C, P6,000. There was no agreement on the division of profits or apportionment of losses. After some years of business operations, the assets of the partnership dwindled to P3,000; so the partners agreed to stop their business. The partnership is indebted to Corpuz for a loan of P12,000. Under the circumstances, from whom can Corpuz demand satisfaction of his credit, and to what extent? (1974) ANS: Since the obligation of P12,000 in the instant case is a partnership obligation arising from a contract, what is applicable here is the rule enunciated in the NCC that all of the partners shall be liable pro rata with all their property after all of the partnership assets have been exhausted. (Art. 1816, NCC.) Consequently, Corpuz may demand payment of the remaining P3,000 from the partnership. He can then compel A, B and C to pay the balance of P9,000 still unpaid in the proportion of I is to 2 is to 3 (1:2:3). In other words, A shall be liable for 1/6 of P9,000, or PI,500; B for 2/6, or 1/3 of P9,000, or P3,000: and C, for 3/6, or 1/2 of P9,000, or P4,5000. 25. “A,” “B,” and “C” formed a partnership under the following terms and conditions: A.

Participation: “A” - 40%; “B” - 40%; “C” - 20%.

B. “A” and “B” would supply the entire capital. “C” would contribute his management expertise and be manager for the first five years without compensation. C.

“C” shall not be liable for losses.

The partnership became bankrupt.

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(1) Could “A” alone, opposed by “B” and “C,” have “C” removed as manager? Explain. (1981) ANS: “A,” alone, opposed by “B” and “C,” cannot have “C” removed as manager of the partnership. According to the NCC, the vote of the partners representing the controlling interest shall be necessary for such revocation of power. Under the partnership agreement, it is crystal clear that the vote of “A” does not represent the controlling interest. (Note: The above answer is based on Art. 1800 of the NCC.)

(2) Could “C” be personally held liable for debts of the partnership not satisfied with the assets of the partnership? Amplify. (1981) ANS: Yes, “C” can be held liable personally, although jointly, liable for debts of the partnership not satisfied with the assets of the partnership. Under our partnership law, as among themselves, the industrial partner is always excluded from any participation in the losses in the absence of an agreement to the contrary. Hence, the agreement that “C,” the industrial partner, shall not be liable for losses is valid. It merely affirms the law. The rule that a stipulation which excludes one or more partners in the profits or loses is void, is applicable only to capitalist partners, not to industrial partners. However, as far as third persons are concerned, the rule is different. An industrial partner can be held personally liable. Of course, this is without prejudice to his right to hold his co-partners proportionately liable for what he paid to partnership creditors. Thus, in the instant case, the liability of “A,” “B” and “C” is joint (pro rata) and subsidiary. The facts merely state that their participation is: “A” — 40%; “B” — 40%; “C” — 20%. Therefore, since by agreement “C” is excluded from any participation in the losses, the agreement that “C’s” participation is 20% applies only to his participation in the profits. In the case of “A” and “B,” the agreement applies to both profits and losses. Despite the exclusion of “C” in the losses, such agreement is not applicable insofar as partnership creditors are concerned. Consequently, the liability of the three partners for partnership debts shall also be: 40% for “A”; 40% for “B”; and 20% for “C.” Hence, “C” can now be compelled to pay 20% of

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the partnership debts. After payment, he can then proceed against his co-partners “A” and “B” for reimbursement of the amount paid by him. (Note: The above answer is based on Art. 1816 of the NCC in relation to Arts. 1797 and 1799.)

26. A and B are partners of Liwanag Auto Supply, a commercial establishment. X, who was employed by them as security guard, was killed in line of duty. His widow and minor children in due time filed a claim for compensation with the Workmen’s Compensation Commission, which ordered the partners to pay to them jointly and severally the amount fixed by the referee. Decide whether or not the Commission erred in declaring the obligation of the partners as solidary. ANS: Ordinarily, the liability of the partners in a partnership is not solidary, but the laws governing the liability of partners is not applicable to the case at bar wherein a claim for compensation by dependents of an employee who died in line of duty is involved. Although the Workmen’s Compensation Act does not contain any provision expressly declaring the obligation of business partners as solidary, Arts. 1711 and 1712 of the NCC taken together with Sec. 2 of the Workmen’s Compensation Act, reasonably indicate that in compensation cases, the liability of business partners should be solidary, otherwise, the right of the employee may be defeated, or at least crippled. If the responsibility of the partners were joint and not solidary and one of them happens to be insolvent, the amount awarded to the employee would only be partially satisfied, which is evidently contrary to the intent and purpose of the Act. Since the Workmen’s Compensation Act was enacted to give full protection to the employees, reason demands that the nature of the obligation of the employers to pay compensation to the heirs of the employee who died in line of duty should be solidary; otherwise, the purpose of the law could not be attained. (Liwanag vs. Workmen’s Compensation Commission, supra.) 27.

(a) What is meant by a partner by estoppel? (1970)

(b) When is an existing or actual partnership bound by the representation made by or in behalf of a person (part­ ner by estoppel) that he is a member of the partnership?

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(c) What is the character of the liability of a par ner by estoppel to persons who, relying on the representa­ tion that the former is a partner in an actual or apparent partnership, have given credit to such partnership? ANS: (a) A partner by estoppel refers to a person who repre­ sents 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.) (b) 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.) (c) 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 a 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 consenting to the representation. (Art. 1825, NCC.) 28. Discuss?

What are the three (3) final stages of a partnership?

ANS: The three (3) final stages of a partnership are: (1) dissolution; (2) winding up; and (3) termination. 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

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of liquidating partnership affairs. Termination, in point of time, refers to that moment when partnership affairs are wound up. The partnership, although dissolved continues 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. 29. When does the four (4) years prescription period of the right of a partner to demand an accounting of the partnership business start to run? ANS: As long as the partnership exists, any of the partners may demand an accounting of the partnership business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done. (Emnace vs. Court of Appeals, G.R. No. 126334, November 23, 2001.) 30. What are the causes for the dissolution of a partnership? ANS: Dissolution is caused: (1)

Without violation of the agreement between the part­

ners: (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 partners who have not assigned their interests or suffered them to be charged for their separate debts either before or after the termination of any specified term or particular undertaking; (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 a dissolution under any other provision of this article, by the express will of any partner at any time.

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Arts. 1767-1867

(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 the civil interdiction of any partner;

(8) By the decree of court under the following article. (Art 1830, NCC.) On application by or for a partner the court shall decree a dissolution whenever: (1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind; (2) A partner becomes in any other way incapable of performing his part of the partnership contract; (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; (5) a loss; (6)

The business of the partnership can only be carried on at Other circumstances rendering a dissolution equitable.

On the application of the purchaser of a partner’s interest under Article 1813 or 1814: (1) undertaking;

At the termination of the specific term or particular

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(2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. (Art. 1831, NCC.) 31. Does dissolution of the partnership terminate all authority of the managing partner, if one had been appointed, or of any partner, if no manager had been appointed, to act for the partnership? ANS: The dissolution of the partnership terminates all authority of the managing partner or of any partner, as the case may be, to act for the partnership. This rule, however is subject to the following exceptions: (1)

Acts necessary to wind up partnership affairs;

(2) Acts necessary to complete transactions begun but not then finished; and (3) Acts or transactions which would bind the partnership if dissolution had not taken place, provided the other party to such transactions: (a) Had extended credit to the partnership prior to dis­ solution and had no knowledge or notice of such dissolution; or (b) Although he had not so extended credit, had never­ theless known of the partnership prior to dissolution, and, hav­ ing no knowledge or notice of dissolution, the fact of dissolution had not been advertised in a newspaper of general circulation in the place at which the business was regularly carried on. (Arts. 1832,1834, NCC.) 32. Are the above exceptions absolute in character? ANS: The above exceptions are not absolute in character. According to the third paragraph of Art. 1834 of the NCC, the partnership is in no case bound by the act of a partner after dissolution: (1) Where it is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs;

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OBLIGATIONS AND CONTRACTS Partnership

(2)

Arts. 1767-1867

Where the partner acting is insolvent; or

(3) Where the partner has no authority to wind up partnership affairs, except by a transaction with one who — (a) Had extended credit to the partnership prior to dis­ solution and had no knowledge or notice of his want of author­ ity, or (b) Had not extended credit to the partnership prior to dissolution and, having no knowledge or notice of his want of authority, the fact of his want of authority had not been adver­ tised in a newspaper of general circulation in the place at which the business was regularly carried on. (Art. 1834, NCC.) 33. Who has the right or duty to wind up or liquidate partnership affairs? ANS: If the winding up or liquidation of partnership affairs is judicial, the right or duty to wind up or liquidate partnership affairs devolves upon the partner or legal representative or assignee designated by the court. (Art. 1836, NCC.) If it is extrajudicial, the right or duty devolves upon the managing partner. (Aldecoa & Co. vs. Warner, Barnes & Co., 16 Phil. 423; Po Yeng Cheo vs. him Ka Yan, 44 Phil. 172; Guidote vs. Borja, 53 Phil. 900.) But where there is no managing partner, or even where there is, he dies, then the right or duty devolves upon the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner, not insolvent. (Art. 1836, NCC.) 34. Distinguish between a general partnership and a limited partnership. ANS: The two (2) may be distinguished from each other in the following ways:

(1) As to composition: A general partnership is composed only of general partners, whereas a limited partnership is composed of at least one general partner and one limited partner. (2) As to constitution: A general partnership, as a general rule, may be constituted in any form, whereas a limited partnership must be contained in a certificate of limited partnership, duly signed

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and sworn to by all of the partners, and recorded in the Office of the Securities and Exchange Commission. (3) As to firm name: A general partnership must operate under a firm name, which may or may not include the name of one or more of the partners, whereas a limited partnership must also operate under a firm name, followed by the word “Limited.” (4) As to dissolution and winding up: There are also differ­ ences, formal and procedural, between the dissolution and winding up of a general partnership and that of a limited partnership. 35. Distinguish between a general partner and a limited partner. ANS: The two (2) may be distinguished from each other in the following ways: (1) A general partner can be held personally liable for partnership obligations after all of the assets of the partnership have been exhausted, whereas a limited partner cannot be held liable. (2) A general partner may participate in the management of the partnership, whereas a limited partner does not. (3) A general partner may contribute money, property, or industry to the common fund, whereas a limited partner, as such, can contribute money or other property only. (4) The name of a general partner may appear in the firm name, whereas that of a limited partner does not. (5) There is a limitation on the right of a general partner to engage in another business or in the same kind of business as that in which the partnership is engaged, whereas there is no such limitation in the case of a limited partner. 36. Can a limited partner be held liable for partnership obligations? ANS: A limited partner as such cannot be held liable for partnership obligations. (Art. 1843, NCC.) However, if his surname appears in the partnership or firm name or if he participates in the management or control of the business, he can be held liable. (Arts. 1846, 1848, NCCJ

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37.

Arts. 1767-1867

(a) Is the interest of limited partner assignable? (b)

what is a substituted limited partner?

(c) When does an assignee of the interest of a limited partner become a substituted limited partner? (d) What are the rights and obligations of a substituted limited partner? ANS: (a) Yes, the interest of a limited partner is assignable. (b) A substituted limited partner is a person admitted ? to all the rights of a limited partner who has died or has assigned his interest in a partnership. (Ibid.) (c) An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor, being thereunto empowered by the certificate of limited partnership, gives the assignee that right. (Ibid.) However, he becomes a substituted limited partner only from the moment that the certificate is appropriately amended in accordance with Art. 1866. (Ibid.) (d) The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. (Ibid.) 38. What is the order of payment in the winding up of partnership liabilities? ANS: We must distinguish between the order of payment if the partnership is a general partnership and the order of payment if the partnership is a limited partnership. If the partnership is a general partnership, the order of payment is as follows: (1) (2) profits. (3)

Those owing to creditors other than partners. Those owing to partners other than for capital and Those owing to partners in respect of capital.

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Arts. 1767-1867

(4) NCC.)

OBLIGATIONS AND CONTRACTS Partnership

Those owing to partners in respect of profits. (Art. 1839,

If the partnership is a limited partnership, the order of payment is as follows: (1) Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their contributions, and to general partners. (2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions. (3) Those to limited partners in respect to the capital of their contributions. (4) profits. (5) (6) NCC.)

Those to general partners other than for capital and Those to general partners in respect to profits. Those to general partners in respect to capital. (Art. 18631

1064

Title X AGENCY (Arts. 1868-1932) 1.

What is a contract of agency?

ANS: 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, NCC.) 2. What is the underlying principle of the contract of agency? What is its purpose and basis? What is the legal fiction of qui facit per alium facit per se? The underlying principle of the contract of agency is to accomplish the results by using the services of others — to do a great variety of things like selling, buying, manufacturing and transporting. Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. The basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence — qui facit per alium facit per se. (Eurotech Industrial Technologies, Inc. vs. Cuizon, G.R. No. 167552, April 23, 2007). 3. What are the essential elements of a contract of agency? As a nominate contract, what are its basic and peculiar characteristics? ANS: The essential elements of a contract of agency are: (1) there is consent, express or implied, of the parties to establish the relationship of agency; (2) the object is the execution of a juridical act

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OBLIGATIONS AND CONTRACTS Agency

in relation to a third person; (3) the agent acts as a representative and not for himself; and (4) the agent acts within the scope of his authority. (Rallos vs. Felix Go Chan & Sons, 81 SCRA 251.) As a nominate contract, it is consensual, preparatory and informal. Its peculiar characteristics are: it is personal; it is representative; and it is derivative. 4. Kris asked her close friend, Korina, to buy some groceries for her in the supermarket. Was there a nominate contract entered into between Kris and Korina? In the affirmative, what was it? Explain. (2003) ANS: Yes, there was a nominate contract. On the assumption that Korina accepted the request of her close friend Kris to buy some groceries for her in the supermarket, what they entered into was the nominate contract of agency. Article 1868 of the NCC provides that by the contract of agency a person binds himself to render some services or to do something in representation or on behalf of another, with the consent or authority of the latter. 5. Distinguish between a contract of agency and a contract of lease of services. ANS: The two (2) contracts may be distinguished from each other in the following ways: (1) In the first, the principle of representation is applied, whereas in the second, it is not; in other words in the first, the basis of the contract is representation, whereas in the second, the basis is employment. (2) In the first, the contract may be extinguished at will by the principal, whereas in the second, the concurrence of both parties is necessary. (3) The agent exercises discretionary powers in order to attain the end for which he was appointed, whereas the employee exercises ministerial functions only. (4) The first is a preparatory contract, whereas the second is a principal contract.

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6. A and B entered into a contract, whereby it was agreed that the latter shall administer and manage certain haciendas belonging to the former. In the contract, it was stipulated that B shall have the power to contract the services of laborers to work in the fields, that he can fix their compensation, and that he can make improvements on the property. What contract was perfected in this case — a contract of agency or a contract of employment? Reasons. ANS: The contract is a contract of agency. B was not simply called upon to render services for a definite price or to perform acts which require sole manual or mechanical execution. More than that he was appointed administrator and manager of A’s haciendas. He was given authority to represent the owner in matters such as the contract for the employment of laborers and field hands, as well as their compensation. He was given wide discretion to employ the means necessary to accomplish the end for which he was appointed — to make the haciendas productive. He was indeed the representative of the owner in those haciendas. (Gabin vs. Villanueua, CA, 51 Off. Gaz. 5749.)

7. Distinguish between a contract of agency and a contract with an independent contractor. ANS: The two (2) contracts may be distinguished from each other in the following ways: (1) In the first contract, the principle of representation exists, whereas in the second contract, such principle is not recognized. (2) An agent is more or less under the control of his principal, whereas an independent contractor is not under the control of the person with whom he contracts. (3) An agent binds his principal provided that he acts within the scope of his authority, whereas an independent contractor generally cannot bind the person with whom he contracts by his acts. (4) If a third person is injured through the fault or negligence of an agent, he can proceed against the principal for damages, but if he is injured through the fault or negligence of an independent

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contractor, he cannot proceed against the person with whom the latter had contracted for damages. (5) The first is a preparatory contract, whereas the second is a principal contract.

8. A left his car at a Shell Station, operated by B, to be washed, greased and sprayed. When the car was being raised in the elevator shaft, it fell from the service platform and as a result it suffered damage estimated at P2,000. Since the car was insured by X Insurance Co., the latter had to pay P2,000 to A. Upon payment of the amount, X Insurance Co. brought an action against the Shell Co. of the Philippines to recover said amount. The defendant Company interposed the defense that B, operator of the service station, is an independent contractor, consequently, it cannot be held liable. Is this correct? Reasons. ANS: The contention of the Shell Co. of the Philippines is not correct. In two cases with similar facts, the Supreme Court ruled that the contract entered into between the Company and the operator of a service station is a contract of agency. The operator of the service station is not an independent contractor, but merely an agent of the Company because even the equipment which he uses in his service station are owned by the Company and the oil, gasoline and other products which he sells to the public are sold at a commission. (Shell Co. vs. Firemans Insurance Co., L-5169 [1957]; Africa vs. Caltex Phil, 16 SCRA 448.)

9.

What are the different kinds of agency?

ANS: Agency may be classified as follows: (1)

As to constitution: (a)

Express — when it is expressly constituted.

(b) Implied — (1) from the acts of the principal, (2) from his silence or inaction, or (3) from his failure to repudiate the agency, knowing that another is acting on his behalf without authority.

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OBLIGATIONS AND CONTRACTS Agency

(2)

(3)

(4)

Arts. 1868-1932

As to form: (a)

Oral

(b)

Written

As to cause: (a)

Onerous — when it is for a compensation.

(b)

Gratuitous — when there is no compensation.

As to extent:

(a) General — when it comprises all of the business of the principal. (b) Special — when it comprises one or more specific transactions. (5)

As to third persons: (a)

Agent de jure

(b) Agent by estoppel — when a person, who is not re­ ally an agent, represents himself or is represented as such.

10. Can there be a perfected contract of agency if the acceptance by the agent is merely implied? ANS: Yes, there can be a perfected contract of agency if the acceptance by the agent is merely implied. According to the law, acceptance by the agent may be implied from his acts or from his silence or inaction according to the circumstances. (Art 1870, NCC.) As far as acceptance by mere silence or inaction is concerned, the following rules shall govern: (1) Between persons who are present, the acceptance may be implied if the principal delivers his power of attorney to the agent and the latter receives it without objection. (Art. 1871, NCC.) (2) Between persons who are absent, the acceptance cannot be implied, unless: (a) The principal transmits his power of attorney to the agent, who receives it without any objection; or (b) The principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is 1069

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habitually engaged as an agent, and he did not reply to the let­ ter or telegram, (Art. 1872, NCC.)

11. Distinguish between implied agent and agent by estoppel. ANS: The two (2) may be distinguished from each other in the following ways: (1) An implied agent is a true agent, a de jure agent, with rights and duties as such, whereas an agent by estoppel is not really an agent. (2) Consequently, 3rd persons who deal with the implied agent can always hold the principal liable, whereas those who deal with an agent by estoppel cannot always hold the principal liable. The reason for this is that in agency by estoppel, the agency may arise either from the representation made by the alleged agent or from the representation made by the alleged principal. If made by the alleged agent without the knowledge of his alleged principal, only such agent is liable; if made by the alleged principal, such principal is liable. A good example of the latter would be that which is contemplated in Art. 1873 of the NCC.

12. Jose appoints Augusto, a minor 18 years of age, his agent to sell his car. AUgusto sells the car to Maria. Soon thereafter, the price of cars went up with the floating rate of the peso, and Jose promptly sought to disaffirm the sale and brought an action to recover the car on the ground that Augusto’s act was void since a minor cannot be an agent. May Jose avoid the contract entered into by Augusto in favor of Maria on the ground of his agent’s incapacity? Explain your answer. (1970) ANS: Jose cannot avoid the contract entered into by Augusto in favor of Maria on the ground of his agent’s incapacity. In a contract of agency, as far as third persons are concerned, what is important and material is the legal capacity of the principal to enter into a contract. The capacity of the agent is of no moment. The reason is evident. The agent’s personality is merely an extension of the principal's. If the principal has the necessary capacity, that is enough. (Mendoza vs. De Guzman, 33 Off. Gaz. 1505.)

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Arts. 1868-1932

13. In the sale of a piece of land or any interest therein through an agent, what is the form which is necessary for validity. ANS: The authority of the agent must be in writing; otherwise, the sale shall be void. (Art. 1874, NCC.)

14. The son of X sold a piece of land owned by his father to Y, signing as the owner’s agent. The fact, however, is that no power of attorney has been executed in his favor. Later on, in the presence of witnesses, X told Y that he would abide by the sale. Can Y sue X for the enforcement of the sale? ANS: It is submitted that Y cannot sue X for the enforcement of the sale. It must be noted that the deed of sale was signed by X’s son as his agent despite the fact that no power of attorney has been executed in his favor. Consequently, the case falls squarely within the purview of Art, 1874 of the NCC which declares that when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. It is, of course, axiomatic that a void contract is not susceptible of ratification. True, Art. 1874 seems to indicate that it is applicable only to a case where the agent was given an authority by the owner to sell the land but not in writing and not to a case where such agent was not given any authority. It is submitted, however, that whether it is one or the other, the article is applicable. In the latter case, the sale is still made though an agent. Otherwise, it would always be possible for the parties to convert or transform a void contract into an unenforceable one susceptible of ratification, thus, nullifying the purpose of the law in making the requirement of a writing an essential requisite for the validity of the contract. So, even where X never gave any authority to his son to sell the property, the same answer stands. Besides, even assuming that the case does not fall within the purview of Art. 1874, the act of X in verbally ratifying the contract would still fall within the purview of the Statute of Frauds. (Art. 1403, No. [2], par. [e], NCC.) His promise that he would abide by the sale is unenforceable by court action. The deed of sale signed by his son as his “agent” cannot be presented as evidence to prove such promise, because it is not in a writing, or in a note, or memorandum subscribed by him or by his “agent.” (Ibid.) 1071

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15. A and B entered into a contract with X whereby they agreed to sell a house and lot belonging to the latter for P30,000 for a commission of 5% plus overprice. They introduced C, a prospective buyer, to X, but she informed them that she was no longer interested in selling the property. Subsequently, however, she sold the property to C for P36,000. A and B then commenced this action against X for the payment of the 5% commission plus the overprice. Will the action prosper? Reasons. ANS: Yes, the action will prosper. There was bad faith on the part of X This act of bad faith cannot serve as a basis for her to escape payment of the compensation agreed upon. (Infante vs. Cunanan, 49 Off,: Gaz. 3320.)

16. A authorized B to sell his land at P10 a square meter promising him a 5% commission. B found a buyer, C, who wanted to pay only P9 a square meter. A refused to sell and informed B that his authority will be withdrawn. B asked for one more day to find a buyer which A granted. B failed to find a buyer, so A informed B that he was cancelling his authority. Three (3) months later, C contacted A and the two were able to agree on the sale. Upon learning of this sale, B sued A for his commission alleging that the sale was made through his efforts. Will the action prosper? Reason. (1971) ANS: The action will not prosper. A had not acted in bad faith. The facts of the case clearly indicate that B’s authority to sell the land at P10 a square meter had already been terminated property and that such termination was not made for the purpose of evading the payment of the 5% commission. As a matter of fact, B asked for one more day within which to find another buyer when he was informed by A that his authority will be withdrawn. His request was granted. However, he failed to find another buyer, As a result A finally cancelled his authority, which he can very well do under the law. Therefore, when A sold the land directly to C three (3) months later, B did not have any more interest in the transaction. In other words, the actual sale was made without the intervention of B. Hence, the latter cannot demand for compensation. (Reyes vs. Mosqueda, 53 Off. Gaz. 2158.) 1072

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17. (a) Distinguish between general agency and special agency.

(b) Distinguish agency couched in general term from general and special agency. ANS: (a) General agency refers to that type of agency which comprises all of the business of the principal, whereas special agency refers to that type of agency which comprises one or more specific transactions. (Art. 1876, NCC.)

(b) Whether general (which comprises all of the busin of the principal) or special (which comprises one or more specific transactions), the agency may be couched in general terms. In such a case, the agency merely authorizes the agent to perform acts of administration. (Art. 1877, NCC.) Consequently, a general agency may or may not be couched in general terms; but an agency couched in general terms may be either a general agency, if it comprises all of the business of the principal, or a special agency, if it comprises only one or more specific transactions.

18. Did the buyer validly acquire a real property sold where the agency to sell the real property was not put into writing? ANS: The buyer did not validly acquire such real property for under Art. 1878, NCC, a sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. Under Art. 1874, NCC, this authority must be in writing, other­ wise, the sale shall be void. (Cosmic Lumber Corp. vs. CA, 332 Phil. 948; Delos Reyes vs. CA, 372 Phil. 522.) A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. (Cosmic Lumber Corp. vs. CA, supra.) Without an authority in writing, the agent could not validly sell the subject property. Hence, any ‘sale’ in favor of buyer is void. (Art. 1403, NCC; Pineda vs. CA, G.R. No. 127094, February 6, 2002.) Further, Art. 1318, NCC lists the requisites of a valid and perfected contract, namely: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established. (Islamic Doctrorate o f the Philippines vs. CA, 338 Phil. 956.) Pineda was not authorized to 1073

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enter into a contract to sell the property. As the consent of the real owner of the property was not obtained, no contract was perfected. (San Juan and Steel Fabricators, Inc. vs. CA, 357 Phil. 631.) 19. What are the different cases or instances where an agent shall have to secure a special power of attorney in order to bind his principal? ANS: Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4)

To waive any obligation gratuitously;

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter’s act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance;

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(14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. (Art. 1878, NCC.)

20. (a) Suppose that an agent holds a special power to sell a certain property, is he also empowered by implication to mortgage said property?

(b) Suppose that the special power to sell does n specify the manner or terms of payment, may the agent sell the property on credit? ANS: (a) No, the agent is not empowered to mortgage the property. Art. 1879 of the NCC declares that “a special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.” Consequently, if an agent, holding a special power to sell, mortgages the property, the contract would be unenforceable.

(b) No, the agent may not sell the property on cre (Art. 1905, NCC.) This does not mean, however, that the sale is not valid; it is perfectly valid, but the principal may demand from the agent payment in cash, in which case, the latter, once he has delivered the cash to the former, would then be entitled to any interest or benefit which may result from the sale. (Ibid.) 21. On January 31, 1959, “A” who owns a piece of agricultural land, gave a general power of attorney to “B.” On February 20, 1959, “A,” without the knowledge of “B,” executed in favor of “C” a special power of attorney to sell said piece of land. On February 25,1959, “B” as attorney-in-fact of “A,” executed a deed of sale in favor of “D.” On the same date February 25, 1959, “C” under the special power given by “A,” sold the same piece of land to "E.” Assuming that the vendees have not yet registered their respective documents nor have taken possession of the land, which o f the two (2) sales is valid and enforceable and who is responsible for damages, if any? Reasons. ANS: Our answer to the above problem must be qualified. (1) If the general power of attorney given by A to B specifically delegates to the latter all of the business of the principal (Art. 1876,

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NCC.) or as it is often done, enumerates the powers which are delegated so as to include not only acts of administration but also acts of dominion, then undoubtedly, not only C but B was empowered by A to sell the land. While it is true that under the law of agency, a general power of attorney, such as that given to B, is revoked by a special one granted to another agent, such as that given to C, as regards the special matter involved in the latter (Art. 1926, NCC.), nevertheless, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. (Art 1922, NCC.) It is clear from the facts stated in the problem that there was no notice of the revocation of the power granted to B to third persons. Therefore, the sale of the land made by B to D and the sale of the same land made by C to E are .valid and binding. Hence, we now have a case of a double sale of one and the same thing to two (2) persons. Consequently, the provisions of Art. 1544 of the NCC shall apply. Inasmuch as there is neither registration nor possession and inasmuch as both deeds of sale were made on the same day, then it will be necessary to determine by competent evidence which of the two sales was the first to be perfected, since under the law, in the absence of registration or possession, the ownership shall pertain to the person who presents the oldest title, provided there is good faith. (Art 1544, NCC.) Whether the land is adjudicated to D or E, the principal A, alone, shall be liable in damages to the vendee whose contract will be rejected since both agents B. and C had acted in good faith. (Art. 1917, NCC J (2) However, if the general power of attorney granted to B is couched in general terms, then Art. 1877 of the NCC shall apply. His agency would comprise only acts of administration, not acts of dominion. Consequently, only C was empowered to sell the land in question, in which case, only the sale made by C to E would be valid and enforceable, while the sale made by B to D would be unenforceable since it was made without any authority or in excess of authority. (Art 1898, NCC.) In such a case, assuming now that B did not give sufficient notice to D of his powers, B, alone, can be held liable by D. 22. An agent with general powers of administration, leased to another person two (2) parcels of land belonging to his principal; with one for 10 years PI,000 a year payable

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annually, and with the other without a fixed term at P 100.00 a month payable monthly. Do you think that these contracts are valid and binding upon the principal? Give your reasons. ANS: The first contract is not valid and binding, because according to the NCC, to lease any real property to another person for more than one year, a special power of attorney is necessary, (Art. 1878, No. 8, NCC.) The second, however, is valid and binding, because the contract involves merely a simple act of administration. 23. An agent with general powers of administration, desirous of improving the financial condition of his principal’s business, sold a piece of land belonging to his principal for double the price that appeared in an inventory prepared by the principal before leaving the place. Do you think the agent ha.s exceeded his powers? Why? ANS: Yes, the agent in this case has exceeded his authority. An agent with general powers of administration cannot perform acts of strict dominion without a special power of attorney. (Art. 1878, NCC.) Consequently, the contract in this case is not valid; it is unenforceable, 24. (a) What are the most fundamental obligations of an agent? (b) Is there any distinction between the authority of an agent and his power? ANS: (a) The most fundamental obligations of an agent are: 1st, to carry out the agency; 2nd, to act within the scope of his au­ thority; and 3rd, to act on behalf of his principal. (b) Broadly speaking, authority and power are inter­ changeable terms. There is, however, a distinction between the two terms. “Authority” refers to the mandate given to the agent by his principal, whereas “power” refers to the extent of the mandate or agency. In other words, the 1st is the cause, whereas the 2nd is the effect. 25. Can an agent, authorized to sell a given commodity, bind his principal by selling it to himself, either directly or indirectly? Explain your answer.

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ANS: No, an agent authorized to sell a given commodity cannot bind his principal by selling such commodity, either directly or indirectly, to himself. The law is explicit. An agent is bound by his acceptance to carry out the agency. (Art, 1884, NCC.) Consequently, if he sells the commodity to himself, by acting through a sub-agent, the sale is unenforceable, unless the principal ratifies the sale after he has full knowledge of the facts. (Barton us. Leyte Asphalt, 46 Phil. 938.) {Note: The sale is void, not unenforceable. This is clear from the provision of No. 2, Art. 14 9 1 of the NCC.)

26. (a) Suppose that an agent contracts in his name or without disclosing his principal, what would be the effect of the contract? (b) Suppose that an agent contracts in the name of his principal, exceeding the scope of his authority, what would be the status and effect of the contract? ANS: (a) If the agent entered into a contract with a third person in his own name or without disclosing his principal, it is clear that such contract would be binding only as between the 2 parties, because obviously, the third person did not rely on the credit of the principal when he entered into the contract. There are, however, two (2) instances where the principal is bound by the contract. They are: (1)

Where the contract involves things belonging to him;

and (2) Where he ratifies the contract or derives benefits therefrom. (Art. 1883, NCC.) (b) We must distinguish. Effect upon principal — As far as the principal is concerned, the contract is unenforceable. (Arts. 1403, No. 1, 1898,1910, NCC.) This is true whether the third person with whom the contract is entered into was aware or unaware of the fact that the agent was acting outside of the scope of his authority. Consequently, if such third person is prejudiced as a result of the contract, he would not be able to proceed against the principal. There are, however, two instances where he may hold the principal liable. They are:

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(1) Where such principal has ratified the contract — In such a case, the contract becomes a valid and binding contract (Arts. 1403, No. 1,1898,1910, NCC.) (2) Where such principal had allo wed the agent to "act as though he had full powers — In such a case, the former is solidarily liable with the latter. (Art. 1911, NCC.) Effect upon agent • —As far as the agent is concerned, the status of the contract shall depend upon whether the third person was unaware or aware of the fact that such agent was acting outside of the scope of his authority. If the third person was unaware of such fact, the contract is certainly binding as between the two (2) parties, although unenforceable insofar as the principal is concerned. If the third person was aware of such fact, the contract is unenforceable even as between the two (2) parties. In such a case, the agent cannot be held liable, unless he undertook to secure the principal's ratification. Obviously, the principal cannot also be held liable, unless he ratifies the contract. (Art. 1898, NCC.) It must be observed that the NCC (Art. 1898.), in describing the status of a contract entered into by an agent who exceeds the scope of his authority with a third person, who is aware thereof, calls it “void.” It is submitted that what is meant is “unenforceable.” The Code itself declares that the contract is susceptible of ratification. It is, of course, obvious that a void contract is not susceptible of ratification. 26. (a) Suppose that the agent receives something by virtue of the agency, such as a gift or an amount in excess of the purchase price, is he bound to make an accounting to his principal even if such thing, gift or excess is not owing to the latter? (b) In a document executed on June 2, 1956, A granted X, a real estate broker, the exclusive agency to sell a big tract of land in Quezon City at the rate of P2.00 per square meter (or for more than P176,000) with a commission of 5% of the total price, if the property is sold within a period of four (4) months. X subsequently authorized Y to look for a buyer, promising him 1/2 of the 5% commission. Thereafter, Y introduced B to X as prospective buyer. After a series of conferences, B came out with a final offer to buy the property

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for P 109,000. A, egged by X, agreed. As a result, B paid to A PI,000 as earnest money. Out of this amount, A gave P300 to X as an advance on his commission. B, on the other hand, gave a gift or propina of PI,000 to X pursuant to a promise made to the latter for persuading A to sell his property at a much lower price. This fact was not disclosed to A. However, all of a sudden, the sale bogged down. Smelling something fishy, X went to the office of the Register of Deeds and discovered that A had indeed sold his property to C, wife of B. Because of A’s refusal to pay his commission, X, with Y as intervenor, brought an action against him for recovery of his commission and damages. Will the action prosper? Reasons. ANS: (a) Yes, he is bound to render an accounting as directed by Art. 1891 of the NCC which provides: “Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void.” (b) The action will not prosper. Actually, the factual setting of the above problem is substantially identical to that in Domingo vs. Domingo (42 SCRA 131). In that case, the Supreme Court ruled: The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. Consequently, the decisive legal provisions are found in Arts. 1891 and 1909 of the NCC. These provisions demand the utmost good faith, fidelity, candor and fairness on the part of the agent, the real estate broker in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency, so much so that the law does not countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal, and forfeits his right to collect the commission from his principal even if the principal does not suffer any injury by reason of such breach of fidelity x x x; because the rule

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is to prevent the possibility of any wrong, not to remedy or repair an actual damage. By taking such profits or bonus or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of an agent for his principal, who has a right to treat him, insofar as his commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. As a necessary consequence of such breach of trust, X must forfeit his right to his commission. Y, the sub-agent of X, can only recover from the latter one-half of whatever amounts the latter received by virtue of the transaction as his sub-agency was with X alone and not with A, who was not even aware of such sub-agency. Since X received from A and B, P300 and PI,000, respectively, 1/2 of the same, which is P650, should be paid to Y by X. Because of X5s clearly unfounded complaint, A should be awarded moral damages of PI,000 and attorney’s fees of PI,000. 27. X authorized Y to sell his car for P 10,000 cash with 5% commission. Y was able to sell the car for P12,000.00 cash or P2,000.00 more than X’s price. For what amount is Y accountable to X? Explain your answer. (1970) ANS: Y is accountable to X for the P12,000 purchase price of the car. This is clear from Art. 1891 of the NCC which declares that every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. As a matter of fact, the article also states that every stipulation exempting the agent from the obligation to render an account shall be void. Thus, in a recent case, the Supreme Court stated: “An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal even if the principal does not suffer any injury by reason of such breach of fidelity.” (Domingo vs. Domingo, 42 SCRA 131.) 28. “A,” an official of a mining company, was appointed by the company as its buying agent for the acquisition of mining rights in a designated area for operation by the

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company. “A” proceeded to enter into contracts with the claim owners. Claim owner “B,” an illiterate, was helped by “A,” in locating and perfecting his rights and for which “A” by contract, obtained a participation in the royalty paid by the company to the claim owner. A. The mining company goes to you for advice as to whether it is entitled to the royalty obtained by “A” from “B.” What would your advice be and why? (1981) B. May “B,” the claim owner, question the royalty obtained by “A”? On what grounds? Explain briefly. (1981) ANS: A. I would advice the mining company to withhold the payment of the part of the royalty corresponding to “A.” This is so because of the explicit mandate of the NCC. According to the law: Every agent is bound to render an account of his transaction and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. It is crystal clear that the act of “A,” agent of the mining company, falls squarely within the purview or coverage of this rule. B. “B,” the claim owner, may question the royalty obtained by “A” on the ground that it is “not owing to the principal.” It must be observed that the obligation of the agent to deliver to his principal anything which he has received by virtue of the agency is followed by the phrase “even though it may not be owing to the principal.” This means that the action for recovery of “B” should be directed against the mining company and not against the agent. (Note: The above answers are based on Art. 1891 of the NCC and on Manresa’s opinion, Vol. II, p. 512.)

29. May an agent appoint a substitute? If so, in what cases is the agent liable for the acts of the substitute? ANS. An agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1)

When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. 1082

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All acts of the substitute appointed against the prohibition of the principal shall be void. (Art. 1892, NCC.) 30. Art. 1897 of the NCC reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. Said provision declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. Cite two (2) instances when an agent becomes personally liable to a third person. ANS: The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the second instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. However, it must be pointed out that in case of excess of authority by the agent, the law does not say that a third person can recover from both the and the agent. (Eurotech Industrial Technologies, Inc. vs Edwin Cuizon, G.R.No. 167552, April 23, 2007.) 31. (a) What is a commission agent? How would you distinguish a commission agent from a broker? (b) What is a commission merchant? How would you distinguish a commission merchant from a commercial broker? (c) Distinguish between an ordinary commission and a guarantee commission. ANS: (a) A commission agent is one who is engaged in the business of buying and selling for a principal of personal property, which for this purpose has to be placed in his possession and at his disposal. (Pacific Com. Co. vs. Yatco, Off. Gaz., August 2,1941,p. 127.) A broker, on the other hand, is a middleman or intermediary who, in behalf of others, and for a commission or fee, negotiates contracts or transactions relative to real or personal property. (Behn, Meyer & Co. vs. Nolting and Garcia, 35 Phil. 274.) The two (2), therefore, may be easily distinguished from each other as follows: (1) The job of a commission agent involves a three (3)fold- relationship; in other words, the agent is related not only

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to his principal and to the buyer or seller, but also to the prop­ erty constituting the object of the transaction which should be placed in his possession and at his disposal. The job of a broker, on the other hand, involves only a double relationship; in other words, the broker is a pure intermediary, a pure go-between who does not have either the custody or the possession of the property that he disposes of. (2) The commission agent engages only in the business of buying or selling personal property for his principal, where­ as the broker engages in the business of buying or selling for his clients either personal or real property. (3) The commission agent should have a place of busi­ ness, whereas this is not necessary for the broker. (4) The broker is much more independent than the com­ mission agent. (b) A commission merchant is a commercial agent to whom the possession of personalty is entrusted by or for the owner, to be sold, for compensation, in pursuance of the agent’s usual trade or business, with title to the goods remaining in the principal, as distinguished from a person who purchases merchandise with his own capital, taking title in his own name, and sells for his own account at whatever price he may deem advisable. A commission merchant differs from a broker in that he may buy or sell in his own name without disclosing his principal, while the broker can only buy or sell in the name of his principal. (Commissioner of Internal Revenue vs. Cadwallader Pacific Co., 18 SCRA 827.) (c) The ordinary commission given to a commission agent is merely the fee or compensation for the sale of the goods which are placed in his possession and at his disposal, whereas the guarantee commission (del credere commission) is merely additional compensation for risks of collection. Should the commission agent receive on a sale, in addition to the ordinary commission, a guarantee commission — (1) he shall bear the risk of collection and (2) shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. (Art. 1907, NCC.)

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32. What are the causes for the extinguishment of a contract of agency? ANS: 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) agency;

By the accomplishment of the object or purpose of the

(6) By the expiration of the period for which the agency was constituted. (Art. 1919, NCC.) 33.

(a) How may a contract of agency be revoked?

(b) What are the exceptions to the rule that agency is revocable by the principal at will? (1970) ANS: (a) A contract of agency may be revoked either express­ ly or impliedly. (Art. 1920, NCC.) Implied revocation may be effected — (1) By the act of the principal in appointing another agent for the same business or transaction (Art. 1923, NCC.); or (2) By the act of the principal in directly managing the business entrusted to the agent (Art. 1924, NCC.); or (3) By the act of the principal in subsequently granting a special power of attorney as regard the same business to an­ other agent, where he had previously granted a general power of attorney to one agent. (Art. 1926, NCC.) (b)

An agency is not revocable at will in the following

cases: (1) NCC.);

If a bilateral contract depends upon it (Art. 1927,

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(2) If it is the means of fulfilling an obligation already contracted (Ibid.); (3) If a partner is appointed manager of the partnership in the contract of partnership and his removal from the management is unjustifiable (Ibid.); (4) If it has been constituted in the common interest of the principal and of the agent or in the interest of a third per­ son who has accepted the stipulation in his favor. (Art. 1930, NCC.) 34. What is meant by an agency coupled with an interest? ANS: An agency coupled with an interest refers to an agency wherein the agent has acquired some interest of his own in the execution of the authority granted to him, in addition to his mere interest in the contract of employment with the resulting gains. (Mechem on Agency, Sec. 5969, p. 406.) 35. Arnold sold a large parcel of land in Cebu to Mel for P100 million payable in annual installments over a period of 10 years, but title will remain with Arnold until the purchase price is fully paid. To enable Mel to pay the price, Arnold gave him a power-of-attomey authorizing him to subdivide the land, sell the individual lots, and deliver the proceeds to Arnold, to be applied to the purchase price. Five (5) years later, Arnold revoked the power of attorney and took over the sale of the subdivision lots himself. Is the revocation valid or not? Why? (2001) ANS: The revocation is not valid. The power of attorney given to the buyer is irrevocable because it is coupled with an interest: the agency is the means of fulfilling the obligation of the buyer to pay the price of the land. (Art. 1927, NCC.) In other words, a bilateral contract (contract to buy and sell the land) is dependent on the agency. 36. “AA” had an option to purchase a vessel. He entered into a contract with “BB” wherein he assigned his option to “BB” under the condition that “BB” would appoint him as agent of the vessel for five (5) years. “BB” purchased the

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vessel and appointed “AA” as agent in accordance with the contract. After three (3) years of operation, “BB” revoked the appointment of “AA” as agent for loss of confidence. “AA” sued “BB” for damages. Would you hold “BB” liable for damages? (1980) ANS: “BB” should be held liable for damages. True, according to the NCC the principal may revoke the agency at will. But there are exceptions. These exceptions are sometimes denominated as agency coupled with an interest. To constitute an agency coupled with an interest, it is necessary that there should co-exist in the agent, along with the power given him, an interest in the property to be disposed of or managed. In the instant case, it is undeniable that “AA” has an interest in the property on which his power is to operate. He assigned his option to purchase the vessel to “BB” under the condition that “BB” would appoint him an agent of the vessel for five (5) years. Upon purchasing the vessel, “BB” appointed him as agent in accordance with the contract. “AA’s” agency is, therefore, an agency coupled with an interest. As a consequence, it has become an irrevocable agency for a period of five (5) years. By revoking the agency before the expiration of the term or period of five (5) years, “BB” has clearly breached his contract. Under the law, he is liable for damages. (Note: The above answer is based on Arts. 1927 and 1930 of the NCC and on De la Rama Steamship Co., Inc. vs. Tan, 99 Phil. 1034.)

37. DT borrowed P50,000.00 from a bank and to secure the payment thereof, signed a Deed of Real Estate Mortgage in favor of the bank in the usual printed form. It was pro­ vided, among others, that “for the purpose of extra-judicial foreclosure, the mortgagor hereby appoints the mortgagee as his attorney-in-fact to sell the property mortgaged under Act 3135, as amended, to sign all documents and perform any act requisite and necessary to accomplish said purpose.” Upon failure of DT to pay the loan, the bank foreclosed and bought the property at the foreclosure sale. During the one year period of redemption, DT died and the property was not redeemed despite the lapse of one year. The bank, despite its actual knowledge of D Ps death, consolidated its title by executing the affidavit of consolidation and Deed of Sale of

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the land in its favor as empowered in the Deed of Real Estate Mortgage. After the bank had consolidated its title, the heirs of DT asked the bank to allow them to redeem the property by paying only the P50,000.00 plus accrued interest and ex­ penses of foreclosure, contending that the sale in favor of the bank was invalid due to the prior death of DT which there­ fore revoked the power of attorney inserted in the Deed of Mortgage. The bank demanded payment of P200,000.00, the fair market value then of the property. Can the bank be com­ pelled to accept the tender of redemption by the heirs of DT? Why? (1979) ANS: The bank cannot be compelled to accept the tender of redemption by the heirs of DT. True, agency is extinguished by the death of the principal, but there are two (2) well-known exceptions. The first exception is where the agency is coupled with an interest and the second is where the agent, unaware of the death of his principal, enters into a contract in behalf of his principal with a third person who is also unaware of the death of the principal. (Arts. 1930, 1931, NCC.) The instant case falls squarely within the purview of agency coupled with an interest. According to the NCC, the agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. It is clear that the act of the mortgagor in appointing the mortgagee as his attomey-in-fact is for the benefit of both. Hence, despite the death of DT, the power granted by him to the bank to sell the property mortgaged and to sign all documents and perform any act requisite and necessary to accomplish the extra-judicial foreclosure in case he is unable to pay the loan is still of full force and effect. The foreclosure, therefore, and the consolidation by the bank of its title over the mortgaged property are perfectly valid. 88. X and her sister, Y, were the registered owners of a parcel of land. They executed a special power of attorney in favor of their brother, B, authorizing him to sell the property for and in their behalf. X however, died a few days afterwards. About four months after the death of X, B sold the land to FG Realty Co. The sale was duly registered. Subsequently, A, administrator of the estate of X, brought an action for the

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OBLIGATIONS AND CONTRACTS Agency

Arts. 1868-1932

reconveyance of X’s one-half share in the property on the ground that the contract of sale as far as X is concerned is unenforceable. Will the action prosper? Why? ANS: Yes, the action will prosper. Agency is basically personal, representative and derivative. That explains why under the NCC, it is extinguished by the death of the principal or agent. (Art. 1919, par. 3, NCC.) Is this rule subject to any exception? There are two (2) exceptions. They are: first, Art. 1930 of the NCC which provides that agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor; and second, Art. 1931 which provides that anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. Art, 1930 is not involved here because admittedly the special power of attorney executed in favor of B was not one coupled with an interest. Art. 1931 is the applicable law. Under this provision, there must be two conditions, viz.: (1) that the agent acted without knowledge of the death of the principal; and (2) that the third person who contracted with the agent acted in good faith. “Good faith" means that the third person was not aware of the death of the principal at the time he contracted with said agent. The two requisites must concur, the absence of one will render the act of the agent invalid and unenforceable. In the instant case, undoubtedly, B knew of the death of his sister X at the time of the sale. On the basis of this established knowledge of the agent concerning the death of the principal, it is clear that Art. 1931 is inapplicable. Therefore, the contract of sale as far as X is concerned is unenforceable. (Ratios vs. Felix Go Chan & Sons Realty Corp., 81 SCRA 251.) 39. (a) An agent with express power to sell certain property, without being aware of the death of his principal, sold the property after the death of his principal. The pur­ chaser, however, knew of the death of the principal. Do you believe the contract valid and binding? Why?

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OBLIGATIONS AND CONTRACTS Agency

(b) What is the duty of a person dealing with an agent? ANS: (a) The contract is not valid. This is so, because the purchaser had acted in bad faith since he was aware of the death of the principal. According to the NCC, “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 person who may have contracted with him in good faith.” (Art. 1931, NCC.) (b) A person dealing with an agent must investigate; Otherwise, he acts at his own peril. (Manila Memorial Park Cemetery, Inc. vs. Linsangan, G.R. No. 151391, November 22, 2005.) 39. In 1950, A executed a power of attorney authorizing B to sell a parcel of land consisting of more than 14 hectares. A died in 1954. In 1956, his four (4) children sold more than 12 hectares of the land to C. In 1957, B sold eight (8) hectares of the same land to D. It appears that C did not register the sale executed by the children. D, who was not aware of the previous sale, on the other hand, registered the sale executed by B whose authority to sell was annotated on the back of the original certificate of title. (1) What was the effect of the death of A upon B’s authority to sell the land? (2) Assuming that B still had the authority to sell the land — who has a better right over said land, C or D? ANS: (1) While the death of the principal in 1954 ended the authority of the agent to sell the land, it has not been shown that he was aware of his principal’s demise. Hence, the act of such agent is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith in conformity with Art. 1931 of the NCC. (Buason vs. Panuyas, 105 Phil. 795; Henera vs. Luy, 110 Phil. 1020.) (2) As the case at bar is a case of double sale of registered land, he who recorded the sale in good faith has a better right in conformity with Art. 1644 of the NCC. Since D was not aware of the previous sale, he had to rely on the face of the certificate of title of the registered owner. Hence, he now has a better right to the land. (Buason vs. Panuyas, supra.)

1090

Title XI LOAN (Arts. 1933-1961) 1. Define and distinguish from each other commodatum and simple loan. (1977) ANS: Commodaturn is defined as a contract by virtue of which one of the contracting parties delivers to the other a non-consumable (non-fungible) thing so that the latter may use the same for a certain time and return it. Simple loan or mutuum, on the other hand, is defined as a contract by virtue of which one of the contracting parties delivers to the other money or any other consumable (fungible) thing subject to the condition that the same amount of the same kind and quality be paid or returned. (Art. 1933, NCC.) The two (2) may be distinguished from each other in the following: (1) As to object: In the first, the object is, as a general rule, a non-consumable (non-fungible) thing, whereas in the second, the object is money or any consumable (fungible) thing. (2) As to cause: The first is essentially gratuitous, whereas the second may or may not be gratuitous. (3) As to purpose: The first is a loan for use, whereas the second is a loan for consumption. (4) As to transmission o f ownership: In the first, the bailor retains the ownership of the thing loaned, whereas in the second, ownership passes to the debtor. (5) As to what must be returned: In the first, the bailee must return the specific thing loaned, whereas in the second, the debtor must pay or return an equal amount of the same kind and quality. 2.

Is a contract of loan consensual or real? Reason.

ANS: It is real because it is not perfected until after the de­ livery of the thing which constitutes the subject matter of the con­

1091

Arts. 1933-1961

OBLIGATIONS AND CONTRACTS Loan

tract. (Arts. 1316, 1933, NCC; Monte de Piedad vs. Javier, 36 O.G. 2176.) 3. Is a contract of loan perfected at the time of the delivery or release of the loan or at the time of signing of the contract such that the debtor can now incur in delay even without the release of the loan? ANS: The contract of loan is not a consensual contract but a real contract which is perfected only upon the delivery of the object of the contract. (Arts. 1316, 1933, 1934, NCC.) Hence, the contract is perfected at the time of the release of the loan. A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. (Rose Packing Co., Inc. vs. CA, 167 SCRA 309.) It is a basic principle in reciprocal obligations that neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. (Art. 1169, NCC.) Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation. If the latter fails, default sets in. Consequently, the creditor could only demand for the payment of the monthly amortization after the release of the loan, for it was only then when it complied with its obligation under the loan contract. (BPI Investment Corp. vs. CA, G.R. No. 133632, February 15, 2002.) A loan is a real contract,not consensual, and as such is perfect­ ed only upon the delivery of the object of the contract. This is evident in Art. 1934 of the NCC. Upon delivery of the object of the contract of loan (as in a case where the money is received by the debtor when the checks were encashed), the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount. Delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of another.Thus, although the respondent did not physically receive the proceeds of the checks, these instruments were placed in the respondent’s control and possession under an arrangement whereby the respondent could actually re-lend the amounts to another. (Gar­ cia vs. Thio, G.R. No. 154878, March 16, 2007)

1092

OBLIGATIONS AND CONTRACTS Loan

4.

Arts. 1933-1961

Distinguish between commodatum and lease.

ANS: Commodatum and lease may be distinguished from each other in the following ways: (1) The first is a real contract, whereas the second is a consensual contract. (2) The object of the first is a non-consumable (non-fungible) thing, whereas the object of the second may even be work or service. (3) The first is essentially gratuitous, whereas the second is not gratuitous. 5.

Distinguish between mutuum and lease.

ANS: Mutuum or simple loan and lease may be distinguished from each other in the following ways: (1) In simple loan, the object is money or any consumable (fungible) thing, whereas in lease, the object may be anything, whether movable or immovable, fungible or non-fungible. (2) In simple loan, the thing loaned becomes the property of the debtor, whereas in lease, the owner does not lose his right of ownership. (3) In simple loan, the relationship which is created is that of creditor and debtor, whereas in lease, the relationship that is created is that of landlord and tenant or lessor and lessee. (Tolentino vs. Gonzales, 50 Phil. 558.) 6. In a contract of commodatum, when is the bailee liable for the loss of the thing which is the object of the contract, even if such loss is due to a fortuitous event? ANS: The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned; (2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted;

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Arts. 1933-1961

OBLIGATIONS AND CONTRACTS Loan

(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event; (4) If he lends or leases the thing to a third person, who is not a member of his household; (5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter. (Art. 1942, NCC.) 7. Jake and Mai migrated to the United States of America, leaving behind their four (4) children, one of whom is Noelle. They own a duplex apartment and allowed Noelle to live in one of the units. While in the United States, Jake died. His widow and all his children executed an Extraju­ dicial Settlement of Jake’s estate wherein the two (2)-door apartment was assigned by all the children to their mother, Mai. Subsequently, she sold the property to Peter. The latter required Noelle to sign a prepared Lease Contract so that he and his family could continue occupying the unit. Noelle refused to sign the contract alleging that his parents allowed him and his family to continue occupying the premises. If you were Peter’s counsel, what legal steps will you take? Explain. (2006) ANS: If I were Peter’s counsel, I would first demand that Noelle vacate the apartment. If Noelle refuses, I will file an ejectment suit. When Noelle was allowed by his parents to occupy the premises, without compensation, the contract of commodatum was created. Upon the death of the father, the contract was extinguished as it is a purely personal contract. As the new owner of the apartment Peter is entitled to exercise his right of possession over the same. (Suggested Answers to the 2006 Bar Examination Questions, PALS) 8. A borrowed B’s truck. During a fire which broke out in A’s garage, he had time to save only one vehicle and he saved his car instead of the truck. Is he liable for the loss of B’s truck? Why? (1983) ANS: A is liable for the loss of B’s truck. It must be observed that when A borrowed the truck of B, what was perfected was a contract of commodatum. Under the NCC, it is explicitly declared

1094

OBLIGATIONS AND CONTRACTS Loan

Arts. 1933-1961

that the bailee is liable for the loss of the thing, even if it should be through a fortuitous event, if, being able to save the thing borrowed or his own thing, he chose to save the latter. Under this provision, it is crystal clear that A is liable for the loss of B’s truck. (Note: The above answer is based on Art. 1942, No. 5, NCC.)

9.

What is a contract of precarium?

ANS: A contract of precarium is a contract of commodatum where the bailor has the right to demand the return of the thing which is the object of the contract at will. This takes place in the following cases: (1) If neither the duration of the contract nor the use to which the thing loaned should be devoted has been stipulated; or (2) If the use of the thing should be merely tolerated. (Art. 1947, NCC.) 10. D borrowed P2,000 from C on October 15,1981. The contract is not evidenced by any writing. It was, however, verbally agreed that the former shall pay the obligation after the expiration of two (2) years and that the rate of interest shall be 21% per annum. On October 15, 1983, when the obligation became due and demandable, C demanded from D for the payment of the obligation plus accumulated interests. D did not pay. Two (2) years later, on October 15, 1985, C filed a complaint against D for the recovery of the amount of P2,000 plus interest at 21% per annum to be computed from October 15, 1981. Will the action prosper? Reasons. ANS: With respect to the recovery of the amount of the principal of P2,000, there is no question that the action will prosper. With respect to the verbal agreement that the loan shall earn an interest of 21% per annum, it is submitted that the same is void since according to the NCC, “no interest shall be due unless it has been expressly stipulated in writing.” (Art. 1956, NCC,) Consequently, there can be no recovery of such interest. This does not mean that there can be no recovery of any interest whatsoever. According to one provision of the NCC, “if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being her stipulation to the contrary, shall be the payment of

1095

Arts. 1933-1961

OBLIGATIONS AND CONTRACTS Loan

the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum” (Art. 2209, NCC.), and according to another provision, “interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.” (Art. 2212, NCC.) Now, under the facts stated in the problem, since C demanded from D for the payment of the obligation on October 15, 1983, and the latter did not pay, therefore, we can now say that he has already incurred in delay from that very day (Art. 1169, NCC.); consequently, D can be held liable for the payment of legal interest per annum by way of indemnity for damages to be computed from October 15, 1983, when he had already incurred in delay. (Art. 2209, NCC.) In addition to this, he can also be held liable for the payment of legal interest per annum of the interest due to be computed from October 15, 1985, when the complaint was filed. (Art. 2212, NCC.) (Note: Since the obligation in this case involves the payment of money, the legal interest is 12%per annum. [See Reformina vs. Tomol, 139 SCRA 553].)

The law on usury had been suspended. There is no longer any ceiling in interest rates on loans pursuant to CB Circular No. 224 issued last December 1, 1982. 11. Leo entered into a contract of loan with Gil where the stipulated interest rate is 72% per annum using as basis C.B. Circular No. 905. Is such stipulation proper? ANS: Such stipulation is not proper. Although C.B. Circular No. 905 has lifted the Usury Law ceiling on interest rates, the same circular does not grant lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. While decreeing that the aforementioned interest was not usurious, the Court held that the rate must be equitably reduced for being iniquitous, unconscionable and exorbitant. (Spouses Solangon vs. Salazar, G.R, No. 125944, June 29, 2001.) 12. There was failure to pay in a loan agreement dated December 31, 1990 with interest at 16% per annum, payable in 24 equal monthly amortizations. lienee, a suit

1096

1

OBLIGATIONS AND CONTRACTS Loan

Arts. 1933-1961

for collection was filed. The RTC held the borrower liable for the principal and interest. The CA reversed it and held that there was usurious interest on the loan. In the Supreme Court, it was contended that C.B. Circular No. 905 should be applied retroactively to a contract executed on December 31,1980. Is the contention correct? ANS: The laws in force at the time the contract was made and entered into, govern it. (U.S. vs. Diaz conde and R. de Conde, 42 Phil. 767.) Further, C.B. Circular No. 905 did not repeal nor in any way amend the Usury Law but only suspended the latter’s effectivity. (Medel vs. CA, 299 SCRA 481; SBTC vs. RTC, Branch 61, 263 SCRA 483.) A Central Bank circular cannot repeal a law. Only a law can repeal another law. (Palanca vs. CA, 239 SCRA 593; Art. 7, NCC.) Thus, retroactive application of a Central Bank Circular cannot be presumed, (Art. 4, NCC; First Metro Investment Corp. vs. Este Del Sol Mountain Reserve, Inc., G.R. No. 141811, November 15, 2001.) 13. The debtor failed to pay a loan with an agreement to pay interest of 7% per month. A suit for collection was filed. The lower court reduced the interest to only 15% per month. The debtor invoked Medel vs. CA, 299 SCRA 481, on appeal to the Supreme Court contending that the interest imposed was excessive, iniquitous, unconscionable or exorbitant, is the contention correct? ANS: The contention is not correct. The issue was never raised in the lower court. Hence, it is considered as waived, Medel us. CA case is not applicable because the debtor in said case questioned the validity of the 5.5% interest per month agreed upon. In the case at bar, the debtor never questioned the 7% interest per month agreee upon. Hence, in the Medel case, the interest rate was declared void, but in the instant case, the interest rate of 7% per month agreed upon was upheld to be valid, without raising the validity of the interest rate, the Court cannot just declare it void, lest it would be construed that it be striking down any interest rates agreed upon by parties in a loan transaction. Parties are bound by the stipulations in the contracts voluntarily entered into by them. Parties are free to stipulate terms and condition which they deem convenient provided they are not contrary to law, morals, good customs, public order, or public policy. The interest rate of 7% per month was voluntarily

1097

Arts. 1933-1961

OBLIGATIONS AND CONTRACTS Loan

agreed upon. There is nothing to show that the debtors were victims of fraud when they entered into the agreement. Neither is there a showing that one was at a disadvantage on account of moral dependence, ignorance, mental weakness, tender age or handicap, which would entitle them to the vigilant protection of the courts as mandated by Art. 24 of the NCC. (Sps. Pascual vs. Ramos, G.R. No. 144712, July 4, 2002.) 14. What is the effect of a loan that is usurious? Explain. ANS: The entire obligation in usurious loans does not become void because of an agreement for usurious interest. The unpaid principal debt still remains valid but the stipulation as to the interest becomes void. (Private Development Corporation o f the Philippines vs. IAC, 213 SCRA 282.) The reason for this rule was explained in the case of Angel Jose 'Warehousing Co., Inc. vs. Chelda Enterprises, 23 SCRA 119, where the Court held that in simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract is not illegal. (Art. 1350, NCC.) The illegality lies only as to the prestation to pay the stipulated interest. Hence being separable, only the latter should be deemed void, since it is the only one that is illegal. The nullity of the stipulation on the usurious interest does not affect the lender’s right to receive back the principal amount of the loan. The amount paid as interest under usurious agreement is recoverable by the debtor since the payment is deemed to have been made under restraint, rather than voluntarily. (First Metro Investment Corp. vs. Este Del Sol Mountain Reserve, Inc., G.R. No. 141811, November 15, 2001.) 15. In a claim for insurance resulting from the loss of things due to fire, what is the amount of interest to be imposed? ANS: An insurance claim is not a forbearance of money, goods or credit. Thus, the interest rate should be 6% computed from the date of the filing of the complaint and not 12%. (Country Bankers Insurance Corp. vs. Lianga Bay and Community Multi-Purpose Cooperative, Inc., G.R. No. 136914, January 25, 2002.)

1098

Title XII DEPOSIT (Arts. 1962-2009) 1.

What is a deposit? What are its classes?

ANS: A deposit is that which is constituted from the moment a person receives a thing belonging to another with the obligation of safely keeping it and of returning the same. (Art. 1962, NCC.) It may be either judicial or extra-judicial. (Art. 1964, NCC.) It is judicial when it is so constituted by virtue of a court order for the attachment or seizure of property in litigation. (Art. 2005, NCC J It is extra-judicial when it is not so constituted. Extrajudicial deposits, on the other hand, may be either voluntary or necessary. (Art, 1967, NCC.) A voluntary deposit is that which is effected by the will of the depositor (Art. 1968, NCC.), while a necessary deposit is that which is effected in compliance with a legal obligation, or on the occasion of any calamity, or by travellers in hotels or inns with regard to their effects, or passengers in common carriers. (Arts. 1996, 1998, 1754, NCC,) * 2.

Distinguish between depositum and commodatum.

ANS: The two (2) may be distinguished from each other in the following ways: (1) In the first, the main purpose is the safekeeping of the thing, whereas in the second, the main purpose is the use of the thing. (2) In the first, the nature or class of the object of the contract is immaterial, whereas in the second, the object, as a general rule, must be a non-consumable (non-fungible) thing. (3) The first may or may not be gratuitous, whereas the second is always gratuitous.

1099

Arts. 1962-2009

OBLIGATIONS AND CONTRACTS Deposit

(4) The first may be constituted judicially or extra-judicially, whereas the second can be constituted extra-judicially only. 3. Distinguish between extrajudicial and judicial deposits. ANS: The two (2) may be distinguished from each other in the following ways: (1) The first is constituted by will of the contracting parties, while the second is constituted by virtue of a court order. (2) In the first, the object must be movable property, whereas in the second, the object may be either movable or immovable property. (3) The purpose of the first is the safekeeping of the thing deposited, whereas the main purpose of the second is to secure or protect the owner's right. (4) The first is, as a general rule, gratuitous, whereas the second is always onerous. (5) In the first, the depositary is obliged to return the thing deposited upon demand made by the depositor, whereas in the second, the thing shall be delivered only upon order of the court. 4. Would you consider deposits of money in banks and similar institutions, such as savings deposits and current ac­ count deposits, contracts of depositum or mutuum? Explain your answer. (1970) ANS: I would consider deposits of money in banks and similar institutions, such as savings deposits and current account deposits as contracts of mutuum. This is clear from Art. 1980 of the NCC which states that fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions of the NCC concerning simple loan (mutuum). 5. Eastern Plywood Corp. (Eastern) and Benigno Lim, president and stockholder of Eastern, held a joint account with the commercial Bank and Trust Co. (CBTC). Sometime thereafter, Benigno Lim and Mariano Velasco opened a joint

1100

OBLIGATIONS AND CONTRACTS Deposit

Arts. 1962-2009

account with the CBTC with funds drawn from the account of Eastern and/or Lim. Later on, Velasco died. Subsequently, Eastern obtained a loan of P78,000 front CBTC. Eastern and Lim signed a “hold-out agreement” wherein it was stated that as security for the loan, a holdout is established on the joint account of Lim and Velasco. A petition for the settlement of Velasco’s estate was then fixed and the whole balance of P331,261.44 in the joint account of Velasco and Lim was being claimed as part of Velasco’s estate. Consequently, the intestate court granted the motion of Velasco’s heirs to withdraw the deposit under the said account. In 1980, CBTC merged with BPI and the latter filed a complaint against Lim and Eastern demanding payment of the loan. Lim and Eastern, in turn, filed a counterclaim for the return of the balance in the joint account of Lim and the accused Velasco. The trial court dismissed both the complaint and the counterclaim, so both parties appealed. The Court of Appeals rendered judgment ordering BPI to pay to the defendants the outstanding balance in the bank account in question. Is BPI still liable to Eastern and Lim on the account subject of the holdout agreement after its withdrawal by the heirs of Velasco? ANS: Yes. The counterclaim of Eastern and Lim for the return of the P331,261.44 was equivalent to a demand that they be allowed to withdraw their deposit in the bank. Art. 1980 of the NCC expressly provides that “fixed, savings, and current deposits of money in banks shall be governed by the provisions concerning simple loan.” Bank deposits are in the nature of irregular deposits; they are really loans because they earn interest. The relationship then between a depositor and a bank is one of creditor and debtor. The deposit under the questioned account was an ordinary bank deposit; hence, it was payable on demand of the depositor. The account was proved to belong to Eastern even if it was deposited in the names of Lim and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or demand p a y m e n t thereof. BPI cannot be relieved of its duty to pay Eastern simply

1101

Arts. 1962-2009

OBLIGATIONS AND CONTRACTS Deposit

because it already allowed the heirs of Velasco to withdraw it. Petitioner should not have allowed such withdrawal. (BPI vs. Court of Appeals, May 10,1994, 51 SCRA 188.) 6. A deposited P10,000 in his current account with X Bank. Subsequently, the Bank was declared insolvent. During the insolvency proceeding, A intervened claiming that the P 10,000 deposited does not constitute a part of the assets of the Bank that will be placed in the possession of the receiver or assignee because he is still the owner thereof. Shall A’s claim prosper? Reasons. ANS: No, A’s claim shall not prosper. This is so, because when A deposited the P I0,000 in his current account with the Bank the contract that was perfected was a contract of simple loan and not a contract of depositum. (Art. 1980, NCC; Gullas vs. National Bank, 62 Phil. 519.) Hence, the relationship between A and X Bank is that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of the contract. 7. Suppose that in the above problem, the P I0,000 had been placed in a box, properly sealed, marked and identified as A’s property, and such box was found in the vaults of the Bank, would that make any difference in your answer? Reasons. (1948) ANS: Yes, it would make a difference in my answer. The contract that was perfected in such a case is a contract of depositum. (Art. 1981, NCC.) Hence, the relationship that was established between A and the Bank is that of depositor and depositary; consequently, bhe ownership of the amount placed in the box was not transmitted bo the Bank when the deposit was constituted. Therefore, A can properly claim that the amount cannot constitute a part of the assets }f the Bank that will be placed in the possession of the receiver or assignee, because he is still the owner thereof. 8. Is the contractual relation between a bank and ioint renters in a contract of rent of a safety deposit box with respect to its content placed by the latter to be considered i>ne of bailor and bailee, or one of lessor and lessee?

1102

OBLIGATIONS AND CONTRACTS Deposit

Arts. 1962-2009

ANS: The contract is one of special deposit. It cannot be characterized as an ordinary contract of lease under Art. 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters. The guard of the box remained with the respondent Bank. Without this key, neither of the renters could open the box. On the other hand, the respondent Bank could not likewise open the box without the renter’s key. In this case, the said key had a duplicate which was made so that both renters could have access to the box. It is must be noted, however, that the primary function is still found within the parameters of a contract of deposit, i.e., the receiving in custody of funds, documents and other valuables objects for safekeeping. The renting out of the safety deposit boxes is not independent from, but related to or in conjunction with, this principal function. (CA Agro-Industrial Development Corp. vs. CA, March 3,1993.) 9. When is the depositary liable for the loss of the thing deposited through a fortuitous event in contracts of depositum? ANS: The depositary is liable for the loss of the thing through a fortuitous event: (1)

If it is so stipulated;

(2)

If he uses the thing without the depositor’s permission;

(3)

If he delays its return;

(4)

If he allows others to use the same. (Art. 1979, NCC.)

10. A and B deposited with C PI,000, without stating what amount belongs to each. Can A claim from C the return of the entire amount deposited? Explain your answer. ANS: No, A cannot claim from C the return of the entire amount deposited. According to the law, when there are two or more depositors, if they are not solidary, and the thing admits of division, each one cannot demand more than his share. (Art. 1985, NCC.) Consequently, A can demand only for the return o f his share.

1103

Title XIII ALEATORY CONTRACTS (Arts. 2010-2027) 1.

What do you understand by aleatory contracts?

ANS: By an aleatory contract, one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. (Art. 2010, NCC.) 2. How would you distinguish an aleatory contract from other contracts which depend upon a suspensive con­ dition? ANS: The distinguishing element is with respect to the effect upon the obligation if the event which constitutes the condition does not happen or is not fulfilled. In the case of aleatory contracts, the contract is effective regardless of the fulfillment or nonfulfillment of the event, whereas in the case of other contracts which depend upon a suspensive condition, the obligation arising from the contract does not become effective if the event does not happen or is not fulfilled. 3. What is a contract of insurance and what law governs it? ANS: Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event. (Sec. 2, Act No. 2427, as amendedJ This contract is governed by special laws, such as the Insurance Law, as amended (Act No. 2427.), and other special laws. Matters not expressly provided for in such laws shall be regulated by the NCC. (Art. 2011, NCC.) 4. H, married to W, insured his life at X Insurance Co. for P20,000, with M, his mistress, as beneficiary on June 15,

1104

OBLIGATIONS AND CONTRACTS Aleatory Contracts

Arts. 2010-2027

1955. He died on January 15,1959. Can M collect the value of the policy? If she cannot, who shall be entitled to the amount? Reasons. ANS: M cannot collect the value of the policy. According to Art. 2012 of the NCC, any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him. Since under Art. 739, No. 1, persons who were guilty of adultery or concubinage at the time of the donation cannot make donations to each other, it is evident that M is disqualified from becoming the beneficiary, hence, she cannot collect the value of the policy. Who then shall be entitled to the P20,000? Shall the validity of the contract of life insurance be affected? The validity of the contract of life insurance is not affected. What is affected is merely the capacity of the beneficiary. Consequently, we have a contract of life insurance which is very similar to a case where the beneficiary is the estate of the insured or where the beneficiary died before the insured. Therefore, the estate of the insured shall be entitled to the value of the insurance policy. 5. Can a common-law wife named as beneficiary in a life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter? ANS: No, a common-law wife named as beneficiary in the life insurance policy of a legally married man cannot claim the proceeds thereof in case of death of the latter. This is so because of the ban or proscription found in Art. 2012 of the NCC. The article declares that any person who is forbidden from receiving any donation under Art. 739 cannot be named as beneficiary of a life insurance policy by the person who cannot make a donation to him. Art. 739, on the other hand, declares that the following donation, among others, is void: “Those made between persons who were guilty of adultery or concubinage at the time o f the d o n a tio n Definitely, under this provision, the common-law wife is disqualified. The reason behind the proscription are as follows: (1) In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured

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pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Art. 739 of the NCC should equally operate in life insurance contracts. (2) Public policy and morality justify the institution of a barrier between common-law spouses with respect to property relations since such relationship ultimately encroaches upon the nuptial and filial rights of the legitimate family. There is every reason to hold that the ban on donations between legitimate spouses and between illegitimate ones should also be enforced in or applied to life insurance policies since donations and life insurance policies are based on identical considerations. Therefore, the proceeds of the policy should be paid to the estate of the insured. (Insular Life Assurance Co. vs. Ebrado, 80 Phil 181.)

)

(Note: Ebrado was supposed to solve a question of first impression, a question which, incidentally, every student of law had been solving during the past 30 years in the same way that the Supreme Court finally solved it. Unfortunately, in its decision, the Court declared: “There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration. As above pointed out, a beneficiary in a life insurance policy is no different from a donee. Both are recipients of pure beneficence. So long as marriage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities.” (Ebrado, 80 SCRA 181 [1871].) To make matters worse, the Court then comes out with a quotation from Matabuena (38 SCRA 287-288). The above obiter has created another question (of first impression) which, probably, will haunt the academes for the next 30 years. The question is as follows: Can a common-law wife named as beneficiary in the life insurance policy of her common-law husband who is not married to any body claim the proceeds thereof in case of death of the latter? If we allow our imagination to run wild, we might even add the following rider: Suppose that before the insured died, he got married to another woman, what is the effect of such marriage upon the capacity or qualification of his ex-common-law wife to be a beneficiary?

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i

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5

1

OBLIGATIONS AND CONTRACTS Aleatory Contracts

Arts. 2010-2027

It is submitted that in solving a legal problem, we should solve it in accordance with the law as it is, and not in accordance with the law as it should be. Art. 2012, which is the applicable law, is dear and categorical; Art. 739, No. 1, is even clearer and more categorical. Art. 2012 delimits the ban or proscription to those made between persons who were guilty of adultery or concubinage at the time of the perfection of the contract of life insurance. Obviously, the commonlaw wife does not fall within the purview of the ban or proscription.)

6.

What is a game of chance?

ANS: A game of chance is that which depends more on chance or hazard than on skill or ability. In case of doubt, a game is deemed to be one of chance. (Art, 2013, NCC.) 7. A became indebted to B as a result of losses incurred in a game of monte. The debt is evidenced by a promissory note. In case A is unable to pay, can B institute an action against him for payment? Reasons. ANS: No. According to the NCC, no action can be maintained by the winner for the collection of what he has won in a game of chance. (Art. 2014, NCC.) 8. Suppose that in the above problem, A was able to pay the debt, what is the right which is available to him as a result of such payment? ANS: According to the NCC, the loser in a game of chance may recover his loss from the winner, with legal interest from the time he paid the amount lost, and subsidiarily from the operator or manager of the gambling house. (Art. 2014, NCC.) 9. A challenged B to a chess match, loser to pay the winner PI,000. B accepts the challenged. A wins the match but B refuses to pay. Can A sue B for the PI,000? Why? ANS: A cannot sue B for the PI,000. True, under Art. 2020 of the NCC, the loser in any game which is not one of chance when there is no local ordinance which prohibits betting therein, is under obligation to pay his loss. True also, chess is not a game of chance. But then, under Presidential Decree No. 438, betting, except as may be authorized by law, in basketball, volleyball, softball, baseball,

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OBLIGATIONS AND CONTRACTS Aleatory Contracts

chess, boxing, “jai-alai,” “sip a ” pelota and other sport contests is prohibited. 10. A, a Crispa fan, and B, a Tanduay supporter, watching T.V. last night before the Crispa-Tanduay match, agreed to give the other P500.00 if his team loses. Both teams were so evenly matched that they tied at the end of the regulation time and as a result, the game went to a 5-minute extension. Crispa finally won over Tanduay ESQ, 113-110. What is this kind of obligation between A and B? Can it be enforced? Decide with reasons. (1977) ANS: The obligation between A and B is an obligation arising from a contract which the NCC denominates as an aleatory contract of gambling or betting. (Arts. 2013, et seq NCC .) The obligation of B to pay his bet of P500.00 cannot be enforced. True, under the NCC (Arts. 2019, 2020.), since basketball is not a game of chance, the obligation may be enforced when there is no ordinance which prohibits betting therein. There is, however, a law which prohibits it. (P.D. No. 483, as amended.) Therefore, the obligation of B to pay to A P500.00 is void and cannot be enforced. 11. What is a contract of life annuity? ANS: The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income. (Art. 2021, NCC.) 12. Upon whose life and in favor of whom may a con­ tract of life annuity be constituted? ANS: The annuity may be constituted upon the life of the person who gives the capital, upon that of a third person, or upon the lives of various persons, all of whom must be living at the time the annuity is established. (Art. 2022, NCC.) It may be constituted in favor of: (a) the person who gives the capital, or (b) the person or persons upon whose life or lives the contract is entered into, or (c) another or other persons. (Ibid.)

1108

Title XIV COMPROMISES AND ARBITRATIONS (Arts. 2028-2046) 1.

What is a contract of compromise?

ANS: A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (Art. 2028, NCCJ 2. Over what matters does the law prohibit compro­ mises? (1977) ANS: There can be no compromise upon the following: (1)

Criminal liability of the accused in a criminal action;

(2)

The civil status of persons;

(3)

The validity of a marriage or a legal separation;

(4)

Any ground for legal separation;

(5)

Future support;

(6)

The jurisdiction of courts;

(7)

Future legitime. (Arts. 2034, 2035, NCC.)

3.

What is the effect of a compromise?

ANS: A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. (Art. 2037, NCC.) 4. Before the war, A became indebted to X Bank for P40,000. During the Japanese occupation, A paid the entire indebtedness with Japanese military notes. After liberation, the Bank demanded from A, for the liquidation of the pre-war obligation. A offered to compromise his case by paying the

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Arts. 2028-2046

OBLIGATIONS AND CONTRACTS Compromises and Arbitrations

indebtedness provided that the Bank forego its claim as to interests. This offer was accepted by the Bank and so A paid the entire amount of P40,000 to the latter. On April 19, 1948, the Supreme Court promulgated its decision in the Haw Pia vs. China Banking Corp. case, holding payments in Japanese currency to be valid. Whereupon A brought an action against X Bank for the recovery of the amount paid after liberation plus damages on the ground that the payment was made by mistake. Will the action prosper? Reasons. ANS: The action will not prosper. Under the facts stated in the case, there was no payment by mistake, for the plaintiff and defendant had entered into a contract of compromise whereby the former agreed to pay his indebtedness provided that the latter forego the payment of interest, and this compromise was arrived at when there was still uncertainty as to the validity of the payments made during the Japanese occupation. It being a compromise, it is binding upon the parties and as such it has all of the effect and authority of res judicata. (Berg vs. Nationality Bank o f New York, 102 Phil. 309.) 5. Do you think that a contract of compromise entered into after a decision has been rendered in the suit without the knowledge of the parties would be valid? ANS: It depends. If the judgment is final and, therefore, may no longer be revoked or set aside or reviewed on appeal, the contract of compromise may still be rescinded by the winning party on the ground that there was error or mistake. However, if the judgment is not yet final and, therefore, may still be revoked or set aside or reviewed on appeal, ignorance of the judgment is not a valid ground for attacking the contract of compromise. (Art. 2040, NCC.) 6. What is a contract of arbitration? What rules govern the nature, incidents and consequences of this contract? ANS: A contract of arbitration is one whereby two or more persons agree to stand by and accept the decision of another or others with respect to their controversy over their respective rights. The nature, incidents and consequences of this contract are governed by the same rules applicable to compromises. (Art. 2043, NCCJ

1110

Title XV GUARANTY (Arts. 2047-2084) 1. Define guaranty and suretyship. Distinguish one from the other. ANS: Guaranty is a contract by virtue of which a person called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. Suretyship, on the other hand, is a contract by virtue of which a person binds himself solidarily with the principal debtor to fulfill the obligation. (Art. 2047, NCC.) The two (2) may be distinguished from each other in the following ways: (1) The liability of the guarantor is subsidiary, whereas the liability of the surety is primary. (2) The guarantor assumes liability by virtue of an independent agreement to pay the obligation if the principal debtor fails to do so, whereas the surety assumes liability as a regular party to the undertaking or contract. (3) The liability of a guarantor is collateral, whereas the liability of a surety is original. (4) A guarantor is the insurer of the solvency of the debtor, whereas a surety is the insurer of the debt. (5) A guarantor can avail himself of the benefit of excussion and of division if the creditor proceeds against him for payment of the obligation, whereas a surety cannot. 2. darity.

Distinguish between suretyship and passive soli­

ANS: Suretyship and passive solidarity may be distinguished from each other in the following ways:

1111

\xts. 2047-2084

OBLIGATIONS AND CONTRACTS Guaranty

(1) In suretyship, the surety is liable for the payment of the debt of another, whereas in passive solidarity, the solidary debtor is liable, not only for the payment of the debt of another, but also for the payment of a debt which properly is his own. (2) In suretyship, if the surety pays the debt, he can compel the principal debtor to reimburse to him the entire amount which he has paid, whereas in passive solidarity, if a solidary debtor pays the debt, he can compel his co-debtors to reimburse to him only their proportionate shares in the debt. (3) A surety is entitled to more rights than a solidary debtor. Thus, if an extension of time is granted by the creditor to the principal debtor for the payment of the obligation without the knowledge or consent of the surety, the latter is released from the obligation. In the case of passive solidarity, if the creditor grants an extension to one of the solidary debtors without the knowledge or consent of the solidary debtors, such debtors are not released from the obligation. (Villa vs. Garcia Bosque, 49 Phil. 126; Stevenson vs. Climaco, CA, 36 Off,: Gaz. 1571.) 3. Distinguish a corporate or compensated surety from a private or gratuitous surety. ANS: The law has authorized the formation of corporations for the purpose of conducting surety business, and the corporate surety differs significantly from the individual private surety. First, un­ like the private surety, the corporate surety signs for cash and not for friendship. The private surety is regarded as someone doing a rather foolish act for praiseworthy motives; the corporate surety, on the contrary, is in business to make a profit and charges a premium depending upon the amount of guaranty and the risk involved. Sec­ ond, the corporate surety, like an insurance company, prepares the instrument, which is a type of contract of adhesion, whereas the private surety usually does not prepare the note or bond which he signs. Third, the obligation of the private surety is assumed simply on the basis of the debtor’s representations and without legal advice, while the corporate surety does not bind itself until a full investiga­ tion has been made. For these reasons, the courts distinguish be­ tween the individual gratuitous surety and the vocational corporate surety. In the case of the corporate surety (a favorite of the law), the

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OBLIGATIONS AND CONTRACTS Guaranty

Arts. 2047-2084

rule of strictissimi juris is not applicable, and courts apply the rules of interpretation appertaining to contracts of insurance. (Zeyson vs. Rizal Surety & Insurance Co., 16 SCRA 551.) 4. In order to help A obtain a loan, his friend B wrote to C (a friend of B) a letter of this tenor: "I take pleasure in introducing to you my friend A. He badly needs P2,000 and I believe you can help him. I assure you that he is a very good man; he religiously complies with his obligations, and is solvent far in excess of the amount he asks for. I shall highly appreciate the favor that you may grant him. Sincerely yours. (Sgd.) B,” In consideration of this letter, C gave A a loan for P2,000 and A executed and delivered to C the corresponding note. What is said in the latter concerning A was true, but A suffered reverses of fortune and lost all of his properties. At the maturity of said note, there was nothing left of A’s properties of which to make it effective. Now C wants B to pay the note. Has C any right of action against B? Reason out your answer briefly. (1935) ANS: C has no right of action against B. At most, the only obligation of B is moral, not civil. This is so, because here, there is no contract of guaranty. According to the law, a guaranty must be express; it can never be presumed, (Art. 2055, NCC.) 5. (a) What is meant by the benefit or excussion in favor of the guarantor? (1970) (b) When can the guarantor avail himself of this benefit? (c) When can the guarantor not avail himself of this benefit? (1970) ANS: (a) The benefit of excussion in favor of the guarantor refers to the right by which such guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the principal debtor, and has resorted to all of the legal remedies against such debtor. (Art. 2058, NCC.)

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Arts. 2047-2084

OBLIGATIONS AND CONTRACTS Guaranty

(b) In order that the guarantor may avail himself of the benefit of excussion, he must set it up against the creditor upon the Iatter’s demand for payment from him, and point out to the creditor available property of the debtor within Philippine territory, sufficient to cover the amount of the debt. (Art. 2060, NCC.) (c) This excussion shall not take place: (1)

If the guarantor has expressly renounced it;

(2)

If he has bound himself solidarily with the debtor;

(3)

In case of insolvency of the debtor,

(4) When he has absconded, or cannot be sued within the Philippines unless he has left a manager or representa­ tive; (5) If it may be presumed that an execution on the prop­ erty of the principal debtor would not result in the satisfaction of the obligation; (6)

In the case of a judicial bondsman; and

(7) When the guarantor has constituted in favor of the creditor a pledge or mortgage as additional security. (Arts. 2059, 2084, NCC; Southern Motors vs. Barbosa, 99 Phil. 263.) 6. Can a guaranty be given as security for future debts or obligations? ANS: Under Art. 2053, NCC, a guaranty may also be given as security for future debts, the amount of which is not yet known. The nature of the above guaranty or surety is the present day continuing guaranty or surety agreements which are common place in financial and commercial practice. A bank or financing institution, which anticipates entering into a series of credit transactions with a particular company, commonly requires the projected principal debtor to execute a continuing surety agreement along with its sureties. By executing such an agreement, the principal debtor places itself in a position to enter into the project series of transactions with its creditor. With such continuing suretyship agreement, there would be no need to execute a separate surety contract of bond for each financing or credit accommodation extended to the principal debtor. (Fortune Motor [Phils J Corp. vs. CA, 335 PhiL 315; South

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OBLIGATIONS AND CONTRACTS Guaranty

Arts. 2047-2084

City Homes, Inc. vs. BA Finance Corp., G.R. No. 135462, December 7,2001.) 7. When is a surety obliged to pay under a suretyship agreement? ANS: In the case of Babst vs. CA, G.R. No. 99398, January 26, 2001, the Court held that a contract or surety is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not. A surety is an insurer of the debt. He promise to pay the principal’s debt if the principal will not pay. While a surety is solidarily liable with the principal debtor, his obligation to pay only arises upon the principal debtor’s failure or refusal to pay. 8. “FF” and “GG” executed a promissory note binding themselves, jointly and severally, to pay “X” Bank P 10,000.00 within 90 days from January 10, 1979. “FF” signed the note as principal and “GG” as guarantor. Upon failure to pay the note on due date “X” Bank sued “FF” and “GG” for payment. “GG” interposed the defense that he was just a guarantor and the Bank must first exhaust all the remedies against the principal “FF.” Is “GGV* defense tenable? (1980) ANS: “GG’s” defense is untenable. Had he not bound himself solidarily with “FF” to pay the obligation, undoubtedly, as guarantor, he could have availed himself of the defense of benefit of excussion. In other words, he cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and has resorted to all the legal remedies against the said debtor. But then in the promissory note, he bound himself jointly and severally with “FF” to pay the obligation to the creditor. According to the law, such a defense now invoked by “GG” is no longer available. (.Note: The above answer is based on Arts. 2068, 2059, NCC.)

9. A bought certain machineries from X Co., payable in monthly installments, with B as guarantor. As additional security, B constituted a real estate mortgage on a lot belonging to him in favor of X Co. Because of A’s failure

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Arts. 2047-2084

OBLIGATIONS AND CONTRACTS Guaranty

to pay for several installments, X Co. brought an action to foreclose the real estate mortgage. B, interposed the defense that he is merely the guarantor of the payment of the debt of A and that plaintiff has no right of action against him before exhausting all legal remedies against A, the true debtor. Decide the case, stating your reasons. ANS: X Co. can foreclose the mortgage. The right of guarantors enunciated in Art. 2069 of the NCC to demand exhaustion of the property of the principal debtor exists only when a pledge or a mortgage has not been given as special security for the payment of the principal obligation. It is well-settled that a pledgor or mortgagor is not entitled to the benefit of excussion or exhaustion. (Southern Motors vs. Barbosa, supra.) 10. In a contract of sale, a surety and a guarantor joined the vendor in the same contract, assuring the performance of the obligations therein. The vendor failed to comply with his obligation and they were all sued in the same action. Both the surety and the guarantor were adjudged in default, and the judgment rendered became final. Can the surety and the guarantor successfully oppose the levy on execution issued against them on the ground that the action against the vendor is still pending? Reasons. (1961) ANS: Yes, both the surety and the guarantor can successfully oppose the levy on execution issued against them on the ground that the action against the vendor is still pending. It is, of course, true that the liability of the surety is solidary, but this character of his liability does not mean that there can now be a levy on execution against his properties while the case against the vendor or principal debtor has not yet been adjudicated. The solidarity existing between him and the vendor requires, at least in a case where the action is brought against both of them, that before there can be a levy, the liability of the latter must first be established by final judgment. And besides, suppose that the vendor is exonerated of any liability, what will happen then to the levy? As far as the guarantor is concerned, there can be no levy against his properties because of the subsidiary character of his liability. As a matter of fact, even where there is already a final judgment against the vendor, he can still oppose the levy by availing himself of the benefit of excussion given to him by law. (Arts. 2058, et seq., NCC.)

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OBLIGATIONS AND CONTRACTS Guaranty

Arts. 2047-2084

11. What is meant by the benefit of division in favor of guarantors? ANS: Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. The creditor cannot claim from the guarantors except the shares which they are respectively bound to pay, unless solidarity has been expressly stipulated. The benefit of division against the co-guarantors ceases in the same cases and for the same reasons as the benefit of excussion against the principal debtor. (Art. 2065, NCC.) 12. What are the rights of a guarantor who pays for a debtor? ANS: The following are the rights of a guarantor who pays for a debtor: (1) Reimbursement or indemnification. — The indemnity comprises: (a)

The total amount of the debt;

(b) The legal interest thereon from the time the pay­ ment was made known to the debtor, even though it did not earn interest for the creditor; (c) The expenses incurred by the guarantor after hav­ ing notified the debtor that payment had been demanded of him; and (d)

Damages, if they are due. (Art. 2066, NCC.)

(2) Subrogation. ~ The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor. However, if the guarantor has compromised with the creditor, he cannot demand of the debtor more than what he has really paid. (Art. 2067, NCC.) 13. When may the guarantor, even before having paid, proceed against the principal debtor? ANS: The guarantor, even before having paid, may proceed against the principal debtor: (1)

When he is sued for the payment;

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Sits. 2047-2084

(2)

OBLIGATIONS AND CONTRACTS Guaranty

In case of insolvency of the principal debtor;

(3) When the debtor has bound himself to relieve him from he guaranty within a specified period and this period has expired; (4) When the debt has become demandable, by reason of the ixpiration of the period for payment; (5) After the lapse of 10 years, when the principal obligation las no fixed period for its maturity, unless it be of such a nature hat it cannot be extinguished except within a period longer than en years; (6) If there are reasonable grounds to fear that the principal lebtor intends to abscond; and (7) If the principal debtor is in imminent danger of becoming nsolvent. In all these cases, the action of the guarantor is to obtain ■elease from the guaranty, or to demand a security that shall protect lim from any proceeding by the creditor and from the danger of nsolvency of the debtor. (Art. 2071, NCC.) 14. Can the guarantor or surety in a loan raise the deense that they are not liable as such for lack of considerition? ANS: The guarantor or. surety cannot raise such defense for t is basic principle that in contracts of loan, consideration for the >ureties is the very consideration for the principal obligor. The Court leld in the case of Wilex Plastic Industries Corp. vs. CA (256 SCRA 178), that the consideration necessary to support a surety obligation leed not pass directly to the surety since a consideration moving to he principal alone is sufficient. A guarantor or surety is bound by he same consideration that makes the contract effective between he parties thereto. It is not necessary that a guarantor or a surety hould receive any part or benefit, if such there be, accruing to the >rincipal. (Lee vs. CA, G.R. No. 117913; Mico Metals Corp. vs. CA, l.R. No. 117914, February 1, 2002.) 15.

When and how is a guaranty extinguished?

ANS: The obligation of the guarantor is extinguished at the

OBLIGATIONS AND CONTRACTS Guaranty

Arts. 2047-2084

same time as that of the debtor, and for the same causes as all other obligations. (Art. 2076, NCC.) In addition to these causes, the NCC also gives four other special causes of extinguishment. They are as follows: (1) If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he should afterwards lose the same through eviction, the guarantor is released. (Art. 2077, NCC.) (2) A release made by the creditor in favor of one of the guarantors, without the consent of the others, benefits all to the extent of the share of the guarantor to whom it has been granted. (Art 2078, NCCJ (3) An extension granted to the debtor by the creditor w ith ou t the consent of the guarantor extinguishes the guaranty. The mere failure on the part of the creditor to demand payment after the debt has become due does not of itself constitute any extension of time referred to herein. (Art. 2079, NCC.) (4) The guarantors, even though they be solidary, are released from their obligation whenever by some act of the creditor they cannot be subrogated to the rights, mortgages, and preferences of the latter. (Art. 2080, NCC J 16. X Co. executed a bond in favor of C guaranteeing a credit line for D to the extent of P 5 0 ,0 0 0 and for a period of two years. Upon request of D , C extended the period a n d the amount of the obligation to three years and P 75,000, respectively, without the knowledge of X Co. What is the liability of the bonding company in case D is unable to pay the obligation? Reasons. Suppose that the bonding company is a surety, and not a guarantor, will that make any difference in your answer? Reasons. ANS: X Co. is not liable. According to Art. 2 0 7 9 o f the NCC, “an extension granted to the debtor by the creditor without the c o n s e n t of the guarantor extinguishes the guaranty.” This provision alone would be sufficient to justify the ruling that the bonding company is n o t liable. But there is another reason which is equally im p o r ta n t. It must be noted that the amount of the principal obligation was

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OBLIGATIONS AND CONTRACTS Guaranty

increased by P25,000, without the knowledge of the guarantor. According to the Supreme Court, such a change constitutes "a material alteration” of the principal contract, effected by the creditor and principal debtor without the knowledge and consent of the guarantor. Such a change completely discharges the guarantor from all liability. (Asiatic Petroleum vs. Hizon, 45 Phil. 534; Phil. National Bank vs. Veraguth, 50 Phil. 259J The same principles are also applicable in the case of a contract of suretyship. (Ibid,)

1120

Title XVI PLEDGE, MORTGAGE AND ANTICHRESIS PLEDGE (Arts. 2085-2123) 1. Define pledge. What are the essential requisites of a contract of pledge? ANS: Pledge may be defined as an accessory, real and unilateral contract by virtue of which, the debtor or a third person delivers to the creditor or to a third person movable property as security for the performance of the principal obligation, upon the fulfillment of which the thing pledged, with all its accessions and accessories, shall be returned to the debtor or to the third person. The essential requisites of a contract of pledge are as follows: (1) It must be constituted to secure the performance of a principal obligation. (2) pledge.

The pledgor must be the absolute owner of the thing

(3) The pledgor should have the free disposal of the thing pledged, and in the absence thereof, he should be legally authorized for the purpose. (4) When the principal obligation becomes due, the thing pledged may be alienated for the payment of such obligation. (5) The thing pledge must be placed in the possession of the creditor or of a third person by common agreement. (See Arts. 2085, 2087, 2093, NCC.) 2. The owners of a real property located at Greenhils borrowed P2,500,000.00 from Siochi to help finance the campaign for representative of Nicanor De Guzman who is

Arts. 2085-2123

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Pledge

one of the owners. The property had a value of P10,000,000.00. The mortgagee, however, was able to transfer the property under his name. He then sold it to petitioners. The mortgagors filed a suit to nullify the sale to Siochi contending that the sale was a mere equitable mortgage. The petitioners contended that they were buyers in good faith and for value as they relied merely upon the face of title of Siochi. (a) Is the contract on equitable mortgage? (b) Are the petitioners innocent purchasers? ANS: (a) The contract between the owners and Siochi was one of an equitable mortgage. At the time of the sale for P2,500,000.00, the property was worth P I0,000,000.00. This is a proof that the contract was one of equitable mortgage. Since it was an equitable mortgage, the title remained with the owner and the title should be transferred back to the owners conformably with the wellestablished doctrine that the mortgagee does not become the owner of the property mortgaged because the ownership remains with the mortgagor. (Montevirgen vs. CA, 112 SCRA 641.) The issuance of the title to Siochi did not vest title upon him; nor did it validate the sale to the petitioners. Art. 2083, NCC provides that the creditor cannot appropriate the things given by way of pledge or mortgage or dispose of them. (Sps. Uy vs. CA, G.R. No. 109197, June 21, 2001.) (b) Petitioners are not innocent purchasers. They could have easily inspected the property. This especially so that they are engaged in the realty business. The burden of proving that he is a buyer in good faith lies upon the buyer. It is true that a person dealing with registered lands need not go beyond the certificate of title. A purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man on his guard. His mere refusal to face up to the fact that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make him an innocent purchaser for valu^ if it afterwards developes that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with the measure of precaution which may may be required of a prudent man in a like situation. (Crisostomo us. CA, 197 SCRA 833; Sps. Uy vs. CA, G.R. No. 109197, June 21, 2001.)

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3. Define pactum commissorium. What is the rule with regard to pactum commissorium? Is there any exception to this rule? ANS: Pactum commissorium is a pact or agreement in a contract of pledge, mortgage, or antichresis by virtue of which if the debtor cannot fulfill his obligation, the creditor can appropriate or dispose of the thing given by way of pledge, mortgage or antichresis. Such an agreement is prohibited by law. (Art. 2088, NCC.) The only exception is in the case of contract of pledge, but even then, certain conditions should be complied with. In pledge, if the debtor is unable to pay his obligation, the creditor has a right to have the thing pledged sold at public auction for the payment of his credit. If the thing is not sold, a second public auction should be held. If still it is not sold, then he may appropriate the thing. (Art. 2112, NCC.) 4. D borrowed P500 from C. As security for the payment of the debt, the former pledged to the latter a diamond ring valued at P2,000. It was expressly stipulated in the contract that if D cannot pay his debt when it matures, “the debt of P500 shall be considered as full payment of the diamond ring without further action.” D was unable to pay when the debt matured. Can C now appropriate the ring? Reasons. ANS: C cannot appropriate the ring. The reason for this is evident. The agreement stated in the contract that in case of non­ payment “the debt of P500 shall be considered as full payment of the diamond ring without further action” constitutes what is known as pactum commissorium, which is expressly prohibited by Art. 2088 of the NCC. According to this article, “the creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.” The prohibition stated in this provision has been interpreted by the Supreme Court to refer only to those cases where upon failure of redemption, the ownership of the thing which is pledged or mortgaged automatically passes to the creditor. It is clear that the above case fall squarely within the purview of this interpretation. (Reyes vs. Nebrija, 52 Off. Gaz. 1928.) 5. Suppose that in the above problem, the agreement is to the effect that in case of nonpayment when the debt matures, “the same shall be paid with the ring given as

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security,” or “the debtor shall execute a deed of absolute sale of the ring in favor of the creditor,” would that make a difference in your answer? Reasons. ANS: Yes, that would make a difference in my answer. In Doth of these cases, there is no automatic transmission of the right Df ownership over the thing which is given by way of pledge, but merely a promise to constitute an assignment of property. What is prohibited by the law is where the stipulation would have the effect >f giving to the creditor automatic ownership over the property. (See Dalay vs. Aquiantin, 47 Phil. 941; Reyes vs. Nebrija, supra.) 6. May the thing pledged be alienated by the pledgor Dr owner? If so, when does the vendee acquire ownership of the thing pledged? ANS: With the consent of the pledgee the thing pledged may De alienated by the pledgor or owner, subject to the pledge. The jwnership of the thing pledged is transmitted to the vendee or ,ransferee as soon as the pledgee consents to the alienation, but the atter shall continue in possession. (Art. 2097, NCC.) 7. If the debtor is unable to comply with his obligation ivhen it becomes due and demandable, and such obligation s secured by a pledge, what is the remedy of the creditor? [Explain. ANS: The creditor to whom the credit has not been satisfied n due time, may proceed before a Notary Public to the sale of the ;hing pledged. This sale shall be made at a public auction, and with lotification to the debtor and the owner of the thing pledged in a jroper case, stating the amount for which the public sale is to be leld. If at the first auction the thing is not sold, a second one with he same formalities shall be held; and if at the second auction there s no sale either, the creditor may appropriate the thing pledged. In his case, he shall be obliged to give an acquittance for his entire :laim. (Art. 2112, NCC.) 8. What are the effects of the sale of the thing >ledged? ANS: The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the s?id are equal to the

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amount of the principal obligation, interest and expenses in a proper case. If the price of the sale is more than said amount, the debtor shall not be entitled to the excess, unless it is otherwise agreed. If the price of the sale is less, neither shall the creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary. (Art. 2115, NCC.) 9. To secure an obligation of P10,000, Adriano pledge 100 shares of stock of Golden Corporation in favor of Bravo. Because Adriano defaulted, Bravo sold at public auction the said shares of stock previously delivered to him by Adriano. In the public auction, the shares were sold at P15,000. It turned out, however, that after the pledge, but before the auction sale, Adriano had executed a bill of sale transferring the shares to Marcelo. Questions: (1) Who acquires the ownership of the shares? (2) After applying the proceeds to the obligation, there is an excess of P5,000. How is this excess applied? Explain. ANS: (1) The buyer at the auction sale acquires ownership of the 100 shares of stock. The fact that before the auction sale, the pledgor Adriano had executed a bill of sale transferring the shares to Marcelo is of no moment in the instant case. It was executed without the knowledge and consent of the pledgee Bravo. Art. 2097 of the NCC states that with the consent of the pledgee, the thing pledged may be alienated by the pedgor or owner, subject to the pledge. The ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, but the latter shall continue in possession. It is clear that in the case at bar the pledgee was not bound by the bill of sale executed by Adriano in favor of Marcelo. Consequently, assuming that the auction sale is valid, the buyer at such auction sale has acquired ownership of the 100 shares of stock. (2) The excess of P5,000 shall be for the benefit of the creditor and not of the debtor. This is clear from Art. 2115 of the NCC which declares, among others, that if the price of the (auction) sale is more than the amount of the principal obligation, interest and expenses, the debtor shall not be entitled to the excess unless it is otherwise agreed.

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10. A debtor pledged to his surety pieces of jewelry to indemnify the latter in case the surety would be obliged to pay the creditor. The surety paid P2,800.00 to the creditor. To recover the amount, the surety sold at public auction the jewelry but realized only P500.00. May the surety recover the deficiency from the debtor? Explain. (1975) ANS: The surety cannot recover the deficiency from the debtor. ' According to Art. 2115 of the NCC, the sale of the things pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. If the price of the sale is more than said amount, the debtor shall not be entitled to the excess, unless it is otherwise agreed. If the price of the sale is less, neither shall the creditor be entitled to the deficiency, notwithstanding any stipulation to the contrary. By electing to sell the articles pledged, the creditor waived any other remedy, and must abide by the result of the sale. (Manila Surety vs. Velayo, 21 SCRA 515.) 11. (a) Give some examples of pledges created by operation of law (legal pledges). (b) In legal pledges, if the pledgor or debtor is unable to pay his debt, what is the remedy of the pledgee or creditor? ANS: (a) Examples of legal pledges: (1) A possessor in good faith exercising his right of re­ tention for necessary and useful expenses. (Art. 546, NCC.) (2) A usufructuary exercising his right of retention for taxes paid on the capital and for extraordinary expenses. (Art. 612, NCC.) (3) A person exercising his right of retention over a mov­ able for his fee or compensation for the work executed on the movable (mechanic’s lien). (Art. 1731, NCC.) (4) An agent exercising his right of retention for advanc­ es made of necessary expenses for the execution of the agency and for damages which the execution of the agency may have caused him. (Arts. 1912,1913, 1914, NCC.)

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(5) A bailee exercising his right of retention for dam­ ages caused by the flaws of the thing loaned where the bailor, knowing such flaws, did not advise the bailee of the same. (Art. 1944, NCC.) (6) A depositary exercising his right of retention for necessary expenses if the deposit is gratuitous or for fortu­ itous damages caused him by the character of the thing depos­ ited whether the deposit be gratuitous or onerous. (Art. 1994, NCC.) (7) A hotel-keeper exercising his right of retention over things brought to the hotel by a guest as security for credits on account of board and lodging. (Art. 2004, NCC.)

(b) The remedy of the pledgee or creditor if the pledg or debtor is unable to pay his debt is to have the thing over which he is exercising his right of retention sold at public auction. However, it is necessary that he must first demand payment of the amount for which the thing is retained. The public auction shall take place within one month after such demand. If, without just grounds, the creditor does not cause the public sale to be held within such period, the debtor may require the return of the thing. (Art. 2122, NCC.) REAL ESTATE MORTGAGE (Arts. 2124-2131) 12. Define real estate mortgage (REM). What are the essential requisites of a contract of rem? ANS: A real estate mortgage may be defined as an accessory contract whereby the debtor guarantees the performance of the principal obligation by subjecting real property or real rights as security in case of non-performance of such obligation within the period agreed upon. The essential requisites of a contract of rem are as follows: (1) It must be constituted to secure the performance of the principal obligation. (2) The mortgagor must be the absolute owner of the property mortgaged.

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(3) The mortgagor should have the free disposal of the property mortgaged, and in the absence thereof, he should be legally luthorized for the purpose. (4) When the principal obligation becomes due, the property mortgaged may be alienated for the payment of such obligation. (5) The subject matter of the contract must be immovable property or alienable real rights upon immovables. (See Arts. 2085, 2087, 2124, NCC.) 13. In 1926) A, a widow, borrowed P100.00 from R. This is evidenced by an informal private instrument executed by IV. The security for the loan is a parcel of unregistered land which belongs to A and which she had inherited from her parents. In 1938, A died without paying the indebtedness. The records show that R had been paying the realty taxes from 1926 to 1944 when he finally died. S, his son, who had inherited the property, continued paying the taxes. In 1961, 5 filed an application for the registration of his title to the land. The children of A, who were in possession of the land, filed their opposition. They contended that they are the owners of the land and that S does not have a registrable title thereto. Decide the controversy. ANS: The children of A are the owners of the land. Consequently, 3 does not have a registrable title thereto. Obviously, and this can be shown by an analysis of the private nstrument executed by A in favor of R, the contract that was perfected n 1926 was a contract of loan secured by a contract of rem. Failure >f the mortgagor to redeem the property does not automatically vest ;he ownership of the property to the mortgagee. Otherwise, there would be a violation of Art, 2088 of the NCC which reads: “The :reditor cannot appropriate the things given by way of pledge or mortgage or dispose of them. Any stipulation to the contrary is null and void.” It is crystal clear, therefore, that if S is allowed to register :he subject property in his name, that would constitute ,a pactum commissorium which is contrary to morals and public policy. The belief of the applicant that he owns the property in question which he inherited from his father cannot overthrow the fact that

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the transaction is a mortgage. The doctrine “once a mortgage always a mortgage” has been firmly established whatever be its form, (Macapinlac vs. Gutierrez Repide, 43 Phil. 781.) The parties cannot, by stipulation, however express and positive, render it anything but a mortgage. No right passed to the applicant except that of a mortgage since one cannot acquire a right from another who was not in possession thereof. A derivative right cannot rise higher than its source. Consequently, the oppositors should now pay the indebtedness of their predecessor plus legal interest. (See Reyes vs. Sierra, 93 SCRA 472.) 14. Is registration in the Registry of Property necessary for the validity of a contract of rem? ANS: Registration in the Registry of Property is not necessary for the validity of the contract. However, it is necessary for the purpose of binding third persons. Consequently, whether registered or not, the contract is binding upon the parties. (Samanilla vs. Cajucom, 107 Phil. 432.) This is clear from Art. 2126 of the NCC which declares that — “In addition to the requisites stated in Art. 2085, it is indispensable, in order that a mortgage may be validly constituted, that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties.” 15. To secure a debt, Torre executed a mortgage on a parcel of registered land in favor of Unson, with Victorio acting as one of the two (2) witnesses to the mortgage deed. Neither Torre nor Unson registered the mortgage. Upon Torre’s failure to pay when the debt became due, Unson sought to foreclose the mortgage. Victorio (who in the meantime had bought the land) resisted the foreclosure, claiming that the mortgage, not having been registered, was ineffective because under the law, registration is the “operative act” that binds the land, and that, at any rate, he (Victorio) could not be prejudiced by the unregistered mortgage to which he

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was not a party. Is the position taken by Victorio tenable? (1974) ANS: The position taken by Victorio is untenable for the following reasons: (a) According to the NCC, if the document in which the mort­ gage appears is not recorded, the mortgage is nevertheless binding between the parties. (Art. 2125, NCC.) Consequently, when Torre subsequently sold the mortgaged land to Victorio, the latter was bound by the contract of mortgage under the principle of relativity of contracts. According to the law, contracts take effect between the parties, their assigns and heirs. (Art. 1311, NCC.) Victorio is clearly an assign within the meaning of the law. True, under our land regis­ tration laws, registration is the operative act that binds the land. It must be noted, however, that this principle is only for the protection of the persons; it is not for the protection of the contracting parties or their privies. „ (b) Besides, Victorio was a witness to the execution of the mortgage deed. He was, therefore, aware of the fact that the land was mortgaged. It is well-settled that such knowledge or notice is equivalent to registration. (c) Furthermore, under the principle of estoppel, Victorio cannot now deny the existence of the contract of mortgage. Consequently, he is precluded by his previous conduct from asserting a legal title or interest in derogation thereof, being a witness thereto, and at the same time, a successor in interest of the mortgagor. 16. them. m

What are the different kinds of rem? Define each of

ANS: The different kinds of rem are the followings: (1) Voluntary mortgages, or those agreed to between the parties, or constituted by the will of the owner of the property in which they are created. (2)

Legal mortgages, or those constituted by operation of

law. (3) Equitable mortgages, or those which lack one or some of those formalities or other requisites prescribed by law, but show

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the intention of the parties to charge real property or real rights as security for the payment of a debt and contains nothing which is impossible or contrary to law. 17. Distinguish between a contract of rem and a contract of sale with right of repurchase. ANS: A contract of rem and a contract of sale with right of repurchase may be distinguished from each other in the following ways: (1) A rem is an accessory contract, whereas a sale with right of repurchase is a principal and independent contract. (2) In the first, there is no transfer of title and possession of the property, whereas in the second, there is a transfer of title and possession of the property, although conditional. (3) In the first, the creditor has no right to the fruits of the property during the pendency of the mortgage, whereas in the second, the vendee a retro is entitled to the fruits even during the period of redemption. (4) In the first, if the debtor fails to pay his debt, the creditor cannot appropriate the property mortgaged nor dispose of it, whereas in the second, as soon as there is a consolidation of title in the vendee a retro, he may dispose of it as absolute owner. (5) In the first, if the debtor fails to pay within the time agreed upon, the mortgage does not acquire the property mortgaged, whereas in the second, if the vendor a retro does not redeem the property within the time agreed upon, the vendee a retro irrevocably acquires absolute ownership thereof. 18. Distinguish between a contract of pledge and a contract of rem. ANS: A contract of pledge and a contract of rem may be distinguished from each other in the following ways: (1) Pledge is a real contract, whereas rem is a consensual contract. (2) The subject matter of pledge is personal property, whereas that of rem is real property.

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(3) In the first, the possession of the thing pledged is vested in the creditor, whereas in the second, the possession of the thing mortgaged remains with the debtor. (4) In the first, the pledgee has the right to receive the fruits of the thing pledged, with the obligation of applying the same to the interest of the debt, if owing, and the balance if any, to the principal, whereas in the second, the mortgagee does not possess such right. (5) The sale at public auction of the thing pledged is always extra-judicial, whereas the foreclosure of the thing mortgaged may be either judicial or extrajudicial. 19. A debt secured with mortgage upon real property of the debtor fell due on a certain date and was not paid. Do you think that the fruits harvested from the mortgaged land on the date of maturity are subjected to the mortgage, no mention thereof having been made in the contract? How about pending fruits? ANS: Pending fruits or those which are not yet harvested when the obligation becomes due are covered by the contract of real estate mortgage, but not those which are already harvested. This is evident from Art. 2127 of the NCC. 20. Suppose that in the contract of rem, there is a stipulation prohibiting the owner of the mortgaged property from alienating the property during the pendency of the mortgage (pactum de non alienando). Is the stipulation valid? ANS: The stipulation is void. (Art. 2130, NCC.) 21. To secure a loan obtained from a rural bank, Ellen assigned her leasehold rights over a stall in the public market in favor of the bank. The deed of assignment states that in case of default in the payment of the loan, the bank shall have the right to sell Ellen’s rights over the market stall as her attorney-in-fact, and to apply the proceeds to the payment of the loan. 1) Was the assignment of leasehold rights a mortgage or a cession?

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2) Assuming the assignment to be a mortgage, does the provision giving the bank the power to sell Ellen’s rights constitute pactum commissorium or not? Why? (2001) ANS: 1) The assignment was a mortgage, not a cession, of the leasehold rights. A cession would have transferred ownership to the bank. However, the grant of authority to the bank to sell the leasehold rights in case of default is proof that no such ownership was transferred and that a mere encumbrance was constituted. There would have been no need for such authority had there been a cession.

2) No, the subject provision is not a pactum commisso um. It is pactum commissorium when default in the payment of the loan automatically vests ownership of the encumbered property in the bank. In the instances, the bank does not automatically become owner of the property upon default of the mortgagor. The bank has to sell the property and apply the proceeds to the indebtedness. 22. (a) Spouses Madonna and Bradd Pacquiao leased a portion of a tract of land owned by Jen Lopez. To finance their business venture, respondents Spouses Pacquiao obtained a loan from PNB secured by a real estate mortgage on their own four (4) residential houses located in Makati City as well as on the agricultural land owned by Jen Lopez who executed a Special Power of Attorney in their favor. For failure to pay their obligation, the mortgaged properties were foreclosed by PNB. PNB was the highest bidder of the foreclosed properties at P447,632.00. Before the expiration of the redemption period, Lopez tendered payment for the redemption of the agricultural land in the amount of P484,482.96. PNB rejected the tender of payment on the ground that the redemption price should be the total claim of the bank on the date of the auction sale and custody of property plus charges accrued plus interest amounting to P2,779,978.72. Is PNB correct? ANS: PNB is not correct. There is no doubt that Lopez is an accommodation mortgagor. An accommodation mortgagor is not himself a recipient of the loan, otherwise that would be contrary to his designation as such. It is not always necessary that the accommodation mortgagor be appraised beforehand of the entire

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amount of the loan nor should it first be determined before the execution of the Special Power of Attorney. On the other hand, PNB has no claim against accommodation mortgagor Lopez inasmuch as she only mortgaged her property to accommodate the Spouses Pacquiao who are the loan borrowers of the PNB. The principal contract is the contract of loan between the Spouses Pacquiao, as borrowers/debtors, and the PNB as lender. The accommodation real estate mortgage (which secures the loan) is only an accessory contract. The term “mortgagor” in Section 25 of P.D. No. 694 pertains only to a debtor-mortgagor and not to an accommodation mortgagor. On the other hand, accommodation mortgagors as such are not in any way liable for the payment of the loan or principal obligation of the debtor/borrower. The liability of the accommodation mortgagors extends only up to the loan value of their mortgaged property and not to the entire loan itself. Hence, it is only just that they be allowed to redeem their mortgaged property by paying only the winning bid price thereof (plus interest thereon) at the public auction sale. (Belo vs, PNB, 353 SCRA 359.) (b) Discuss the one-year redemption period and the failure of the mortgagor to redeem the foreclosed property. ANS: Sec. 6 of Act No. 3135 provides that the mortgagor or his successor-in-interest may redeem the foreclosed property within one (1) year from the registration of the sale with the Register of Deeds. (The Bureau of Internal Revenue, however, clarified that the re­ demption period of one (1) year for individuals and three (3) months for corporations shall be reckoned from the issuance of certificate of sale.) Under Sec. 7 of the law, if the mortgagor fails to redeem the property, the buyer at public auction may file, with the RTC in the province or place where the property or portion thereof is located, an ex parte motion for the issuance of a writ of possession within one (1) year from the registration of the Sheriffs Certificate of Sale, and the court shall grant the said motion upon the petitioner’s posting a bond in an amount equivalent to the use of property for a period of 12 months. On the strength of the writ of possession, the Sheriff is duty-bound to place the buyer at public auction in actual possession of the foreclosed property. After the one-year period, the mortgagor loses all interest over it. The purchaser, who has a right of posses-

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sion that extends after the expiration of the redemption period be­ comes the absolute owner of the property when no redemption is made. Thus, the bond required under Sec. 7 of Act No. 3135 is no longer needed. The possession of land becomes an absolute right of the purchaser as confirmed owner. The purchaser can demand pos­ session at any time following the consolidation of ownership in his name after the issuance to him of a new transfer certificate of title. After the consolidation of title in the buyer’s name for failure of the mortgagor to deem the property, the writ of possession becomes a matter of right since issuance to a purchaser in an extrajudicial fore­ closure sale is merely a ministerial function. (Spouses De Vera vs. Agloro, G.R. No. 155673, January 2005.) 23. Who has the burden of establishing the absence of certain requisites in foreclosure proceedings? ANS: The prevailing jurisprudence is that foreclosure proceedings have in their favor the presumption of regularity and the burden of evidence to rebut the same is on the mortgagor. A mortgagor who alleges absence of a requisite has the burden of establishing that fact. (Baluyut vs. Poblete, G.R. No. 144435, February 6, 2007.) ANTICHRESIS (Arts. 2132-2139) 24. Define antichresis. ANS: Antichresis is a contract by virtue of which 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, NCC.) 25. Distinguish between a contract of antichresis and a contract of sale with right of repurchase. ANS: The two (2) may be distinguished from each other in the following ways: (1) Antichresis is an accessory contract, whereas sale with right of repurchase is a principal and independent contract.

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(2) In the first, there is no transfer of the title over the property from the debtor to the creditor, whereas in the second there is a transfer of the title over the property from the vendor a retro to the vendee a retro although conditional. (3) In the first, if the debtor fails to pay his debt, the creditor cannot appropriate the property nor dispose of it, whereas in the second, as soon as there is a consolidation of title in the vendee a retro, he may dispose of it as absolute owner, (4) In the first, if the debtor fails to pay his debt within the time agreed upon, the creditor does not acquire the ownership of the property, whereas in the second, if the vendor a retro does not redeem the property within the time agreed upon, the vendee a retro irrevocably acquires absolute ownership thereof. 26. Distinguish between a contract of antichresis and a contract of pledge. ANS: The two (2) contracts may be distinguished from each other in the following ways: (1) Antichresis is a consensual contract, whereas pledge is a real contract. (2) In the first, the subject matter is real property, whereas in the second, the subject matter is personal property. (3) In the first, the requirement that the contract must be in writing is essential for validity, whereas in the second, the requirement that the contract must be in a public instrument is merely for the purpose of binding third persons. (4) In the first, the foreclosure in case of non-payment of the debt is as a rule judicial, although the parties may agree to make it extrajudicial whereas in the second, the sale in case of non-payment of the debt is always extrajudicial. 27. Distinguish between a contract of antichresis and a contract of rem. ANS: The two (2) contracts may be distinguished from each other in the following ways: (1)

In antichresis, the creditor acquires the right to receive

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the fruits of the property, but with the obligation to apply them to the payment of the interest and thereafter to the principal of his credit, whereas in rem, the creditor does not acquire such right. (2) In the first, the creditor as a rule is in possession of the property, whereas in the second, the debtor is always in possession of the property mortgaged. (3) In the first, the requirement that the contract must be in writing is essential for the validity of the contract, whereas in the second, the requirement that the contract must be registered in the Registry of Property is merely for the purpose of binding third persons. (4) In the first, there is an obligation of the creditor to pay taxes and charges upon the property as well as expenses necessary for its preservation and repair, whereas in the second, such obligation is not imposed upon the creditor. (5) In the first, foreclosure in case of non-payment of the debts is as a rule judicial, although the parties may agree to make it extra-judicial, whereas in the second, the foreclosure may be judicial or extra-judicial at the option of the creditor. 28. In 1941, D borrowed P2,000 from C. As security for the loan, the former conveyed to the latter a parcel of unregistered land. This conveyance is evidenced by a deed which the parties call “sangla*' or “prenda” in the dialect. The records show that since 1941, C had been in continuous possession and enjoyment of the property, and that in 1950, the tax declaration was changed to his name. In 1958, D died survived by his son, X. Subsequently, X brought an action against C for the recovery of the land and for an accounting of the fruits. C, however, interposed the defense of prescription. Decide the case, stating your reasons. ANS: X’s action against C will prosper. It is now well-settled in this jurisdiction that the contract in this case indicates a mortgage, which coupled with delivery of possession of the land to the creditor, amounts to a contract of antichresis. (Diaz vs. Mendezona, 48 Phil. 666; Miranda vs. Imperial, 77 Phil. 1066; Trillana vs. Manansala, 51 Off\ Gaz. 2911.) It is also well-settled that the antichretics

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Arts. 2132-2139

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Antichresis

creditor cannot ordinarily acquire ownership over the property by prescription. (Trillana vs. Manansala, 51 Off. Gaz. 2911.) Thus, in the case of Macapinlac vs. Gutierrez Repide, 43 Phil. 770, the Supreme Court declared: “The respective rights and obligation of the parties to a contract of antichresis under the NCC appears to be similar and in many respects identical with those recognized in the equity jurisprudence of England and America as incident to the position of a mortgagee in possession, in reference to which the following propositions may be taken to be established, namely: that if the mortgagee acquires possession in any lawful manner, he is entitled to retain such possession until the indebtedness is satisfied and the property redeemed; that the non-payment of the debt within the term agreed does not vest the ownership of the property in the creditor; that the general duty of the mortgagee in possession towards the premises is that of the ordinary prudent owner; that the mortgagee must account for the rents and profits of the land, or its value for purposes of use and occupation, any amount thus realized going towards the discharge of the mortgage debt; that If the mortgagee remains in possession after the mortgage debt has been satisfied, he becomes a trustee for the mortgagor as to the excess of the rents and profits over such debt; and lastly, that the mortgagor can only enforce his rights to the land by an equitable action for an account and to redeem.” (3 Pom. Eq., Jr., Secs. 1215-1218.) 29. A obtains a loan of P500.00 from B and delivers to the latter a piece of coconut land as security for the payment of the loan. In the deed executed, A agreed that B would avail of the fruits of the land during the time that the loan remains unpaid, without saying that the value of said fruits should be applied to the interest or the capital of the loan. State the nature of the contract between the parties. Give your reasons. ANS: It is submitted that the contract in this case is a type of equitable mortgage, because, although it lacks some of the formalities prescribed by law, nevertheless, it shows the intention of the parties to charge real property as security for the payment of a debt and contains nothing that is contrary to law. (Art. 1602, NCC.) Strictly speaking, it cannot be considered a contract of antichresis

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Arts. 2140-2141

because it lacks the requisite regarding the obligation of the creditor to apply the fruits received by him to the payment of the interest, if owing, and thereafter to the principal of his credit. (Art. 1232, NCC.) In spite of the fact that it is a type of equitable mortgage where the mortgagee is in possession, it has been held by the Supreme Court, however, that the rights and obligations of the parties are similar and in many respect identical with those in a contract of antichresis. (Macapinlac vs. Gutierrez Pepide, 43 Phil. 770; Diaz vs. Mendezona, 48 Phil. 666; Miranda vs. Imperial, 77 Phil. 1066; Trillana vs. Manansala, 51 Off. Gaz. 2911.) CHATTEL MORTGAGE (Arts. 2140-2141)

30, Define chattel mortgage (CM). ANS: By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a CM. (Art. 2140, NCC.) 31. On September 13, 1965, A and B, spouses, filed a complaint against X and Y, spouses, for recovery of P100,000 based on a promissory note. Upon motion of the former, a writ of preliminary attachment was issued on September 14, 1965 and a notice of levy of said attachment on a house and lot belonging to the latter was duly registered. In addition, several personal properties of X and Y were attached. On September 30,1965, Y, without consent or authority from her husband X, executed a chattel mortgage over said personal properties in favor of C as security for a loan of P20,000. Said mortgage was registered on October 1,1965. On November 2, 1965, C filed a third-party claim over said attached personal properties. Will the claim prosper? Reasons. ANS: No, the claim of C will not prosper. Under Sec. 14 of Rule 57 of the Revised Rules of Court, a third-party claimant to a property levied upon by a writ of attachment must show that he has title thereto or right to the possession thereof. This excludes

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Arts. 2140-2141

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Chattel Mortgage

a chattel mortgagee because a CM is merely a security for a loan and does not transfer title of the property mortgaged to the chattel mortgage. Neither is a chattel mortgagee entitled to the possession of the property upon the execution of the CM for otherwise the contract becomes a pledge and ceases to be a CM. “By CM, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage.” Moreover, the CM is of doubtful validity since only the husband, as administrator of the conjugal assets (Art. 165, NCC.), has the power to dispose of the same, and the wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law. (Art. 172, NCC.) Furthermore, the CM may be rescinded on the ground that it refers to things under litigation and entered into by the debtor without the knowledge and approval of the litigants or of competent judicial authority or that the same was executed in fraud of creditors when the latter cannot in any other manner collect the claim from them. (Art. 1381, pars. 3 and 4, NCC; Serra vs. Rodriguez, 56 SCRA 538.) 32. X Taxicab Co. purchased by installment ten Holden Toranas from A Co. at P28,500 per car. It paid PI,000 as downpayment security for the promissory notes covering the balance of the purchase price. Subsequently, B obtained a judgment for P50,000 against the taxicab company, and in order to satisfy the judgment credit, the sheriff levied upon the 10 Toranas and, shielded by an indemnity bond posted by B, immediately took possession of them. A Co. then filed a third-party claim. Question: May A Co. qualify as a third-party claimant within the meaning of Sec. 14 of Rule 57 of the Revised Rules of Court, or is the Serra ruling (supra) applicable? ANS: The Serra ruling is not applicable. In Northern Motors, Inc. vs. Coquia (66 SCRA 415), the Supreme Court, speaking through Justice Ramon Aquino, declared that even before there is a breach of 1140

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Arts. 2140-2141

the CM, the mortgagee may file a third-party claim under Section 14 of Rule 57 of the Rules of Court for the following reasons: (1) The recording of the mortgage in the Chattel Mortgage Register gives the chattel mortgagee the symbolical possession of the mortgaged chattel. Such recording is equivalent to the actual delivery of possession to the creditor. (Meyers vs. Theiri, 15 Phil. 303, 306.) Hence, under the Revised Rules, the mortgagee is a person who has a right of possession over the mortgaged chattel. (2) Besides, the Chattel Mortgage Law, in relation to Art. 319 of the Revised Penal Code, contemplates that the mortgagor should always have the physical possession of the mortgaged chattel until there is a breach, in which case the mortgagee is then entitled to take possession of the chattel so that the mortgage can be foreclosed. Hence, what a judgment creditor of the chattel mortgagor can attach is only the equity or right of redemption and, to effectuate the attachment levy, it is not a requisite that the mortgaged chattel itself be seized by the sheriff. It is, therefore, clear that the sheriff in the above problem wrongfully levied upon the mortgaged taxicabs and erroneously took possession of them. 33. Suppose that in the above problem, not only did the sheriff wrongfully levy upon the mortgaged taxicabs and erroneously took possession of them, but the court even dissolved the indemnity bond posted by B, as a consequence of which the ten Toranas were sold at public auction to B as highest bidder. What would be the effect upon the rights of A Co.? ANS: A Company still has a superior, preferential and para­ mount right to have possession of the mortgaged taxicabs and to claim the proceeds of the execution sale. (Northern Motors, Inc. vs. Coquia, 66 SCRA 415; see also Bachrach Motor Co. vs. Summers, 42 Phil. 3; Northern Motors, Inc. vs. Herrera, 49 SCRA 392.) The sheriff wrongfully levied upon the mortgaged taxicabs and erroneously took possession of them. He could have levied only upon the right or equity of redemption pertaining to the taxicab company as chattel mortgagor and judgment debtor, because that was the only leviable or attachable property right of the company

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Arts. 2140-2141

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Chattel Mortgage

in the mortgaged taxicabs. Therefore, what the sheriff could have sold at public auction was merely the mortgagor’s right or equity of redemption. Consequently, following the ruling in Cabral vs. Evangelista (28 SCRA 1000, 1006), the judgment creditor (of the chattel mortgagor) who bought the mortgaged chattels at the execution sale is solidarily liable with the mortgagor to the chattel mortgagee for the mortgaged obligation, less the net proceeds of the sale. (Northern Motors, Inc. vs, Coquia, supra.) 34. Distinguish between a contract of CM and a contract of pledge. ANS: The two (2) contracts may be distinguished from each other in the following ways: (1) CM is a consensual contract, whereas pledge is a real contract. (2) In the first, the possession of the thing mortgaged remains with the debtor, whereas in the second, the possession of the thing pledged is vested in the creditor. (3) In the first, the requirement that the contract must be recorded in the Chattel Mortgage Register is essential for validity, whereas in the second, the requirement that the contract must be in a public instrument is merely for the purpose of binding third persons. (4) The procedure for the foreclosure of a CM is different from the procedure for the sale at public auction of the thing pledged. (5) In the first, if the price of the sale in case of foreclosure is less than the amount of the principal obligation, the creditor is entitled to recover the deficiency from the debtor, whereas in the second, the creditor is not entitled to recover such deficiency. 35. Distinguish between a contract of CM and a contract of rem. ANS: The two (2) contracts maybe distinguished from each other in the following ways: (1) In a CM the subject matter is personal property, whereas in an rem, the subject matter is real property.

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(2) In the first, the requirement of registration is essential for the validity of the contract, whereas in the second, the requirement of registration is merely for the purpose of binding third persons. (3) The procedure for foreclosure of a CM is different from the procedure for foreclosure of an rem. 36. Is registration of a CM in the Chattel Mortgage Register essential for the validity of the contract? ANS: Yes, registration in the Chattel Mortgage Register is essential for the validity of a contract of CM. This is evident the definition of chattel mortgage as enunciated in Art. 2140 of the NCC. (Associated Insurance & Surety Co. vs. him Ang, CA, 52 Off. Gaz. 5218; Malonzo vs. Luneta Motors, CA, 53 Off. Gaz. 556.) Consequently, if there is no registration, the contract is void or inexistent.

from

37. Where must the registration of a CM he made? ANS: Under both the NCC (Art. 2140.) and the Chattel Mortgage Law (Act No. 1508.), the registration must be made in the Chattel Mortgage Register. It must be noted, however, that — (1) If the subject matter of the contract is situated in a province or city different from that in which the mortgagor resides, the mortgage must be registered in the Chattel Mortgage Register of both provinces or cities. (2) If the subject matter of the contract is a vessel, the mortgage must be registered in the office of the Collector of Customs at the port of entry. (3) Furthermore, if the subject matter of the contract is a motor vehicle, in addition to the requirement of registration in the Chattel Mortgage Register, the mortgage should be reported to the Land Transportation Office. (Sec. 5, Land Transportation and Traffic Code [Rep. Act No. 4136, as amended].) This requirement, however, is not for validity, but for the purpose of binding third persons. (Borlough vs. Fortune Enterprises, L-9451, March 29,1957; Aleman vs. De Catera,L-13693-13694, March 25, 1961.)

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Arts. 2140-2141

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Chattel Mortgage

38. A bought a bus from X Co. by installment. To secure the payment of the unpaid installments, he executed a CM on the bus in favor of the company. This mortgage was duly registered in the Chattel Mortgage Registry. Subsequently, A sold the bus to B. This sale was registered in the Land Transportation Commission (LTC). Later, the bus, which was being used by B as a passenger truck, fell into a ditch because of overspeeding, thereby causing death to two (2) of the passengers. A judgment for damages was then rendered in favor of the legal heirs of the two (2) passengers against B. By writ of attachment issued by the court, the bus was levied upon. X Co. subsequently filed a third-party claim to the bus. Who has a preferred right to the bus — the company or the legal heirs of the vehicular accident victims? ANS: The legal heirs of the vehicular accident victims have a preferred right to the bus under attachment. As the Supreme Court has repeatedly held: “A mortgage in order to affect third persons should not only be registered in the Chattel Mortgage Registry, but the same should also be recorded in the LTC as required by Sec. 6, Land Transportation and Traffic Code.” (Borlough vs. Fortune Enterprises, Inc., 53 Off. Gaz. 4070; Aleman vs. De Catera, 111 Phil. 377.) In the instant case, the company did not record in the LTC the mortgage executed in its favor. Such being the case, the mortgage is ineffective as far as the legal heirs of the victims of the vehicular accident are concerned. Its right, therefore, in the bus cannot prevail over that of the latter who may now be considered innocent purchasers, having derived their right from an innocent purchaser, the bus owner-operator B, who had recorded her purchase in the LTC. (Aleman vs. De Catera, supra.) 39. Is the creditor entitled to a deficiency judgment in a CM contract? ANS: Yes, the creditor is entitled to a deficiency judgment in a CM contract. This was the doctrine enunciated by the Supreme Court in Ablaza vs. Ignacio, 103 Phil. 1151, and reiterated in Garrido vs. Tuason, 24 SCRA 727. According to the Supreme Court in these cases, Art. 2115 of the NCC cannot be applied because it is clear from Art. 2141 of the same Code that the provisions of the NCC on pledge shall apply to a CM only insofar as they are not in conflict with Sec.

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14 of the Chattel Mortgage Law. Under the Chattel Mortgage Law it can be inferred that if the price of the sale of the thing mortgaged is less than the amount of the principal obligation, an action may still be maintained by the creditor against the debtor for the deficiency The only exception to this rule is that which is provided for in Art. 1484, No. 3, NCC. According to this provision, should the vendee fail to pay two (2) or more installments in a contract of sale of personal property the price of which is payable in installments, the vendor may foreclose the CM, but he shall not have any further action against the vendee to recover any unpaid balance of the price. 40. On October 27, 1978, Acme Shoe Corp. obtained a loan of P3 million from Producers Bank of the Philippines. To secure its payment, Acme executed a CM, subsequent promissory note or notes either as renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations. The mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations “without the necessity of executing a new contract.” This loan was paid. On January 10 and 11, 1984 the bank granted Acme a new loan of PI million that was not settled, prompting the bank to institute foreclosure proceedings. Acme sought to enjoin the bank from foreclosing but the regional trial court ruled that the PI million loan was covered by the CM. Is the PI million loan covered by the CM previously executed by Acme? ANS: The Supreme Court held in the case of Acme Shoes, Rubber and Plastic Corporation vs. CA, (260 SCRA 714), that while a pledge, rem, or antichresis may secure after-incurred obligations so long as these future debts are accurately described, a CM, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a CM to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law.

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Arts. 2140-2141

OBLIGATIONS AND CONTRACTS Pledge, Mortgage and Antichresis Chattel Mortgage

Sec. 3 of the Chattel Mortgage Law requires that the parties must execute an oath that the “mortgage is made for the purpose of securing the obligation specified in the conditions 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 debt referred to in the law must be a current one, not an obligation that is merely contemplated. In this case, the only obligation specified in the chattel mortgage was the P3-million loan that was already paid. By virtue of Sec. 3 of the Chattel Mortgage Law, the payment of the obligation automatically rendered the CM void or terminated. Hence, there was no longer any CM that could cover the new loans that were concluded thereafter.

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Title XVII EXTRA-CONTRACTUAL OBLIGATIONS QUASI-CONTRACTS (Arts. 2142-2176)

1. What are “obligations without an agreement?” Give five examples of situations giving rise to this type of obliga­ tions? (2007) ANS: Obligations without an agreement are those which are not based on contract. Apart from contracts, obligations may arise from (1) law; (2) quasi-contract; (3) delict; and (4) quasi-delict. Examples of situations giving rise to “Obligations without an agreement” are as follows: 1. of tax.

A law was passed requiring the payment of a specific kind

2. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises (Art. 2154, NCC), 3. When a person voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, he is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise in either of these instances: a. When the property or business is not neglected or abandoned; b. If in fact the manager has been tacitly authorized by the owner (Art. 2144, NCC).

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Arts. 2142-217

OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Contracts

4. A person, through negligence, caused damage or injury to another. 5.

A person intentionally damaged a property of another.

6. The obligation by the recipient to return what has been paid or delivered to him by mistake, the recipient not having the right to demand it, is one that arises from quasi-contract (Art. 2154, NCC). 7. The obligation of the culprit to pay actual damages for causing the death of a person is one which arises from delict or crime (Art 2206, NCC). 8. The obligation of the tortfeasor to pay damages for injuries or damages caused by him to another person due to his act or omission, characterized by fault or negligence, is one which arises from quasi-delict (Art. 2176, NCC) and 9. The obligation to pay a reward for a certain act or accomplishment pursuant to a promise made to the general public is an obligation based on a unilateral promise. (Suggested Answers to the 2007 Bar Examination Questions, PALS) 2. Define quasi-contracts. What are the different kinds of quasi-contracts? ANS: Quasi-contracts may be defined as those juridical relations arising from lawful, voluntary and unilateral acts of persons based on the principle that no one shall be unjustly enriched or benefited at the expense of another. (Art. 2142, NCC.) Quasi-contracts are either nominate or innominate. There are two (2) kinds of nominate quasi-contracts regulated by the NCC. They are negotiorum gesto (Art. 2144, et seq., NCC.) and solutio indebiti. (Art. 2154, et seq., NCCJ The innominate quasi-contracts, on the other hand, are those regulated by Arts. 2164 to 2175 of the NCC. 3. What is meant by negotiorum gestio? What are its requisites? (1977) ANS: Negotiorum gestio refers to the juridical relation which arises when a person voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, as a consequence of which, he is obliged

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Arts. 2142-2176

to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, 4f the owner is in a position to do so. (Art. 2144, NCC.) Its requisites are as follows: (1) The gestor must voluntarily assume the agency or man­ agement of the business or property of another. (2) The business or property must be either neglected or. abandoned. (3) The agency or management must not be authorized by. the owner either expressly or impliedly. (4) The assumption of the agency or management must be made in good faith, 4. Distinguish between negotiorum gestio and implied agency. ANS: Negotiorum gestio and implied agency may be distin­ guished from each other in the following ways: (1) In the first, it is essential that the gestor should never have been authorized in any manner whatsoever to assume the agency or management of the business or property of another, whereas in the second, the agent is actually authorized to assume the agency by virtue of the acts of the owner or by virtue of his silence, or inaction, or his failure to repudiate the agency, knowing that another is acting on his behalf without any authority. (2) In the first, it is essential that the business or property should be either neglected or abandoned, whereas in the second, this is not required. (3) So long as the owner does not know that another is acting on his behalf without authority, the quasi-contract of negotiorum gestio exists, but once he becomes aware of such fact and still he does not repudiate the acts of the agent, the quasi-contract ceases to exist; it has become a contract of implied agency. 5. When is the gestor or officious manager liable for fortuitous events? ANS: The officious manager shall be liable for any fortuitous event:

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Contracts

(1) If he undertakes risky /operations which the owner was lot accustomed to embark upon; (2)

If he has preferred his own interest to that of the owner;

(3) If he fails to return the property or business after demand >y the owner; (4) SICC.)

If he assumed the management in bad faith. (Art. 2147,

(1)

If he is manifestly unfit to carry on the management;;

(2) If by his intervention he prevented a more competent jerson from taking up the management. (Art. 2148, NCC.) 6. In fear of repraisals from lawless elements besiegng his barangay, X abandoned his fishpond, fled to Manila, ind left for Europe. Seeing that the fish in the fishpond were ♦eady for harvest, Y, who is in the business of managing fish­ ponds on a commission basis, took possession of the prop­ erty, harvested the fish, and sold the entire harvest to Z. Thereafter, Y borrowed money from W and used the noney to buy new supplies of fish fry and to prepare the ishpond for the next crop. (a) What is the juridical relation between X and Y luring X's absence? (b) Upon the return of X to the barangay, what are the >bligations of Y to X as regards the contract with Z? (c) Upon X’s return, what are the obligations of X as *egards Y’s contract with W? (d) What legal effects will result if X expressly ratifies Ps management and what would be the obligations of X in ‘avor of Y? (1992) ANS: (a) The juridical relation is that of the quasi-contract of legotiorum gestio. Y is the “gestor” or “officious manager” and X is h e “owner.” (Art. 2144, NCC.)

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Sig. 38-BBACK -Civil Law Reviewer By: Jurado 6x9

Except when the management was assumed to save the >roperty or business from imminent danger, the officious manager ihall be liable for fortuitous events:

OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Contracts

Arts. 2142-2176

r (b) Y must render an account of his operations and deliver to X the price he received for the sale of the harvested fish. (Art. 2145, NCC.) (c) X must pay the loan obtained by Y from W because X must answer for obligations contracted with third persons in the interest of the owner. (Art. 2150, NCC.) (d) Express ratification by X provides the effects of an express agency and X is liable to pay the commissions habitually received by the gestor as manager. (Art. 2149, NCC.) 7. requisites?

What is meant by solutio indebiti! What are its

ANS: Solutio indebiti refers: to the juridical relation which arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it. (Art. 2154, NCC.) Its requisites are as follows: (1) There must be a payment or delivery made by one person to another; . (2) The person who made the payment or delivery was under no obligation to do so; . (3) The payment or delivery was made by reason of a mistake.. 8* “C,” a Filipino resident of the U.S., sent to his father “D” in Manila $500.00 through “X” Bank which had a branch in Manila. Due to mistake of the employees of the Bank, “D” was paid $5,000.00 instead of $500.00.00. Upon delivery of the mistake, the Bank demanded from “D” the return of the $4,500.00. “D” refused and the Bank sued him. Is the Bank entitled to recover from “D”? (1980) ANS: Yes, the Bank is entitled to recover the $4,500 from “D.” We have in this case an example of a quasi-contract of solutio inde­ biti which arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it. Its requisites are:

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Vrts. 2176-2194

OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

(1) There must be a payment or delivery made by one person :o another; (2) The person who made the payment or delivery was under no obligation to do so; and (3)

The payment or delivery was made by reason of mistake.

It is obvious that the above requisites are present in the instant case. (Note: The above answer is based on Art. 2154, NCC. Observe the similarity between the problem and the Javier case. Current events can also play a role in bar examinations.)

QUASI-DELICTS (Arts. 2176-2194) 9.

Define quasi-delicts.

" ANS: A quasi-delict may be defined as the fault or negligence of a person, who, by his act or omission* connected or unconnected with, but independent from, any contractual relation, causes damage to another person. (Art. 2176, NCC.) Using the expanded concept in Elcano vs. Hill (77 SCRA 98) as basis, it may also be defined as an act, whether punishable or not punishable by law, whether criminal or not criminal in character, whether intentional or voluntary or negligent, which results in damage to another. 10.

What is the scope or coverage o f quasi-delict?

ANS: Quasi-delicts include acts, whether punishable by law or not punishable by law, whether criminal or not criminal in character, whether intentional or voluntary or negligent, which n suit in damage to another. Using the exact language of the Supreme Court in Elcano: “It is more congruent with the spirit of law, equity and justice, and more in harmony with modern progress, to hold, as we do hold, that Art. 2176, where it refers to fault or negligence, covers not only acts not punishable by law, but also acts criminal in character, whether intentional or voluntary or negligent^’ (Elcano and Elcano vs. Hill and Hill, 77 SCRA 98.)

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

Arts. 2176-2194

11. Tony bought a Ford Expedition from a car dealer in Muntinlupa City. As payment, Tony issued a check drawn against his current account with Premium Bank. Since he has a good reputation, the car dealer allowed him to immediately drive home the vehicle merely on his assurance that his check is sufficiently funded. When the car dealer deposited the check, it was dishonored on the ground of “Account Closed.” After an investigation, it was found that an employee of the bank misplaced Tony’s account ledger. Thus, the bank erroneously assumed that his account no longer exists. Later it turned out that Tony’s account has more than sufficient funds to cover the check. The dealer however, immediately filed an action for recovery of possession of the vehicle against Tony for which he was terribly humiliated and embarrassed. Does Tony have a cause of action against Premium Bank? Explain. (2006) ANS: Yes, Tony may file an action against Premium Bank for damages under Art. 2176. Even if there exists a contractual relationship between Tony and Premium Bank, an action for quasi­ delict may nonetheless prosper. The SC has consistently ruled that the act that breaks the contract may also be a tort. There is a fiduciary relationship between the bank and the depositor, imposing utmost diligence in managing the accounts of the depositor. The dishonor of the check adversely affected the credit standing of Tony. Hence, he is entitledto damages (Singson vs. BPI, G.R. No. L-24932, June 27, 1968; American Express International, Inc. vs. IAC, G.R. No. 72383, November 9, 1988; Consolidated Bank and Trust vs. CA, G.R. No. L-70766 November 9, 1998). (Suggested Answers to the 2006 Bar Examination Questions, PALS) 12. Who are the persons who can be held liable for damages arising from quasi-delicts? ANS: Obligations arising from quasi-delicts are demandable not only from the person directly responsible for the damages incurred (Art. 2176, NCC.), but also against the following: (1) The father and, in case of his death or incapacity, the mother, with respect to damages caused by the minor children who live in their company;

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

(2) Guardians with respect to damages caused by the minors >r incapacitated persons who are under their authority and who live n their company; (3) The owners and managers of an establishment or enter­ prise, with respect to damages caused by their employees in the ser­ vice of the branches in which the latter are employed or on the occa­ sion of their functions; (4) Employers, with respect to damages caused by their imployees and household helpers acting within the scope of their is signed tasks, even though the former are not engaged in any business or industry; (5) The State, when it acts through a special agent; but not when the damages caused by the official to whom the task done properly pertains; and (6) Lastly, teachers or heads of establishments of arts and trades, with respect to damages caused by their pupils and students )r apprentices, so long as they remain in their custody. (Art. 2180,

vcc.l

13. In a criminal action filed against the truck driver, the employer owner of the truck involved in the accident t>e held subsidiarily liable for the damages awarded to the offended parties despite a separate civil action filed by the offended parties against the employer truck owner? 2an

ANS: No, because of the rule against double recovery. The law prohibits recovery of damages by the injured party twice. In the ;ase of Rafael Reyes Trucking Corp. vs. People, G.R. No. 129029, \pril 3, 2000, the Court held that in negligence cases, the aggrieved party has the choice between (a) an action to enforce civil liability arising from crime under Art. 100 of the Revised Penal Code; or ’b) a separate action for quasi-delict under Art. 2176, NGC. When :he choice is made, the injured party cannot avail himself of any )ther remedy because he cannot recover damages twice for the same negligent act or omission of the accused. 14. Cite two (2) specific provisions of the Philippine law which provide for the employer’s liability with respect to the damages caused by his employee.

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

Arts. 2176-2194

ANS: The aforementioned case of Rafael Reyes Trucking Corp. vs. People cites the specific provisions of Philippine law as follows: (1) That expressed in Art. 2176 in relation to Art. 2180, NCC al­ lowing an action predicated on quasi-delict to be instituted by the injured party against the employer for his employer’s act or omis­ sion and necessitating only a preponderance of evidence to prevail. The employer’s liability for the negligent conduct of the subordinate is direct and primary, subject to the defense of due diligence in the selection and supervision of the employee. The enforcement of the judgment against the employer in an action based on Art. 2176 does not require the employee to be insolvent since the nature of the li­ ability of the employer with that of the employee is solidary, the two (2) being statutorily considered joint tortfeasors. (2) That predi­ cated on Art. 103 of the Revised Penal Code, providing that an em­ ployer may be held subsidiarily civilly liable for a felony committed by his employee in the discharge of his duty. This liability attaches when the employee is convicted of a crime done in the performance of his work and is found to be insolvent that renders him unable to properly respond to the civil liability adjudged. 15. Is the employer civilly liable for the criminal act of his employee in the performance of his functions? ANS: Based in Art. 103 of the Revised Penal Code, the employer can be held, civilly liable and such liability is enforceable in the s ame criminal proceeding where the award is made. To comply with the requirement of due process and before the execution thereof against the employer, a hearing must be set for the purpose of determining: (1) the existence of an employer-employee relationship; (2) that the employer is engaged in some kind of industry; (3) that the employee is adjudged guilty of the wrongful act and found to have committed the offense in the discharge of his duties (not necessarily any offense he commits “while” in the discharge of such duties); and (4) that the said employee is insolvent. (Basilio vs. CA, G.R. No. 113433, March 17,2000.) 16. Professionals are considered personally liable for the fault or negligence they commit in the discharge of their duties, and their employer cannot be held liable for such fault or negligence. Hence, a hospital cannot be held liable

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For the fault or negligence of a physician or surgeon in the treatment or operation of patients. Comment on this view. ANS: The foregoing view is grounded on the traditional notion that the professional status and the very nature of the physician’s calling preclude him from being classed as an agent or employee }f a hospital, whenever he acts in a professional capacity. The 'Schloendorff doctrine" regards a physician, even if employed by a hospital, as an independent contractor because of the skill he 2xercises and the lack of control exerted over his work. Under this doctrine, hospitals are exempt from the application of the respondeat superior principle for fault or negligence committed by physicians in :he discharge of their profession. However, the efficacy of the foregoing doctrine has weakened with the significant developments in medical care. Thus, the deviation Tom the Schloendorff doctrine, noting that modem hospitals do far •nore than provide facilities for treatment. The court then concluded :hat there is no reason to exempt hospitals from the universal rule >f respondeat superior. In the case of Ramos us. CA, the court ruled :hat an employer-employee relationship exists between hospitals and their physicians. Furthermore, the liability of hospitals is anchored upon the agency principle o f apparent authority or agency ?y estoppel and the doctrine o f corporate negligence. Apparent authority, or what is sometimes referred to as the ‘holding out” theory or doctrine of ostensible agency or agency by estoppel imposes liability upon hospitals, because of the hospitals’ actions as principal or as employer in somehow misleading the public into believing that the relationship or the authority exists. Phe hospital is now estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory eading the public to believe that it vouched for their skill and competence. Under the doctrine of corporate negligence, hospitals low have the duty to make reasonable effort to monitor and oversee ,he treatment prescribed and administered by the physicians practicing in its premises. Accordingly, it has the duty to exercise reasonable care to protect from harm all patients admitted into its 'acility for medical treatment. Physicians guilty of malpractice are therefore solidarily liable for damages. (Professional Services, Inc. >s. Agana, G.R. No. 126297, January 31, 2007)

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17. What presumption arises when an injury is caused by the negligence of the employee? ANS: Under Art. 2180 of the NCC, when an iiy ury is caused by the negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the servant or employee, or in supervision over him after selection or both. There arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family, (Manliclic vs. Calctunan, G.R. No 150157, January 25,2007) 16. Spouses Deang sued GSIS for failure to return their title which they mortgaged in favor of GSIS (as it was lost), after the obligation was satisfied. GSIS said that it is not liable for the negligent act of its employee acting within the scope of his assigned tasks since GSIS is a government-owned and controlled corporation (GOCC) performing governmental functions. Further, GSIS said that it falls within the term "state” under Art. 2180(6), NCC and cannot, therefore, be held vicariously liable for negligence committed by its employee acting with the scope of his functions. Decide the case. ANS: In the GSIS vs. Sps. Deang case (G.R. No. 135644, September 17, 2001), the Court held that there was a pre-existing contract between the parties. GSIS and the spouses Deang had a loan agreement secured by a real estate mortgage. The duty to return the owner’s duplicate copy could not be returned to the owners. Art. 2i80(6), NCC is not applicable although GSIS is liable for damages because of negligence. The more applicable provisions of the NCC are Arts. 1170 and 2201. “Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof are liable for damages.” “Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time of the obligation was constituted.”

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Since good faith is presumed and bad faith is a matter of fact which should be proved. (Bermudez vs. Gonzales, G.R. No. 132810, Dec. 11, 2000.) GSIS can be treated as a party who defaulted in its obligation to return the owner’s duplicate copy of the title. As an obligor in good faith, GSIS is liable for all the “natural and probable consequences of the breach of the obligation.” The inability of the spouses Deang to secure another loan and the damages they suffered thereby has its roots in the failure of the GSIS to return the owner’s duplicate copy of the title. (GSIS vs. Sp$, Deang, G.R. No, 135644, September 17, 2001.) 17. Respondent-appellee spouses are legitimate parents of Julie Ann Gotiong, 18 years old who died in a shooting incident in 1979, while petitioner-appellants are parents of Wendell Libi, a minor 18 years old and CANU agent, who died in the same incident. Julie Ann and Wendell were former sweethearts, but their relationship broke up. Wendell kept pestering Julie Ann for reconciliation but the latter persistently refused, leading the former to resort to threats. The lower court dismissed the complaint of respondentappellee for insufficiency of evidence; likewise, petitionerappellant’s counterclaim was dismissed for lack of merit. On appeal, the IAC reversed, and petitioners-appellants were held subsidiarily liable for the criminal act of Wendell, a minor living in their company following Fuellas vs. Cadano (3 SCRA 361 [19611) which held that “the subsidiary liability of parents for damages caused by their minor children imposed by Art. 2180 of the NCC covers obligations arising from both quasi-delict and criminal offenses.” It also applied Art. 2194 which provides for solidary liability of joint tort feasors.

What is the civil liability of parents for quasi-delict and felonies of their minor children? ANS: The SC ruled that the civil liability of parents for quasi­ delict of their minor children is primary and not subsidiary. The Court found that Wendell’s father owned a gun which he kept in a safety deposit box inside a drawer in their bedroom. Spouses did not exercise diligence in supervising their minor child which, in this case, would be safely locking the gun away. Wendell could not have

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gotten hold of the gun unless one of the keys to the safety deposit box was negligently left lying around or be had free access to the box of her mother where the key was. The Court also held that the liability of the parents for felonies committed by their minor children is also primary, not subsidiary under Art. 2180 in relation to Art. 101 of the Revised Penal Code. (Libi vs. Hon. I AC, G.R. No. 70880, September 18,1992.) . 18. Arturo sold his Pajero to Benjamin for PI Million. Benjamin took the vehicle but did not register the sale with the LTO. He allowed his son Carlos, a minor who did not have a driver’s license, to drive the car to buy pan de sal in a bakery. On the way, Carlos driving in a reckless manner, sideswiped Dennis, then riding a bicycle. As a result, he suffered serious physical injuries. Dennis filed a criminal complaint against Carlos for reckless imprudence resulting in serious physical injuries. 1. Can Dennis file an independent civil action against Carlos and his father Benjamin for damages based on quasi­ delict? Explain. (2006) ANS: Yes, Dennis can file an independent civil action against Carlos and his father for damages based on quasi-delict there being an act or omission causing damage to another without contractual obligation; Under Sec. 1 of Rule 111 of the 2000 Rules on Criminal Procedure, what is deemed instituted with the criminal action is only the action to recover civil liability arising from the act or omission punished by law. An action based on quasi-delict is no longer deemed instituted and may be filed separately [Sec. 3, Rule 111, Rules o f Criminal Procedure]. 2. Assuming Dennis’ action is tenable, can Benjamin raise the defense that he is not liable because the vehicle is not registered in his name? Explain. (2006) ANS: No, Benjamin, cannot raise the defense that the vehicle is not registered in his name. His liability, vicarious in character, is based on Art. 2180 because he is the father of a minor who caused damage due to negligence. While the suit will prosper against the registered owner, it is the actual owner of the private vehicle who is

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iltimately liable/SeeDuavit vs. CA, G.R. No. L -29759, May 18,1989). purpose of car* registration is to reduce difficulty in identifying he party liable in case of accidents (Villanueva vs. Domingo, G.R. Vo. 144274, September 14, 2004). (Suggested Answers to the 2006 3ar Examination Questions, PALS)

rhe

19. What are the requisites necessary in order that the lefendant can be held liable for damages in a quasi-delict ;ase? ANS: In actions based on quasi-delicts, before the person njured can recover damages from the defendant, it is necessary that le must be able to prove the following facts: (1)

The fault or negligence of the defendant;

(2)

The damage suffered or incurred by the plaintiff; and

(3) The relation of cause and effect between the fault Or legligence of the defendant and the damage incurred by the plaintiff. Taylor vs. Manila Electric, Co., 16 Phil. 8.) 20. Assuming that there is a pre-existing contractual relation between the plaintiff and the defendant, such as that )f employer and employee, or that of passenger and carrier, shall that preclude or bar the institution of an action for recovery of damages predicated on a quasi-delict or tort? ANS: No, such fact shall not preclude or bar the institution >f an action by the plaintiff against the defendant for recovery of lamages predicated on a quasi-delict or tort. As held by the Supreme Dourt in Araneta vs. De Joya (57 SCRA 59), the fact that defendant vas occupying a contractual position at the office of plaintiff is of no noment. The existence of a contract between the parties constitutes 1 0 bar to the commission of a tort by one against the other and the consequent recovery of damages. This is now well-settled. As a matter )f fact, the action for recovery of damages may even be predicated )n both breach of contract (culpa contractual) and a tort at the same ;ime. This is also well-settled. (Air France vs. Carrascoso, 18 SCRA 155; Lopez vs. Pan-American Airways, 16 SCRA 431; Zulueta vs. °an-American Airways, 431 SCRA 397.)

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21. What is meant by the following? Explain. (a)

Proximate cause

(b) Doctrine of contributory negligence (c)

Doctrine of imputed negligence

(d)

Doctrine of last clear chance

(e)

Doctrine of res ipsa loquitur

ANS: (a) One of the essential facts which the plaintiff must prove in order that he can recover from the defendant is the relation of cause and effect between the defendant’s negligence and the damage or injury which he has incurred. This is more frequently known as the doctrine of proximate cause. It is defined as that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred. (38 Am. Jur. 695J (b) The doctrine of contributory negligence may be stated as follows: If the negligence of the plaintiff cooperated with the negligence of the defendant in bringing about the accident causing the injury complained of, such negligence of the plaintiff would be an absolute bar to recovery. If the negligence of the plaintiff was merely contributory to his injury, the immediate and proximate cause of the accident causing the injury being the defendant’s negligence, such negligence would not be a bar to recovery, but the amount recoverable shall be mitigated by the courts.(Art. 2179, NCC; Rakes vs. Atlantic Gulf Pacific Co., 7 Phil. 359; Cangco vs.CA Manila Railroad Co., 36 Phil. 766; Borromeo vs. Manila Railroad Co., 44 Phil. 156; Del Prado vs. Manila Electric Co., 52 Phil. 900.) Negligence is contributory only when it contributes proximately to the injury, and not simply a condition for its occurrence. (Annonuevo vs., G.R. No. 130003, October 20, 2004.) (c) The doctrine of imputed negligence merely refers to the rule whereby the negligence of a certain person in a transaction or act which gave rise to the injury complained of is imputable or chargeable against the person for whom he was acting or against his associates. (d) The doctrine of last clear chance, otherwise known as the doctrine of discovered peril or the humanitarian doctrine, 1161

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may be stated as follows; Where both parties are negligent in such a way that it would be impossible to determine whose negligence was the proximate cause of the accident, the party who had the last clear chance or opportunity to avoid the accident by the use of proper care but failed to do so is considered in law solely responsible for the consequences of the accident. (See Picart vs. Smith, 37 Phil. 809; Mr. and Mrs. Ong vs. Metropolitan Water District, L-7694, August 29, 1958.) For example, if a truck driver saw an incoming car that swerved and entered the truck’s lane to avoid running over a pedestrian, and the truck driver did not slow down or move to the side of the road and give way to the incoming car, even though he could have done so to avoid a collision, then the truck driver shall be solely responsible for the accident (Mckee vs. IAC, G.R. No. L-68102, July 16, 1992). (Suggested Answers to the 2007 Bar Examination Questions, PALS) (e) The doctrine of res ipsa loquitur may be stated as follows: Where a thing is shown to be under the management of the defendant or of his servants, and the accident is such as is in the ordinary course of events does not happen if those who have the management had used proper care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care. (See Africa vs. Caltex, 16 SCRA 448; Rep. o f the Phil. vs. Luzon Stevedoring Corp., 21 SCRA 279.) The conditions usually stated for the application of this doctrine are as follows: (1) The accident must be of a kind which ordinarily does not happen in the absence of someone’s negligence. (2) It must be caused by an agency or instrumentality within the exclusive control of the defendant. (3) It must not be due to any voluntary action or contribution on the part of the' plaintiff. (Prosser on Torts, pp. 291-295.) In cases involving medical negligence, the doctrine of res ipsa loquitor allows the mere existence of an injury to justify a presumption of negligence on the part of the person who controls the instrument causing the injury, provided the foregoing requisites concur. (Cantre vs. Sps. John Go, G.R. No. 160889, April 27, 2007). 1162

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Arts. 2176-2194

22. While gasoline was being hosed from a tank truck belonging to Caltex (Philippines) Inc. into an underground storage belonging to a Caltex service station, a fire broke out spreading to and burning several houses. The owners of these houses brought an action against both the gasoline company and the operator of the service station, the first as alleged owner and the second as agent in charge of operation. In their complaint, the negligence of both defendants is attributed as the cause of the fire. By way of defense, defendants contend that there is no proof whatsoever that they have been negligent and even if it can be presumed that the operator of the service station and his employees were negligent, as far as the gasoline company is concerned, there can be no liability because the operator of the station is not an agent of the company but an independent contractor. Actually, during the trial, no evidence was introduced to prove negligence on the part of the defendants. Decide the case. ANS: Both the defendant gasoline company and the operator of the service station are liable ^ As far as the first contention is concerned, it must be noted that the gasoline station, with all its employees, its appliances and its equipment, was under the control of'defendants. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were defendants and their employees, but they gave no explanation thereof whatsoever. Therefore, there is a fair and reasonable inference that the accident happened because of want of proper care. In other words, the doctrine of res ipsa loquitur is applicable. This doctrine, which is well-entrenched in American jurisprudence, is stated as follows: Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper, care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from w;ant of care; As far as the second ground is concerned, taking into consideration the fact that the operator, owed his position to the company and the latter could remove him or terminate his services at will; that the station belonged to the company and bore its trade­ 1163

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

name and the operator sold only the products of the company; that the equipment used belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised and conducted periodic inspections of the station; that the price of the products sold was fixed by the company; and that the receipts signed by the operator indicated that he was issuing such receipts only for the company, all prove that the operator is an agent and not an independent contractor. (Africa vs. Caltex [PhilJ, Inc., 16 SCRA 448.) 23. Distinguish between a quasi-delict and a criminal offense. ANS: The two (2) may be distinguished from each other in the following ways: (1) Crimes affect the public interest, while quasi-delicts are only of private concern; (2) The Penal Code punishes or corrects the criminal act,, while the NCC, by means of indemnification, merely repairs the damages incurred; (3) Crimes are not as broad as quasi-delicts, because the former are punished only if there is a law clearly covering them, while the latter include all acts in which any kind of fault or negligence intervenes. (Barredo vs. Garcia and Almario, 73 Phil. 607.) 24. As a result of a collision between a taxicab operated by A Taxicab Co. and another taxicab operated by B Taxicab Co., P, a passenger in the first taxicab, was injured. A criminal action was commenced against both drivers. (a) In order to" maintain the independent character of the action to recover damages, is it necessary that P must reserve his right to institute a civil action separately? (b) As far as P’s right of action for damages against both operators is concerned, is it necessary that he must choose between proceeding in accordance with the provisions of the NCC on culpa contractual and culpa aquiliana and proceedings in accordance with the provisions of the

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Arts. 2176-2194

Revised Penal Code on the liability of employers for crimes committed by their employees? (c) Suppose that in both the criminal and civil case, both operators are able to prove due diligence in the selection and supervision of their drivers, will such a defense relieve them of liability for damages? ANS: (a) In order to maintain the independent character of the action to recover damages, it is not necessary that P must reserve his right to institute a civil action separately. True, The Revised Rules of Criminal Procedure, 2000, declares that such a reservation should be made. But such a reservation is not necessary because it is now beyond cavil that the negligence of the two (2) drivers gives rise to at least 2 separate and independent liabilities, (a) the civil liability arising from crime or culpa criminal, and (b) the civil” liability arising from civil negligence (culpa contractual and culpa aquiliana). These concepts of fault or negligence are so distinct from each other that exoneration from one does not result in exoneration from the other. (See problems under Arts. 31-34, NCC.)

(b) No, it is not necessary that P must choose or sele his remedy or remedies. What is barred or proscribed by the law is double recovery, not double remedies. A negligent act, such as that committed in this case, gives rise to at least two separate and independent liabilities: (a) the civil liability arising from crime or culpa criminal, and (b) the liability These two concepts of fault or negligence are so distinct from each other that exoneration from one does not result in exoneration from the other. Adjectively and substantively, they can be prosecuted "separately and independently, although Art. 2177 of the NCC precludes recovery of damages twice for the same negligent act or omission. Consequently, P may select his remedy or remedies, or, if he so desires, he may use both remedies either simultaneously or successively. (Padua vs. Robles, 66 SCRA 485; Elcano vs. Hill, 77 SCRA98.) Thus, if P institutes the two actions simultaneously, and varying amounts are awarded in the two (2) cases, he may recover only the bigger amount. If there has already been a recovery in one 1165

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OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

case and in the other case the amount adjudged is bigger, he shall be entitled in the second case only to the excess. But if he had already been paid a bigger amount in the first case, he may not recover anymore in the second case, (Ibid.) (c) If both operators are able to prove due diligence in the selection and supervision of their drivers in the civil action based on the crime committed (culpa criminal), such a defense will not relieve them of liability. They are still subsidiarily liable under Art. 103 of the Revised Penal Code. The reason is the very nature of their obligation. It is subsidiary. However, if they are able to prove such due diligence in the action based on both culpa contractual and culpa aquiliana, I distinguish. In the case of A Taxicab Co., since P was a passenger in the taxicab operated by said company, such a defense will not relieve the company of liability. Under Art.. 1759 of the NCC, the company is still liable. The defense, however, may prove good faith on the part of the company, in which case, the amount of damages recoverable may be mitigated. In the case of B Taxicab Co., since the action against said company is based on a quasi-delict or culpa aquiliana, such a defense will relieve the company of liability. This is expressly recognized in Art. 2180 of the NCC. The reason for the above distinction is simple. In the case of A Taxicab Co., we apply the law on common carriers. In said law (Art. 1759 of the NCC.), we do not adhere to the theory of respondeat superior; we adhere to the theory that there is always an implied duty of the carrier to bring its passenger, safely to his place of destination. On the other hand, in the case of B Taxicab Co., we apply the law on quasi-delicts. In said law (Art. 2180 of the NCC.), we adhere to the theory that if the driver is negligent, there arises a disputable presumption of negligence of the employer or operator, a presumption which can be overcome by proof of due diligence in the selection and supervision of his employees or drivers. 25. As a result of a vehicular accident involving a Mer­ cedes Benz owned and driven by A, a jeep owned and driven by B and a truck owned by C and driven by D, where the 1166

OBLIGATIONS AND CONTRACTS Extra-Contractual Obligations Quasi-Delicts

Arts. 2176-2194

Mercedez Benz and the jeep were badly damaged, criminal actions for damage to property through reckless impru­ dence were instituted by A against B and B against D. After joint hearing of the two cases, the court rendered judgment acquitting B and declaring D as guilty beyond reasonable doubt. According to the court, the collision between A’s car and B’s jeep was the result of the latter having been bumped from behind by the truck driven by D. Subsequently, A insti­ tuted a civil action $1^ damages against both B and C either in the alternative or in solidum* The court dismissed the ac­ tion on the ground that it is barred by final judgment and by plaintiffs failure to reserve his right to institute a civil action separately. Is the order of dismissal correct? ANS: As far as G is concerned, the order of dismissal is not correct for the following reasons: (1) Well-settled is the rule that for a prior judgment to constitute a bar to a subsequent case, the following requisites musst concur: (1) it must be a final judgment; (2) it must have been rendered by a court having jurisdiction over the subject matter and over the parties;. (3) it must be a judgment on the merits;, and (4) there,must be between the first and second actions identity of parties, identity of subject matter and identity of cause of action. Obvious is the fact that in the criminal case, D was not prosecuted for damage to A’s car but for damage to B’s jeep. Neither was C a party in said case. And more importantly, in the criminal case, the cause of action was the enforcement of the civil liability arising from criminal negligence under Art. 100 of the Revised Penal Code, whereas the instant civil case is based on quasi-delict under Art. 2180, in relation to Art. 2176 of the NCC. As far as B is concerned, the order of dismissal is correct. Plaintiffhad opted to base his cause of action against B on culpa criminal and not on culpa aquiliana. There is, therefore, no need for him to reserve his right to file a separate civil action as his action for civil liability was deemed impliedly instituted in the criminal case. Neither would an independent civil action lie. According to the court, B cannot be held liable for the damage sustained by A’s car. In other words, “the fact from which the civil might arise did not exist.” Accordingly, the civil action has already been extinguished 1167

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in consonance with the Revised Rules on Criminal Procedure, 2000. And even if A’s cause of action against B were not ex-delicto, the end result would be the same, it being clear from the judgment in the criminal case that B’s acquittal was not based on reasonable doubt. (Art. 29, NCC; Mendoza vs. Arrieta, 91 SCRA 113.) 26. Suppose that the injured parties had instituted an action to recover damages against both the operator and the driver of a jeepney based on culpa aquiliana and the case is dismissed on the ground that the driver was not negligent, and during the pendency of the civil case, a criminal case is filed against said driver and the judgment is one of conviction, would the previous dismissal of the civil action based on culpa aquiliana preclude the application of Art. 103 of the Revised Penal Code? ANS: This question was raised up for the first time in Jocson vs. Glorioso (22 SCRA 316). In this case, it was held that the previous dismissal of the action based on culpa aquiliana could not. be a bar to the enforcement of the subsidiary liability of the employer required by Art. 103 of the Revised Penal Code. The principle of res judicata is not applicable because the previous action is based on culpa aquiliana, while the second action is based on the subsidiary liability of employers for criminal offenses committed by their employees while performing their duties. Hence, there can be no identity of reliefs so as to make the second case fall under the operation of Rule 8, Sec. 1(d) of the Rules of Court. What clearly emerges, therefore, is the controlling force of the principle that once there is a conviction for a felony, final in character, the employer, according to the plain and explicit command of Art. 103 of the Revised Penal Code, is subsidiarily liable if it be shown that the commission thereof was in the discharge of the duties of such employee. To deprive the injured parties now of this remedy would be to deprive them altogether of the indemnity to which they are entitled by operation of law. 27. A freight truck owned and operated by plaintiff X and driven by Y and a bus owned and operated by defendant A and driven by B collided resulting in heavy damage to the freight truck. A criminal case for damage to property through 1168

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Arts. 2176-2194

reckless imprudence was brought against B resulting in hi8 conviction. In said case, X expressly reserved his right to institute a civil action separately. Subsequently, X instituted the civil action against A, but it was dismissed on the ground of prescription. The judgment became final. Later, X brought the present action based on the subsidiary liability of A under the Revised Penal Code. The trial court dismissed the action on the ground of res judicata. Is the court correct? Why? ANS: The trial court is not correct. (Mendoza vs. La Mallorca Bus Co., 82 SCRA 243.) It is well-settled that the essential requisites of res judicata are: (1) the former judgment must be final; (2) it must have been' rendered by a court having jurisdiction on the merits; (3) it rirast be a judgment on the merits; and (4) there must be, between the first and second actions: (a) identity of parties; (b) identity of subject matter; and (c) identity of cause of action. The only dispute here is whether or not there is identity of cause of action; The test of identity of cause of action is: Would the same evidence support and establish the former and present cause of action? Before applying the above-stated test, it must be noted that the former action which was dismissed on the ground of prescription was based on quasi-delict, while the present action is based on criminal liability. Applying the test, it is evident that res judicata cannot be a defense. Defendant could easily thwart an adverse decision in the former action based on quasi-delict by proving due diligence in the selection and supervision of his driver, but this same evidence will fail in the present action for his liability is inseparable from that of his driver once the latter is finally convicted. (Mendoza vs. La Mallorca, supra.)

28. In a criminal case for homicide through reckless imprudence, upon arraignment, defendant driver, D, pleaded guilty. The trial court rendered judgment convicting him and sentencing him to pay the heirs of the deceased P12,000. Upon motion of the heirs of the deceased, a writ of execution was issued against D, but was returned unsatisfied because 1169

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of the letter’s insolvency. Whereupon, a motion for the issuance of a subsidiary writ of execution was filed against E, D’s employer. E now contends that since he is not impleaded in the criminal case, the proper remedy in order to enforce the subsidiary liability of employers under Art. 103 of the Revised Penal Code is to bring a separate civil action against him. Should this contention of E be sustained? ANS: This contention of E should not be sustained. Pursuant to Art. 103, in relation to Art. 102, of the Revised Penal Code, an employer may be subsidiarily liable for the employee’s civil liability in a criminal action when: (1) the employer is engaged in any kind of industry; (2) the employee committed the offense in the discharge of his duties; and (3) he is insolvent and has not satisfied his civil liability. The subsidiary liability of the employer, however, arises only after conviction of the employee in the criminal;case. It is a well-settled doctrine that the decision convicting the employee is binding and conclusive upon the employer not only with regard tb his subsidiary liability but also with regard to the amount of the liability. Hence, the court has no other function than to render a decision based upon the indemnity awarded in the criminal case and has no power to amend or modify it even if in its opinion an error has been committed in the decision. Consequently, the validity of any claim or defense of the employer can be litigated and resolved in the same criminal case. The employer may adduce all the evidence necessary for that purpose. Indeed, the enforcement of his subsidiary liability may be conveniently litigated within the same proceeding because the execution of the judgment is a logical and integral part of the case itself. This would certainly facilitate the application of justice to the rival claims of the contending parties. (Pajarito vs. Senetis, 87 SCRA 277.) 29. “MM,” driver o f“X” Bus Co., drove the bus recklessly and injured “NN,” a pedestrian. “NN” sued “X” Bus Co. for damages. The bus company is liable to “NN” either under the Revised Penal Code or under the NCC. Explain and distinguish the liability of the bus company under the Revised Penal Code and under the NCC with

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respect to the nature of such liability and the defenses that may be interposed. ANS: Under the Revised Penal Code* the bus company is merely subsidiarily liable to “NN.” The latter, therefore, must proceed against “MM” criminally. He may allow the civil action to be impliedly instituted in the criminal case or he may reserve his right to institute a civil action separately. If “MM” is convicted but is insolvent, the bus company is subsidiarily liable. May the company relieve itself of liability by proving due diligence of a good father of a family in the selection and supervision of its drivers? It cannot.. The reason is the very nature of the obligation itself This is wellsettled. Under the NCC, however, the bus company is directly and primarily liable to “NN.” The reason is this. The negligence of “MM” is disputably presumed to be the negligence of the company. “NN,” therefore, may proceed against the company alone. The basis will be a quasi-delict or culpa aquiliana. May the company relieve itself of liability by proving due diligence in the selection and supervision of its drivers? According to the NCC, it may. 'In such a case, the presumption of negligence op the part of the company has been overcome. (Note: The above answer is based on Arts. 100 and 103 of the Revised Penal Code, on Arts. 2176, 2177 and 2180 of the NCC and on a long line of notable decisions rendered by the SC.)

30. C, a 14-year-old son of A and B, was struck by a taxicab driven by X and operated by Y causing his death. A civil action based on culpa aquiliana was instituted by A and B against both X and Y. The trial court came out with a decision holding X liable for damages amounting to P27,000, but absolving Y from any liability. A year later, X was convicted in the criminal case of the offense of homicide through reckless imprudence. In the decretal portion of the decision, the court declared that the civil liability of the accused had already been determined and assessed in the civil case based on culpa aquiliana. Because of the failure of A and B to collect the P27,000 awarded to them from X, they finally brought an action against Y to enforce his subsidiary

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liability under Art. 103 of the Revised Penal Code. Will the action prosper? ANS: Yes, the action will prosper. Civil liability co-exists with criminal responsibility. In negligence cases, the offended party (or his heirs) has the option between an action for enforcement of civil liability based on culpa criminal under Art. 100 of the Revised Penal Code and an action for recovery of damages based on culpa aquiliana under Art. 2177 of the NCC. The action for enforcement of civil liability based on culpa criminal is deemed simultaneously instituted with the criminal action, according to Section 1 of Rule 111 of the Rules of Court, unless expressly waived or reserved for a separate application by the offended party. Art. 2177 of the NCC, however, precludes recovery of damages twice for the same negligent act or. omission. In the case at bar, A and B chose, in the first instance, an action for recovery of damages based on culpa aquiliana under Arts. 2176, 2177, and 2180 of the NCC which action proved to be ineffectual. There is no inconsistency between such action and their subsequent application for enforcement of the civil liability arising from the offense committed by X, and consequently, the exaction of Y’s subsidiary responsibility. Allowance of the latter application involves no violation of the proscription against double recovery of damages for the same negligent act or omission. Moral justice, therefore, dictates that the decretal portion of the decision of the trial court stating that the civil liability of the accused had already been assessed in the previous civil case, although circuitous and ambiguous, should be interpreted to mean that the amount of P27,000 assessed in the civil case as damages to be awarded to A and B should also be the amount assessed in the criminal case. Consequently, under the principle of subsidiary liability recognized in Art. 103 the Revised Penal Code, A and B can now proceed against Y for recovery of the P27,000 award given to them. (Padua vs. Robles, 66 SCRA 485.) (Note: The above decision of the SC has been the subject of debate ever since its promulgation, In effect, it would now be possible for the offended party or his heirs to institute two (2) simultaneous actions —

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one based on culpa aquiliana and the other based on culpa criminal. As Justice Barredo has stated it in his concurring opinion: “It is by now beyond all cavil, as to dispense with the citation of jurisprudence, that a negligent act, such as that committed [in this case], gives rise to at least two separate and independent kinds of liabilities, [1] the civil liability arising from crime or culpa criminal and [2] the liability arising from civil negligence or the so-called culpa aquiliana. These 2 concepts of fault are so distinct from each other that exoneration from one does not result in exoneration from the other, Adjectively and substantively, they can be prosecuted separately and independently of each other, although Article 2177 of the NCC precludes recovery of damages twice for the same negligent act or omission, which means that should there be varying amounts awarded in 2 separate cases, the plaintiff may recover, in effect, only the bigger amount. That is to say, if the plaintiff had already been ordered paid an amount in one case and in the other case the amount adjudged is bigger, he shall be entitled in the 2nd case only to the excess over that fixed in the 1st case, but if he had already been paid a bigger amount in the 1st case, he may not recover anymore in the 2nd case. [Padua vs. Robles, supra].)

31. X, a married minor, residing in the house of his father, F, and depending upon the latter for his subsistence, killed C, a son of A and B. He was charged with the crime of homicide, but was acquitted on the ground that his act was not criminal because of lack of intent to kill, coupled with a mistake. Subsequently, A and B brought an action for damages against both X and F based on the quasi-delict committed by X. Considering that X is a married minor, may his father be held liable? Reason. ANS: Yes, F may be held liable for damages under Art. 2180 of the NCC; Under Art. 236 of the FC, the emancipation of the minor by marriage, although he be below 21 years of age, is full and absolute, such that the parents or guardians can no longer be held liable for the torts of married minors under Art. 2180 of the NCC. However, RA No. 6809 has excepted marriage and torts from the complete emancipation of one who has reached 18 years of age and has returned to the parents and guardians the responsibility for the torts committed by those between eighteen and 21 years of age but who are still living with them. In view of the change brought about by RA No. 6809, the ruling in Elcano vs. Hill would still be applicable.

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32. A is the registered owner of a motor vehicle which, while being driven by B, hit C, the son of X. As a result of the accident, C died. B was prosecuted for homicide through reckless imprudence and was convicted. As he was insolvent, X brought an action for damages against A, the registered owner of the vehicle, without including B as a party defendant. A tried to present evidence to show that he is not actually the owner of the vehicle, but was not allowed by the court. (1) Is the action of the court in not allowing A to present evidence to show that he is not actually the owner of the vehicle justified? Reason. (2)

Can A be held liable for damages? Reason.

ANS: (1) Yes, the action of the court is justified. This was the ruling of the Supreme Court in Erezo vs. Jepte (102 Phil. 103). The registered owner of a motor vehicle is not allowed to show proof of the ownership of such vehicle in order to escape liability. Otherwise, it would be easy for him, by collusion with others, to escape responsibility by transferring the vehicle to one who possesses no property. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury other than by a recourse to the registration in the Land Transportation Office. The protection which the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. (2) A is liable for damages. According to the SC in the case cited, the registered owner of the vehicle, even if not used for a public service, is primarily responsible under Art. 2180 of the NCC to the public or to third persons for injuries caused to the latter. The reason has already been stated in the preceding paragraph. (For liability of registered operator of public utility vehicles — see Tamayo vs. Aguino, 105 Phil. 949; Vargas vs. Langcay, 6 SCRA 174; Perez vs. Gutierrez, 53 SCRA 149; Jauniza vs. Jose, 89 SCRA 306.) 33. A van owned by Elmer and driven by Dodie, while negotiating a downhill slope of a city road, suddenly gained speed, obviously beyond the authorized limit in the area, and bumped a car in front of it, causing severe damage to the car

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and serious injuries to its passengers. Elmer was not in the car at the time of the incident. The car owner and the injured passengers sued Elmer and Dodie for damages caused by Dodie’s negligence. In their defense, Dodie claims that the downhill slope caused the van to gain speed and that, as he stepped on the brakes to check the acceleration, the brakes locked, causing the van to go even faster and eventually to hit the car in front of it. Elmer and Dodie contend that the sudden malfunction of the van’s brake system is a fortuitous event and that, therefore, they are exempt from any liability. (a) (b) delict.

Is this contention tenable? Explain. Explain the concept of vicarious liability in quasi­

(c) Does the presence of the owner inside the vehicle causing damage to a third party affect his liability for his driver’s negligence? Explain. (2002) ANS: (a) The contention is not tenable. Dodie was negligent in not checking the brakes before approaching the slope. Moreover, he could have used the gears to slow down the descend. (b) Art. 2180 of the NCC provides for the vicarious liability of employers. However, this is based on their own negligence in the selection and supervision of their employees. There is no showing in this case that the owner was negligent in this regard. (c) Art. 2154 of the NCC provides that in motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune. However, in one case, the SC held that the owner cannot be held liable if he himself did not know how to drive. 34. When is the State liable for quasi-delicts committed by its employees? Explain. ANS: According to the law, the State is liable for a quasi-delict only when it acts through a special agent; but not when the quasi? delict is committed by the official to whom the task done properly pertains, in which case such official and not the State shall be liable.

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(Art. 2180, par. 6, NCC.) By “special agent,” the law refers to a government employee who is performing a job or act foreign to his usual duties. (Merritt vs. Gov’t, o f the Phil., 34 Phil. 311; Rosete vs. Auditor General, 81 Phil. 453.) In other words, the State is liable only for torts caused by its special agents, specifically commissioned to carry out the acts complained of outside of such agent’s regular duties. (Rep. o f the Phil. vs. Palacio, 23 SCRA 899.) Thus, if the accident causing the injury complained of was due to the negligence of the driver of an ambulance belonging to the Philippine General Hospital (Merritt vs. Gov't; supra.) or of the driver of a vehicle belonging to a certain provincial government (Palafox vs. Ilocos Norte, 102 Phil. 1186.), and at the time of the accident, such driver was- performing his usual duties, only such driver and not his employer can be held liable. 35. In motor vehicle mishaps, where the proximate cause of the accident is the fault or negligence of the driver, what is the difference between the liability of the owner of the vehicle who was in the vehicle at the time of the mishap and that of the owner who was not in the vehicle? ANS: In Art. 2184, the NCC declares that “in motor vehicle mishaps, the owner is .*olidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune x x x if the owner was not in the motor vehicle, the provisions of Art. 2180 are applicable.” From this provision, it is clear that the liability of an owner who was in the vehicle at the time of the mishap and that of one who was not in the vehicle may be distinguished from each other in the following ways: (1) While the owner who was in the vehicle at the time of the mishap, and who could have, by the use of due diligence, prevented the misfortune, cannot avail himself of the defense of due diligence in the selection and supervision of his employees, the owner who was not in the vehicle can avail himself of such defense. (2) While the owner who was in the vehicle at the time of the mishap is solidarily liable with his driver, the owner who was not in the vehicle is not solidarily liable with his driver; in other words, while the owner who was in the vehicle, after payment of the claim 1176

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of the victim, can demand from the driver reimbursement o f only 1/2 of the entire amount which he has paid/Art. 1217, NCC.), the owner who was not in the vehicle, after payment of the claim o f the victim, can demand from the driver reimbursement of the entire amount which he has paid. (Art. 1281, NCC.) 36. A Cadillac driven by “B” and owned by and a Mercury driven by the owner, MC,” collided somewhere in Highway 54. As a result of the accident, “C” including his wife and four children were injured. Subsequently, the six victims brought this action for damages against “B ” and “Y.” There is no doubt that the collision was directly traceable to “B’s” negligence. Question: Can “Y,” owner of the Cadillac, who was in the vehicle at the time of the accident, be held solidarily liable with his driver, “B” pursuant to A rt. 2184 of the NCC? ANS: The factual setting of the above problem is identical to that of Caedo vs. Yu Khe Thai (26 SCRA 381). A c c o r d i n g to the Supreme Court, the applicable law is Art. 2184 of the NCC. Under this article, if the causative factor was the driver’s negligence, the owner of the vehicle who was present is likewise held liable if he could have prevented the mishap by the exercise of due diligence. The rule is not new, although formulated as law for the first time in the NCC. It was applied in Chapman vs. Underwood (27 Phil. 374). The basis of the master’s liability is not respondeat superior but rather the relationship of pater familias. The theory is that ultimately the negligence of the servant, if known to the m a s t e r and susceptible of timely correction by him, reflects his own negligence if he fails to correct it in order to prevent injury or damage. So, the real question in this case is can negligence be imputed to “Y”; in other words, being present in the vehicle, could he have prevented the misfortune? We do not see that such negligence may be imputed. In the first place, the records disclose that “B” has been “ YV* driver for a long time and during that period, there is no r e c o r d o f any violation of traffic rules and regulations. In the second place, when it comes to the accident itself, the records also disclose that the car was not running at an unreasonable speed; that the road was wide and open and devoid of traffic that early morning; that there was no reason for the car owner to be in any special state of alert. And then

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the time element was such that there was no reasonable opportunity for “Y” to assess the risks involved and warn his driver accordingly. The test of imputed negligence under Art. 2184 of the NCC must necessarily be subjective. What would be a negligent omission on the part of a car owner who is in the prime of age and knows how to handle a motor vehicle is not necessarily so on the part, say, of an old and infirm person who is not similarly equipped. Consequently, we must depend upon what his perception, his own sense would tell him to do in order to avoid the accident. The test of his negligence within the meaning of Art. 2184, therefore, is his omission to do that which the evidence of his own senses tells him he should do in order to avoid the accident. Judged by this test, the car owner, “Y” in the instant case was not negligent, and therefore, cannot be held solidarity liable with his driver* 37. (a) A, a pedestrian, was injured when he was struck by an automobile owned by X and driven by Y. The proximate cause of the accident was the negligence of Y. X, at the time of the accident, was in the automobile. Assuming that the latter, by the use of due diligence, could have prevented the accident, what would be the character of his liability? (b) Suppose that in the above case, X was not in the automobile at the time of the accident, what would be the character of his liability? ANS: (a) X is not only, primarily and directly liable; he is also solidarity liable with his driver, Y. This is clear from Art. 2184 of the NCC. Consequently, if he pays the entire amount of damages to A, he can demand from Y the latter's proportionate share, which in this case would be one-half of the amount. (Art. 1217, NCC.) Under our law, if it can be shown that the owner was in the vehicle at the time the accident took place, and it can also be shown that he could have, by the use of due diligence, prevented the misfortune, he is not only primarily and directly liable, being the employer, he becomes a joint tortfeasor. Consequently, by way of penalty, the law declares that he is solidarily liable with his driver. 'Art. 2184, NCC.) Therefore, if he pays the entire amount of damages to the injured party, at the most, he can demand reimbursement of 3nly one-half of the amount which he paid. (Art. 1217, NCC.)

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(b) It is submitted that X cannot be held solidarily liable with his driver, Y. In other words, he is primarily and directly liable, because the law presumes that he has not exercised due diligence in the selection and supervision of his driver, but since he did not participate directly in bringing about the injury complained of, he cannot be held solidarily liable. It must be noted that the responsibility of an owner of a vehicle who was not in the vehicle at the time of the accident is not as great or as serious as the responsibility of one who was in the vehicle. That is why, under our law, although such owner who was not in the vehicle at the time the accident took place is primarily and directly liable, yet there is the consolation that if he pays the entire amount of damages to the injured party, he can demand reimbursement of the amount which he has paid from his driver. (Art. 2181, NCC.) 38. A 3-year-old child was bitten by a dog in the possession of the petitioners. She developed hydrophobia, a symptom of rabies and died of asphyxia broncho-pneumonia, a complication of rabies. Can the petitioners be held liable? ANS: Yes. Art. 2183 of the NCC holds the possessor — not necessarily tfie owner — of the offending animal liable even if the animal should escape or be lost. It does not matter that the dog was tame and was merely provoked by the child into biting her. The law does not speak of vicious animals but covers even tame ones as long as they cause injury. Besides, the child was only three years old. (Miranda Vistil vs. I AC, November 6,1986.) 39. A, while waiting for a jeepney at the corner of Luneta and P. Burgos Avenue, fell into an uncovered manhole, as a result of which he suffered injuries. Subsequently, he brought an action for damages against the City of Manila invoking Art. 2189 of the NCC, which declares that provinc­ es, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control and supervision. Defendant City, however, contends that under Sec. 4 of R.A. No. 409 (Charter of Manila), it is not liable. Be­

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sides, even assuming that Art. 2189 of the NCC is applicable, P. Burgos Avenue is a national road; it does not belong to the City of Manila. Decide the case. ANS: Defendant City is liable under Art. 2189 of the NCC. Section 4 of Rep. Act No. 409 (Charter of Manila) refers to liability arising from negligence in general, regardless of the object thereof, whereas Art. 2189 of the NCC governs liability due to “defective condition of roads and streets” in particular; Consequently, the latter is applicable to the case at bar. The contention that P. Burgos Avenue is a national road, and therefore, does not belong to the City of Manila is untenable. Under Art. 2189 of the NCC, it is not necessary for the liability therein established to attach that the defective road or street should belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality has either “control or supervision” over said road or street. (City of Manila us. Teotico, 22 SCRA 267.) 40. Mr. and Mrs. R own a burned-out building, the firewall of which collapsed and destroyed the shop occupied by the family of Mr. and Mrs. S, which resulted in the injuries to said couple and the death of their daughter. Mr. and Mrs. S had been warned by Mr. and Mrs. R to vacate the shop in view of its proximity to the weakened wall but the former failed to do so. Mr. and Mrs. S filed against Mr. and Mrs. R an action for recovery of damages the former suffered as a result of the collapse of the firewall. In defense, Mr. and Mrs. R rely on the doctrine of “last clear chance” apeging that Mr. and Mrs. S had the last clear chance to avbid the accident if only they heeded the former’s warning to vacate the shop, and therefore Mr. and Mrs. R’s prior negligence should be disregarded. If you were the judge, how would you decide the case? State your reasons. (1990) ANS: I would decide in favor of Mr. and Mrs. S. The proprietor of a building or structure is responsible for the damages resulting from its total or partial collapse, if it should be due to the lack of necessary repairs. (Art. 2190, NCC.)

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As regards the defense of Mr. and Mrs. R relying on the doctrine of “last clear chance,” the same is not tenable because according to the Supreme: Court in one case (De Roy vs. Court o f Appeals, G.R. L80718, January 29, 1988, 157 SCRA 757J, the doctrine of “last clear chance” is not applicable to instances covered by Art. 2190, NCC. Further, in Phoenix Construction, Inc. vs. Intermediate Appel­ late Court (G.R. L-65295, March 10, 1987, 148 SCRA 353), the Su­ preme Court held that the role of the common law “last clear chance” doctrine in relation to Article 2179 of the NCC is merely to mitigate damages within the.context of contributory negligence. 41. (a) What is the character of the responsibility of two (2) or more persons who are liable for a quasi-delict? (b) Would it be correct to say that, so long as the accident causing the injury complained of was due to the concurrent acts of two (2) or more persons, the responsibility of such persons is solidary? ANS: (a) According to Art. 2194 of the NCC, the responsibility of 2 or more persons who are liable for a quasi-delict is solidary. (b) Yes, it would be correct to say that, so long as the accident causing the injury complained of was due to the concurrent acts of two (2) or more persons, the responsibility of such persons is solidary. The same is true whether such acts constitute a quasi-delict, or an intentional tort, or a strict liability tort, or even a criminal offense. This is so, because of the very nature of their obligation. As a matter of fact, the^principle is even extended to those cases where there is a pre-existing contractual relation between the injured person and the persons responsible for the injury. 42. In a collision between a public service passenger bus and a freight truck, one of the bus passengers suffered physical injuries. Subsequently, this injured passenger brought suit against the owners of both vehicles. It is admitted that both drivers were at fault. (a)

Is the passenger entitled to moral damages?

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(b) Are the defendants solidarily liable or not? ANS: (a) The injured passenger is entitled to recover moral damages from the owner of the freight truck but not from the owner of the passenger bus. It must be noted that the only way by which the injured passenger would be entitled to recover moral damages from the owner of the passenger bus would be to predicate his claim either on No. 1 or No. 2 of Art. 2219 or of Art. 2220 of the NCC. In other words, he must prove that his claim is based on a criminal offense resulting in physical injuries (Art. 2219, No. 1.) or on a quasi-delict causing physical injuries (Art. 2219, No. 2.) or that there was fraud or bad faith on the part of the defendant. It is evident that this would not be possible as far as his claim against the owner of the passenger bus is concerned since his action against the latter is based on culpa contractual. (Cachero vs. Manila Yellow Taxicab Co., 101 Phil. 523; Verzosa vs. Baytan, L-14092, April 29, 1960; Rex Taxicab Co. vs. Bautista, L-15322, September 30, 1960.) As far as the owner of the freight truck is concerned, the injured passenger is certainly entitled to recover moral damages from him. This is so, because the claim against him is based on a quasi-delict or culpa aquiliana. No. 2 of Art. 2219 of the NCC expressly declares that moral damages are recoverable in such case. (b) We must distinguish. Since moral damages can be recovered only from the owner of the freight truck it is apparent 5 that he alone can be held liable for such damages. However, as far as actual or compensatory damages are concerned, according to the Supreme Court in Gutierrez vs. Gutierrez (56 Phil. 177) and Viluan vs. Court of Appeals (16 SCRA 742), cases with similar facts, both defendants are liable solidarily. Nor should it make any difference that the liability of one springs from contract while that of the other springs from quasi-delict; The reason for this, although it was not stated in the cases cited, is that the very nature of their obligation requires solidarity. (Art. 1207, NCC.)

1182

Title XVIII DAMAGES (Arts. 2195-2235) 1.

Define damages.

ANS: Damages may be defined as sum; of money, which? the law awards or imposes as pecuniary compensation, recompense, or. ; satisfactionforan;injurydoneq;^ayrcflng^ of the breach of some duty or the violation of; some^right. (35 Am. Jr. 387.) 2. What are the different kinds of damages recoverable tpider our NCC? Define each of them. ANS: The different kinds of damages recoverable under our NCC are: -v .. ,7 , (1) Actual or compensatory damages, or the compensation awarded to a person for such pecuniary loss suffered by him as he has d u i y ^ r o (Art. 2199, NCC.) (2) Moral damages, or the compensation awarded to a person for physical^suffering, mental anguish, fright, serious anxiety, besmirched ,reputation, wounded feelings, moral shock, social humiliation, and similar injury. (Art. 2217, NCC.) (3) Nominal damages, or an amount awarded to a person in order that his right, which had been violated or invaded, may be vindicated or recognized: (Art. 2221, NCC.) (4) Temperate or moderate damages, or the compensation which is more than nominal but less than compensatory damages, awarded to a person when the court finds that he has suffered some Iq.sSjbut its amount cannot, from the nature of the case, be proyed.with certainty. (Art 2224, NCC.)

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(5) Liquidated damages, or that agreed upon by the parties to a contract, to be paid in case of breach thereof. (Art. 2226, NCC.) (6) Exemplary or corrective damages, or that imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. (Art. 2229, NCC.) 3. What are the two (2) kinds of actual or compensa­ tory damages? Define each of them. ANS: The two (2) kinds of actual or compensatory damages are udano emergente” and “lucro cesante.” The first refers to the value of the loss suffered, while the second refers to the profits which the obligee failed to obtain. (Art. 2200, NCC.) 4. May actual damages be recovered on the basis of mere testimony? ANS: In the case of Fuentes vs. CA (253 SCRA 430), the Court held that as there is no tangible document upon which the actual damages is based, actual damages cannot be recovered on the basis of mere testimony. In crimes and quasi-delicts, the defendant is liable for all damages which are the natural and probable consequences of the act or omission complained of. To seek recovery for actual damages, it is essential that the injured party proves the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages, but must depend on actual proof. There must be factual basis for an award of actual damages. Actual damages to be awarded must be proven by clear evidence. 5. Can the Court award indemnification for loss of earning capacity without adequate proof? ANS: The Court cannot award indemnification for loss of earning capacity without adequate proof. Well-settled is the rule that the indemnification for loss of earning capacity must be duly proven. Hence, the bare testimony of the brother of the deceased is not sufficient proof. Indemnification for loss of earning capacity partakes of the nature of actual damages

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Arts. 2195-2235

which must be duly proven; A self-serving statement being unreliable, is not enough. But for the lost income to be recovered, there must be likewise be an unbiased proof of the deceased’s average, not just gross, income. An award for loss of earning capacity refers to the net income of the deceased, i.e., his total income net of expenses. (People vs. Cuenco, G.R. No. 143819, January 19, 2002.) 6. In determining compensatory damages in actions based on contracts and quasi-contracts, what are the consequences for which the obligor can be held liable? ANS: In contracts and quasi-contracts; the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach, of the obligation, and which the parties have foreseen at the time the obligation was constituted. ; In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. (Art. 2201, NCC.) 7. “A,” a fourth-year medical student at the University of Santo Tomas, was severely injured in an accident white he was a passenger in a bus operated by the Laguna-Tayabas Bus Co. As a result of the accident, he became virtually an invalid both physically and mentally, and as a consequence, he was unable to continue with his studies. Subsequently, he and his parents brought an action for damages against the Bus Company. The records show that at the time of the accident, “A” was a professional student, being supported by his parents; that the proximate cause of the accident was the negligence of the driver of the bus; and that the defendant company had exercised due diligence in the selection and supervision of its employees. (a)

Is the defendant company liable for damages?

(b) If so, in addition to compensatory damages for hospitalization and medical expenses, is “A” entitled to recover the income which he could have earned had he finished his medical course? 1185

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(c) fees?

OBLIGATIONS AND CONTRACTS Damages

Is he entitled to moral damages and attorney’s

(d) How about his parents — are they not entitled to damages? ANS: (a) Undoubtedly, the defendant company is liable. It must be noted that there is a pre-existing contractual relation of carriage between “A” and the Bus Company. In this jurisdiction, it is well-settled that the defense of due diligence in the selection and supervision of employees is not available as a defense in damage actions based on culpa contractual. It is, of course, available in actions based on culpa aquiliaria where there is a disputable presumption to the effect that the fault or negligence of the employee is the fault or negligence of the employer, but in actions based on culpa contractual> the fault or negligence of the employee is conclusively presumed to be the fault or negligence of the employer. As a matter of fact, Art. 1759 of the NCC expressly declares that the liability of common carriers does not cease upon proof that they exercised due diligence in the selection and supervision of their employees. (b) Although not available as a defense, the fact that the defendant company had exercised due diligence in the selection and supervision of its employees is sufficient to prove that it had acted in good faith. Consequently, in determining the extent of its liability, the provision of the first paragraph of Art. 2201 of the NCC is applicable. Under this provision, the company is liable for all of the natural and probable consequences of the breach of the obligation which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. There is, therefore, no question that the defendant company can be held liable for all medical and hospitalization expenses incurred by “A.” But how about the income which the latter could have earned had he not been prevented by the accident from finishing his medical course, can we place such loss of future income in the same category as medical and hospitalization expenses? There is no reason why we cannot. Such fact is not only a natural and probable consequence of the accident; it could have been reasonably foreseen by the parties at the time “A” boarded the bus of the defendant. At that time he was already a fourth-year student in medicine in a reputable university, and we can very well assume that he could have finished the course and would have passed the board examination in due time. As regards the income that he could

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have possibly earned as a medical practitioner, the amount of P300 could easily be expected as his minimum monthly income ,had he finished his studies. Using this as basis, a total award of P25,000 compensatory damages, including medical and hospitalization expenses, would be fair enough. (Cariaga vs. Laguna Tayabas Bus Co., 110 Phil. 346.) (c) “A” is not entitled to moral damages. Art. 2219 of the NCC enumerates the instances when moral damages may be recovered. The case at bar does not fall under any one of them. Under our law, the only instances where moral damages are recoverable in damage actions predicated on culpa contractual are: (1) where the mishap results in the death of a passenger; and (2) where it is proved that the carrier was guilty of fraud or bad faith* even if death does not result. Neither is he entitled to attorney’s fees because this case does not fall under any of the instances enumerated in Art. 2208 of theNCC; (Cariaga vs. Laguna Tayabas Bus Co., supra.) (d) As far as the parents of “A” are concerned, it is evident that their claim for compensatory and moral damages is without merit.-The present action is based upon a breach of a contract of carriage to which they are not a party. Neither can they premise their claim on a quasi-delict since they themselves were not injured in the accident. (Cariaga vs. Laguna Tayabas Bus Co., supra.) 8. In determining compensatory damages in actions based on crimes and quasi-delicts, what are the consequences for which the defendant can be held liable? ANS: In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. (Art. 2202, NCC.) 9. (a) How much is the amount of damages recoverable for death caused by a crime or quasi-delict?

(b) In fixing the amount of award of compensator damages for death caused by a crime or a quasi-delict, do we still follow the rule that the minimum award shall be at least three thousand pesos?

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ANS: (a) The amount of damages for death caused by a crime or quasi-delict shall be at least P3,000 even though there may have been mitigating circumstances; In addition: (1) The defendant shall be liable for the loss of the earn­ ing capacity of the deceased,’ and the indemnity shall be paid to the heirs of the latter, such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the de­ fendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to law, the recipient who is not an heir called to the decedent’s inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a pe­ riod not exceeding 5 years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. (Art. 2206, NCC .) (b) In People vs. Pantoja (25 SCRA 468), the Supreme Court, speaking through Justice Capistrano, held: “In 1947, when the Project of the NCC was drafted, the Code Commission fixed the sum of P3,000 as the minimum amount of compensatory damages for death caused by a crime or quasi-delict. The Project of NCC was approved by both houses of the Congress in 1949 as the NCC of the Philippines which took effect in 1950. In 1948, in the case of People vs. Amansec, 80 Phil. 424, the Supreme Court awarded P6,000 as compensatory damages for death caused by a crime “considering the difference between the value of the present currency and that at the time when the law fixing a minimum indemnity of P2,000 was enacted.” The law referred to was Commonwealth Act No. 284 which took effect in 1938. In 1948, the purchasing power of the Philippine peso was 1/3 of its pre-war purchasing power. In 1960, when the NCC took effect, the minimum amount of compensatory damages for death caused by a crime or quasi-delict was fixed in Art. 2206 of the Code at P3,000. The article repealed by implication Commonwealth Act No. 284. Hence, from the time the NCC took effect, the court could properly have

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awarded P9,000 as compensatory damages for death caused by a crime or quasi-delict. It is common knowledge that from 1948 to the present (1968), due to economic circumstances, beyond government control, the purchasing power of the Philippine peso has declined further such that the rate of exchange now in the free market is one U.S. dollar to almost four Philippine pesos. This means that the present purchasing power of the Philippine peso is 1/4 of its pre-war purchasing power. We are, therefore, of the considered opinion that the amount o f award o f compensatory damages for death caused by a crime or quasi-delict should now be PI2,000. “Parenthetically, we should point out that, in proper cases, besides compensatory damages in the suhi of P I2,000, the courts may also award additional sums as further compensatory damages for loss of earnings, and for support. The courts may likewise award additional sums as moral damages and as exemplary damages.” (Arts. 2206 and 2230, NCC.) The above doctrine was subsequently reiterated in the cases of People vs. Ramos (26 SCRA 186), People vs. Gutierrez (26 SCRA 143), People vs. Acabado (36 SCRA 727), and Heirs of Raymundo Castro vs. Bustos (27 SCRA 327), and many others. As a matter of fact, in the last case cited (Heirs o f Castro vs. Bustos), the Supreme Court held: “The amount of P3,000 referred to in the above article (Art. 2206.) has already been increased by this Court first, to P6,000 in People vs. Amansec, 80 Phil. 426, and lately to P12,000 in the case of People vs. Pantoja, G.R. No. L-18793, promulgated October 11, 1968, and it must be stressed that this amount, as well as the amount of moral damages, may be adjudicated even without proof of pecuniary loss, the assessment of the moral damages being left to the discretion of the court, according to the circumstances of each case.’” (Art. 2216.) (Note: In People vs. De la Fuente [126 SCRA 518], the Supreme Court increased the amount recoverable for the mere fact of death to P30,000.00. Although the Court did not state the reason for the increase, it is obvious that the line of reasoning which was followed in the Pantoja case must have been followed also in this case. Be that as it may, the precedent established in said case has been followed in subsequent cases. Said death indemnity was further increased to P50,000.00 in accordance with the policy adopted by the Supreme

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Court en banc on August 30, 1990. [People vs. Sazon, 189 SCRA 900; People vs. Jereza, 189 SCRA 690; People vs. De Guzman, 194 SCRA 618 and a long line o f other cases].)

10. When death occurs as a result of a crime, what then would be the different damages to which the heirs of the deceased are entitled? Itemize. ANS: In Heirs of Castro vs. Bustos (27 SCRA 327, 334-335), the Supreme Court, speaking through Justice Barredo (after citing and discussing the different laws applicable to this question, such as Arts. 100,104 and 107 of the Revised Penal Code, and Arts. 2202, 2203, 2204, 2206, 2208, 2211, 2216, 2230, and 2233 of the NCC.), declared: “When death occurs as a result of a crime, the heirs of the deceased are entitled to the following items of damages: 1.

As indemnity for the death of the victim of the offense — P12,000, without the need of any evidence or proof of damages, and even though there may have been mitigating circumstances attending the commission of the offense.

2.

As indemnity for loss o f earning capacity of the deceased — an amount to be fixed by the court according to the circumstances: of the deceased related to his actual income at the time of death and his probable life expectancy, the said indemnity to be assessed and awarded by the court as a matter of duty, unless the deceased had no earning capacity at said time on account of permanent disability not caused by the accused. If the deceased was obliged to give support, under Art. 291, NCC, the recipient who is not an heir, may demand support from the accused for not more than five (5) years, the exact duration to be fixed by the court.

3.

As moral damages for mental anguish — an amount to be fixed by the court. This may be recovered even by the illegitimate descendants and ascendants of the deceased.

4.

As exemplary damages, when the crime is attended by one or more aggravating circumstances — an amount to be fixed in the discretion of the court, the same to be considered separate from fines.

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Arts. 2195-2235

5.

As attorney’s fees and expenses of litigation — the actual amount thereof (but only when a separate civil action to recover civil liability had been filed or when exemplary damages are awarded).

6.

Interests in the proper cases.

7.

It must be emphasized that the indemnities for loss of earning capacity of the deceased and for moral damages are recoverable separately from and in addition to the fixed sum of P12,000 corresponding to the indemnity for the sole fact of death, and that these damages may, however, be respectively increased or lessened according to the mitigating or aggravating circumstances, except items 1 and 4 above, for obvious reasons.” As above-stated, the indemnity for the sole fact of death has been fixed in the sum of P50,000.00. Un­ der prevailing jurisprudence (People vs. Agudez, G.R. Nos. 138386-87, May 20, 2004; People vs. Malinao, G.R. No. 128148, February 16, 2004), People vs. Catbagan, G.R. Nos. 149430-32, February 23, 2004 and People vs. Quinzon, G.R. No. 133541, April 14, 2004, P50,000.00 shall be awarded as civil indemnity for death. This kind of civil indemnity is distinct and separate from other forms of indemnity for damages. It is automatically awarded without necessity for further proof, other than the fact of death, as well as the responsibility of-the accused therefor.

11. Suppose that the only surviving heir of a certain person whose death was caused by a crime or a quasi-delict is a brother or sister, can such brother or sister recover moral damages for mental anguish by reason of the death of the deceased? ANS: No, such brother or sister cannot recover moral damages for mental anguish by reason of the death of the deceased. No. 3 of Art. 2206 of the NCC is explicit. According to this provision, only “the spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.” Brothers and sisters are not

1191

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OBLIGATIONS AND CONTRACTS

Damages

included. (Receiver for North Negros Sugar Co. vs. Ibanez, 24 SCRA 797.) 12. According to Art. 2206 of the NCC, in determining the amount recoverable in case of death caused by a crime or a quasi-delict, the defendant can be held liable, among others, for the loss of earning capacity of the deceased which will be paid to the heirs of the latter. How do we determine the amount of such loss of earning capacity? ANS: In Villa Rey Transit, Inc, vs. Court of Appeals (31 SCRA 511), the SC held that the determination of the amount depends upon two (2) factors, namely: (1) the number of years on the basis of which the damages shall be computed; and (2) the rate at which the losses sustained by plaintiffs should be fixed. The first factor is based upon the life expectancy of the deceased. Although it is not the sole element, it is certainly an important element in fixing the amount recoverable by plaintiffs. Thus, in the case at bar, since the deceased was about 30 years old at the time of his death, under the formula (2/3 X [80 —age of deceased at death, in this case, age 30] = life expectancy) adopted in the American Expectancy Table of Mortality, it is clear that the life expectancy of the deceased is 33-1/3 years. As far as the second factor is concerned, the amount recoverable is not loss of the entire earning or gross income, but rather the loss of that portion of the earnings which the beneficiary (plaintiffs) would have received. In other words, only net earnings or income, not gross earnings, are to be considered. Hence, the basic formula is (the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses). Thus, in the case at bar, since the deceased had an annual salary of only P2,184, it is fair and reasonable to fix the deductible living, earning and other expenses at PI, 184, or about P i00 a month. Consequently, the loss of plaintiffs, who are the sisters of the deceased, would be roughly estimated at P I,000 a year, or P33,333.33 for the 33-1/3 years of the life expectancy of the deceased. (The above ruling was reiterated in Davila vs. Philippine Air Lines, 49 SCRA 497, where the victim was a lawyer of 30 with annual gross income of P15,000. However, the victim’s life expectancy was reduced to only 25 years

1192

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Arts. 2195-2235

because of ailments prior to the accident. In the case of his gross income, the amount of P7,200 was deducted from said income as living and earning expenses. Ultimately, his parents who were the plaintiffs were able to recover P195,000 for loss of earning capacity. (See also MD Transit vs. CA, 90 SCRA 542,) Admittedly, in several cases, the SC reduced the life expectancy multiplier considering the medical history such as when the deceased previously underwent a major surgery or when it was shown that he was treated for chest pains, backache or occasional feeling of tiredness and the fact that the deceased has been consistently engaged in dangerous and risky activity tending to shorten his life. In computing, the third factor, which is the necessary living expense, a survey of the more recent jurisprudence shows that the SC consistently pegged the amount of 50% of the gross annual income. When there is no showing that the living expenses constituted the smaller percentage of the gross income, the SC fix the living expenses at half of the gross income. Applying the aforestated jurisprudential guidelines in the computation of the amount of award for damages set out in Villa Rey, the SC proceeded to determine Melquiades’ life expectancy in the case of Cadano Shipping Lines, Inc. vs. Sugata-on, G.R. No. 163212, March 13, 2007), thus : Life Expectancy - 2/3 x [80-age of deceased at the time of death] 2/3 x [80-56] 2/3 x [24] Life Expectancy = 16 With 16 more years of life expectancy and a monthly income of P7,800.00, as evidenced by the pay slips duly presented before the RTC, Melquiades’ earning capacity is computed as follows : Net Earning Capacity= life expectancy x (gross annual incomereasonable and necessary living expenses). =

16 x (P93,600.00;

=

16 x (P46,800.00)

P46,800.00)

Net Earning Capacity = P748,800.00.

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OBLIGATIONS AND CONTRACTS Deunages

13. When are attorney’s fees and expenses of litigation recoverable as damages? ANS: In the absence of stipulation, attorney’s fees and expenses >f litigation, other than j udicial costs, cannot be recovered, except: (1) When exemplary damages are, awarded (Under Art. 2208 >f the NCC), attorney’s fees may also be recovered where exemplary lamages are awarded. See case of Victory Liner vs. Gamrnad, G.R. Vo. 159636, November 25, 2004.); (2) When the defendant's act or omission has compelled the )lamtiff to litigate with third persons or to incur expenses to protect lis interest. (See case of Insular Life Assurance vs. Court of Appeals, l.R. No. 126850, April 28, 2004.); (3) In criminal cases of malicious prosecution against the >laintiff; (4) In case of a clearly unfounded civil action or proceeding igainst the plaintiff; (5) Where the defendant acted in gross and evident bad faith n refusing to satisfy the plaintiff’s plainly valid, just and demandable :laim; (6)

In actions for legal support;

(7) In actions for the recovery of wages of household helpers, aborers and skilled workers; (8) In actions for indemnity under workmen’s compensation md employer’s liability laws; (9) In a separate civil action to recover civil liability arising rom a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and quitable that attorney’s fees and expenses of litigation should be ecovered. In all cases, the attorney’s fees and expenses of litigation must ie reasonable. (Art. 2208, NCC.)

1194

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14. If the obligation consists in the payment of money, and the debtor incurs in delay, how shall we measure the indemnity for damages to be awarded to the creditor? ANS: If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is 6% per annum. (Art. 2209, NCC.) Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. (Art. 2212, NCC.) 15. Jay sues Ike for (a) collection on a promissory note for a loan, with no agreement on interest, on which Ike defaulted, and (b) damages caused by Ike on Jay’s priceless Michaelangelo painting on which Ike accidentally spilled acid while transporting it. The court finds Ike liable on the promissory note and awards damages to Jay for the damaged painting, with interests for both awards. What rates of interest may the court impose with respect to both awards? Explain. (2002) ANS: On the award for payment of the loan, there being no agreement on interest, the rate of interest should be 12% per annum. On the award for damages, the rate of interest should be 6% per annum. The legal rate of interest on monetary obligations not arising from loans or forbearance of credits or goods is 6% per annum in the absence of stipulations to the contrary. 16. Suppose that in an action for recovery of damages due to loss or injury to person or property, the Regional Trial Court rendered a decision in favor of the plaintiff ordering the defendant to pay P 100,000.00 with legal interest from the filing of the complaint, what is meant by legal interest — should it be 12% per annum, pursuant to Circular No. 416 of the Bangko Sentral ng Pilipinas or should it be 6% per annum only, pursuant to Art. 2209 of the NCC in relation to Arts. 2210 and 2211 thereof? ANS: Circular No. 416 which took effect on July 29, 1974 was issued and promulgated by the Monetary Board pursuant to the

1195

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uthority granted to the then Central Bank by P.D. No. 116, which mended Act No. 2655, otherwise known as the Usury Law. Acting ursuant to this grant of authority, the Monetary Board increased tie rate of legal interest from that of 6% per annum originally llowed under Sec. 1 of Act No. 2655 to 12% per annum. Thus, the )ircular (416) provides: “By virtue of the authority granted to it under Section 1 of Act 2655, as amended, otherwise known as the “Usury Law” the Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate al­ lowed in judgments, in the absence of express contract as to such rate of interest, shall be 12% per annum. This circular shall take effect immediately.” Now, what kind of judgment is referred to under the abovetated circular? According to the Supreme Court in Reformina vs. Tomol (139 SCRA 260): “The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank. The Monetary Board may not tread on forbidden grounds. It cannot rewrite other laws. That function is vested solely with the legislative authority. It is axiomatic in legal hermeneutics that statutes should be construed as a whole and not as a series of disconnected articles and phrases. In the absence of a clear contrary intention, words and phrases in statutes should not be interpreted in isolation from one an­ other. A word or phrase in a statute is always used in associa­ tion with other words or phrases and its meaning may thus be modified or restricted by the latter.” Premises considered, since the decision in the case at bar is a decision for damages due to loss or injury to person or property, therefore, the law applicable is Art. 2209 of the NCC in relation to 1196

OBLIGATIONS AND CONTRACTS Damages

Arts. 2195-2235

Arts. 2210 and 2211 thereof In other words, the legal interest is 6% per annum. 17. Two fiber drums of Riboflavin were shipped from Japan through Eastern Shipping Lines. The shipment was insured by plaintiff Mercantile Insurance Co, When the shipment was delivered to the consignee, one of the drums was found to contain spillages, while the rest of its contents were adulterated or fake. As a consequence of the losses sustained, plaintiff Mercantile Insurance was compelled to pay the consignee P19,032 under the insurance policy it had issued. Mercantile insurance then sued the carrier Eastern Shipping Lines, the arrastre operator Manila Port Service, and the broker Allied Brokerage Corp. for the recovery of the amount it was made to pay. The trial court rendered judgment holding the defendants solidarily liable to reimburse the plaintiff of the amount it had paid to the consignee with legal interest at 12% per annum from the date of the filing of the complaint. Is the trial court correct in requiring the payment of 12% legal interest from the date of the filing of the complaint. ANS: No. With regard to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed as follows: (1) When the obligation breached consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extra-judicial demand. (2) When the obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall 1197

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begin to run from the time the claim is made judicially or extrajudicially but when such certainty cannot be so reasonably begin to run only from the date the judgment of the court is made when the amount of damages may be deemed to have been reasonably ascertained. The actual base of the computation of legal interest shall, in any case, be on the amount finally adjudged. (3) When the judgment of the court awarding the sum of money becomes final and executory, the rate of legal interest, whether the case falls under par. 1 or par. 2, shall be 12%per annum from such finality until its satisfaction, this interim period being deemed to be by then equivalent to a forbearance of credit. Hence, in this case, the legal interest to be paid is 6%, on the amount computed from the decision of the Court “a quo.” A 12% interest, in lieu of the 6%, shall be imposed on such amount upon finality of the decision of the SC, until payment thereof. (Eastern Shipping Sales, Inc. vs. CA, July 12, 1994, 53 SCAD 202.) 18. Petitioner-spouses David Ines and Hortencia Castro-Ines filed an action to annul a deed of sale over their conjugal residential house and lot in favor of Spouses Geronimo. The trial court declared the deed of sale void as to the one-half conjugal share of David Ines in the subject property due to the forgery of his signature and the other half belonging to his wife as equitable mortgage. Private respondents were ordered to reconvey the 1/2 share of the wife upon the return of the sum of P150,000, the consideration of the contract. Petitioners appealed on the ground that the husband’s forged signature did not bind the conjugal partnership; hence the entire contract is voidable as the consent of an indispensable party, the husband, was lacking. Court of Appeals sustained petitioners* contention, declared the deed of sale void in its entirety and ordered to reconvey the entire subject property in favor of petitioners who were again ordered to return the P150,000 consideration they received from the sale, but with legal interest from April L5, 1982 until fully paid. Petitioners* motion for the partial reconsideration of the decision to delete the imposition of egal interest on the amount of P150,000 was subsequently 1198

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denied. Is the court correct in awarding legal interest in favor of Spouses Geronimo? ANS: Subject to the modification that the legal interest should commence to run from July 31, 1990 until fully paid, the decision appealed from should be as it is affirmed in all other respects. In resolving the petitioner’s motion for reconsideration to delete the award of interest, respondent court correctly explained that the imposition of legal interest on the amount due was made not because the appellees sought affirmative relief but because the award of legal interest on the amount due is a necessary consequence of the finding that the Contract of Sale executed by appellant Hortencia Ines is void in its entirety. To the above-quoted justification, the SC added that the award of legal interest is based on equitable grounds duly sanctioned by the NCC under Art. 2210 which provides: “Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.” The Court took exception, however, to the ruling of public respondent as to the date when the legal interest should commence to run which we hold, in view of the consistent rulings of this Court, should start from the time of the rendition of the trial court’s decision on July 31,1990 instead of April 15,1982, the date when the deed of sale was executed. (Ines vs. CA and Geronimo, August 14, 1995.) 19.

When are moral damages recoverable?

ANS: Moral damages may be recovered in the following and analogous cases: (1)

A criminal offense resulting in physical injuries;

(2)

Quasi-delicts causing physical injuries;

(3)

Seduction, rape or other lascivious acts;

(4)

Adultery or concubinage;

(5)

Illegal or arbitrary detention or arrest;

(6)

Illegal search;

(7)

Libel, slander or any other form of defamation; 1199

\rts. 2195-2235

OBLIGATIONS AND CONTRACTS Damages

(8)

Malicious prosecution;

(9)

Acts mentioned in Art. 309;

(10) Acts and actions referred to in Arts. 21, 26, 27, 28, 29, 30, 32v 34, and 35, NCC; The parents of the female seduced, abducted, raped or abused, "eferred to in No. 3 may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters liay bring the action mentioned in No. 9 in the order named. (Art. 2219, NCC.) 20. Fernando contracts KNP, Inc. to supply and install ;ile materials in a building he is donating to his province. Fernando pays 50% of the contract price as per agreement, [t is also agreed that the balance would be payable periodically after every 10% performance until completed. \fter performing about 93% of the contract, for which it has >een paid an additional 40% as per agreement, KNP, Inc, loes not complete the project due to its sudden cessation of >perations. Instead, KNP, Inc. demands payment of the last L0% of the contract despite its non-completion of the project. Fernando refuses to pay, invoking the stipulation that payment of the last amount of 10% shall be upon completion. £NP, Inc.’s brings suit for the entire 10%, plus damages. Fernando counters with claims for: (a) moral damages for £NP, Inc. unfounded suit which has damaged his reputation is a philanthropist and respected businessman in his community, and (b) attorney’s fees. (a) Does Fernando have a legal basis for his claim for noral damages? (b) How about his claim for attorney’s fees, having lired a lawyer to defend him? (2002) ANS: (a) There is no legal basis to Fernando’s claim for moral lamages. It does not fall under the coverage of Art. 2219 of the sTCC. (b) There is likewise no legal basis for his claim for ittorney’s fees. It does not fall under any of the cases enumerated in ^rt. 2208 of the NCC:

1200

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21. What are the circumstances which courts must consider in determining the amount of moral damages to be awarded? ANS: According to the SC, moral damages are to be fixed in the discretion of the court taking into consideration the educational, social and financial standing of the parties. Thus, it has been held that where neither plaintiff nor defendant appears to be of much social or financial consequences, an award of P50,000 by way of moral damages, when the action is based on acts of lasciviousness, would be excessive. Hence, the amount of the award was reduced to P I,000. (Dominding vs. Ng, 103 Phil. 11.) Apparently, these guideposts in determining the amount of the award as enumerated in the Dominding case are now well-entrenched in our law. Thus, in a much more recent case, the Supreme Court expressly declared that “the amount of damages awarded has been determined by considering the official,, political, social, and financial standing of the offended parties on one hand, and the business and-financial position of the offender on the other hand.” This was the case of Lopez vs. Pan American World Airways (16S SCRA 431), where Vice President Lopez, who was then Senate President Pro-Tempore and the other plaintiffs were given a total award of P200,000, which was divided as follows P100,000 for Mr. Lopez; P50,000 for his wife; P25,000 for his daughter; and P25,000 for his son-in-law. Again in a case decided only on February 28, 1972 (Zulueta vs. Pan American World Airways, 43 SCRA 397), the same doctrine was reiterated. Mr. Zulueta, a well-known impressario, his wife and a daughter were given a total award of P500,000 moral damages. As it is, the task of fixing the amount of moral damages is primarily with the trial court depending upon the circumstances of each particular case. This is clear from Art. 2216 of the NCC which states that no proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages maybe adjudicated. The amount of such damages (the article continues), except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. As the SC once declared: “The task of fixing the moral and exemplary damages, as well as attorney’s fees, is primarily with the trial court. Since the CA did not interfere with the same and because the facts and circumstances point to the reasonableness of the amount fixed by the lower court, the dictates

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of good sense suggest that we give our imprimatur thereto.” (Air France vs. Carrascoso, 18 SCRA 155.) 22. (a) What are required to award moral damages? (b) What are some factors that can be considered in assessing moral damages? ANS: (a) Under Art. 2217, NCC, moral damages, occasionally termed contemporary damagesare awarded to compensate a person for such injuries as physical sufferings, fright, serious anxiety, mental anguish, bersmirched reputation, wounded feelings, moral shock, social humiliation or similar injury caused to him by the wrongful act or omission of another. An award of moral damages requires: (1) that there is a factual basis for the damages; (2) that the proximate cause of the injury is the claimee’s wrongful act of omission; (3) that the case is predicated on any of the in­ stances enumerated in, and must come to terms with, the pro­ visions of Arts. 2217 to Art, 2220, as well as other special provi­ sions, of the NCC, on Human Relations. (Malonzo vs. Galang, 100 Phil. 18; Ventanilla vs. Ceneno, 110 Phil. 811; Mercado vs. CA, 108 Phil. 414.) (b) Among the factors that can be considered in assessing moral damages is the standing of the offended party in the community, on the other hand, and the financial capability of the claimee, upon the other hand, without either being preclusive of other circumstances even perhaps more primordial, like the gravity of the injury and the wrong causing it, that may be attendant to each case. (Zulueta vs. Pan American World Airways, Inc., 43 SCRA 396 and 49 SCRA 1.) 23» Will mere allegations of respondent on the mental anguish, serious anxiety and wounded feelings he suffered suffice to sustain his claim for moral damages? ANS: No. In order that moral damages may be awarded, there must be pleading and proof of moral suffering, mental anguish, fright and the like. While respondent alleged in his complaint that he suffered mental anguish, serious anxiety, wounded feelings and moral shock, he failed to prove them during the trial. Indeed, respondent should have taken the witness stand and should have

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testified on the mental anguish, serious anxiety, wounded feelings and other emotional and mental suffering he purportedly suffered to sustain his claim for moral damages. Mere allegations do not suffice; they must be substantiated by clear and convincing proof. No other person could have proven such damages except the respondent himself as they were extremely personal to him. The testimony of another was not enough evidence of the moral damages that the respondent supposedly suffered. Another person may have clearly testified on the specific words uttered by petitioner against respondent but he could not have testified on the wounded feelings respondent allegedly went through by reason of petitioner’s slanderous remark. The award of moral damages must be anchored to a clear showing that respondent actually experienced mental anguish, besmirched reputation, sleepless nights, wounded feelings or similar injury. There was no better witness to this experience than respondent himself. Since respondent failed to testify on the witness stand, the trial court did not have any factual basis to award moral damages to him. (Mahinay vs. Velasquez, Jr., G.R. No. 152753, January 13, 2004J 24. In breaches of contract, when are moral damages awarded? ANS: In breaches of contract, moral damages are awarded if the defendant was shown to have acted fraudulently or with malice or bad faith: (Morris and Whittier vs. CA, G.R. No. 127957, February 21, 2001; Salvador vs. Court of Appeals, G.R. No. 124899, March 30, 2004.) The fact that the complaint suffered economic hardship (Perez vs. CA, 121 Phil. 149.) or worries and mental anxiety (Solis and Yarusabtis vs. Salvador, 122 Phil. 223.) is enough. Art. 1764 in relation to Art. 2206 of the NCC also holds the common carrier which is in breach of its contract of carriage resulting in the death of a passenger liable to pay moral damages. 25. Can the court award moral and exemplary damages even without proof of pecuniary loss in a case where checks of the respondents who were engaged in business were dishonored inspite of their big balance maintained in the bank? ANS: Considering that the dishonor of the checks of the respondents adversely affected the respondents’ credit standing

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and business dealing, the Court can award moral and exemplary damages. Well-settled is the rule that the financial credit of a businessman is a prized and valuable asset, it being a significant part of the foundation of his business. Any adverse reflection therein constitutes some financial loss to him, (Leopoldo Araneta vs. Bank of America, 40 SCRA 144.) The damages to the reputation and social standing of the respondents entitles them to moral damages. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,: social humiliation, and similar injury. (Arts. 221 and 2219, NCC.) The bank’s wrongful act caused serious anxiety, embarrassment, and humiliation to the respondents for which they are entitled to moral damages. (Producers Bank of the Philippines vs. CA, G.R. No. 111584, September 11, 2001.)

26. What is the formula for the computation of loss of earning capacity. ANS: The following is the formula for the computation of loss of earning capacity: Net earning capacity - life expectancy x [Gross Annual Income - Living Expenses (50% of gross annual income)], where life expectancy —2/3 (80 —the age of the deceased). Only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income, less living and other incidental expenses. When there is no showing that the living expenses constituted a smaller percentage of the gross income, we fix the living expenses at half of the gross income. (Negros Navigation Co., Inc. vs. CA, 281 SCRA 534; Smith Bell Dodwell Shipping Agency Corp. vs. Borja, G.R. No. 143008, June 10, 2002; Magbanua vs. Tabusares, G.R. No. 152134, June 4S2004.)

27. Can life expectancy be based on the retirement age of a person from government? ANS: Life expectancy should not be based on the retirement age of a government employee which is pegged at 65. In calculating the life expectancy of an individual for the purpose of determining loss of 1204

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earning capacity under Art. 2206(1), NCC, the deceased is assumed to have earned income even after retirement from a particular job. (Negros Navigation Co., Inc. vs. CA, 281 SCRA 534.) What has been used consistently is the American Experience/Expectancy Table of Mortality or the Actuarial Experience/Expectancy Table of Mortality, which consistently pegs the life span of the average Filipino at 80 years, from which it extrapolates the estimated income to be earned by the deceased had he or she not been killed. (People vs. Villanueva, 302 SCRA 380.) But for purposes of determining loss of earning capacity, life expectancy remains at 80. Otherwise, the computation of loss of earning capacity will never become final. The computation should not change even if respondent lived beyond 80 years.

28. What requisites are necessary in order that moral damages may be awarded? ANS: The following are the requisites for the award of moral damages: (1) there is an injury whether physical, mental or psychological clearly sustained by the claimant; (2) there is a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate, cause of the injury sustained by the claimant; (4) award of damages is predicated on any of the cases stated in Art. 2219, NCC. (Cityti'ust Banking Corporation vs. Villanueva, G.R. No. 1410111, July 19, 2001.) However, the amount of moral damages, which is left largely to the sound discretion of the courts should be granted in reasonable amounts, considering the attendant facts and circumstances. (Prudencio vs. Alliance Transport Systems, Inc., 148 SCRA 440.) Moral damages, though incapable of pecuniary estimation, are designed to compensate the claimant for actual injury suffered and not to impose a penalty. Moral damages are not intended to enrich a plaintiff at the expense of the , defendant. They are awarded only to obtain a means, a diversion or an amusement that will serve to alleviate the moral suffering the injured party has undergone by reason of the defendant’s culpable action; They must be proportionate to the suffering inflicted, (San Andres vs. CA, 110 SCRA 81; RCPI vs. Rodriguez, 182 SCRA 899; R and B Surety and Insurance Co., Inc. vs. IAC, 129 SCRA 736; Sps. Quisumbing vs. Meralco, G.R. No. 142943, April 3, 2002.)

29. The records show that B became pregnant by her present husband, A, prior to their marriage; that to conceal 1205

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her pregnancy, she had herself aborted by X, a physician; that after she got married to A, she became pregnant twice, and that in both cases, finding her pregnancy inconvenient, she had herself aborted by the same physician. After the third abortion. A brought an action to recover damages from X. (a) child?

Can X be held liable for the death of the unborn

(b) Can X be held liable for the anguish suffered by A, the husband, attendant to the loss of the foetus and the frustration of his parental expectation? ANS: (a) X cannot be held liable for the death of the unborn child. It is, of course, true that the NCC (Art. 2206.) fixes a minimum of P3,000 for the death of a person, but this provision of the Code does not cover the case of an unborn child or foetus that is not endowed with any juridical personality. Since an action for damages on account of personal injury or death pertains primarily to the one injured, it is easy to see that if no action for such damages could be instituted on behalf of the unborn child on account of the injuries it received, no such right of action could derivatively accrue to its parents or heirs. In fact, even if cause of action did accrue on behalf of the unborn child, the same was extinguished by its pre-natal death^since evidently, there can be no transmission to any one from one that lacked juridical personality. Art. 40 of the NCC expressly limits the provisional personality of a conceived child by imposing the condition that the child should be subsequently born alive. In the instant case, the child was dead when separated from its mother’s womb. (Geluz vs. Court of Appeals, 2 SCRA 801.) (b) Whether X can be held liable for the anguish suffered by the husband, A, attendant to the loss of the foetus and the frustration of his parental expectations will have to depend upon whether the abortions were performed with the knowledge and consent of A or without his knowledge. If they were performed with his knowledge and consent, certainly, X cannot be held liable for damages. As a matter of fact, in Geluz vs. Court o f Appeals, (supra), where it was shown that the husband was aware of the first and second abortions but not of the third, the Supreme Court held that the one who performed the abortions cannot be held liable for damages because such husband’s indifference in the case of the 1 2 0 6

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first and second abortions clearly indicates that he was unconcerned with the frustration of his parental expectations. However, if it can be proved that the abortions were performed without the knowledge of A, X can be held liable for moral and exemplary damages under Arts. 2217 and 2230 of the NCC. 30. Considering the fact that under the Revised Penal Code, there is no offense denominated “malicious prosecu­ tion” and the only offense which may be said to refer to the same subject is incriminatory machination (Art. 363j , if a complaint is filed for recovery of moral damages based on malicious prosecution, is there a valid cause of action? ANS: Yes, there is a valid cause of action. Art. 2219 of the NCC which provides that moral damages may be recovered for “malicious prosecution” would more than sufficiently serve as a basis for relief in court against a party who has maliciously caused another to baselessly and unjustifiably undergo a criminal prosecution for an offense he knows the latter had not committed. Related provisions, such as Art, 21 and Art. 2176 on torts or quasi-delicts, may also serve the same purpose. However, the aggrieved party must prove: (1) that he has been denounced or charged falsely of an offense by the defendant, (2) that the latter knows that the charge was false, (3) that the said defendant acted with malice, and (4) of course, the damages he has suffered i ( Ventura us. Bernabe, 38 SCRA 587.) It must be noted, however, that A resort to judicial processes is not, per se, evidence of ill will upon which a claim for damages may be based. (Ceballos vs. Intestate Estate o f the Late Emigdio Mercado, G.R. No. 155856, May 28, 2004.) 31. Are moral damages and exemplary damages recoverable in damage actions predicated on a breach of promise to marry? ANS: No, moral damages and exemplary damages are not recoverable in damage actions predicated on a breach of promise to marry. The reason for this is clear. The mere breach of promise to marry is not actionable. Not being- actionable, there can be no possible basis for an award for damages, whether moral or exemplary;

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(Hermosisima vs. CA, 109 Phil. 629; Estopa vs. Piansay, 109 Phil. 640;G alangvs.CA,4SCRA55.) It would be different, however, if the act of the defendant in breaking his promise to marry is accompanied by any of the acts enumerated in Art. 2219 of the NCC, such as seduction, abduction, rape, or lascivious acts, or that the act is contrary to morals, good customs or public policy. In such cases moral damages may then be recovered, but, evidently, the basis of recovery will not be breach of promise to marry. 32, C, a lawyer, while a passenger in a taxicab operated by the Manila Yellow Taxicab Co., fell out of the vehicle. As a result he suffered slight physical injuries. The driver was subsequently prosecuted and convicted. Having reserved his right to institute a separate civil action, C finally brought an action against the Manila Yellow Taxicab Co. to recover actual and moral damages, including attorney’s fees. Granting that he is entitled to actual damages, is he also entitled to moral damages and attorney’s fees? Reasons. ANS: The facts stated in the above problem are exactly the same as those in the case of Cachero vs. Manila Yellow Taxicab Co., 101 Phil, 523, where the Supreme Court held that the plaintiffs not entitled to moral damages and attorney's fees. It must be noted that the only way by which C will be able to recover moral damages from the taxicab company would be to predicate his claim either on No. 1 or No. 2 of Art. 2219 of the NCC. In other words, he must prove that his claim is based on a criminal offense resulting in physical injuries (Art. 2219, No. 1, NCC.) or on a quasi-delict causing physical injuries. (Art. 2219, No. 2, NCC.) With regard to the first, it is evident that the taxicab company has not committed any criminal offense. The one who committed the offense is the driver and such driver has not been included in the complaint as a party defendant; consequently, Art. 103 of the Revised Penal Code, which would make the employer subsidiary liable cannot be applied. With regard to the second, it is also evident that there is no quasi-delict since the plaintiff was a passenger in the taxicab; consequently, the action is based on culpa contractual, not on culpa aquiliana. Hence, the case at bar does not fall within the purview

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of any of the instances where moral damages are recoverable. Therefore, C is not entitled to moral damages. As to attorney’s fees, neither does the present case fall within the purview of any of the exceptions provided for in Art. 2208 of the NCC. Consequently, C is not also entitled to such fees!

33. Suppose that instead of incurring physical injuries, the passenger in a taxicab or in a bus is killed, would his heirs be entitled to moral damages and attorney’s fees? Reasons. ANS: This was the question which was resolved by the Supreme Court in the cases of Necesito vs. Paras, 104 Phil. 75; Flores us. Miranda, 105 Phil. 266; Verzosa vs. Baytan, 107 Phil. 1010; Rex Taxicab Co. vs. Bautista, L-15392, September 30, 1960; Santos vs. Tolentino, 5 SCRA 197; Laguna Tayabas Bus Co. vs. Tiongson, 16 SCRA 240; Soberano vs. Manila Railroad Co., 18 SCRA 732. According to the Supreme Court, the heirs of the deceased are entitled to moral damages and attorney’s fees for the following reasons: "The case of a passenger who dies in the course of an ac­ cident, due to the carrier’s negligence, constitutes an exception to the general rule. While under Art. 2220 of the NCC there can be no recovery of moral damages for a breach of contract in the absence of fraud (malice) or bad faith, the case of a viola­ tion of the contract of carriage leading to a passenger’s death escapes this general rule, in view of Art. 1764 in connection with Art. 2206, No. 3, of the NCC. Being a special rule limited to cases of fatal injuries, these articles prevail over the general rule of Art. 2220. It thus appears that under the NCC, in case of accident due to a carrier’s negligence, the heirs of a deceased passenger may recover moral damages, even though a passen­ ger who is injured, but manages to survive, is not entitled to them. There is, therefore, no conflict between this decision and that of Cachero vs. Manila Taxicab Co., L-8721, May 23, 1957, where the passenger suffered injuries but did not lose his life. In the Cachero case, this Court disallowed attorney's fees because the litigation arose out of plaintiffs exaggerated and unreasonable demands for an indemnity. But in the pres­ ent case, plaintiffs original claims cannot be deemed a priori

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wholly unreasonable, since they had a right to indemnity for moral damages besides compensatory ones, and moral damag­ es are not determined by set and unvariable bounds. A litigant who improvidently stipulates higher counsel fees than those to which he is lawfully entitled, does not for that reason earn the right to a larger indemnity; but, by parity of reasoning, he should not be deprived of counsel fees if by law he is entitled to recover them.” (Necesito vs. Paras, supra.) 34. X was one of several passengers who were injured When the passenger jeepney in which they were riding met an accident. Subsequently, the driver was charged and convicted of serious physical injuries through reckless imprudence. An action to recover actual and moral damages Was then brought against A, registered owner of the jeepney. The latter, however, contends: (a) that she had already sold the jeepney to another one day before the accident; (b) that, assuming that she can still be held liable, she cannot be held liable for attorney’s fees; and (c) neither can she be held liable for moral damages. Decide the case. ANS: (a) Assuming the dubious sale to be a fact, it has been repeatedly held that a transfer, if made without the requisite approval of the Public Service Commission (now the Land Transportation Franchising and Regulatory Board, commonly referred to as the “LTFRB”), although valid between the parties, is not effective and binding in so far as the responsibility of the grantee under the franchise in relation to the public is concerned. The law was designed primarily for the protection of public interest. Consequently, until the approval of the LTFRB is secured, the vehicle is, in contemplation of law, still under the service of the operator standing in the records of the Board, which the public has a right to rely upon. (b) Anent the attorney’s fees, it-must be noted that such fees are included in the concept of actual damages and may be awarded whenever the court deems it just and equitable in accordance with Art. 2208 of the NCC. (c) Anent the moral damages, the same must be discarded. Such damages are not recoverable in damage actions predicated on a breach of contract of transportation in view of Arts.

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2219 and 2220 of the NCG. (Cachero vs. Manila Yellow Taxicab, 101 Phil. 523; Necesito vs. Paras, 104 Phil. 75.) The exception to this rule is a mishap resulting in the death of a passenger, in which case Art. 1764 makes the common carrier expressly subject to the rule enunciated in Art. 2206, by virtue of which the spouse, descendants and ascendants of the deceased passenger can recover moral damages for mental anguish by reason of the death of the deceased passenger. This exception makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. To award moral damages for breach of contract, therefore, without proof of malice or bad faith on the part of the defendant, as required by Art. 2220, would be to violate the clear provisions of the law, and would constitute unwarranted judicial legislation. (Flores vs. Miranda, 105 Phil. 266.)

35. (a) When may moral damages be recovered in culpa contractual? (b)What is the amount of moral damages to be awarded? ANS: (a) Moral damages may be recovered in culpa contractu­ al where the defendant acts in bad faith or with malice in the breach of contract . Malice or bad faith implies moral obliquity or a conscious and,intentional design to do a wrongful act for a dishonest purpose. However, a conscious or intentional design need not always be pres­ ent since negligence may occasionally be so gross as to amount to malice or bad faith. Bad faith, in the context of Art. 2220 of the Civil Code includes gross negligence. Thus, the SC has held in a number of cases that moral damages may be awarded in cw/pa contractual or breach of contract when the defendant acts fraudulently or in bad faith, or is guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. (Bankard, Inc. vs. Feliciano, G.R. No. 141761, July 28, 2006). (b) With respect to the amount of moral damages to be awarded, the well-entrenched principle is that the grant thereof de­ pends upon the discretion of the court considering the circumstances of each case. In the case of Bankard, Inc. vs. Feliciano, it is undis­ puted that the respondent’s PCIBank Mastercard was dishonored in a foreign country where the respondent was not expected to have family members or close friends nearby to lend him a lending hand.

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Moreover, respondent had absolutely no inkling then that there was a problem with his card. However, since moral damages are patently not meant to enrich the complainant at the expense of the defendant and should only be commensurate with the actual loss or injury suffered, the SC reduced the amount awarded by the CA from P800,000.00 to P500,000.00.

36. When may temperate or moderate damages be allowed? ANS: Under Art. 2224, NCC, temperate or moderate damages, which-are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount.can not, from the nature of the case be proved with certainty. (Victory Liner vs. Gammad, G.R. No. 159636, November 25, 2004.) In the case of Araneta vs. Bank of America (40 SCRA 144), injury to one’s commercial credit or to the goodwill of the business firm is often hard to show in terms of money. The rational behind temperate damages is precisely that from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss. (Premiere Development Bank vs. CA, G.R. No. 159352, April 14, 2004.) When the court is convinced that there has been such loss, the judge is empowered to calculate moderate damages, rather than let the complainant suffer without redress from the defendant’s wrongful act. (Necesito vs. Paras, 104 Phil. 85; GSIS vs. Sps. Deang, G.R. No. 135644, September 17, 2001.)

37. Can temperate and nominal damages be granted concurrently? ANS: Temperate and nominal damages are incompatible and cannot be granted concurrently. (City Trust Banking Corp. vs. Intermediate Appellate Court, 232 SCRA 559.) Art. 2221, NCC provides that nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. On the other hand, Art. 2224, NCC provides that temperate or moderate damages, which are more than nominal but less than compensatory damages may be recovered when the court finds that some pecuniary

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loss has been suffered but its amount cannot, from the nature of the case, be proved with reasonable certainty. 38. Why are exemplary damages awarded? ANS: The Court held in the case of People vs. Catubig, G.R. No. 137842, August 23, 2001, that exemplary damages, otherwise known as punitive or vindictive damages, are awarded to' serve as a deterrent to serious wrong doings and as a vindication of undue sufferings and wanton invasion of the rights of an injured or a punishment for those guilty of outrageous conduct. In common law, there is preference in the use of exemplary damages when the award is to account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for the hurt caused by the highly reprehensible conduct of the defendant — associated with such circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud — that intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of damages that may be awarded against a person to punish him for his outrageous conduct. In either case, these damages are intended in good measure to deter the wrongdoer and others like him from similar conduct in the future. Art. 2231 of the NCC explicitly authorizes the imposition of exemplary damages in cases of quasi-delicts if the defendant acted with gross negligence. (Ttu vs. Arriesgado, G.R. No. 138060, September 1, 2004.) 39. What are the rules provided by Arts. 2229-2235 of the NCC governing the award of exemplary or corrective damages? ANS: The following are the rules governing the award of exemplary or corrective damages: (1) Exemplary damages or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. (Art. 2229, NCC.)

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(2) In criminal offense, exemplary damages as part of the civil liability may be imposed when the crime was committed with one or more aggravating circumstances. Such damages are separate and distinct from fines and shall be paid to the offended party. (Art. 2230, NCC.) (3) In quasi-delicts, exemplary damages may be granted if the defendant acted witH gross; negligence; (Art. 2232, NCC.) (4) In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. (Art. 2232, NCC.) (5) Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. (Art. 2233, NCC.) (6) While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. (Art. 2234, NCC.) 40. What then are the exceptions to the rule that moral damages are not recoverable in damage actions predicated on a breach of contract of carriage? ANS: There are two (2) exceptions to the rule that moral damages are not recoverable in such actions. They are: (1) Where the mishap results in the death of a passenger (Arts. 1764, 2206, NCC.); and (2) Where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. (Art. 2220, NCC.)

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41. The award of moral damages in favor of the husband against the wife is assailed on the ground that her refusal to perform her wifely duties, her denial of consortium and desertion of her husband are not included in the enumeration of cases where moral damage may lie. Is the contention meritorious? Why? (1976) ANS: The contention is hot meritorious. In No. 10 of Art. 2219 of the NCC under the law on moral damages, the Code declares that moral damages may be recovered under Art. 21 of the NCC. Art. 21 .provides that any person who willfully causes loss or injury ,to another in a manner that is contrary to morals, good customs and public policy shall compensate the latter for the damage. Accordingly, in Tenchaues vs. Escano (15 SCRA 355, 17 SCRA 674), the SC held that the acts of the wife in riot complying with her wifely duties, her denial of consortium and desertion of her husband are acts which constitute a willful infliction of injury upon the husband’s feelings in a manner contrary to morals, good customs or public policy for which No. 10 of Art. 2219 of the NCC authorizes an award for moral, damages. 42. When may exemplary or corrective damages be imposed? ANS: (1) In criminal offenses, exemplary damages may be imposed when the crime was committed with one or more aggravating circumstances; (2) in quasi-delicts, they may be imposed if the defendant acted with gross negligence; and (3) in contracts and quasi-contracts, they may be imposed if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. (Arts. 2230, 2231, 2232, NCC.) However, in all of the above cases, before the court may award the damages in favor of the plaintiff, the latter must show that he is entitled as a matter of right to either compensatory, or temperate, or moral damages. In case liquidated damages have been agreed upon, he must show that, were it not for the agreement, he would be entitled as a matter of right to either compensatory, or temperate, or moral damages. (Art. 2234, NCC.) Furthermore, such damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. (Art. 22331NCC.)

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43. Plaintiff Senator Lopez who was then Senate President Pro-Tempore, his wife, daughter and son-in-law made first class reservations with defendant air-carrier in its Tokyo-San Francisco flight. Through mistake, defendant’s agents cancelled the reservations. Expecting that some cancellations of booking would be made before the flight time, the reservations supervisor withheld from plaintiffs the information that their reservations had been cancelled. Upon arrival in Tokyo, defendant informed plaintiffs that there was no accommodation for them in the first class stating that they could not go unless they take the tourist class. Due to pressing engagements in the US, plaintiffs were constrained to take the flight as tourist passengers, but they did so under protest. Subsequently, they brought this action against defendant for moral damages, exemplary damages and attorney’s fees. Defendant, however, contends that since the basis of the action is breach of contract and since there was no bad faith of defendant, assuming that there was a breach of contract, therefore, there can be no basis for an award of moral and exemplary damages. Decide the case. ANS: Actually, the above facts are identical to the factual backdrop of the case of Lopez vs. Pan American World Airways (16 SCRA 431). In this case, the SC held that in misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant willfully and knowingly placed itself into the position of having to breach its aforesaid contracts with plaintiffs should there be no last-minute cancellations by other passengers before the flight time, as it turned out in this case. Such actuation of defendant may indeed have been promoted by nothing more than the promotion of its self-interest in holding on to plaintiffs as passengers in its flight and foreclosing their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the same, in legal contemplation, such conduct already amounts to action in bad faith. This is so because bad faith means a breach of a known duty through some motive of interest or ill-will. Self enrichment or fraternal interest, and not personal ill-will, may have been the motive, but it is malice nevertheless. As a proximate result of defendant’s breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation,

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wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stopovers, they were expected to be among the first class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. Therefore, pursuant to the provisions of the NCC on moral damages (Arts. 2217,2220.), plaintiffs are given an award of P200,000 moral damages to be divided thus: P100,000 for Senator Lopez; P50,000 for his wife; P25,000 for his daughter; and P25,000 for his son-in-law. In the case of exemplary damages, as the name implies, its purpose is to provide an example for the public good. In view of its nature, it should be imposed in such amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. Therefore, since defendant had breached its contracts in bad faith, an award of P75,000 exemplary damages, applying Arts, 2229 and 2232 of the New NCC, is reasonable. In the case of attorney’s fees, considering the prominence of Atty. Vicente Francisco, counsel for plaintiffs, in the legal profession and the work that he has done in this case, an award of P50,000 is also reasonable. 44. C, a first class passenger in a plane operated by Air France, while already in the first class compartment of the plane immediately before the start of the Bangkok-Tehran flight, was forced out of his seat by the Bangkok Manager of the airline and transferred to the tourist class compartment. His first class seat was then given to a white man. Subsequently, when he came back to the Philippines, he brought an action against Air France for moral damages, exemplary damages and attorney’s fees. Defendant, however, contends that since the action is predicated on breach of contract, there can be no basis for an award of moral damages, exemplary damages and attorney’s fees. Decide the case. ANS: In a case with identical facts, the SC held that the defendant is liable for moral damages, exemplary damages and attorney’s fees both from the view point of tort and from the view

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point of breach of contract. As a matter of fact, the Court awarded to the plaintiff P25,000 as moral damages, P10,000 as exemplary damages, and P3,000 as attorney’s fees. (Air France vs. Carrascoso, 18 SCRA 155.) It is clear that there was bad faith on the part of the defendant. The manner of the ejectment of C from his first class seat fits into this legal precept. The defendant’s manager not only prevented C from enjoying his first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment — just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For bad faith contemplates “a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill-will or for an ulterior purpose,” Thus, for the willful and malevolent act of the manager, defendant, who is the employer, must answer. The responsibility of an employer for the tortious act of its employees is well-settled in law. Art. 21 of the NCC, which defines the tort, and Art. 2219(10) of the same Code, which declares that moral damages are recoverable, are applicable. From the viewpoint of contract, it must be observed that a contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier’s employees, naturally, could give ground for an action for damages. Passengers do not contract merely for transportation. They have aright to be treated by the carrier’s employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the part of the employees towards a passenger gives the atter an action for damages against the carrier.

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Hence, since there was bad faith on the part of the defendant carrier, Arts. 2217, 2220, 2229, and 2232 of the NCC are applicable. In other words, moral damages, exemplary damages and attorney’s fees are recoverable, (Air France vs. Carrascoso, supra.) 45. A, a well-known Filipino impressario, his wife, B, and a daughter, C, were passengers aboard a PANAM plane from Honolulu to Manila, the first leg of which was Wake Island, where the passengers were told that they could disembark for a stopover of about 30 minutes. The records show that A, after disembarking, proceeded to the beach to answer the call of nature. After about 30 minutes, the flight was called and the passengers, except A, boarded the plane. Because of A’s absence, the take-off was delayed. Minutes later, he was seen walking from the beach. As he approached, he remarked: “You people almost made me miss my flight. You have a defective announcing system and I was not paged.” Angered, the captain of the carrier, in the subsequent exchange of words between the two (2), called him and his wife and daughter “these monkeys.” Afterwards the former ordered him to open his luggages, for inspection because of a report that he was hiding a bomb. He refused. As a result, he was left in Wake Island. He was able finally to return to Manila after several days. Subsequently, he, with his wife and daughter as co-plaintiffs, brought an action for recovery of moral and exemplary damages plus attorney’s fees against the air-carrier basing their action on Arts. 21, 1759, 2217, 2219, 2220, 2232 and 2208 of the NCC. Will the action prosper? Reasons. ANS: The factual setting of the above problem is substantially identical to that in Zulueta vs. Pan American World Airways (4 SCRA 397), where the Supreme Court, reiterating the doctrine enunciated in Air France vs. Carrascoso (supra.) and Lopez vs. Pan American World Airways (supra.), held that the action will prosper. Briefly, the decision is as follows: Indeed, the rude and rough reception plaintiff received at the hands of the captain of the air-carrier and also of the manager of defendant carrier, the menacing attitude of the captain and the supercilious manner in which he had asked plaintiff to open his bags,

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the abusive language and highly scornful reference to plaintiffs as monkeys, the airline officials’ refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake, and the subsequent effects upon plaintiffs wife and daughter — all these justify an award for moral damages. As held in Air France vs. Carrascoso: “A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier’s employees naturally could give ground for an action for damages. “Passengers do not contract merely for transportation. They have a right to be treated by the carrier’s employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rade or discourteous conduct on the part of the employees towards a. passenger gives the latter an action for damages against the carrier.” Consequently, both from the point of view of torts (Art. 21.) ind from the point of view of breach of contract (Art. 1759.) and rom the point of view of the implementing provisions under the aw on damages (Arts. 2217, 2219, 2220, 2229, 2230, 2208.), and onsidering the professional, social, political and financial standing if the offended parties on one hand, and the business and financial position of the offender on the other, plaintiffs shall recover from defendant the sums of P600,000 as moral damages, P200,000 as xemplary damages, and P76,000 as attorney's fees. 46. The plaintiff, a business executive, while shopping t a supermarket with his wife and 2 daughters, picked p a cylindrical rat-tail file costing P3.50 and placed it in is breast pocket with a good portion thereof exposed to iew. When he paid for his purchases, he forgot to include

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the file, as a consequence of which, despite his apology and explanation, he was accused of shoplifting in front of many customers of the supermarket and of his wife and two (2) daughters. Subsequently, he brought an action for damages against the supermarket based on Arts. 19 and 21 of the NCC. When the case was elevated to the CA, the Court awarded the following as damages: (1) P75,000.00 moral damages; (2) P25,000.00 exemplary damages; and (3) P5,000.00 attorney’s fee. Are these awards justified? ANS: According to the SC, considering that exemplary damages are awarded for wanton acts and that they are penal in character granted not as a compensation to the offended party but as a punishment of the offender and as a warning to others, under the facts and circumstances of this case, the plaintiff is not entitled to exemplary damages. There was good faith on the part of the defendant. Although it acted wrongfully within the meaning of Arts. 19 and 21 of the NCC, nevertheless, it was only trying to protect and recover its property. Therefore, the award of P25,000.00 exemplary damages is without legal basis. In the case of the awards of P75,000.00 moral damages and P5,000.00 attorney’ s fee, since it is undeniable that the entire incident at the supermarket emanated unwittingly from the negligent act of the plaintiff in forgetting to pay for the file, therefore, Art. 2214 of the NCC is applicable. The awards should be reduced to P5,000.00 moral damages and P2,000.00 attorney’s fee. (Grand Union Supermarket vs. Espino, 94 SCRA 953.) 47. Can a passenger of a jeepney who was injured as a result of the gross negligence of the driver hold the operator of said jeepney liable for exemplary damages? ANS: In order that the principal or master can be held liable for exemplary damages based upon the wrongful act of his agent or servant, he should have participated in the doing of such wrongful act or should have previously authorized or subsequently ratified it with full knowledge of the facts. Reasons for this rule are that since exemplary damages are penal in character, the motive authorizing their infliction will not be imputed by presumption to the principal when the act is committed by an agent or servant, and that since they are awarded not by way of compensation, but as a warning to

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others, they can only be awarded against one who has participated in the offense, and the principal, therefore, cannot be held liable for them merely by reason of wanton, oppressive or malicious intent on the part of the agent. Consequently, in order that the operator can be held liable for exemplary damages by reason of the wrongful act of his driver, it must be shown that he previously authorized or knowingly ratified it thereafter, in effect making him a co­ participant. It is not enough to say that an example should be made for the public good, especially in accident cases where public carriers are involved. For the causative negligence in such cases is personal to the employees actually in charge of the vehicles and it is they who should be made to pay this kind of damages by way of example. Otherwise, there would practically be no difference between the liability of employers for exemplary damages and their liability for compensatory damages. (Munsayac vs. De Lara, 23 SCRA 1086.) 48. Felicitas Sipe, remitted to her sister-in-law the amount of P3,000.00 to pay for her tuition fee at U.P., Quezon City. When Felicitas went to PT & T to claim it, she was advised that nothing was sent to her. Eventually, however, she was informed that money was sent to her. PT & T tried to deliver it to her at her dormitory but failed to do so because she was not around. Finally, when the check was delivered, she was not able to encash it as there was no clearance from PT&T. She filed an action for damages, aggrieved by the delay, where the RTC held PT & T liable for actual, moral and exemplary damages. The CA affirmed on appeal. It deleted the award of actual damages finding no proof of pecuniary loss but sustained the award of moral and exemplary damages. Is the decision of the CA correct? ANS: The deletion of the award of actual damages is correct. If there is no evidence of pecuniary loss, there can be no award of actual damages; The award of actual damages can be done only when proof of pecuniary loss in an action based on culpa contractual is essential. (P T & TCorp. vs. CA, G.R. No. 139268, Septemver 3,2002.) As to moral damages, the same cannot be awarded in the absence of any clear indication of bad faith or gross negligence amounting to bad faith. It would be an error to award moral damages merely because the defendant was unable to effect immediate delivery of

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the money sent through money orders. The rationale for the rule is that, recovery of moral damages is more of an exception rather than the rule. Moral damages are not punitive in nature but are designed to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person. In order that an award of moral damages can be aptly justified, the claimant must be able to satisfactorily prove that he has suffered such damages and the injury causing it has sprung from any of the cases listed in Arts. 2219 and 2220 of the NCC. Then, too, the damages must be shown to be the proximate result of a wrongful act or omission. The claimant must establish the factual basis of the damages and its causal tie with the acts of the defendant. In fine, an award of moral damages would require, firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicates on any of the instances expressed or envisioned by Art. 2219 and Art. 2220 of the NCC. In culpa contractual or breach of contract, particularly, moral damages may be recovered when the defendant has acted in bad faith or is found to be guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual obligation. (Expert Travel and Tours, Inc. vs. CA, 309 SCRA 141; Packaging Corp. vs. CA, 333 SCRA 1780; Magat, Jr. vs. CA, 337 SCRA 298; Go vs. CA, 272 SCRA 752; Del Rosario vs. CA, 267 SCRA158; Oclot vs. Ybanez, 11 SCRA 79; Ace Haulers Corp. vs. CA, 338 SCRA 572; Macalino, Jr. vs. People, 340 SCRA 11.) As to exemplary damages, the same cannot likewise be awarded. Although such damages need not be proved, plaintiff must first show that he is entitled to moral, temperate, or compensatory damages before a court can favorably consider an award of exemplary damages. (Art. 2234, NCC; PNB vs. CA, 266 SCRA 136.) In contracts and quasi-contracts, exemplary damages may be justified if the defendant is shown to have acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. (J Marketing Corp. vs. Sia, Jr., 285 SCRA 580; Xentrex Automotive, Inc. vs. CA, 291 SCRA 66; Art. 2234, NCC.) The defendant might have been remiss in the prompt delivery of the sums sent through it to respondent, however, it would

Arts. 2195-2235

OBLIGATIONS AND CONTRACTS Damages

be hard put to say that such delay under the facts obtaining can be described as being wanton, fraudulent, reckless, or oppressive in character. 49. When is an award of attorney’s fees as part of damages considered just and equitable? ANS: The award of attorney’s fees as part of damages is considered just and equitable when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the other party. (Ching Sen Ben vs. CA, 314 SCRA 762.)

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Title XIX CONCURRENCE AND PREFERENCE OF CREDITS (Arts. 2236-2251) 1. What claims or liens are preferred with reference to specific movable property? ANS: With reference to specific movable property of the debtor, the,following claims or liens shall be preferred: (1) Duties, taxes and fees due thereon to the State or any subdivision thereof; (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; (3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; (4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged up to the value thereof; (5) Credits for the making, repair, safekeeping o r preservation of personal property, on the movable thus made, repaired, kept or possessed;

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(6) Claims for laborer’s wages, on the goods manufactured or the work done; (7)

For expenses of salvage, upon the goods salvaged;

(8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for 30 days thereafter; (10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; (11) Credits for seeds, and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale. In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor, within thirty days from the unlawful seizure. (Art. 2241, NCC.) 2. If there are two (2) or more eredits with respect to specific movable property, how shall they be satisfied? ANS; If there are two (2) or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof. (Art. 2247, NCC.) 3. What claims, mortgages and liens are preferred with reference to specific immovable property? ANS: With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall

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Arts. 2236-2251

be preferred, and shall constitute an encumbrance on the immovable or real rights: (1)

Taxes due upon the land or building;

(2) For the unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, masons, mechanics and other work­ men, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (5) Mortgage credits recorded in the Registry of Property, when the law authorizes reimbursement, upon the immovable preserved or improved; (6) Credits annotated in the Registry of Property in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits;, (7) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (8) Claims of donors of real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (9) Credits of insurers, upon the property insured, for the insurance premium for two (2) years. (Art. 2242, NCC.)

4. If there are two (2) or more credits with respect to the same specific immovable property, how shall they be satisfied? ANS: If there are two (2) or more credits with respect to the same specific real property or rear rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the immovable property or real right. (Art 2259, NCC.) 5. X borrowed money from y to finance the construc­ tion of a building, mortgaging his land and the building so constructed thereon to secure the loan. After the building

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as erected, X failed to pay the laborers who worked on the uilding and some suppliers who furnished materials theren. Upon foreclosure of the mortgage, who would have prefrential right to the proceeds of the sale — the laborers, the uppliers or the mortgagee? Explain, ANS: We must distinguish. With regard to the proceeds of the ale of the building, the three credits shall be satisfied pro rata, but rith regard to the proceeds of the sale of the land, Y, the mortgagee, hall have preferential right. As far as the building is concerned, there is no question that, nder Art. 2242 of the NCC, the credits of the laborers, suppliers nd mortgagee are an preferred, and therefore, shall constitute n encumbrance on the property. Hence, they shall be satisfied ro rata from the proceeds of the sale of the building. (Art 2249, ICC.) However, as far as the land is concerned, only the credit of he mortgagee is preferred. This is so, because the laborers did not onstruct the land. Neither did the suppliers supply any material or the land. As held by the Supreme Court in the case of Lopez s. Orosa, (10 Phil. 98) — “The law give preference to refectionary redits only with respect to the real estate upon which the refection >r work was made. This being so, the inevitable conclusion must be hat the lien so created attaches merely to the immovable property or the construction or repair of which the obligation was incurred. Svidently, therefore, the lien in favor of the material-men attaches mly to the building and to no other property of the obligor.” Therefore, he right of the mortgagee over the proceeds of the sale of the land is superior to that of the laborers and suppliers. 6. What is the order of preference in the payment of claims or credits with reference to other property, real and personal, of the debtor? ANS: With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the Drder named: (1) Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court;

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Arts. 2236-2251

(2) Creditor services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; (3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own;

(4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment; (5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency; (6) Support during the insolvency proceedings, and for three months thereafter; (7) offense;

Fines and civil indemnification arising from a criminal

(8) Legal expenses, and expenses incurred in the administra­ tion of the insolvent’s estate for the common interest of the credi­ tors, when properly authorized and approved by the court; (9) Taxes and assessments due the national government other than those mentioned in Articles 2241, No. 1, and 2242, No. i; .

(10) Taxes and assessments due any province, other than those referred to in Articles 2241, No. 1, and 2242, No. 1; (11) Taxes and assessments due any city or municipality, other than those mentioned in Articles 2241, No. 1, and 2242, No. 1; (12) Damages for death or personal injuries caused by a quasi­ delict;

(13) Gifts due to public and private institutions of charity or beneficence; (14) Credits which, without special privilege, appear in: (a) a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively. (Art. 2244, NCC.)

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OBLIGATIONS AND CONTRACTS Concurrence and Preference of Credits

7. C sold a house and lot to V. Because of non-payment of the balance of the purchase price, the former filed suit and obtained judgment against the latter. Meanwhile, the latter, after having secured a clean certificate of title, mortgaged the property to B, who later foreclosed the mortgage. Upon learning of the foreclosure proceedings, C filed a motion for the recognition of his “vendor’s lien” over the property. This was granted and the lien was duly registered. The court then ordered that C’s lien and B’s mortgage credit shall be prorated from the proceeds of the foreclosure sale. Is this order of the court in accordance with law? ANS: The order of the court prorating C’s vendor’s lien and B’s mortgage credit from the proceeds of the foreclosure sale is not in accordance with law. This is so because the mortgage credit should be given preference over the vendor’s lien, applying the well-established principle concerning registered lands — that a purchaser in good faith and for value, such as B in the instant case, takes the property free from liens and encumbrances other than statutory liens and those recorded in the certificate of title. And this is as it should be. Otherwise, if a person dealing with registered land were to take it in every instance subject to all the preferred claims enumerated in Art. 2242 of the NCC, even if the existence and import thereof cannot be ascertained from the records, all confidence in Torrens Titles would be destroyed and credit transactions on the faith of such titles would be hampered, if not prevented, with incalculable results. It is, of course, true that under the NCC, only taxes enjoy absolute preference, while all the remaining preferred claims or credits enjoy no priority among themselves, but must be paid pro rata. (Arts. 2242, 2249.) But then, these rules regarding concurrence and preference of credits contemplate a. case where all of the preferred creditors must necessarily be convened, and the import of their claims ascertained. Consequently, there must be some proceeding where the claim of such creditors may be bindingly adjudicated, such as insolvency, the settlement of the decedent’s estate, or other liquidation proceedings of similar import. It is clear, therefore, that one preferred creditor’s third-party claim to the proceeds of a foreclosure sale, such as the one at bar, is not the proceeding contemplated by law. (Barretto vs. Villanueva, 6 SCRA 928.)

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TRANSITIONAL PROVISIONS (Arts. 2252-2269) 8. There are new provisions and rules laid down by the NCC which may prejudice or impair vested rights. Do they have retroactive effect? Explain your answer. ANS: They do not have retroactive effect; (Art. 2252, NCC.) Although the NCC, following a well-established principle of modern legislation, provides that if a right should be declared for the first time in said Code, it shall be effective at once, even though the act or event which gives rise thereto may have been done or may have occurred under the prior legislation, nevertheless, there is an exception, and that is when said right prejudices or impairs a vested or acquired right. In such a case, such right shall be prospective and not retroactive. (Art. 2253, NCC.) 9. Shall contracts with a condition or a period which were executed before the NCC took effect be regulated by said NCC in the event that the condition should be fulfilled or the period should arrive at the time said NCC become effective? Explain your answer. (1963) ANS: No, such contracts shall not be regulated by the NCC even though the condition should be fulfilled or the period should arrive at the time said NCC became effective. This is clear from Art. 2255 of said NCC which declares that the former laws shall regulate acts and contracts with a condition or period, which were executed or entered into before the effectivity of this Code, even though the condition or period may still be pending at the time this body of laws goes into effect. The reason behind this provision, according to the Code Commission, is that the legal relation is created at the time the act or contract is executed or entered into, although the condition or period is still pending. (Report p. 167.) 10. In 1947, A sold to X a parcel of land with right of repurchase within 10 years from the date of sale. In 1958, A sold the same property to his daughter, B, without the knowledge of X. After the sale, B tendered payment of the redemption price to X. The latter refused on the ground that his title to the property had already been consolidated.

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Arts. 2252-2269

OBLIGATIONS AND CONTRACTS Transitional Provisions

Suppose now that B, in cox^junction with her father, A, followed this up with an action for reformation of the deed of sale on the ground that the contract is an equitable mortgage, and the court rendered a judgment which became final that the contract is a true contract of sale with right of repurchase, would the third paragraph of Art. 1606 of the New Civil Code, whereby the vendor may still exercise the right to repurchase the property within 30 days from the time of final judgment, apply? ANS: In Villalobos vs. Catalan (5 SCRA 422), a case with similar facts, the Supreme Court held that the third paragraph of Art. 1606 of the NCC cannot be applied. The original sale a retro did not confer upon the vendee a mere expectancy but an actual right of ownership that would continue to exist indefinitely unless the vendor exercises in due time his right if redemption. This right was already vested in X in 1947 and could not be defeated by the new right created by Art. 1606, since the Code itself expressly so declares. (Art. 2253, last sentence.) Such being the case, the applicable rule is not Art. 2268 which is general, but the specific one of Art. 2256 providing that conditional rights continue to be subject to the law formerly in force. Therefore, if under the Civil Code of 1889 (Art. 1509.), the vendee’s right of ownership became absolute immediately upon failure of the vendor to redeem it in due time, certainly that right would now be impaired if the latter is now to be given the privilege to redeem beyond the period stipulated. 11. Juana married Pedro in 1947. Is her capacity to execute acts and contracts governed by the NCC? Explain your answer. ANS: Juana’s capacity to execute acts and contracts is governed by the NCC. This is clear from Art. 2259 of said Code which declares that the capacity of a married woman to execute acts and contracts is governed by this Code even if her marriage was celebrated under the former laws. According to the Code Commission, the reform in the new Code establishing the civil capacity of married women, except in a few cases specified by law, would not fully attain the remedy intended, unless it is made retroactive. The change in the law is therefore designed to do away with a legal anachronism and should

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OBLIGATIONS AND CONTRACTS Repealing Clause

Art. 2270

apply to all married women, whether they were married before or after the effectivity of the new Code. (Report, p. 169.)

REPEALING CLAUSE (Art. 2270) 12. What is the repealing clause of the NCC? (1962) ANS: The following laws and regulations are hereby repealed: (1) Those parts and provisions of the Civil Code of 1889 which are in force on the date when this NCC becomes effective; (2) The provisions of the Code of Commerce governing sales, partnership, agency, loan, deposit and guaranty; (3) The provisions of the Code of Civil Procedure on prescription as far as inconsistent with this Code; and (4) All laws, Acts, parts of Acts, rules of court, executive orders, and administrative regulations which are inconsistent with this Code. (Art 2270, NCC.)

13. When was the Spanish Civil Code repealed? ANS: The Spanish Civil Code was repealed by Rep. Act No. 386, otherwise known as the Civil Code of the Philippines, on August 30, 1950. The reason for this is that it was on this date that the New Civil Code became effective. (Lara vs. Del Rosario, 94 Phil. 778; Raymundo us. Penas, 96 Phil. 311; Camporedondo vs. Aznar, 102 Phil. 1055.) This is clear from the repealing clause (Art. 2270, New Civil Code.) which declares that e p* U 0) T 3> n a a; a

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APPENDIX B REPUBLIC ACT No. 9523 AN ACT REQUIRING THE CERTIFICATION OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT (DSWD) TO DECLARE A “CHILD LE­ GALLY AVAILABLE FOR ADOPTION" x x x SECTION 1. Declaration of Policy. — It is hereby declared the policy of the State that alternative protection and assistance shall be afforded to every child who is abandoned, surrendered, or neglected. In this regard, the State shall extend such assistance in the most expeditious manner in the interest of full emotional and social development of the abandoned, surrendered, or neglected child. It is hereby recognized that administrative processes under the jurisdiction of the Department of Social Welfare and Development for the declaration of a child le­ gally available for adoption of abandoned, surrendered, or neglected children are the most expeditious proceedings for the best interest and welfare of the child. SEC 2. Definition of Terms. — As used in this Act, the following terms shall

mean: (1) Department of Social Welfare and Development (DSWD) is the agency charged to implement the provisions of this Act and shall have the sole authority to issue the certification declaring a child legally available for adoption. (2) Child refers to a person below eighteen (18) years of age or a person over eighteen (18) years of age but is unable to fully take care of himself/herself or protect himself/herself from abuse, neglect, cruelty, exploitation, or discrimination because of physical or mental disability or condition. (3) Abandoned Child refers to a child who has no proper parental care or guardianship, or whose parent(s) have deserted him/her for a period of at least three (3) continuous months, which includes a foundling. (4) Neglected Child refers to a child whose basic needs have been deliberately unattended or inadequately attended within a period of three (3) continuous months. Neglect may occur in two (2) ways: (a) There is physical neglect when the child is malnourished, ill-clad, and without proper shelter. A child is unattended when left by himselfTherself without proper provisions and/or without proper supervision. (b) There is emotional neglect when the child is maltreated, raped, seduced, exploited, overworked, or made to work under conditions not conducive to good health; or is made to beg in the streets or public places; or when children are in moral danger, or exposed to gambling, prostitution, and other vices. (5) Child Legally Available for Adoption refers to a child in whose favor a certification was issued by the DSWD that he/she is legally available for adoption

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APPENDIX B Republic Act No. 9523

after the fact of abandonment or neglect has been proven through the submission of pertinent documents, or one who was voluntarily committed by his/her parent(s) or legal guardian. (6) Voluntarily Committed Child is one whose parent(s) or legal guardian knowingly and willingly relinquished parental authority to the DSWD or any duly accredited child-placement or child-caring agency or institution, (7) Child-caring agency or institution refers to a private non-profit or gov­ ernment agency duly accredited by the DSWD that provides twenty-four (24) hour residential care services for abandoned, neglected, or voluntarily committed chil­ dren. (8) Child-placing agency or institution refers to a private non-profit institution or government agency duly accredited by the DSWD that receives and processes applicants to become foster or adoptive parents and facilitate placement of children eligible for foster care or adoption. (9) Petitioner refers to the head or executive director of a licensed or accred­ ited child-caring or child-placing agency or institution managed by the government, local government unit, nongovernmental organization, or provincial, city, or munici­ pal Social Welfare Development Officer who has actual custody of the minor and who files a certification to declare such child legally available for adoption, or, if the child is under the custody of any other individual, the agency or institution does so with the consent of the child’s custodian. (10) Secretary refers to the Secretary of the DSWD or his duly authorized representative. (1.1) Conspicuous Place shall refer to a place frequented by the public, whereby the notice of the petition shall be posted for information of any interested person. (12) Social Case Study Report (SCSR) shall refer to a written report of the result of an assessment conducted by a licensed social worker as to the socio­ cultural economic condition, psychosocial background, current functioning and facts of abandonment or neglect of the child. The report shall also state the efforts of social worker to locate the child’s biological parents/relatives. SEC. 3. Petition. — The petition shall be in the form of an affidavit, subscribed and sworn to before any person authorized by law to administer oaths. It shall contain facts necessary to establish the merits of the petition and shall state the circumstances surrounding the abandonment or neglect of the child. The petition shall be supported by the following documents: (1) Social Case Study Report made by the DSWD, local government unit, licensed or accredited child-caring or child-placing agency or institution charged with the custody of the child; (2) Proof that efforts were made to locate the parent(s) or any known relatives of the child. The following shall be considered sufficient: (a) Written certification from a local or national radio or television station that the case was aired on three (3) different occasions; (b)

Publication in one (1) newspaper of general circulation;

1240

APPENDIX B Republic Act No. 9523

(c) Police report or barangay certification from the locality where the child was found or a certified copy of a tracing report issued by the Philippine National Red Cross (PNRC), National Headquarters (NHQ), Social Services Division, which states that despite due diligence, the child’s parents could not be found; and (d) Returned registered mail to the last known address of the parent(s) or known relatives, if any. (3)

Birth certificate, if available; and

(4) Recent photograph of the child and photograph of the child upon abandonment or admission to the agency or institution. SEC. 4. Procedure for the Filing of the Petition. - The petition shall be filed in the regional office of the DSWD where the child was found or abandoned. The Regional Director shall examine the petition and its supporting documents, if sufficient in form and substance and shall authorize the posting of the notice of the petition in conspicuous places for five (5) consecutive days in the locality where the child was found. The Regional Director shall act on the same and shall render a recommendation not later than five (5) working days after the completion of its posting. He/she shall transmit a copy of his/her recommendation and records to the Office of the Secretary within forty-eight (48) hours from the date of the recommendation. SEC. 5. Declaration o f Availability for Adoption. — Upon finding merit in the petition, the Secretary shall issue a certification declaring the child legally available for adoption within seven (7) working days from receipt of the recommendation. Said certification, by itself, shall be the sole basis for the immediate issuance by the local civil registrar of a foundling certificate. Within seven (7) working days, the local civil registrar shall transmit the foundling certificate to the National Sta­ tistics Office (NSO). SEC. 6. Appeal. — The decision of the Secretary shall be appealable to the Court of Appeals within five (5) days from receipt of the decision by the petitioner, otherwise the same shall be final and executory. SEC. 7. Declaration o f Availability for Adoption o f Involuntarily Committed Child and Voluntarily Committed Child. — The certificate declaring a child legally available for adoption in case of an involuntarily committed child under Article 141, paragraph 4(a) and Article 142 of Presidential Decree No. 603 shall be issued by the DSWD within three (3) months following such involuntary commitment. In case of voluntary commitment as contemplated in Article 154 of Presidential Decree No, 603. the certification declaring the child legally available for adoption shall be issued by the Secretary within three (3) months following the filing of the Deed of Voluntary Commitment, as signed by the parent(s) with the DSWD. Upon petition filed with the DSWD, the parent(s) or legal guardian who voluntarily committed a child may recover legal custody and parental authority over him/her from the agency or institution to which such child was voluntarily com m itted when it is shown to the satisfaction of the DSWD that the parent(s) or legal guardian is in a position to adequately provide for the needs of the child: Provided, That, the petition for restoration is filed within three (3) months after the signing of the Deed of Voluntary Commitment.

1241

APPENDIX B Republic Act No. 9523

SEC. 8, Certification. — The certification that a child is legally available for adoption shall be issued by the DSWD in lieu of a judicial order, thus making the entire process administrative in nature. The certification, shall be, for all intents and purposes, the primary evidence that the child is legally available in a domestic adoption proceeding, as provided in Republic Act No. 8552, and in an inter-country adoption proceeding, as provided in Republic Act No. 8043. SEC. 9. Implementing Rules and Regulations. — The DSWD, together with the Council for Welfare of Children, Inter-Country Adoption Board, two (2) representatives from licensed or accredited child-placing and child-caring agencies or institutions, National Statistics Office, and Office of the Civil Registrar, is hereby tasked to draft the implementing rules and regulations of this Act within sixty (60) days following its complete publication. Upon effectivity of this Act and pending the completion of the drafting of the implementing rules and regulations, petitions for the issuance of a certification declaring a child legally available for adoption may be filed with the regional office of the DSWD where the child was found or abandoned. SEC. 10 .Penalty. — The penalty of One hundred thousand pesos (P100,000.00) to Two hundred thousand pesos (P200,000.00) shall be imposed on any person, institution, or agency who shall place a child for adoption without the certification that the child is legally available for adoption issued by the DSWD. Any agency or institution found violating any provision of this Act shall have its license to operate revoked without prejudice to the criminal prosecution of its officers and employees. Violation of any provision of this Act shall subject the government official or employee concerned to appropriate administrative, civil and/or criminal sanctions, including suspension and/or dismissal from the government service and forfeiture of benefits. SEC. 11. Repealing Clause. — Sections 2(c)(iii), 3(b), (e), and 8(a) of Republic Act No. 8552, Section 3(f) of Republic Act No. 8043, Chapter 1 of Titles VII and VIII of Presidential Decree No. 603, and any law, presidential decree, executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the provisions of this Act are hereby repealed, modified, or amended accordingly. SEC. 12. Separability Clause. — If any provision of this Act is held invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting. SEC. 13. Effectivity. — This Act shall take effect fifteen (15) days following its complete publication in two (2) newspapers of general circulation or in the Official Gazette.

This Act which is a consolidation of Senate Bill No. 2391 and House Bill No. 10 was finally passed by the Senate and the House of Representatives on December 17, 2008. Approved: MAR 12 2009

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